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Car makers ask for more

Taxpayers are likely to be asked to fork out more of their hard earned to support our local car manufacturers.

Holden and Toyota are expected to go cap-in-hand to the government again in 2013, seeking extra financial assistance for their Australian manufacturing operations. According to the Australian Financial Review, both companies confirmed yesterday that revamping new engine plants and new local models could see them seek an investment from the federal government as well as the South Australian and Victorian state governments.

Related: The end of the Australian car industry

Holden received promises of $275 million in public funds last year, while Toyota received $63 million after building a $300 million engine plant. Toyota is considering adding a third model to its locally manufactured line-up, which would also require government funding.

Shadow treasurer, Joe Hockey has criticised the government for wasting taxpayers’ money, which also contributed to higher costs. “The fact is, Australia is becoming an incredibly expensive place to produce things”, he said. The Federal government has a $5.4 billion assistance plan running until 2020.

The federal government has also been criticised for forking out taxpayers money to support our steel industry, with BlueScope Steel (ASX: BSL) and OneSteel, err Arrium (ASX: ARI) receiving federal funding. Both companies face significant headwinds, being unable to compete with cheap imported steel, the carbon tax as well as being capital intensive.

The Foolish bottom line

While the automotive industry employs more than 55,000 staff and supports another 200,000, taxpayers are supporting a sector that appears likely to collapse despite the billions being poured into it. The fall into administration of car parts manufacturer, Autodom Limited (ASX: AIE) late last year is evidence of that.

The Productivity Commission has suggested that the government could better spend its money by focusing on removing barriers to help companies improve productivity and by boosting labour mobility. Sounds like a much better plan to me.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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