Additional Comments by Coalition Senators
Coalition Senators agree with the recommendation that the
Senate pass the Car Dealership Financing Guarantee Appropriation Bill 2009.
Following the announced exit of GE and GMAC from the car
dealer financing market due to a freeze in the domestic money market –
exacerbated by the Rudd Labor government’s ill-considered unlimited deposit
guarantee – it was important that Australia’s car dealers be assisted to
maintain finance.
It has always been the Coalition’s view that the best way to
deal with this crisis was to encourage GE and GMAC to slow their withdrawal in
order to allow an orderly transition to other financiers – which it has turned
out has been the case in most circumstances. Nevertheless, the Government has
chosen to establish the SPV to specifically assist Ford Credit and the
Coalition will not stand in the way of its establishment.
However, Coalition Senators do have some concerns about the
substance of the Bill:
Potential cost to the taxpayer
Coalition Senators are concerned that the SPV may in fact
result in an as yet unquantified cost to the budget.
As noted in Budget Paper No. 1:
The guarantee will result in a call being made on the
Government by the OzCar SPV Trustee if the assets underlying the guaranteed
securities fail to generate sufficient income for the SPV to cover its outlays
and any losses from failed car dealerships.
The overall size of the OzCar SPV is expected to be around
$850 million, of which approximately $550 million will be funded by securities
that will attract the government guarantee. The SPV is expected to cease to
operate by 30 June 2010.[1]
However, according to evidence presented by Treasury at
estimates:
I think it is safer to assume, based on the information that
we have available, that the facility will be no more than $450 million in
aggregate.[2]
And earlier in that evidence:
...if the facility is no smaller than $350 to $400 million and
if it runs for at least 12 months then we should get to a break-even point, but
there are a lot of ifs there.[3]
Coalition Senators note that the size of the SPV has been revised
downward twice since first announced – from $2 billion to $850 million (2009-10
Budget) and now to $450 million.
Any more downsizing of the fund and it will, according to the evidence
provided to the committee, mean a cost is borne by the taxpayer.
Further, the SPV will terminate on the 30 June 2010. Given the Bill’s
passage this month, it will only operate for 11 months at most, further
prejudicing the taxpayer.
Changing parameters of the fund
When the details of SPV were announced by the Treasurer on
19 December, Ford Credit was not identified as being a participant in the SPV.[4]
As noted in Chapter 2, Treasury confirmed in its evidence to
Senate Estimates that the parameters were changed to accommodate Ford Credit:
With the decision to accommodate Ford Credit, the parameters
have indeed changed a little...[5]
Coalition Senators do not contest the inclusion of Ford
Credit in the SPV, and we are aware of the potentially disastrous consequences
for both Ford Credit and Ford Australia more broadly were Ford Credit not able
to access wholesale finance.
However, it is apparent that the parameters were changed
specifically to accommodate Ford Credit, and that no such offer was made to
either GE or GMAC to access the fund.
Coalition Senators note this significant change of the
fund's parameters from that which was originally announced.
Coalition Senators regrettably feel compelled to express
their concern at the evidence provided by Mr Delaney of the MTAA in relation to
the number of cases of car dealers and their treatment which appears to be
grossly exaggerated.
Senator
Alan Eggleston
Deputy Chair
Senator Eric Abetz Senator
Barnaby Joyce
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