By Paul Hemsley and Julian Bajkowski

The South Australian and Victorian governments have gone on the offensive to embed Australian made cars into public sector procurement plans for fleet purchasing as a way to prop-up struggling local automotive manufacturers.

South Australian Premier Jay Weatherill and Victorian Premier Denis Napthine have demanded that a majority of Australian-made vehicles now be used in state and federal passenger car fleets after Holden announced that it would need to slash its workforce.

The move to get state and federal governments to buy Australian comes as the southern states contend with the continued decline of the local auto manufacturing sector, which directly employs around 50,000 people, despite continued heavy subsidisation.

Mr Weatherill said that Holden’s announcement to reduce its workforce was in breach of one of the conditions in an agreement between the company and the state government that was meant to ensure minimum employment levels and minimum production levels to create a “high-value, advanced manufacturing industry” until at least 2022.

That agreement included subsidies to the company of $275 million, which included $215 million from the federal government, $50 million from the South Australian government and $10 million from the Victorian government that would be paid in installments until 2018.

The call from the two state governments at today’s Council of Australian Governments (COAG) meeting in Canberra is the result of Holden chairman and managing director Mike Devereux’s announcement earlier in April 2013 that the company would need to reduce its workforce to make up for the lack of demand of its Cruze model.

The company also claimed that the “unprecedented strength” of the Australian dollar has had a significant impact on its export opportunities because of the 60 per cent appreciation in the currency has made making things more expensive, thereby limiting how many vehicles it can sell overseas.

Mr Devereux claimed that these factors have forced the company to re-evaluate its business strategies, which resulted in the company’s announcement of a restructure that would slash 400 of its SA workers down to 1,750 and the present 400 cars being made per day reduced to 335.

However Mr Weatherill expressed his “deep frustration” and anger at Holden’s announcement and will hold off any funding to the company until it ensures new and acceptable terms.

He said he wanted to assure all South Australians that he would not “leave Holden workers and their families behind”.

In response to Holden’s justification for its potential sackings that demand is lacking for its car models, Mr Weatherill has brought the issue to Canberra at the latest COAG meeting by demanding that the federal government invest in Australian-made vehicles in its fleet as a way of boosting the revenue for Holden, therefore ensuring the employment of its threatened workers.

An Australian-only purchasing mandate is certain to be regarded by many as another form of indirect taxpayer subsidisation for what many regard as an industry in terminal decline.

Mr Weatherill said that all governments including federal and state need to play a part in investing in the longevity of the automotive sector.

According to Mr Weatherill, 99 per cent of the South Australian government passenger vehicle fleet is Australian-made, with 74 per cent of those being from Holden.

“I will be seeking consideration from all Australian governments to adopt South Australian, Victorian and Commonwealth government policies regarding procurement of government fleet vehicles to focus on domestically-build product,” Mr Weatherill said.

The purchasing mandate is unlikely to be welcomed by many fleet managers in state governments who have extracted substantial savings by buying smaller imported cars that are cheaper and use less fuel.

They include the NSW Police which now uses Hyundai and Volkswagon vans, Mitsubishi general duties cars and Nissan Patrol four wheel drives for its controversial and unambiguously named Riot Squad.

Australia Post has been another big government fleet purchaser that switched to imported vehicles after it bought Mercedes commercial vans over local incumbent Ford.

Far less clear is how local purchasing mandates may affect local government buyers who remain under great pressure to deliver big savings in fleet purchasing and running costs.