Today I am pleased to announce a Special Purpose Vehicle (SPV) will be established with the support of leading Australian banks to provide liquidity to car dealer financiers who have encountered financing difficulties as a result of the global financial crisis.
The automotive industry plays a vital role in Australia's economy, supporting many thousands of Australian jobs, and today's announcement will support a stable and viable future for the industry, in the face of very difficult global conditions.
The SPV - which will be established as a financing trust - is a private sector solution which will provide liquidity to car dealer financiers through the securitisation of eligible loans provided to car dealers. The SPV will be implemented by 1 January 2009.
This announcement follows a further meeting today with the Chief Executive Officers of ANZ, the Commonwealth Bank of Australia, the National Australia Bank, and Westpac. At this meeting an agreement was reached to provide critical liquidity support to car dealerships that have up until now been financed by GE Money Motor Solutions and GMAC.
Over recent weeks, the Rudd Government, assisted by the Future Fund Chairman David Murray, has been working very closely with the automotive industry, car dealer financiers and the four major banks to devise a workable solution that will allow viable car dealerships to secure the critical financing they need.
The recent announcement by two major car dealer financiers, GE Money Motor Solutions and GMAC, to exit the Australian dealer floorplan financing market is a result of ongoing global financial challenges. This has placed great pressure on a large number of car dealerships and the Australian automotive industry more generally.
The overall size of the SPV will need to be around $2 billion. The Government will provide support to the SPV in the form of a guarantee expected to cover a minor proportion of the securities issued.
The SPV will be designed to support viable businesses. It will not seek to provide an artificial lifeline to unviable dealerships. The eligibility criteria that will apply will be fair and transparent.
Credit Suisse is providing the necessary technical support to develop the SPV. Treasury will continue to work closely with the major banks, Credit Suisse and its advisers over the next three weeks to finalise the details of the SPV and to put it into effect.
This is a transitional arrangement only and will remain in place until viable dealers establish new funding arrangements. Financiers who have refinanced GE or GMAC financed dealerships since those companies announced their withdrawal from the market will be eligible for SPV funding provided they meet the SPV's eligibility criteria.
The SPV will operate with Government support, refinancing dealerships for a period of 12 months, after which its funding level will run down.
It is therefore possible that in light of the overall economic climate, some unviable dealerships will leave the industry.
The SPV will be available to both new vehicle and mixed vehicle dealerships that trade cars, trucks, motorbikes, boats, caravans and other commercial vehicles as long as they are currently financed by GE Money Motor Solutions or GMAC.
The financing that will be available under the SPV will be for wholesale floorplan financing only. Retail financing will continue to be available through banks, building societies, credit unions and finance companies.
I would like to take this opportunity to thank the CEOs of ANZ, the Commonwealth Bank of Australia, the National Australia Bank, and Westpac, along with representatives of the automotive industry, in particular the MTAA, for the overall co-operation and support they have provided to allow this proposal to proceed.Today's announcement will help ensure the long-term viability of the automotive industry and forms part of the Government's commitment to protect jobs in this vital industry and right across the Australian economy.
5 December 2008