A $2 billion lifeline for car dealers involving the federal government and the country's major banks will save jobs, the automotive industry says.
Car dealers have encountered huge difficulties raising funds to buy stock for their showrooms as a result of the global financial crisis.
Two major financiers, GE Money Motor Solutions and GMAC, are exiting the Australian car market because of the crisis, placing great pressure on a large number of dealers and the automotive industry more generally, Treasurer Wayne Swan said in announcing the deal on Friday.
He said the financing arrangement with the CEOs of ANZ, Commonwealth Bank of Australia, the National Australia Bank and Westpac on Friday had been designed to support viable businesses.
"It will not seek to provide an artificial lifeline to unviable dealerships," the treasurer said.
"Today's announcement will help ensure the long-term viability of the automotive industry and forms part of the government's commitment to protect jobs in this vital industry and right across the Australian economy."
Industry data released on Thursday showed the dire straits the motor vehicle industry is in.
November sales slumped over 22 per cent when compared to the same month last year, the worst performance in six years.
This was partly due to weak consumer demand, but also because of the strife car dealers faced in financing.
Federal Chamber of Automotive Industries chief executive Andrew McKellar said this action by the government was a decisive response to extraordinary circumstances.
"These are complex issues but the government has acted quickly and effectively in an effort to head of a potential crisis," Mr McKellar said in a statement.
"The bottom line is - this will save jobs in the industry."
But Opposition Leader Malcolm Turnbull said this problem was brought about by the government's poorly thought out unlimited deposit guarantee.
It left finance companies unable to raise new funds as they did not have the benefit of the guarantee.
"Considerable damage has been done to both the finance industry and the car industry by the Rudd government's mismanagement, and much of that damage will be very difficult to remedy," Mr Turnbull said in a statement.
He was also disappointed the government had once again chosen to avoid parliamentary scrutiny by announcing the measure after parliament had risen for the winter recess.
Mr Swan said the government, assisted by Future Fund chairman David Murray, had been working closely with the car industry, car dealer financiers and the four banks in recent weeks.
A special purpose vehicle (SPV) has been established to provide liquidity to car dealer financiers through the securitisation of eligible loans. The SPV will be implemented by January 1, 2009.
The government will support the SPV by providing a guarantee for a minor proportion of the securities issued, while Credit Suisse is providing technical support.
The SPV will be available to both new vehicle and mixed vehicle dealerships that trade cars, trucks, motorbikes, boats, caravans and other commercial vehicles as long as they are currently financed by GE Money or GMAC.
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