Australia’s treasurer Wayne Smith has today announced plans to boost the country’s ailing car industry.

In a statement, Smith said he was unveiling a Special Purpose Vehicle (SPV) with the support of leading Australian banks to provide liquidity to car dealer financiers who had encountered financing difficulties as a result of the global financial crisis.

“The automotive industry plays a vital role in Australia’s economy, supporting many thousands of Australian jobs, and today’s announcement will support a stable and viable future for the industry, in the face of very difficult global conditions,” the statement said.

The SPV – which will be established as a financing trust – will provide liquidity to car dealer financiers through the securitisation of eligible loans provided to car dealers.

The SPV will be implemented by 1 January 2009.

The announcement follows a further meeting today with the CEOs of ANZ, the Commonwealth Bank of Australia, the National Australia Bank and Westpac.

At the meeting an agreement was reached to provide liquidity support to car dealerships that have up until now been financed by GE Money Motor Solutions and GMAC.

Recently the two major car dealer financiers, GE Money Motor Solutions and GMAC, announced they were exiting the Australian dealer floorplan financing market. The result of this was to place great pressure on a large number of car dealerships and the Australian automotive industry more generally.

The overall size of the SPV will need to be around A$2bn, Smith said. The government will provide support to the SPV in the form of a guarantee expected to cover a minor proportion of the securities issued.

“The SPV will be designed to support viable businesses. It will not seek to provide an artificial lifeline to unviable dealerships. The eligibility criteria that will apply will be fair and transparent,” the Treasurer’s statement explained.

It added: “This is a transitional arrangement only and will remain in place until viable dealers establish new funding arrangements. Financiers who have refinanced GE or GMAC financed dealerships since those companies announced their withdrawal from the market will be eligible for SPV funding provided they meet the SPV’s eligibility criteria.”

The SPV will operate with government support, refinancing dealerships for a period of 12 months, after which its funding level will run down.