I have followed your committee fairly carefully, and you've been hearing a lot of testimony on what I call the “here now” issues and the cyclical issues. I cover off some of those in my deck, and I'm going to avoid those today. I'll gladly answer questions on them. I have some opinions, but I think it would take too long. I would like to focus more on the structural issues in the sector, where the industry is heading in the next dozen or so years, Canada's position in the industry, the future, and the framework we need for government policy in our industry.
Let me tell you categorically that this industry is going to survive its current crisis, absolutely 100%, there's no doubt about it. Vehicles are ingrained into our lifestyle. Vehicles wear out. Did you know that 240 million people in North America this morning got up and drove to work and drove home tonight, and they're ultimately going to have to replace those vehicles? We will have demand. This industry is going to get through this.
At the same time, the level of demand—which you got into a discussion on with Chrysler—and the growth of demand over the next few decades is definitely going to be lower. Americans have been buying vehicles at a ridiculous rate; it is not sustainable in any way, shape, or form. It's not a Canadian problem; we have been very responsible. It's an American problem.
A couple of things reinforce this. We measure vehicles per driving age population: in America it's 101%; in Canada it's closer to 70%. We get along quite well with 70% vehicle ownership. How is it that the Americans need 101%?
I could use many, many examples. The best second example I will throw out is that somewhere between two million and three million Americans a year, every year for the last decade, took out a second 35-year mortgage on their house and used that money to buy a vehicle with, a vehicle that will have largely depreciated within 10 years. How do you sustain that?
So there's been a lot of debate in this committee about demand levels. You can count on, even in the best case scenario, demand likely being at two to three million units for the next 12 years approximately, every year, and there's no way around that. Chrysler's actual forecast in their submission is the most conservative and the most realistic. I back what they were saying.
I could get into other examples, but I won't.
If ownership levels in the United States were to drop down to Canadian levels, that's when you get into these nightmare scenarios that you see out of the CIBC, for instance, of eight million or nine million units of demand, and things like that. It won't happen. Technically, since we overbought by 15 million to 20 million vehicles, we could buy zero next year and survive quite nicely...[Inaudible--Editor] It's not going to happen. There's going to be a base level of demand that Chrysler is probably in the ballpark about.
I fully believe that despite this current crisis, we have an unprecedented opportunity in Canada for growth and to sustain this industry. We're potentially facing the best decade in the history of our industry, looking out to 2020. I wanted to make six points on that.
Peter can talk to you more about this than I can. The product that we will drive over the next 10 to 12 years has to be completely reinvented, top to bottom. We won't recognize it by 2020. We have an American government saying that we have to be at 35 miles per gallon. We can't meet that unless we reinvent our product. Right now, we're investing $30-plus billion a year in North America on innovation—in research, design, development, and testing. That's going to escalate. The fastest growing aspect of the Canadian auto industry today is the intellectual jobs and the many developments happening with them. Again, Peter could document a dozen, or two dozen, of these, where Canada is way up in the value chain and doing a very good job on it. I honestly believe that every single blue-collar job that we lose in our industry in this current crisis can be replaced over the next four or five years—and maybe it might take 10 years—with a higher-paying intellectual job. The potential is there. So I'm very positive.
Yves Landry was my mentor. He left this world more than 10 years ago, and I quote him from 15 years ago when he said that the future of the Canadian auto industry is the six inches between our ears. He was right then. He would be more right today. It just shows you how great a man he was to be thinking 15 years ahead of the curve.
Secondly, this industry has become global and will become more global. There is absolutely nothing Canada or the Americans can do about this. So Canada is going to have to compete and to find a way to compete in a global footprint. We have no choice, top to bottom, and there's no way around that. You cannot protect yourself from it. You can't run. You can't hide. This is a global industry. That's the baseline.
My third point is that auto policy in Canada has been very protectionist in the past. There are dozens of protectionist policies that have helped this industry through the last 20 or 30 years--I'm the expert on it. In fact, I drafted some of them--led by the Auto Pact. Those tools are not available to us. Most of those tools are, indeed, illegal. You can't go back to that era.
This is our real challenge. For the first time in the history of the Canadian auto industry, we have to find a way to secure investments based on our competitive position, pure and simple--not on protection, not on all of the policies and crutches we had in the past.
I believe that is doable with the right kind of policy framework. I sense more of a lack of confidence, and maybe that's the Canadian thing--that “Oh boy, we need this, we need....” Well, you're not going to have it anymore. It's a confidence issue in many respects, not just a policy issue. Don't forget that.
Fourth--and I'll be very quick here--government needs to focus its policy on promoting efficiency in every possible way. That's investment promotion to get the latest and greatest technologies into this country, infrastructure investments, tax, regulatory regimes, human resources, etc. Everything has to be focused on efficiency. To be able to compete in a global framework, you have no choice but to be efficient and take advantage of the opportunity.
My fifth point is to be very careful with regulation and taxation of our industry. Quite frankly, our governments--and it's not just the Canadian government, it's also the Ontario government, the U.S. government--have used tax, used the auto sector as their piggy bank. They have taxed and taxed and taxed--and I could go through them in Canada--air conditioning to fuel-efficiency tax, luxury tax, tire tax, GST, PST, etc., and always under the guise that, oh well, the auto industry is big and can support and pay these taxes; it has to pay its fair share.
As we've come to find out, we can't. Many politicians--and it's not specific to your government or previous federal governments, it's across--have used the auto sector to demonstrate to the electorate that they're on top of other issues, the environment being the best example, saying “We're environmentally sound, we're making the auto industry do X, Y, and Z”, with very little regard for the cost of that. And as we've also come to find out through the hard reality of the last six months, that wasn't sustainable or affordable.
So if you want to take advantage of this opportunity, you have to be very cautious on the taxation and regulatory front.
The sixth point--and I'll wrap up with this--goes right back to what Chrysler was saying. The first level of comfort you have to get as you move forward comes down to three words: product, product, and product--all aspects of product programs. If you become comfortable with Chrysler, Ford, General Motors, or any other company that comes to you with where they're heading with product.... Companies, every time, 100% of the time throughout the history of this industry, get themselves into trouble with product and they get themselves out of trouble with product. That is the first step. Without the product, you have nothing.
There has been a lot of discussion and the conclusion that Canada needs some sort of all-encompassing Canadian automotive policy. It's impossible. You will never get it. It doesn't exist.
Every single ministry in your government touches this auto industry in some way, positively or negatively. Your policy is an accumulation of putting every minister together with this industry and finding out what can be done to take away barriers, what can be done to help--and that's Environment, Agriculture, Industry--every one--putting them together, and perhaps in a patchwork fashion. If you go through all of those, government is really critical. But you're not going to get an automotive policy in Canada.
Thank you very much.