It is possible that many companies in the car industry, as well as tens of millions of taxpayers’ dollars could be saved according to PPB Advisory – a major insolvency company that advises on business restructures and turnarounds. They are calling on the federal government to amend the Fair Entitlements Guarantee scheme to allow employers to use taxpayers’ funds for redundancies without having to collapse first.
The Australian Government provides assistance to people owed outstanding employee entitlements following the insolvency or bankruptcy of employers – available through the Fair Entitlements Guarantee (FEG) or the General Employee Entitlements and Redundancy Scheme (GEERS).
PPB partner Stephen Longley is reported in The Australian (17/2/14) saying it makes sense to change the FEG to give some of the car industry firms a fighting chance:
“Some component makers could survive if they were given government assistance to slash staff numbers by up to 30% and avoid insolvency…
If the business survives we have actually saved money that would have been paid out if the business collapses…
If a business survives for a year or two or three, and eventually collapses, it is not like they are double dipping, because the redundancy (liability) that’s left in the company is only those that didn’t get made redundant the first time round.”
In 2012 APV needed to cut its workforce from 130 to 100 at a cost of $2 million. It was able to find $1m but collapsed because it couldn’t fund all the redundancies and the staff wouldn’t accept a reduced package.
“If a restructure package was available to APV a contribution of $1m would have saved around 100 jobs and the net cost to taxpayers would have actually been $8m.”
The $8m figure is based on the fact that the government paid out to make the whole workforce redundant at a cost of $9m.
PPB says many component makers have high labour costs and need to reduce worker numbers by 20-30% to survive. They have put this idea to the Productivity Commission, to various stakeholders in the automotive sector, and to the Victorian and federal governments.
They have been told “It is in the loop for discussion”.
How long will this take? Will taxpayers be given feedback?