COCA-COLA Amatil has agreed to a number of conditions put by the government to clear the way for a taxpayer cash injection into its fruit canning subsidiary SPC Ardmona, putting pressure on the federal cabinet to approve the deal when it next meets in January.
The conditions include a proviso to control wages of workers at SPCA's Victorian plants, sources said, which some ministers consider too generous.
SPCA has also promised to deliver productivity gains and focus on developing new products if it gets the money, The Australian Financial Review reports.
Any financial assistance will be fiercely opposed by economically conservative members of cabinet who have briefed journalists against it, emboldened by the government's recent decision not to bail out GM Holden.
Prime Minister Tony Abbott appeared to talk tough on SPCA's request for $25 million in funding after it was discussed at the last cabinet meeting for the year. However, sources said Mr Abbott was sympathetic to the company and its willingness to co-operate.
"They've certainly made an approach to the government and the government is considering their approach. The difficulty that I have is that if we say to any business 'here is a pot of money', there is a queue of businesses that are going to line up saying 'What about us?'," Mr Abbott said.
Industry Minister Ian Macfarlane will prepare a proposal on SPCA over the holiday break that will be considered at cabinet's first meeting in 2014.From cannery to modern food business
In a statement, SPCA said it was seeking the funding, which it hopes will be matched by a $25 million injection from the Victorian state government, to urgently transform the company from a cannery to modern food business.
"We are confident we have addressed every productivity issue the government has asked us about. We are fighting every inch of the way for our business and the growers and farmers of the Goulburn Valley," SPCA managing director Peter Kelly said.
"Discussions are continuing with the federal government and we are hopeful of a positive outcome."
A funding deal is supported by some within Mr Abbott's own party, including local MP Sharman Stone, and the Nationals.
"To see the orchards go out of business due to a decision not to fund new factory equipment would just be totally irrational.
"This is about helping SPCA overcome a perfect storm, all of which was none of their doing," Dr Stone said.
Dr Stone rejected Mr Abbott's reasoning that giving money to SPCA would lead to a deluge of other requests.
"These are all demands of our economy and it's not illegitimate. It's the business of the government to create the environment where people can thrive, but sometimes in creating that environment you've got to put taxpayer funds in investments which are going to return dividends in the longer run," she said.
Nationals senator Bridget McKenzie said SPCA should not be put into the same category as GM Holden.
"It's very, very different to the automotive industry, which has been subject to ongoing government support. There are various people that will argue the merits of that or otherwise. [But] I'm not viewing this in the same basket at all," she said.
A potential stumbling block is Victoria's reluctance to commit to providing another $25 million, to add up to SPCA's total request for $50 million of funding. The state government believes the burden should not be equally split, and the federal government should pay more.
Former industry minister Kim Carr, who pledged $25 million to SPCA in September if Labor was re-elected, called for more industry subsidies.
"It is short-sighted madness on behalf of the government to stand back and see manufacturing capabilities in this country leave forever rather than helping manufacturers weather the current storm so the jobs, the capacity and the investment remain [for] when the dollar returns to normal," he said.