I am pleased to announce the Rudd Government has agreed to activate the Car Dealer Financing Special Purpose Vehicle to help secure the immediate future of Ford Credit in Australia and its 230 dealers and thousands of employees across the country.
The global recession has had a devastating impact on global capital markets, making it very difficult for Ford Credit to raise the liquidity it needs in the short term to continue providing its dealerships with competitive wholesale floorplan financing.
The Government has been advised that the possible departure of Ford Credit from Australia would seriously jeopardise thousands of jobs – most of which are in regional areas - not only across the Ford dealership network, but in the Australian car industry more broadly.
After detailed negotiations between Treasury officials, Credit Suisse and Ford Credit representatives, the Government has agreed that Ford Credit will participate in the Special Purpose Vehicle facility that the Prime Minister and I launched in December last year with circumstances such as these in mind.
Ford Credit will be able to access up to $550 million within the facility over the next 12 months so that it can support its dealership network.
Ford Credit's involvement in the "OzCar" facility will add a new dimension to what has already been a very successful initiative.
In October last year more than 400 dealers were stranded by the decision of GE Money Motor Solutions and GMAC to stop providing wholesale floorplan finance in Australia. However, the establishment of the Special Purpose Vehicle provided a critical framework and industry confidence to allow almost all of the former GE and GMAC dealerships to secure finance from the remaining providers, preventing thousands of potential job losses in the automotive industry.
OzCar has encouraged the departing financiers to adopt a much more orderly approach to the wind down of their loan books – thereby providing banks and other lenders with the time they needed to be able to step in.
The important role played by these banks and other lenders has meant that what was initially expected to be a $2 billion facility should now be no larger than $850 million.
The imminent departure of GMAC and the decision to use the Special Purpose Vehicle to support Ford Credit jobs means it will be necessary to activate the facility.
I will therefore be introducing a Bill into the Parliament next week that provides for an appropriation to support the Commonwealth Guarantee that will apply to various securities to be issued by the Special Purpose Vehicle.
An appropriation is required because the participating banks have only agreed to provide liquidity to the Special Purpose Vehicle through the purchase of securities on the basis that non 'AAA' rated securities will be Commonwealth Guaranteed. The Special Purpose Vehicle does not require any capital contribution by the Commonwealth and will not have a direct impact on the Budget bottom line, other than in the event that the guarantee is called.
Failure to pass this Bill risks the departure of Ford Credit and the loss of thousands of Australian jobs in the automotive industry.
13 May 2009