Australia restores some funding to ailing car industry

SYDNEY (REUTERS) - The Australian government on Tuesday partially reversed planned funding cuts to the automotive industry, allowing the sector to keep A$500 million (S$530 million) as major manufacturers prepare to shut down operations.

Prime Minister Tony Abbott's government had planned to cut almost A$1 billion in funding following announcements from Ford Motor Co, Toyota Motor Corp and the Holden unit of General Motors Co last year that they would wind up car manufacturing in Australia by the end of 2017.

However, a hostile upper house refused to pass the cuts, fearing that the car makers would bring forward their closure. State politicians also lobbied to keep the funding ahead of elections.

"We don't want anything to jeopardise the survival of the industry until Holden finally closes," Federal Industry Minister Ian Macfarlane told reporters on Tuesday.

The restored funding will be split 55 per cent to the auto manufacturers and 45 per cent to component makers.

Car companies have blamed the previously high Australian dollar, high costs of manufacturing and low economies of scale for their decision to exit the country.

Government figures show that car makers have not made a profit since 2003, instead running up combined losses of A$4.4 billion.

The closures will be a blow to an already sluggish labour market given about 45,000 people are employed in vehicle and parts manufacturing, with Toyota, Holden and Ford accounting for around 8,000 directly, according to official figures.