In November 2008, during the depths of the global financial crisis, the big car makers of Detroit – General Motors, Ford and Chrysler – asked Congress for as much as $US25 billion of urgent assistance. The car industry in the biggest free market in the world was haemorrhaging dreadfully as car finance companies stopped lending and consumers opted for more fuel-efficient vehicles imported from Asia and Europe. So heated was the US bailout debate, and so sceptical were US senators in particular, that there were open calls for the US car makers to be left to go bankrupt. It is history now, but the US car industry did get billions of dollars of US taxpayers’ funds, and they did reshape their businesses. Recent figures indicate US car sales are once again on the rise.

In Australia, the car manufacturing industry is facing its own crisis, though certainly not as dire and sudden as the US one of 2008. More jobs have been lost from Holden, just one year after federal and state governments promised it an extra $275 million of assistance, and those jobs add to the ones lost last year from Ford and, before that, from Toyota. Now BHP Billiton chairman Jac Nasser, who spent 33 years at Ford and rose to global president, has warned that this country risks losing the industry altogether because of the high Australian dollar, high manufacturing costs and the glut of cars produced overseas.

For all the billions of taxpayer dollars poured into Australia’s car industry over the past three decades, and despite all the commitments by the car companies to restructure and adapt, still the industry struggles. That makes many people sceptical about the value of government subsidies to this sector. The Coalition has said it would cut subsidies by $500 million before 2015 and ask the Productivity Commission to examine alternative forms of assistance. Industry Minister Greg Combet says the Gillard government is committed to the $6.2 billion, 13-year assistance program introduced under the Rudd government in late 2008. But it is important to note the issues today are not the same as those that triggered the Rudd government’s plan, when the focus was on engineering more fuel-efficient cars. If this confluence of economic factors continues to work against the local industry, something has to yield.

The Age believes, as it has for many years, that the industry deserves strong support. Successive governments have poured billions of dollars into propping up the car industry, and they have done so because no one wants to risk the jobs of more than 50,000 workers at Holden, Ford and Toyota, or the estimated 200,000 jobs in related businesses. Nor do they want to lose the rich layer of skills generated through the intricacy of car design and manufacturing. It is fair to ask, however, if the existing structure of subsidies is generating an adequate return on this nation’s investment, and how it might be improved.

Closing the door on the car industry by denying government assistance is not an option. A new funding model might be.

Read more:…