Australian fruit processor SPC Ardmona receives a $22 million rescue package from the Victorian government.
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What is SPC Ardmona?
The Shepparton Preserving Company (SPC) was established in 1917 to process locally grown fruit in the Goulburn Valley region of northern Victoria. In 2002, SPC merged with Ardmona to become SPC Ardmona, the largest producer of packed fruit and vegetables in Australia. Coca-Cola Amatil, an Australian beverage company that is a subsidiary of the global American Coca-Cola Company, bought SPCA in 2005.
Struggling to remain viable in recent years, SPCA sought $25 million in financial assistance from both the Victorian and federal governments, a total of $50 million, to modernise ageing infrastructure and develop new markets for its products. After much deliberation, the federal government refused to grant its share; however, the Victorian government stepped in and offered $22 million to keep the ailing company afloat. CCA has also committed an investment of $78 million.
Why did the federal government refuse funding?
Although federal cabinet had been divided on whether to provide funding assistance, Treasurer Joe Hockey rejected the request, arguing that because SPCA's parent company, CCA, had recorded profits of $215 million in the six months prior, the company did not require $50 million of Australian taxpayers' money. Mr Hockey said he was "very cautious" about "handing out taxpayers' money" to profitable companies. Both Mr Hockey and Prime Minister Tony Abbott also criticised the company for having negotiated workplace conditions that they interpreted as "overly generous" to workers and "way in excess of the award".
These criticisms controversially linked SPCA's financial woes to poor management and financial irresponsibility, claims SPCA emphatically refuted and which Opposition Leader Bill Shorten described as "disgraceful" and "insulting". The Liberal member for Murray, Sharman Stone, said the government's assertions were utterly "wrong". She accused her colleagues of manufacturing a union argument about workplace conditions to further justify the government's decision to refuse funding and to fuel the unrelated political furore emerging over reported union corruption in the building industry.
Why did SPCA seek financial assistance?
SPCA managing director Peter Kelly said the company had been seriously damaged by a "perfect storm" of external economic factors, and not by "over-generous" conditions for its workers, as suggested by the federal government. Prolonged drought, flood, fruit-fly infestations and the effects of policies implemented by the "duopolistic" major supermarket chains had taken a toll. However, the consistently high Australian dollar had the greatest impact because it facilitated a flood of cheap overseas imports into Australia, with which SPCA was unable to compete.
Furthermore, SPCA claimed that Italian tinned tomatoes had been illegally "dumped" on the Australian market, meaning they had been exported and sold to Australia for less than their value in Europe.
Claims such as these are investigated by the government's Anti-Dumping Commission to ensure that conditions remain fair for Australian industries producing the same or similar goods. In SPCA's case, the commission's investigation confirmed that 56 per cent of imported Italian tomatoes had been illegally dumped in Australia since 2010 and that SPCA had been financially harmed in the process.
Tariffs (taxes) were imposed on the imported goods to manage the problem.
How was the Victorian government's news received?
For the thousands of people in Shepparton and the Goulburn Valley region who depend on the survival of Australia's last fresh-fruit cannery, the Victorian government's cash injection was met with gratitude and immense relief.
Dr Stone, who has been praised for fighting so passionately for her constituency, is pleased that food growers and the many supporting industries can "breathe" again. She said that although 25 per cent of pears and 60 per cent of peaches had already been bulldozed, "we can turn off the bulldozers today ... we have a future".
SPCA's Mr Kelly expressed gratitude to consumers for supporting Australian-grown products in recent weeks. He said the public debate had prompted a 50 per cent lift in demand that many hope will continue.
In a further win for the region, supermarket chain Woolworths agreed to invest $3 million in sourcing its home-brand canned fruit from SPCA in future.
However, despite the funding assistance, many acknowledge that big challenges remain. They recognise that tinned fruit is not as popular as it once was and that diversification will be necessary for the region to prosper in the long-term.
What is the response?
Some describe the federal government's refusal to financially support SPCA as cold-hearted and "a slap in the face to cannery workers, growers and the entire Goulburn Valley community". Others say double standards are at play, querying why $3.5 million was allocated to Huon Aquaculture in Tasmania and why the Cadbury chocolate factory was given $16 million to re-establish tourism infrastructure while SPCA's plea was rejected. However, the government's "tough stance" attracted some supporters who argue for an end to industry subsidies and "corporate welfare". They say that providing funding to a profitable company such as CCA could set a dangerous precedent.
Others say economic decisions often have social consequences that require consideration and compassion; particularly where people's livelihoods are concerned. With this in mind, they argue that the debate about whether or not governments should bail out struggling companies remains a potent one.
Recent headlines
"Victorian government aid package 'to save' jobs at SPC Ardmona", The Australian, February 13
"Shepparton may be struggling but locals say it can survive the closure of SPC Ardmona", The Age, February 6
"Shepparton victim of anti-labour ideology", The Age, February 6
"SPC Ardmona sets the record straight", Shepparton News, February 5
What The Age says
"In principle we agree with Prime Minister Tony Abbott that it is not the role of government to prop up private enterprises, but rather to manage the economy well to maximise the opportunity for individuals and businesses to generate wealth, which in turn creates tax revenue to fund welfare and essential public services. This does not mean we are cold-hearted about the workers and families who are feeling insecure and uncertain. In the case of SPC Ardmona, we believe the most appropriate and effective use of taxpayers' money would be through payments to help with any necessary transition to new jobs. This would mean income support and funds for retraining."
Editorial opinion, February 1
What people say
"Congratulations Tony Abbott for not letting an American company extort the Australian taxpayer of money they didn't need!"
Gary, Shepparton News, February 13
"To build a sustainable and profitable business in Australia you need to innovate; to innovate you need to invest. Without investment some of Australia's best-loved packaged fruit and vegetables brands may disappear."
SPCA managing director Peter Kelly, spcardmona.com.au, January 30
"Why should the Commonwealth taxpayers be borrowing to give money to a $9 billion company that made a $215 million after-tax profit in the last six months? It just doesn't make sense."
Prime Minister Tony Abbott, ABC's 7.30, February 4
"It's not as much as I would have liked ... but it's been enough, with the public support in buying the product, for SPCA and Coca-Cola Amatil to say we'll continue to take some losses in the short term but we'll stay there, we'll stay fighting because this business was just ... too important for the country to let it just go to the cleaner."
Federal MP for Murray, Sharman Stone, The Age, February 13
"Tony Abbott just takes this hard-line economic rationalist view that there's no role for government in sustaining some of these businesses. There's a thing called Australia's future and once we lose food manufacturing we'll never get it back."
Shadow agriculture spokesman Joel Fitzgibbon, ABC News, January 31
"We are a resilient community and this is not the first time we have banded together in the face of adversity ... SPCA is an iconic brand and part of the fabric of our region and council will do everything possible to support its retention in Shepparton."
Greater Shepparton mayor Jenny Houlihan, greatershepparton.com.au, February 5
Web links
Your view
What do you think of the federal government's decision to refuse funding to SPCA? Should governments subsidise industry? Why/Why not?
