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Australia sets up $89 million fund for auto workers hit by GM exit

Two new General Motors Holden Veritas sit in a showroom in Melbourne September 5, 2008. REUTERS/Mick Tsikas

SYDNEY (Reuters) - Australia is setting up a A$100 million ($89 million) fund to support regions affected by General Motors Co's (GM) decision to stop production in the country by 2017, including directly supporting those workers affected by the decision.

GM, the world's second-biggest auto maker, said last week it would end vehicle and engine manufacturing in Australia by the end of 2017, dealing a severe blow to the country's auto sector and manufacturing future. The U.S. auto maker cited high costs, a strong Australian dollar and a small, fragmented and highly competitive domestic market as reasons for its decision.

Prime Minister Tony Abbott is launching the fund and related programs as a way to help transition the country from heavy industrial manufacturing to "higher value-added" production, other than just subsidies.

"In the end, no government has ever subsidized its way to prosperity," Abbott told reporters on Wednesday.

"This government will be very loathe to consider requests for subsidies. We will be very loathe to do for businesses in trouble, the sorts of things that they would be doing for themselves."

The fund will include A$60 million in contributions from the Australian federal government and A$12 million from the Victorian government, with the South Australian government contributing the remainder. Abbott said the government also expected GM to make a contribution.

Workers affected by GM Holden's closure will be able to access some support, while the fund will also help existing components manufacturers in Victoria and South Australia, along with other manufacturers and research initiatives.

($1 = 1.1250 Australian dollars)

(Reporting by Maggie Lu Yueyang; Editing by Jacqueline Wong)