Thank you.
I have appeared before the full committee a few times and certainly have represented suppliers. We represent the suppliers for the assembly of new vehicles, so we are not related to the aftermarket problem. So don't ask me questions about aftermarket--I have no idea what's going on.
Most of our facilities are in Ontario and Quebec. About two-thirds of the parts that are manufactured in those facilities are exported directly as parts, and one-third are consumed by the assemblers here in Canada.
First of all, I want to say we do appreciate the measures that have been taken to stabilize the assemblers—they are our customers. Also, the liquidity provisions in the budget, which have not quite been passed yet, are very important to us. We really look forward to that being passed, because we need to deal with that. Since our first presentation to the government over a year ago, when we were starting to face difficulty, things have gone from bad to worse. Even over the last couple of months, things have deteriorated even more. The February statistics released today, simply put, are another disaster.
So I have to say we have three requests of the government, and we don't usually come asking very often. Usually we're simply contributing billions of dollars in taxation to government, either through the companies or the highly paid employees who work for us.
Our first is simply to ensure that our customer, the assemblers, are around to pay us in the normal course. Financial assistance to them is the first lifeblood of suppliers, and we support what is necessary to make sure all the assemblers are healthy. As is well known, our industry supports one job in seven in Ontario, and about 10,000 employees in Quebec.
Our suppliers are the web of the spider web, and what I mean by that is that they are the connecting links between all of the suppliers.
I was going to hand this out, but I'm told I can't because it's not bilingual. You don't have to read the writing anyway, because the picture says everything. For the Chevrolet Equinox, which is assembled in Ingersoll, Ontario, it shows where the parts come from, where the modules come from that feed into that. It has a number of flags. Some of the flags are Canadian, and some of the flags are American. The Equinox is assembled in Ingersoll, and then about 80% of them are sent to the United States. So this web of parts makers is involved in that.
If one of our major customers, such as General Motors, goes down, it will take a number of suppliers with it. When those suppliers go—and those suppliers also supply almost everybody else in North America as well—they then take all the other OEMs down. In about a week's time, all North American production of vehicles comes to a grinding halt. That is simply a fact; it's not a doomsday scenario. That is the way the industry works. That's how integrated we are. It will then take months and months for the ones that still survive to be able to get back up and running again, and some that could have survived by that time have lost so much money that they fail as well. So you end up with a huge cost then of rehabilitating suppliers, if you can, or else importing more vehicles from overseas. The end result is that you've spent way more money resuscitating the industry than you ever would have spent if you put the money on the table in the first place to keep the original companies alive and healthy. That's why I'm here--because we are the ones who will suffer.
The other part that we need is to have good suppliers, but what's happening is that our good suppliers are running out of cash. We were practically shut down in North America from mid-December until the end of January because of a lack of sales and therefore inventory adjustment. Our payday is the second day of the month, so for January production, we were paid Monday of this week. That was an awfully slim paycheque for most suppliers, because there was no production in January. We were paid everything that we were supposed to be paid--almost nothing. Come April 2, we're going to be paid for February, and February was a very low month, so again there will be a very slim paycheque in April, which means that now things have gotten very poor. So now we have suppliers in the same position as our assemblers: they're simply out of money because they've had no cashflow. So if they have no cashflow, they have to close their doors.
An example is Bauer Industries in Kitchener. It has been around since 1886. It had up to 300 employees a few years ago, and then it went down to 30. Now it has closed its doors. I know those people. They are good operators. They just couldn't survive this lack of production.
We have lots more examples of those. I'd able to pull them out from all over. You people from the communities of Guelph and Kitchener, you can see them too. They're in the record; they're just there, unfortunately. A lot of smaller guys are going under because they don't have the wherewithal to continue.
We can say to the bank, well, maybe we could use our receivables. But the bank won't take the receivables as collateral. They don't trust it. They don't know if it's going to go on. So we need receivables insurance. Then at least we could take those receivables to the bank. That could come from government, EDC and BDC. We would very much like them to have the ability to put receivables insurance in place.
Then we have the good suppliers. Our latest production figures list 9.5 million units for 2009. It's usually around 16 million. Next year it may be 10.5 million to 11 million. So this is a very low ebb in the stream. Most companies could never have predicted it would get that low.
We have to get through 2009. We need some patient capital to get good companies through 2009 and the beginning of 2010. Without that patient capital, even for companies that do survive, when things start to pick up they won't have enough money left to buy raw materials and pay their people in order to take advantage of the increased production. We need some patient capital for that. Again, we believe the money is available through the government program of EDC, the Canada Account, administered by BDC. Out of that will come the ability for viable companies to survive.
In terms of giving companies money, we've always said to simply look at that exactly as you've looked at the assemblers. The simple question is this: can the company emerge from the current market crisis as a viable, sustainable company and repay the Canadian taxpayers the funds lent to it? If it can do that on the longer term, then it deserves to be considered for a patient capital loan. If in the longer term it doesn't have the business plan to do that, we cannot ourselves support government funding to that company.
But we believe there is a position to do that. We also believe EDC and BDC have the capacity, the financial wherewithal, and the ability to analyze companies to be able to make that decision on behalf of government. Certainly they have been in the auto industry for a long time. EDC currently has a couple of billion dollars in outstandings, so they are experienced lenders in this industry and are the perfect vehicle. We certainly would not want to see a new agency set up. By the time it got set up to lend money, no suppliers would be left to lend the money to.
So that is what we really are looking for. We need to be able to re-emerge.
The other thing is to take a look at the industry as a whole. I have to say that people in North America are not changing their transportation habits. They will continue to buy and use personal transportation. There will be many changes in how that transportation is powered, but there will be very few changes in the actual vehicle. Right now 90% of the vehicle is still the same, and it will continue to be the same for many, many years.
The motor power might change in some cases, but even that will be only fractionally changed. After all, a hybrid car is a smaller gasoline engine with an electric motor. It is not a brand new form of transport. Even if we get into doing more advanced electric cars, everything is the same except for the fact that they have a very large battery, or maybe a fuel cell to power the battery. It still has windows and doors and headlights; it still has a steering wheel, air bags, and all the other things that parts suppliers make.
We want the Canadian parts suppliers around to be able to make all those for us.
Thank you very much.