What you need to know about the industry’s new $7.2 billion contract with GE
The Australian Financial Services Association (AFSA) says it’s been inundated with calls from members wanting to know what the latest contract will mean for their businesses.
“There’s been a huge amount of inquiries from members about the impact the new contract has on them,” AFSA’s secretary general Paul Durney said.
Mr Durnay says it will be important to get some clarity on the impact on businesses of the new arrangement.
AFLSA members will be able to opt out of the contract, which was announced last week, when they sign up.
The contract was designed to ensure companies with $50 billion in revenue receive at least a $7,000 rebate for each customer they have, while some other companies will be given a rebate for every $1 they spend.
AFSA says this rebate will be used to buy back equipment and parts from the industry, while the other rebate will go to businesses with more than $50 million in revenue.
It says this will be a net savings for the sector and the Australian Government.
Under the contract with Geely, companies will pay a rebate of up to $1,500 for every 1 per cent increase in their revenue, while they’ll also be entitled to receive a rebate on certain types of machinery and services.
Companies with annual turnover above $10 billion will receive $1 million in rebates on all types of machines, equipment and services for their first 10 years.
In the second year, companies with turnover below $10 million will receive a rebate of up $500,000, up to a maximum of $1.5 million.
For smaller companies, the rebate will range from $400,000 to $700,000.
But for a business with annual revenue of $50,000 or less, the rebates will be capped at $500.
That means businesses that are only worth less than $10m in annual revenue will only get a rebate up to the $1m cap.
There will be some exemptions, however, for small businesses with annual revenues of $10,000 and less.
With the new rebate, Geely will receive an average rebate of $8,000 a year for its first 10-year contract, and up to an additional $2,000 per year in subsequent years.
“This will mean that Geely’s new contract will deliver a net saving of $9,000 over the next 10 years, for the $50bn industry, which is a significant reduction on the $15bn industry the Government expects to achieve in the next decade,” AFSAA’s CEO John Smith said.
“The new rebate will also allow Geely to invest in and retain some of its key staff in Australia, while also boosting its capacity to invest elsewhere in Australia.”
AFSSA says that in 2020, Geele will be the only manufacturer to have a direct contract with the Federal Government.
“For the industry as a whole, GEELE is expected to achieve $1 billion in savings by 2020, while Geely can benefit from the $2 billion that will be saved through the rebate,” Mr Smith said.””GEELE will also continue to have an outsourced workforce, while retaining a competitive edge to the other manufacturers that have direct contracts with the Government.