Cars cheaper, wider range?

Press, 6 May 1983, Page 3

Cars cheaper, wider range?

PA Wellington Consumers will have access to a wider range of cars at cheaper prices if the recommendations of an Industrial Development Commission report on the motor industry are accepted by the Government.

The report, released yesterday, advocates freeing up the motor-vehicle'market to promote more competition and better use of resources.

However, by allowing more assembled cars ,to be imported, the recommendations would mean job losses in the car-assembly and component manufacturing industries. The commission said that in the long-term more jobs would be created in the economy through more efficient use of resources. The motor industry was one of the least efficient the I.D.C. had studied, the report said.

The recommendations will be considered by the Government before any action is taken. The Minister of Trade and Industry, Mr Templeton, said there would be “no radical, overnight changes” and cautioned against premature market judgments. The commission predicts the release of the report will lead to depressed new vehicle sales as potential buyers hold off in anticipation of possible price reductions. Because of insufficient data, the commission said, it cannot accurately forecast how much consumers would save by buying imported models. It does not suggest giving car importers open slather. Rather, it recommends a four-year adjustment period, in which franchiseholders would be able to import progressively more cars at reducing tariff levels. Assemblers would also be able to import up to 7.5 per cent of their local production, while tenders would be called for a set level of further imports. To help assemblers compete fairly, the 45 per cent duty imposed on the kits used to make cars should be removed, the commission says. To promote sales, the

commission suggests removing the hire-purchase regulations. It also recommends abolishing price controls on new vehicles. While the commission envisages a better deal for new, and used, car buyers, it offers little in the short term for workers and inefficient sections of the industry. The component manufacturing industry is most likely to suffer.

Assemblers are now obliged to use local components in their products. However, during the four-year testing period, they would be given more access to overseas components. Some component manufacturers may be unable to compete in the new environment although most would probably adapt, the commission says. However, the commission says it expects the component industry to oppose the recommendations in the report. The commission’s plan would put more competitive pressure on the motor-in-dustry and would probably result in structural changes, including plant closings and company mergers, the report says. The commission says its terms of reference did not require it to preserve all parts of the present industry.

“To require this would be incompatible with improving the industry’s efficiency,” the report says. While employment levels would fall, this would not be entirely due to restructuring. Increased productivity because of greater efficiency, continuing low demand in the near future and more imports would contribute to job losses, it says. “Only a loss of market share to imports can fairly be attributed to the commission.” Where workers are laid off, steps should be taken to ensure they are not left out in the cold, the report says. It recommends that the Government sponsor retraining programmes and pay trainees the equivalent

to the emergency unemployment benefit. The commission also suggests that redundant workers forced to shift be given first home buyer status with the Housing Corporation, which should also modify its loan and income limits for them. As well, workers receiving corporation assistance should be given a relocation allowance.

A redundancy agreement between employers and industry unions is also suggested.

The commission recommends that the Government implement the plan as soon as possible. “The industry needs to improve its contribution to the economy urgently, in the interests of the whole community.

“It will not do this until it is required to do so by the pressures which the plan will exert,” the report says. The Opposition’s trade and industry spokesman, Mr David Caygill, said yesterday that the Government appeared to have deliberately avoided Parliamentary discussion of the report. Mr Caygill said that the release of the report the day after Parliament adjourned was “a cynical act of a desperate Government.” / The report was distributed to journalists at Parliament on Wednesday under embargo until yesterday. r ‘Clearly the Government could have made the document available for Parliamentary discussion and still adhered to its time-table of a Wednesday adjournment,” Mr Caygill said. “It seems the Government chose deliberately to avoid Parliamentary discussion of this subject. That makes a travesty of Parliamentary democracy.” Mr Caygill said he hoped Mr Templeton would not stick rigidly to his announced June 3 deadline for comments on the report to be in his hands. That might not be enough time for those affected by the report’s recommendations, Mr Caygill said.