FEDERAL cabinet has demanded new assurances from Coca-Cola Amatil to justify taxpayer aid for its fruit processing division in another sign of Tony Abbott’s hard line on industry assistance.
The move clears the way for a renewed cabinet debate next month over the company’s plea for cash for its SPC Ardmona operations, buying time for Industry Minister Ian Macfarlane to revise the terms of the deal.
Cabinet remains broadly reluctant to give the company the cash it seeks and there is “no sense of urgency” to completing the deal, The Australian was told after yesterday revealing the deep concerns about the company’s request for public funds.
The report incensed the company’s supporters and dashed hopes that a deal was imminent after Coca-Cola Amatil agreed to new government conditions in two rounds of talks on Tuesday.
Furious at the economic “dries” within cabinet, some of the Prime Minister’s own colleagues warned that the objections to the SPC deal were an ominous sign for future decisions on public investments to protect jobs.
While Mr Macfarlane has argued strongly for the $25 million assistance package, other ministers are inclined to reject the intervention and the result yesterday was to put more demands on the company to make the case for taxpayer help.
The decision sets a new deadline to resolve the divisive proposition at the end of January, when cabinet will reconvene to consider the outcome of the minister’s talks with Coca-Cola Amatil in the coming weeks.
Mr Abbott left the door open to a compromise yesterday but said companies should seek cash from shareholders or banks rather than go to the government to help.
“I guess the difficulty that I have is that if we say to any business ‘Here’s a pot of money’, there’s a queue of businesses that are going to line up saying ‘What about us?’,” Mr Abbott said.
“I don’t absolutely rule out, under all circumstances, any assistance of this type whatsoever, but you’ve got to be very, very, very careful about it.”
A third-generation Ardmona orchardist, Peter Hall, 51, urged the government to step in and offer “a little help” to the company, saying its request for a $25 million innovation grant and the subsidies received by the car industry in recent years were very different.
“What they’ve done, they’ve supported an industry that was always going to go out of business the moment support was pulled,” he said of the automotive industry assistance.
“We’re only asking for a little bit of help, and what they spend, they’ll more than receive back in taxes.”
Mr Hall owns or has shares in more than 400ha of trees, which produce fruit for the fresh and canned fruit industries. He has already heavily restructured his own business at his own expense, bulldozing 53ha of peaches and 4ha of pears.
Canning fruit used to make up about 90 per cent of his business. Now that’s down to 20-30 per cent.
SPC Ardmona employs about 1000 people at its Shepparton processing centre in northern Victoria but is struggling to compete against cheap imports as a result of the high Australian dollar and the rise of home-brand products at Coles and Woolworths.
The company is promising to invest $90m to refit the factory if it can get $25m from Canberra and a matching amount from the Victorian government.
The Australian revealed yesterday that senior figures within the government took a dim view of the 14 per cent internal rate of return outlined in the company’s documents, although others said the return was less than 5 per cent.
The figure is central to the argument made against the assistance on the grounds that taxpayer funds should not be used to help a company hit its preferred rate, given many other businesses also struggle to lift their returns.
One source close to the debate said yesterday the 14 per cent was Coca-Cola Amatil’s general rate and that the figure for the SPC Ardmona factory project was far lower.
So frustrated are the company’s supporters that they believe cabinet ministers are wilfully misrepresenting the business proposal in order to shoot it down. The Australian put the 14 per cent claim to the company on Wednesday but it did not want to comment.
SPC Ardmona managing director Peter Kelly said the funding package was needed urgently to upgrade the fruit and vegetable business to compete with imports and enable exports.
“SPC Ardmona rejects claims that it would profit from an injection of taxpayer funds to modernise and upgrade its fruit processing facilities,” the company said in a statement.
“The business is currently losing money despite significant restructuring and site consolidation as well as to date having written off over $300 million.”
The decision is the next test of the government’s approach to “corporate welfare” in the wake of the closure of General Motors Holden and proposals for a debt guarantee for Qantas.
Behind the cabinet criticism of the SPC request is a concern that companies are turning to the government for cash when they are agreeing to workplace conditions that push up their costs.
Labor promised $25m to SPC just before the election, the same time it promised about $20m to Simplot to expand its food processing centres in Tasmania and the NSW town of Bathurst.
Simplot noted at the time that an enterprise bargaining agreement being sought by the Australian Manufacturing Workers Union would have required the company to invest $20m just to deliver the higher profits needed to cover the wage claims.
One industry executive said unions saw the money “coming in the front door” from the government and then increased their demands to take the money “out the back door” in wage claims.
On coming to power, the Abbott government chose not to match the Labor promise to Simplot, which is now negotiating a new EBA without any cash assistance from Canberra.
Victorian Nationals senator Bridget McKenzie said her talks with SPC indicated it had been doing the work needed to keep costs down.
“I back the Prime Minister absolutely in that we shouldn’t throw good money after bad, which is why this case is very different to the assistance for the auto industry,” Senator McKenzie said.
“The onus is on SPC Ardmona but I think they have a very strong case. To let SPC Ardmona go would be incredibly devastating for the Goulburn Valley and those communities.”
Liberal MP Sharman Stone, whose electorate includes the Shepparton SPC factory, said every job lost at the company would lead to six or seven other lost jobs across the region, including farmers going bankrupt.
Dr Stone rejected the argument from some within the government that the company was not doing enough on its own to get costs down.
“I understand there have been negotiations going on and there are agreements to make the workforce more productive,” Dr Stone said.
“To suggest that it’s all about high wages — I find that very disappointing.”
Dr Stone said the bigger issues were the high Australian dollar and trade decisions that allowed cheap foreign fruit to be dumped on the local market.
“We haven’t had a concerted effort to address the crisis in this country with manufacturers, particularly food manufacturers,” Dr Stone said.
“We now have a new government and we can’t turn our backs and walk away.”