Evidence of meeting #4 for Subcommittee on the Automotive Industry in Canada in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chrysler.
A recording is available from Parliament.
8:55 p.m.
Conservative
Jeff Watson Conservative Essex, ON
That was right after all of the zero percent and cash-back financing--
8:55 p.m.
President, DesRosiers Automotive Consultants Inc.
That was in 2002. But if you go back to the early nineties, our market had collapsed because of energy issues and the Middle East wars. We had the same kinds of things: high gasoline prices, products upside down, and quality issues. The Japanese came in 1965, and we knew by 1966 that their quality was superior to ours.
So they could have reacted. As I say, I broadened it out to 15 years earlier than they did.
8:55 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Let me ask a question from a different perspective here. These are just some questions for the record. There are others who will be listening in or reading from this later.
Did the Detroit three build any compact or subcompact cars in Canada?
8:55 p.m.
President, DesRosiers Automotive Consultants Inc.
It's been a while. I can't remember the last compact or subcompact car in Canada.
Canada actually benefited significantly because the Auto Pact rules—I won't get into the technical nature of those—forced them to put high-value-added products into Canada. We ended up with a whole pile of big, expensive products, such as light trucks, etc. Then it happened all through the seventies and eighties that those products exploded. We were sitting there because of the Auto Pact, and we won big--really big.
It's hard to be critical of them for having the product in Canada that employed 150,000 Canadians for a decade and a half.
9 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Do the new domestic companies produce any compact or subcompact parts in Canada?
9 p.m.
President, DesRosiers Automotive Consultants Inc.
Absolutely. Both Toyota and Honda do, and so does CAMI.
9 p.m.
President, DesRosiers Automotive Consultants Inc.
Cost structures, the efficiencies of their plants.... They came in from scratch with greenfield operations. Those options weren't available to GM, Ford, and Chrysler.
9 p.m.
Conservative
Jeff Watson Conservative Essex, ON
What are your comments on the 2008 round of bargaining, then, with the Detroit three here in Canada and the CAW, on the results versus what they probably should have gotten?
9 p.m.
President, DesRosiers Automotive Consultants Inc.
What General Motors did was go after very significant long-term gains. They went after their legacy cost issues, which is the biggest one for them, rather than--
9 p.m.
President, DesRosiers Automotive Consultants Inc.
Most of those gains were going to come in 2010, 2011, 2012, 2013, and 2014. Ford and Chrysler needs them today, so there's a real upside down in terms of their structure that way.
I personally thought General Motors could have gone a lot further, that they missed a lot of low-hanging fruit. They had everything going in their way. You gave them political cover. You had a market in disarray; you had so many things. What did they do? They left spa days on the table; they left penny funds on the table. They didn't go after the pensions. I just shook my head. I don't understand, to this moment, why they left that untouched--I really don't.
9 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Mr. Frise, I have one of your clek booster seats. Could you talk about the health and safety that you work on, about some of those commercialization projects resulting in something like this?
9 p.m.
Chief Executive Officer and Scientific Director, AUTO21 Network of Centres of Excellence, Auto21 Inc.
We started the work in vehicle health and safety. We looked carefully at what kind of work was being done around the world and we wanted to make sure that we made a contribution.
As with most things in Canada, we carved out a niche in vehicle safety for children and vehicle safety for the elderly, as well as health and safety for workers. We specialize in what is called musculoskeletal injuries, such as back injuries and things like that. In each of those areas we have done leading-edge work that is being recognized around the world as some of the top work.
About four years ago our work in vehicle safety for children resulted in Magna starting a new division of the company, which brought out a product called the clek booster seat, which you can buy in Canadian Tire stores and in other retail outlets now. I think that product is now coming to the end of its product life and a new generation of products is coming out that is further based on our research. This is just another example of how research can really make a difference in the market and make a difference to the quality of life of people. I think it's really worth doing that.
9 p.m.
Conservative
The Chair Conservative Michael Chong
Thank you very much, Mr. Frise.
Originally we were going to go in camera at 9 p.m. to discuss committee business. But I've had indications from some members that they wish to ask some more questions. So is it the wish of the committee to continue a little while longer to allow some more members of the committee to ask questions, and then we'll go in camera?
9 p.m.
Some hon. members
Agreed.
9 p.m.
Conservative
The Chair Conservative Michael Chong
We will then have five more members question the witnesses. That will bring us to the end of round two, and at that point we'll go in camera.
We'll begin with Monsieur Vincent.
9 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
Thank you, Mr. Chair.
Mr. Ostroff, let's get down to brass tacks. I understand your situation. I know the work that you are doing. If these two companies asked you what the best solution would be, what would you say? Would it be to declare bankruptcy, to get money from the United States or Canada? In addition to asking for wage cuts and imposing working conditions on workers... Money is now being taken from workers, the U.S. government and the Canadian government. What else can be done? Should they declare bankruptcy and start up under a new name? What do you suggest these companies do?
9 p.m.
Partner, Doucet McBride LLP
That's a very difficult question to answer without knowing more about what the goals were of the companies asking the question. It's always easier to have a bankruptcy, to close the doors and give up trying. The question is, if you've got an obligation to continue the work or if you feel you have an obligation to your shareholders and your employees, it's a different answer, but that's not a legal answer necessarily.
If somebody came to me and asked if they should close their doors or try to continue, there is the business answer and there is the practical answer. If you want to continue the business without throwing up your hands and saying that's the end of the history, it's easy to do the bankruptcy, but that's really a business decision and a political decision more than a legal one.
9:05 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
It wouldn't be the first time that a company went and got money from both sides, so as to get as much as possible, and then closed down, repurchased and went on. Collective agreements and debts have been eliminated, the facilities have been purchased for next to nothing and then it's business as usual.
9:05 p.m.
Partner, Doucet McBride LLP
The fundamental question is this. If you think there's a possibility that coming out streamlined through the process in five, ten, or fifteen years it would be reasonable to continue, then you'd do it for the same reason as you start a business to begin with. It's an entrepreneur seeing an opportunity and taking advantage of it. The additional factor is that it's a business that you know, with a workforce that you know, and a debt that you know. If you can compromise it properly and you're reading the tea leaves as to the marketplace, you want to stay in that business for the same reason you entered it in the first place.
But again, as a counsel, I can only say, “Here is the structure to let you go forward.” The business people have to be satisfied that in five, ten, or fifteen years the market will support the restructuring, because at the end of the day it's an entrepreneur's decision to go forward to make money instead of shutting the door and saying, “I want to go fishing instead.”
9:05 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
Mr. DesRosiers, in your opinion, who will the long-term winner be, Canadian workers, Canadian taxpayers, or the manufacturer?
9:05 p.m.
President, DesRosiers Automotive Consultants Inc.
The jury is out on all three of those. I have a 39-year history of looking at this industry, and usually the taxpayer comes in last--sorry. Whether it's the workers or the companies is often a toss-up, so, sorry.
9:05 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
I took a look at your website. It talks about the future of the North American auto industry, and it states that, in 2008, you believed that the industry would be back on track by 2009 and that we would exceed current sales in 2010. We are far from those forecasts.
9:05 p.m.
President, DesRosiers Automotive Consultants Inc.
And remember, I was the most pessimistic person at the time and I was still two million units over. That's a very good point. The world has changed as a result of this financial meltdown in the United States, there's no doubt about that. And the prospects are much dimmer for all of these companies.