Car firms will rethink Australia: industry

Australian Associated Press - Global automobile companies will regard Australia as a risky place to invest as Canberra axes taxpayer subsidies in breach of a commercial promise, the industry says.

Labor and the coalition have been accused of running an ideological rampage against car makers to fund flood recovery efforts.

Holden, Ford and Toyota wrote an angry letter to Prime Minister Julia Gillard accusing her of breaching an agreement between them and the Rudd government.

As part of that deal, the companies gave the government letters of commitment outlining long-term investment plans, Fairfax newspapers said.

But the end of the green car innovation fund, less than three years into a 10-year program, will scare the big manufacturers, the Federal Chamber of Automotive Industries says.

"That sends a very worrying signal to international investors about the level of certainty that they can expect when they deal with the Australian government," chief executive Andrew McKellar told AAP.

"It means ... Australia's sovereign risk rating goes through the roof."

In late 2008, the Rudd government unveiled a $1.3 billion green car innovation fund.

Car makers were to receive $1 for every $3 spent developing a fuel efficient vehicle.

Toyota used the money to build a hybrid Camry in Melbourne but so far, sales have been disappointing.

Ford, which reneged on a deal to build the Focus small car in Australia, later accepted a green subsidy to add an imported four-cylinder engine to its locally-built Falcon range.

Under political pressure, the government sliced $200 million from the fund in the May budget, and announced another $200 million cut during the election.

Last week, Ms Gillard announced another $234 million would be trimmed, effectively ending the program.

Funding applications ended on January 27.

The coalition joined the assault on Tuesday announcing it would cut $500 million from the $3.4 billion Automotive Transformation Scheme,which subsidises car makers to retool their plants until 2020.

The move was designed to help find $2 billion in savings over the next four years to fund flood rebuilding.

Mr McKellar has accused both sides of politics of running an ideological campaign against the car industry.

"You don't assist those who've been impacted by a natural disaster in Queensland by inflicting a manmade disaster on jobs and investment in Victoria and South Australia," he said.