This is the real world frontline of an issue that has absorbed political and economic theorists for decades. The shift from rhetoric to reality will come frighteningly soon for many observers. Ford will stop making cars here in exactly one year. Holden and Toyota will go by 2017. A clear picture is emerging in the sector that many businesses are in much the same position. They are too busy staying afloat to worry about the rocks ahead. There are warnings of an employment wipeout as up to 200,000 jobs could be ripped from the economy. Assistance debated

Illustration: Rod Clement Now a debate is raging about whether the government should once again stretch its financial assistance - which has already run to billions of dollars in the past two decades - to the broader industry as they struggle for survival in the void left behind. The new Turnbull government, like the Abbott government, wants its main assistance package to the industry, the Automotive Transformation Scheme (ATS), to come to a "natural conclusion" when car making finishes in 2017 – saving at least $400 million. But the opposition, industry experts and academics argue the funding should run until 2020/21, its original legislated end, and be broadened to give businesses within the automotive supply chain a chance to diversify. They argue the cost of keeping the scheme will be outweighed by the bill to the government from job losses and public-funded redundancies.

My concern is a very large proportion of them won't be able to survive after the closure. PPB Advisory partner Stephen Longley "There will be a number of businesses who will be running hard day-to-day, just running their existing businesses and fulfilling orders," Mr Verney's colleague Stephen Longley says. "But it must be pretty hard when you go home at night and put your head on the pillow [knowing] that end is going to come in a year or two years – what happens after that?" Victoria wants more assistance

The Andrews' Labor government in Victoria – where about 55 per cent of Australia's automotive workers live – is concerned. "There is a lack of sufficiently robust and detailed business planning towards transition occurring across the sector," says the Victorian government's submission to a Senate inquiry into the automotive industry. "Industry consultation indicates that many businesses have not started planning for a transition into different sectors or new markets." It's been two years since Ford, Holden and Toyota announced they would close their factories in Australia. Professor Goran Roos – who has advised state and federal governments and was on former prime minister Julia Gillard's Manufacturing Leaders Group – disagrees.

On average, he says, it takes a company about seven years to build alternative income streams and a new customer base. Professor Roos acknowledges this is difficult – particularly when a business hasn't already started on a diversification plan. He estimates about 75 per cent of industry will shut down when Ford, Holden and Toyota quit local manufacturing. "You would have then to say 'in order to save the companies in the supply chain, we should have negotiated a seven year extraction period'," he says. "Yes, that would have cost us some money but that money would have been easily repaid by not having a very large chunk of the supply chain keeling over. We didn't do that because we had a thoughtless approach on how to get them to leave." Death knell sounded in 2013

The death knell for mass passenger vehicle making in Australia sounded two weeks before Christmas 2013, about six months after Ford announced it would shut its factories, when Nationals leader and the acting prime minister Warren Truss and former treasurer Joe Hockey attacked Holden in Federal Parliament. In a seemingly calculated performance, the Treasurer said it was time for Holden to "come clean" and be "fair dinkum" with the Australian people over its future in the country. "Either you're here or you're not," Mr Hockey said. Mr Truss added that Holden "owe it to the workers of General Motors not to go into the Christmas period without making a clear commitment to manufacturing in this country."

For Holden management, which had been in commercial-in-confidence discussions with the government for months, it was a clear signal that the federal cabinet had turned on the company, and wanted a swift end. Holden in turn delivered a swift reply; it would close its Australian factories by 2017. Two months later Toyota announced it would close its factory too, given there would be not enough volume from those in the component supply chain to keep its Australian manufacturing operations continuing. Suppliers upping pressure for support Bosch Australia President Gavin Smith. Credit:Wayne Taylor

One major player in that supply chain is German multinational engineering and electronics company Bosch. It produces and engineers automotive parts in Australia and has had a presence in the country since 1907. The ATS has helped Bosch fund its local expansion plans, and the president of its Australian subsidiary, Gavin Smith, says: "it would be a shame to throw the sector under a bus and walk away from it because the three vehicle manufacturers are stopping". Following consolidation of Bosch's global diode production in Australia, and closure of its German manufacturing plant, Bosch is planning to double its output of diodes to 180 million pieces a year. The expansion would require further investment of up to $15 million, and result in "modest" job creation, Mr Smith says. But Mr Smith said Bosch's head office decision to consolidate diode production in Australia was approved on the basis that the ATS legislation would continue until 2020/21.

"The investments that we have made here were underpinned by the current scheme as legislated and if that scheme were to change or close early, the business case for those decisions would likely be quite different," he said, "From a multinational subsidiary perspective, this is not a discussion that we enjoy." Decisions harder to justify Former Victorian premier and treasurer John Brumby. Credit:Alex Ellinghausen This doesn't mean Bosch will shut its Australian diode factory in Melbourne's outer east. Mr Smith said production would continue, but it made the next investments more difficult to justify.

"The challenge in a multinational is that you are not just competing with your typical external competitors. You're competing for capital investment from a parent who can invest pretty much anywhere in the world. "Australia is not at the front of mind for the group when they consider where to make investments. "And when the board sees after a period of time that investment decisions they have made are being undermined by changes to the underpinning legislated schemes, then that makes them question is it the right place to make future investments." Former Victorian premier and treasurer John Brumby said while the services sector – the three main industries of which are education, financial services and tourism – accounted for 90 per cent of the new jobs in the economy, Australia still needed a strong manufacturing sector. "Every successful advanced economy around the world, still makes and creates things. So for us, the big challenge is what we are going to do in the creative and making space, and the answer is not much," Mr Brumby said.

"There is a bit of defence work and F/A-18 and maybe some submarine work but one of the mainstays has been motor vehicles." Research funding must lift The Australian car industry is coming to the end of the road. Credit:Paul Rovere Mr Brumby said more government assistance needed to be poured into research and development and encouraging entrepreneurship. "We are just way underdone. University research funding has been cut, national health and medical research council funding for applicants now, they have a 15 per cent chance of success..

"We have seen CSIRO funding cut, so all of the engine rooms have had their funding substantially reduced and the biggest single driver of investment in manufacturing – the motor vehicle industry – has had its support significantly reduced. "When you put those two waves together, it's a track that doesn't lead you to good news or good outcomes. It needs to change, and it needs to change quickly." Job losses could be heavy The Federation of Automotive Products Manufacturers estimates the automotive industry generates 6.5 jobs in associated supply and consumer industries for every one automotive job.

This is where were the job loss estimates from the closures of Ford, Holden and Toyota's factories become murky because its calculations are based on how far and wide you go in the supply chain. University of Adelaide researchers, Lance Worrall and John Spoehr​, estimate the closures will trigger a net loss of just under 200,000 jobs, with about $29 billion wiped off Australia's gross domestic product – a gauge for the economy's health. "Now is the time for robust and well resourced growth and innovation promoting policies to help counter deindustrialisation and support accelerated industry diversification into new manufacturing opportunities and value chains," the pair wrote in a submission to the Senate Economics References Committee, which is investigating the future of Australia's automotive industry. "A repurposed ATS could make a significant contribution to this urgent challenge." The Senate inquiry's interim report was released in August and recommended the government should keep the ATS running until 2020/21 to help businesses diversify.

It found that about $800 million under the scheme would be unspent and go back into the government's coffers unless it was changed to allow businesses to produce parts for purposes other than domestic vehicle manufacturing. Labor sounds warning on employment Former industry and innovation minister Kim Carr. Credit:Paul Jeffers Labor Senator and former industry and innovation minister Kim Carr said "hundreds and thousands of Australian families are facing unemployment". "I'm talking about people in all sorts of places," Senator Carr said.

"I was talking to a locksmith company, talking to people in the steel industry, there are people in the glass sector. These are people who aren't anywhere near the registration for ATS but dependent on the orders to come through for Australian automotive manufacturing. "You don't have to accept this conservative ideology that you de-industrialise the country. It's just not necessary. I have recently visited plants that are looking to expand but they need assistance." Government defends managing transition Innovation Minister Christopher Pyne. Credit:Pat Scala The fact is, the government has already moved on from the car industry. Treasurer Scott Morrison said international trade agreements, including the ones Australia has signed with Korea, Japan and China, as well as the 12 nation Trans-Pacific Partnership would help fuel Australia's next wave of economic prosperity.

"The government is focused on innovation and helping develop new opportunities for Australians, particularly with our free trade agreements and the Trans Pacific Partnership just concluded by [Trade Minister] Andrew Robb, that have provided further access into, particularly the growing middle classes in Asia," Mr Morrison said in a statement. "We are working to build a more agile, competitive and innovative economy, one that is going to assist our nation address modern challenges so that Australians will be better off in a new economy with new jobs in the future." Innovation Minister Christopher Pyne argues in a statement that keeping the ATS tied to domestic vehicle production, which is how it will come to a "natural conclusion" in 2017 was "critical to an orderly transition of the automotive manufacturing". Mr Pyne said the government's $155 million 'growth fund', which was announced in May 2014, was helping automotive workers find new jobs. "The government is working with the automotive industry to ensure a clear, orderly transition from passenger vehicle manufacturing by the end of 2017," he said.

"The Growth Fund is helping automotive workers from Holden and Toyota transition to new jobs; encouraging diversification by automotive supply chain firms; and accelerating new private sector business activity outside of car manufacturing in Victoria and South Australia." The government is back by the Productivity Commission which found the ATS "imposes considerable costs on taxpayers and other parts of the economy" and should end when the car makers close their factories. "Further, the ongoing nature of assistance provided by the ATS and its predecessor, the Automotive Competitiveness and Investment Scheme partly shields firms from competitive pressures, and may result in firms making decisions that are not based on a business case that is sound over the long term," the commission reported. It said more than $300 million of assistance remained available to component manufacturers between 2014 and 2017, and this could be used, in part, to aid diversification efforts. The Productivity Commission also estimated that Australian taxpayers sank $30 billion of subsidies into the local car industry between 1997 and 2012.

But there is another way of looking at the data. Australia, at least for the time being, is one of just 13 countries with a car industry spanning design to production. According to former manufacturing minister Kim Carr, Australian taxpayers pay $17.80 per person in automotive manufacturing subsidies to keep those jobs and that industrial capability. The same subsidy figure for the United States industry is $264 per taxpayer. A future of spare parts? Australia is getting nothing in terms of employment from getting rid of tariffs and the car industry and creating the most open car market in the developed world. Credit:Digital image: Simon Bosch

Ford has also managed to retain 63 of its suppliers to produce spare parts for existing Falcon and Territory models, and 17 of those businesses, including MTM and Futuris, will supply Ford's global operations. "This work will help us maintain a supply of high-quality parts for our customers for years to come," said Carl Parkin, Ford of Australia's purchasing general manager. Nissan has also kept on 160 people at its casting plant in Melbourne marking parts, complete with a little kangaroo symbol, in its Pathfinder and Navara trucks, LEAF electric cars and Infiniti Q50. But as PPB Advisory partner Stephen Longley crunches the numbers – 150 manufacturers which supply the car makers directly and another 1000 to 2000 businesses supplying them with parts for their components – he believes there is still a role for government. "A lot of these business don't have the capital to be able to diversify and it's not an area that traditional financiers will go near, particularly in the current climate in terms of a known exit," Mr Longley said.

"Even those who might have the energy and the feeling they could diversify, do they have the capital to be able to do it? "My concern is a very large proportion of them won't be able to survive after the closure."