Subcommittee on the Automotive Industry in Canada Committee on March 9th, 2009

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Nantais.

Mr. Adams, you have an opportunity for a 10-minute opening statement.

[David Adams, President, Association of International Automobile Manufacturers of Canada]

Sure.

Thank you very much, Mr. Chairman and committee members.

I'd like to thank you for inviting me to this forum to present the views of the Association of International Automobile Manufacturers of Canada on the current state of the automotive industry.

By way of background, the AIAMC is the national trade association that represents the Canadian interests of 14 international automobile manufacturers that distribute, market, and manufacture vehicles in Canada.

In 2008, AIAMC members sold over 839,000 new vehicles in Canada, representing 51.2% of Canada's new vehicle market, the first time ever that AIAMC members have comprised more than 50% of the Canadian market.

While our members' sales have grown, so has their Canadian investment. AIAMC members have invested over $8 billion in manufacturing facilities alone. Annual production reached 796,000 new vehicles in 2008, or 38% of the 2.078 million vehicles produced by the three member companies that have production facilities in Canada.

While the majority of vehicles produced--75%--are exported out of the country, almost exclusively to the U.S., each of these companies sells more of the vehicles it builds in Canada to Canadians. For instance, 48% of Honda and Acura vehicles sold in Canada were produced at Honda of Canada Manufacturing. Thirty-seven percent of Toyota and Lexus vehicles sold in Canada were built at Toyota Motor Manufacturing Canada. Additionally, 3% of Suzuki sales in Canada were built at CAMI, and although I didn't mention it earlier, 1% of Volkswagen sales in Canada are actually built at the Chrysler facility in Windsor. Further, compared to other companies producing in Canada, these three companies have a higher percentage of their NAFTA production in Canada: Honda has almost 27% of their production here, Toyota has 26.3%, and CAMI has 100%.

While many would view the membership of the AIAMC as importers, in the context of NAFTA, over 50% of AIAMC member sales in Canada in 2008 were produced in the NAFTA region. And when Kia's $1.2 billion plant in Georgia opens for full production, Porsche and Jaguar/Land Rover will be the only two of our 14 members not producing vehicles in the NAFTA region.

The North American production-to-sales ratios bear out the fact that import penetration has not increased. Since 1990, the North American production-to-sales ratio has ranged from about 78% to a high of 93%, with most years being in the low 80% range. In 2008, the production-to-sales ratio was 80%. So while more consumers may have been buying our members' products, more of them were also being made in North America, providing jobs both in automotive assembly and in the affiliated parts manufacturing facilities.

As you are well aware, things have changed dramatically, as Mark indicated in his remarks, in the Canadian automotive industry in the last eight months, even in the last week. While much of the dire news has been focused on GM and Chrysler, Honda Canada sales were down 42% in February and 39% year to date. Toyota Canada sales were down almost 26% in February, or 15.5% year to date. In fact, only five of our 14 members increased sales on a year-to-date basis over 2008. Overall, sales for our membership are down 15% year to date.

Neither Canada nor the U.S. are isolated cases, either, as Mark previously mentioned. In Canada, from January through December last year, consumer confidence plummeted almost 30 points as Canada moved into a recession that had already started in the U.S. at the end of 2007. The U.S. recession was largely the cause of Canadian production falling almost 20% from the 2007 level owing to the fact that 75% of our members' production is exported to the United States. And that number is higher for the Detroit three.

Canadians became wary of buying major purchases as concern over the economy and their jobs increased. This was clearly evident in vehicle sales. Despite the fact that our sales last year were only down 1.1% from the 2007 level, which represents the third best year on record, the sales were essentially marked by two dramatically different halves. At the end of the first quarter last year, sales were up 7.3% and were tracking for an all-time sales record. By the end of the second quarter, sales were only up 2.4% over 2007, and, as I noted, by the end of the year we were down 1.1%. So the trend is very import to focus on, not the relatively minor dip in overall sales.

As the recession has taken hold, so has the negative trend. Mark already alluded to some of the sales declines in January and February, which were significant. Sales are currently tracking at a rate of 1.3 million units, which would represent a 20% decline in auto sales if it continues at this rate. Most analysts seem to think that the trend will not continue, but even so, it's estimated that sales will be down between 13% and 15%.

Sales decline will be very challenging for Canada's 3,500 new car dealers, who are also feeling the impact of tightening credit. In that regard, we wish to commend the government on the provision of the $12 billion Canadian secured credit facility in the recent budget. We believe this is helpful in ensuring that more credit is available in the marketplace. However, the speed of getting this facility in place is paramount.

Additionally, in a consultation session sponsored by the C.D. Howe Institute last Friday, there was some concern that the $12 billion may not be enough. There's hope that if that is the case, there would be consideration of additional funds being made available. That said, as Mark indicated as well, more credit availability does not necessarily mean that consumers will re-enter the marketplace. In our view, additional consumer incentive is required.

I won't go into too much detail about the scrappage program. You've already heard remarks from Mark. I'll just say in that regard that we are supportive of an enhanced scrappage program as well. We appreciate that the original scrappage program was essentially designed as an environmental initiative, with no direct linkage to the automotive industry. However, we think an enhanced program, as an economic stimulus, is important and it needs to be put in place. In terms of broad parameters, we believe that establishing a $300 million scrappage program with the goal of removing 100,000 vehicles from 1998 or older from Canada's roadways over the course of a one-year period would be something to strive for. This would increase consumer throughput in dealerships, thus shoring up vehicle sales, while providing concurrent safety and environmental benefits.

Given that new vehicles are lasting upwards of nine years and we're heading into a regime of regulated fuel consumption in Canada, a program similar to the BC SCRAP-IT program, which provides a sliding incentive based on GHG emission reductions over a two-year period, would provide the government with a significant measurable reduction of GHG emissions as well.

While scrappage programs would most certainly assist in bringing consumers back to the dealerships, thereby assisting the retail industry in Canada, no amount of sales increase in Canada is going to appreciably increase Canada's production by any of the six manufacturers producing here. The same would hold true for the parts manufacturers in Canada. We saw production fall by 20% last year because the U.S. was already into a recession. It's clear that further production cuts in North America and elsewhere will be necessary to adjust to whatever the new normal of U.S. sales will be.

The $16.8 million seasonally adjusted average of sales that have occurred throughout pretty much the last decade are not realistic and they are not likely to return any time soon. Those sales volumes were predicated on easy credit, high levels of liquidity, and generous incentives from vehicle manufacturers, combined with a growing economy, high consumer confidence, and relatively low unemployment.

Since the end of 2007, the U.S. economy has been in trouble. Consumer confidence has plummeted and unemployment levels have been rising rapidly, with 651,000 jobs in the U.S. vaporized last month alone.

Production capacity in North America has been built up to around 17 million units, which means there is excess capacity right now of about 7 million units, or roughly 28 vehicle assembly plants in North America. New, significantly lower sales volumes have forced all manufacturers to ratchet back production. Most analysts suggest that it will be several years, if ever, before we get back up to 16 million units in sales.

A December 2008 study by the Conference Board of Canada noted that profits last year for Canadian parts makers would be down $1 billion, and an additional 10,800 jobs would be lost in 2008-09, on top of the 12,008 jobs lost in 2007. I suspect that Mr. Fedchun painted a more bleak and accurate picture of the automotive parts industry when he appeared before this committee, so I won't elaborate on that at this point in time.

In our view, the Canadian government, however, should do its utmost to preserve the automotive parts manufacturing base in Canada, as many of its largest parts makers are global innovators in automotive components and subassemblies.

With respect to the provision of public funds and aid to the auto industry, prospects for the automotive parts manufacturers and the vehicle assemblers will not improve, as I noted, until U.S. sales improve. It's important that any aid that is provided to the industry be available on an equitable basis for all who need it, including the parts makers and dealers. Additionally, aid should not confer competitive advantage on those companies receiving it. For this reason, it's fundamentally important that there be a transparent process for the application and receipt of public aid and an accountability structure put in place to ensure the aid is being used for its designated purposes.

Finally, as the economic situation becomes more dire, protectionist sentiments will take hold, and for this reason we believe that a commitment to the maintenance of an open automotive market in Canada should also be a condition of the provision of aids to manufacturers.

I have a bit more, but I'll leave it at that for now.

Thank you very much.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Adams.

Now we have our next guest, Mr. Don Romano. I overlooked the introduction of him at the beginning. He is the vice-chair and president and CEO of Mazda Canada Inc.

Welcome to our committee. You have 10 minutes to make an introductory statement.

[Don Romano, Vice-Chair, President and Chief Executive Officer of Mazda Canada Inc, Association of International Automobile Manufacturers of Canada]

Thank you, Mr. Chair and committee members.

I'm not going to cover a lot of ground.

Mazda Canada is based in Toronto. We have offices in Montreal and Vancouver. We have a warehouse in Toronto. We have 164 dealers across the nation and we employ over 6,000 directly.

We've talked a lot about the declining industry, but I think one of the greater concerns we have right now is the speed at which this decline is taking place. If you look at what happened in the United States, you'll see that the decline started in December of 2007 and was half a per cent. It took seven months before it became a 25% reduction. The decline in Canada started in November. We reached a 28% decline in four months.

The United States is now down 41%, and I believe it's possible, if we don't take action quickly, given the speed at which this change is occurring, that we could also see declines at that same level. We are seeing members in this industry already taking declines at that level.

Another trend that's concerning us is the credit, which is contributing to the speed of this decline. The costs of our funds, despite the best actions that we've given to the banks, are going up. Right now, the funds that we acquire to lend out to customers in APR financing have, in the last 30 days, increased 50 basis points. The cost of funds for leasing has gone up almost 100 basis points in 30 days.

Now, these trends haven't affected the industry yet. These are things that have happened, but that haven't yet flowed through to the consumer side, so we anticipate more challenges in the very near future as the cost of credit goes up.

Leasing is a particular concern. If you take a look at the trends, a year ago we were leasing 43% of all car transactions in Canada. Forty-three per cent of cars were being leased. Today it's 19%. That's a 24-point reduction in the number of leases that are taking place. If you annualize that out over the number of car sales, that's over 390,000 car sales. The decline in our industry isn't that big.

There is a correlation between the decline in leasing and the decline in our industry. No, it's not the only problem, but it is a problem that the secured credit facility needs to be aware of and needs to address through securitization and through this additional focus on making sure we have as many competitive options as possible in the marketplace to secure leasing. What leasing does is provide our consumers an option for a lower payment. When you take that lower payment out of the marketplace, there isn't another option, unless they're going to go for 10- to 12-year finance terms, which doesn't make any sense.

For Mazda, this is particularly important in the province of Quebec. We were doing over 50% leasing. But because there are very few options available and the rates are becoming more and more expensive, that option is becoming less and less available to consumers. Yes, you'll hear that there is credit available, but at what cost? As the price of credit goes up and as the options on leasing disappear, the number of customers we can attract into our showrooms begins to go down. As that goes down, so goes our industry.

So one of our concerns is to keep an eye on the need and make sure there's ample credit, not just for the standard APR, but also for the leasing, which was such a big part of our industry less than a year ago.

Finally, I'm representing a lot of dealers across the country who are also having problems with financing and tight credit situations. Right now, we're seeing dealers who are fortunate enough to have flooring lines. Dealers don't buy the cars. They go out and they finance the cars that you see in the showrooms. If they're fortunate enough to have those flooring lines, their rates are going up. Our dealers' rates on their floor plan, over the last 60 days, have gone up 50 basis points. That means every car out there is costing them more to hold onto. That, coupled with the additional expense of financing the cars, is translating into higher prices for consumers, which is making our cars less affordable and is driving fewer customers into the showroom.

On behalf of the dealers, we also have to make sure that they have ample credit opportunities through our banking systems to provide competitive flooring, competitive construction, competitive flooring lines, and as well, ultimately the consumer financing they need to run their businesses.

Unlike the United States dealership groups, which in many cases are that—they're groups, large corporations—none of ours in Canada, for Mazda, are corporations. They're family owned businesses, small businesses, and many of them are owned by second- and third-generation people who have inherited these businesses and are just trying to keep them afloat right now.

It's hard enough, with the industry going down, to not have the credit available to buy cars from the factory, to floor the cars, to finish their construction projects, to add an additional service bay. When I talk about the tightening of credit, I want to make sure that we've kept in mind the needs of our dealer body—not just Mazda's, but those of every manufacturer out there—and the struggles they're having.

That concludes my remarks, other than to say that I appreciate all that has been done and the efforts you're making in having us here tonight. I know you're putting in a lot of late night hours.

But the industry is moving in the wrong direction, quickly. I believe that with the right actions made promptly, we can turn this around. The industry is sick, but it is not terminal.

I thank you for your time.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Romano.

Now we'll go to Mr. Worts. You have ten minutes to make your introductory statement.

[David Worts, Executive Director, Japan Automobile Manufacturers Association of Canada]

Mr. Chairman, thank you for the invitation to participate in this hearing on the auto industry in Canada.

First let me say a few words about our association. JAMA Canada was established in 1984 with the mandate to enhance understanding on trade and economic issues in the auto sector and to promote closer relations between Canada and Japan. Currently, we have eight members; four are manufacturing vehicles in Canada: Honda, Toyota, Suzuki, and Hino Trucks. Seven of our members have affiliated plants in the U.S. or Mexico.

Canadian manufacturing operations account for approximately a third of total light vehicle production in Canada. In 1984 every vehicle our members sold came from Japan. Today three out of every five vehicles sold in Canada by our members are made in North America. Moreover, Canada has been a net exporter of light vehicles every year since 1993. In 2008, twice as many vehicles were exported from Canada as were imported from Japan.

In the next few months Canadian production among our members will pass the 10 million mark. I note that Honda in Alliston will celebrate subproduction of its five millionth vehicle in 2009. Cumulative vehicle manufacturing investment stands at over $9 billion, including the new Toyota plant in Woodstock, Honda's four-cylinder engine plant in Alliston, and the Hino truck plant in Woodstock as well. Production in Canada last year totalled 682,000 light vehicles as well as 1,230 medium-duty trucks, and a little fewer than 74% were exported; 94% went to the U.S. and the remainder to a variety of other countries.

Compared to the Detroit three, Honda and Toyota devote a larger percentage of their Canadian production to the domestic market, as small vehicles such as the Civic and the Corolla are among the most popular with Canadian consumers. In addition, 65 Japanese-related auto parts, materials, and tooling manufacturers in Canada have been established and are employing over 16,000 team members. Total direct and indirect employment stands at over 70,000 in Canada, including dealerships, as well as about 29,000 in vehicle and auto parts manufacturing. I think you have a copy of a map I distributed, which shows all the vehicle and parts plants currently operating in Canada.

From our perspective, the current crisis facing the auto industry is not only global in scope, as many others have pointed out, but the industry is struggling with both structural and cyclical aspects. In spite of plunging demand in the last two months of 2008, it was a record year for sales for our member companies. However, combined sales are down 20% at the end of February, as others have noted. The onset of the recession has created widespread concern among our members over falling demand, lower consumer confidence, and tighter credit. For the Canadian and the global auto industry, 2009 may well be remembered as a transformative period in its history.

While the Canadian auto industry has been restructuring due to the convergence of several factors over the last few years--currency volatility, the price of oil and other commodities, and shifting consumer demand--in some respects the industry began this period of structural change over 30 years ago with the first oil shock in 1973 and the subsequent rise of globalization. For Japanese automakers in Canada, this period of continuous change has been remarkable for the growth of investment in local production for Canada and for export to the U.S. As you have often heard, the Canadian auto industry is deeply integrated within North America. This has allowed Canada to punch above its weight, producing about twice as much as we consume and exporting a high percentage of local production. With the relatively small domestic market, access to the larger U.S. market is necessary to sustain this level of production and export.

Clearly, the cyclical downturn that started last year in the U.S. is the reason production in Canada is now at risk. Moreover the return of the U.S. consumer is necessary to revive production in Canada. Meanwhile governments continue to play a critical role in stimulating consumer confidence as well as creating a positive and competitive environment for trade in investment by maintaining open, secure, and trade-efficient borders; infrastructure improvements, including the border points; sound fiscal and monetary policies; and supporting innovation through R and D tax credits, etc.

In this regard we are encouraged by the government's effort in the federal budget to backstop credit for dealers with the $12 billion secured credit facility, improving access to credit for suppliers, as well as extending the capital cost allowance on machinery and production equipment.

Whether these measures will bring consumers back into the market is not certain. A more direct consumer stimulus, such as an enhanced scrappage program that others have already suggested, may be needed.

With respect to financial support from the federal and Ontario governments, while JAMA Canada members are not seeking loans or credit assistance at this time, we are concerned that the proposed funds for General Motors and Chrysler may be used to create disadvantages for those in the market not seeking such assistance rather than to maintain Canada's current proportion of production in North America.

Finally, on the matter of harmonized regulations, JAMA Canada fully supports the position of the AIAMC and the CVMA on the need to establish a single dominant standard in North America for fuel efficiency, vehicle safety, and emissions in Canada due to the highly integrated nature of the industry.

We also have some concerns about the impact of an FTA with Korea, as well as the possible negotiations with the EU, but as the time is short, I will provide the committee with our position paper when it's available in both official languages.

Thank you for the opportunity to participate in the discussion. I look forward to your questions.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Worts.

Our last witness is Mr. Carnevale. You have 10 minutes to make an introductory statement.

[Angelo Carnevale, Vice-President, Canadian Association of Moldmakers]

Thank you, Mr. Chairman.

Greetings, honourable members.

On behalf of the Canadian Association of Moldmakers, and in my capacity as vice-president, I want to say thank you. We appreciate the opportunity afforded to us by your committee to offer our input on the current state of the tooling industry in Canada as it pertains to the automotive industry, and we thank you for that.

To state the obvious, our toolmaking industry is in crisis. What may, or may not, be surprising is that we have been dealing with this situation for several years; it's not just due to the current financial crisis. In effect, the rest of Canada is just now feeling our pain.

The initial root of our problem has been inequitable payment terms from the Detroit three—the PPAP payment terms—who are traditionally the largest customers of tool shops. Traditionally, a car maker or OEM would place a production program with its preferred tier one supplier, who in turn would place a tool to be built with their preferred tool shop. The tool would be built and the parts that are produced from that tool would be approved for installation in cars by the OEM. The tier one supplier would receive moneys from the OEM to pay for the tool or the mould. This could typically take from 18 months to 48 months, depending on PPAP or delays. In this timeframe, the tool shops are not paid any amount of funds for their work.

Unfortunately, due to the pricing pressures on program costs by the Detroit three, many moulders and tier one suppliers encountered financial difficulties and either chose not to pay the tooling moneys to the tool shops and/or went into chapter 11—again keeping the funds.

We therefore consider this payment model to be broken and are requesting that a portion of any loans given out by our government be directed to the tooling companies, not as a loan to them but as a payment for work already completed on the OEMs' behalf.

We believe this must be pushed with the weight of government, because this payment plan is unfairly stacked in the favour of the OEMs, and they will not willingly desert this payment strategy as it affords them the ability to kick off tooling and keep the costs off their balance sheets. This payment strategy must be stopped for the future health of the small to medium-sized businesses, which cannot afford to finance the Detroit three. We believe this is an opportune moment for this endeavour, as there is currently a similar effort by the American tool shops that is being viewed seriously by their elected officials.

The mould/tool/die enterprise must be viewed as an independent sector of the automotive business. We are major suppliers to the automotive industry by virtue of its presence in the market, but we could in fact have a robust tooling sector supplying non-automotive industries, such aerospace, medical, wind energy, solar power, fuel cell, nuclear, and houseware products. But we need to be paid for our work so that we can reinvest in new technologies and pursue these opportunities.

Currently we're hindered by the following financial constraints. The majority of tool shops are currently owed significant amounts of money by the automotive sector. Banks are lumping the tool shops in with the automotive industry's difficulties and are therefore restricting credit.

Many banks will not offer accounts receivables coverage for a customer without that customer being approved for EDC coverage. Currently the EDC will not offer coverage for the Detroit three and most of their suppliers, which is in effect forcing the tool shops to refuse work from the Detroit three.

As an example, Chrysler, which is requesting loans from the Canadian government, cannot obtain coverage from the EDC and has recently announced that it will be releasing approximately $500 million in tooling for new models, which most Canadian tool shops will be forced to refuse to quote, given this situation.

This current situation could likely create the following scenario: Chrysler could be approved for loans and receive loans from the Canadian government; EDC, a crown corporation, could continue to refuse to offer receivables insurance to Canadian tool shops for Chrysler; Canadian banks would then refuse to margin Chrysler receivables without EDC coverage; the mould/tool/die sector would then be forced to refuse Chrysler work; Chrysler could then place their tooling either in the U.S. or overseas, where they honour progress payments, in effect paying foreign firms with Canadian taxpayer funds; Canadian companies would then be forced either to downsize or to close, and then would also draw down on whatever EDC-covered receivables they currently had, in effect promoting a type of double-dipping of taxpayer funds.

Therefore, we respectfully suggest the following for your consideration: that any funds have a portion earmarked to pay off critical suppliers, and that the mould/tool/die sector be designated as a critical supplier.

The PPAP payment term system must be discontinued. If the OEMs must pay progress payments to their Chinese suppliers, they can pay them to the Canadian suppliers.

The EDC must increase their credit coverage of the Detroit three in conjunction with the loan strategy. As a government corporation, their non-coverage of the Detroit three is inconsistent with the government's strategy of providing funds to the Detroit three.

The industry is doing its part by participating in various organizations, such as the Canadian Association of Moldmakers. Our particular association promotes the country's toolmakers through efforts such as our recent successful trade fair and our attendance at various trade shows in the U.S., England, and Germany, where we hand out members' trade magazines, meet with various trade representatives from other countries, and obtain sales leads to be distributed to our member shops. As well, we're working with various government MPs and MPPs, such as the Province of Ontario, which recently organized a hugely successive “Powering the Future Summit” at Windsor's new casino, which had in excess of 800 people in attendance. We are also working with agencies such as the Windsor-Essex county's development commission and with our trade commissioners and ambassadors to assist us in procuring out-of-country projects, because most tool shops are primarily export-driven concerns. We also maintain close ties with our local colleges and universities.

In conclusion, we've not come before you to request any loans, but only timely payment for services already rendered to the OEMs and a return to fair practice payment terms so that we can move forward and invest our own money in our own future. The typical Canadian small and medium enterprise shop owner is an aggressive and sometimes fearless and innovative business person who has the drive and desire to survive and prosper, as evidenced by the strong attendance at the “Powering the Future Summit”, which was promoting alternative manufacturing opportunities. It's also evidenced by the fact that most are still surviving in spite of the current formidable challenges described earlier.

Thank you for the opportunity to express our beliefs.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Carnevale.

Before we begin with questions and comments from members, I'll just remind the witnesses that we use both official languages in this committee, so some of the questions will be in English and some will be in French.

We'll have about an hour of questions and comments on the part of members. I'd ask that members direct their questions to a particular witness, or a particular group of witnesses, when they ask those questions.

We'll begin with Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you.

My question is for Mr. Nantais.

First of all, I'd like to thank all of you gentlemen for taking time out of what I am certain is a very busy schedule to come up and speak to this committee.

Just as some history, we know the government is looking at proposals submitted by General Motors and Chrysler, and they must have an answer by the end of the month. Concurrently with that, this committee was conceived by Mr. Michael Ignatieff, who thought it was important that we look outside the box and determine whether or not there are some things that could be offered by the industry as part of the overall solution.

So with that in mind, I move back to last year. I look at what I understood was going on in this industry before I became an elected member of Parliament. What I saw was a decline in the industry. I noticed from General Motors documents that in 2005 they were employing 20,000 people here in Canada, and that has steadily gone down to about 8,000 to 9,000 this past year, with an expected reduction to about 8,000 by mid-year in 2009.

Mr. Nantais, over that period of time, I am curious if there were proposals by the Detroit three in Canada to the Canadian government, proposals that could or should have evolved into a national auto policy of some sort to deal with this—not exclusively a national auto policy, but a North American auto policy, given the integrated nature of the American and Canadian industry. I ask this because I'm looking at an October 2007 document that was submitted by the Canadian Vehicle Manufacturers' Association, which shows that much of what's being discussed today was actually thought of and conceived back in 2007.

So could you talk to us about what was presented, what was asked, what was not responded to? And in your estimation, should we have a national auto policy, and what should it include?

[Mark Nantais]

Thank you very much, Mr. Valeriote.

That is indeed a document that was authored by the CVMA. We put forward at that time a series of different proposals or propositions that we believed would enhance the well-being of the Canadian auto industry--not just the CVMA companies, but every vehicle manufacturer that actually produced vehicles in Canada. It was also consistent with the recommendations put forward by the Canadian Automotive Partnership Council. So it was a series of things, in the context of an automotive strategy, that we thought could achieve that objective. It included things like the AIF fund to assist companies to innovate and bring new investments into Canada. We worked with the Ontario government as well, with the large-scale investment fund, to help create this envelope for new investment. It has worked well.

On numerous occasions we have raised concerns about various other aspects of the industry--everything from the thickening of the border and the need for new border infrastructure, to the need to remove the tyranny of differences in automotive safety regulations vis-à-vis those in the United States. Emission standards is another one on which we've made some real progress. There was a whole series of things that in aggregate would have been very helpful to industry. We made progress on some, and in the context of this committee or the government, we could still pursue others to the benefit of everybody that produces in Canada.

[Frank Valeriote, Liberal, Guelph, ON]

Would it have helped had those others that you made no progress on been introduced earlier?

[Mark Nantais]

We can always look back in hindsight, which is 20/20, and say that could have been the case. I don't think any of those are actually off the table now. It's a matter of working through them with the government and all parties involved and making progress.

We have already initiated a good process to eliminate some of the differences in safety regulations between Canada and the U.S. We've made some real progress there, but we have to be sure we don't lose momentum.

[Frank Valeriote, Liberal, Guelph, ON]

Is there an organization equivalent to the Canadian Vehicle Manufacturers' Association in the United States?

[Mark Nantais]

Yes, there is.

[Frank Valeriote, Liberal, Guelph, ON]

Do you consult with them?

[Mark Nantais]

We have ongoing discussions with them.

[Frank Valeriote, Liberal, Guelph, ON]

Given the integrated nature of our industry, the need to buoy the industry in the United States, and how much we export to the United States, would they have made similar representations to the Bush administration to buoy the industry there?

[Mark Nantais]

They would have made some of their own proposals, yes.

[Frank Valeriote, Liberal, Guelph, ON]

Okay.

I have a question about the current proposal of $7 billion to $10 billion that's being asked for by General Motors and Chrysler. We have an obligation to the taxpayers, who want to make sure that amount is invested and protected. We've learned that there are no assets in General Motors to secure any loan to them, because that's already been pledged to the United States in the package they offered. In trying to honour the expectations of the taxpayers, we also have a great need to preserve jobs in this country.

I'm trying to find a solution to that dilemma. How do you see the $10 billion or $7 billion being loaned? Do you see it loaned in tranches, with benchmarks being met before the whole amount goes out? Can you give me some perspective on what you think might be a meaningful and reasonable way of structuring these loans?

[Mark Nantais]

It's rather beyond my purview to speak specifically about the viability plans, but there are some things, generally speaking, whether we call them principles or whatever, that one can look at in terms of how that money is disbursed, and those companies will make it clear to you what they are. But whatever the terms and conditions of these loans, I suggest they not be overly constraining. The companies need the flexibility in a short period of time to dispense those funds in a manner that is consistent with their viability plans and the timelines and deadlines they face.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Go ahead, Mr. Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chair.

I've been listening closely to what people have been saying since the meeting began, just as I listened last week. In my estimation, the current problem is auto sales. Do you have a strategy in place for selling vehicles? Even if billions of dollars are allocated to the Canadian and U.S. industries, if no one is buying a car, dealers won't be moving vehicles off their lots. Have you devised a strategy of some kind to sell these vehicles?

Mention has been made of wage rollbacks. All industrial sectors in Canada, and not just the auto and parts industries, are imposing wage rollbacks on workers, a move that reduces their purchasing power. As a result of this move, banks and credit unions are reluctant to lend money, since consumers are already carrying mortgage and other debt. Banks are issuing even fewer car loans.

What can you do to sell vehicles that the middle class can afford, in spite of wage rollbacks? Therein lies the problem: how do you sell your vehicles? I'm interested in hearing your comments. Why kind of national strategy have you devised to market your vehicles so that the industry and the resale market can recover?

[The Chair, Conservative, Michael Chong]

Mr. Vincent, is your question directed to all of the witnesses?

[Robert Vincent, Bloc, Shefford, QC]

It's directed to whomever would like to jump in first.