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

[Brian Masse, NDP, Windsor West, ON]

Does anybody else have anything to add?

[David Adams]

I think both major parties have struggled with Canada-Korea because part of the challenge in our existing circumstance is our reliance on the U.S. market for virtually all of our exports. It's trying to diversify your trading relationships and then also trying to weigh the impact that diversification has on your own economy. Those two things are sometimes very difficult to balance.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[David Worts]

We have specific concerns about the impact that the preferential tariffs on Korean vehicles might have on our members, both those who are importing from Japan and those who are investing in manufacturing in Canada, for small vehicles in particular, which are very popular with Canadian consumers and are very price-sensitive, because they're at the entry level of the market.

Right now, Korean vehicles already have a huge currency advantage, because the Korean won has depreciated against the Canadian dollar, and the Japanese yen has been appreciating against the U.S. and the Canadian dollar. An additional 6.1% tariff advantage would certainly just compound the problems for our member companies.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Mr. Carnevale has indicated...and I'd like to hear quickly from each of you about whether tool-and-die mould-making facilities in the PPAP system are treated exactly the same as outsourced facilities, those outside of this country. I'd like to know from your companies whether they're treated exactly the same or whether there are different arrangements for those supplying in China or elsewhere.

Are they treated exactly the same? I'd like to know that.

[Mark Nantais]

Mr. Masse, this evening I'm not in a position to respond to that, because I don't know.

[Brian Masse, NDP, Windsor West, ON]

I'd like to ask the researcher to follow that up as well.

[The Chair, Conservative, Michael Chong]

Sure, we can get the researcher to do that.

Thank you very much, Mr. Masse.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm going to direct my last two questions to Mr. Nantais, if I may.

There was a conversation with one of the other questioners regarding a potential other “ask”'—more money down the road—if your members take advantage of this. If things don't turn around, I'm wondering how much time this '“ask” buys us.

[Mark Nantais]

Again, I have no means of answering that question.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

There must have been some research done, though, on how long a gap this amount of money will bridge.

[Mark Nantais]

I assume the two companies that submitted viability plans provided some indication of that, or at least addressed that issue to some extent—and to the extent that it's even possible to. But in my position at the CVMA, I just do not have knowledge of that information.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay. Of course, if this drags on, the third company will probably become a part of the “ask” as well. I guess that was—

[Mark Nantais]

In fact, you might have more than three companies.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Right, but I'm talking about your members.

The inspiration for the second question I have comes from an article I read in the media over the weekend. I don't want anyone to claim that I've been fed questions to ask during committee, because I haven't been, but I thought there was a good point made in this article. So in the spirit of some of the numbers there, I've done some calculations. As nearly as I can tell, when you take $6 billion to $8 billion potentially in loans, in effect what you're asking for is up to $250 per Canadian as a loan. So for a family of four, your members are in effect asking them for a $1,000 loan.

The question I would ask is, if you had an opportunity to talk to that family of four and tell them why they should lend you $1,000 of their hard-earned money, what would you say to them? And if the follow-up were how sure they would be to get their money back, what would your answer be to that too?

[Mark Nantais]

The auto industry in Canada accounts for roughly 500,000 direct and indirect jobs. As Mr. Romano pointed out, whether it's through dealerships or the supply chain, we are located in virtually every community across Canada. When something happens to the auto industry, it doesn't happen only to the assembly jobs. It happens to seven other jobs in that community. And to that extent, everybody is going to feel the pain, particularly when the auto industry itself accounts for 12% of manufacturing GDP in Canada.

Our view would be that sooner or later the $1,000 that you as an individual loan to these companies will pay more dividends in terms of job retention, and therefore benefits in every community across Canada, than if we did nothing. If we do nothing, the pain is going to be pretty substantial in every community where we're located. We've seen this happen before. A strike at General Motors for a period of time in the mid-nineties knocked off a full percentage of GDP in Canada in a very short time. That is huge.

So that would be an attempt at a response to an individual who asks if they should or shouldn't lend $1,000 of their money to these companies.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Will that family get its $1,000 back?

[Mark Nantais]

It depends on how they engage the economy, I suppose. But I would say yes.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Nantais.

I have a last intervention from Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

It's just a short question to Mr. Nantais.

Of those 500,000 jobs--of course, many are parts-related--there are about 58 parts manufacturers in the London area, about 37 in the Guelph-Wellington area, and 31 in the Kitchener area. As part of the strategy discussions with the United States, I understand we will be seeking a protection of approximately 20% of the mandates in Canada to preserve our assembly base here. First, is it worthwhile? Second, is it reasonable to expect that we can also preserve our parts manufacturing in some way by assuring our parts manufacturers they will continue to have part of the market in the United States?

[Mark Nantais]

That's a question you really have to ask the parts industry itself.

As I've said, we're highly integrated. We've got parts companies in Canada that, one, are diversifying, which is a good thing, and two, provide parts and components to companies, our assembly plants, on both sides of the border. This is why it is so critical that as we move forward on the government's decision, both in the U.S. and in Canada, we make sure there's no daylight between those decisions. And that's what happened. We had no daylight between those decisions.

In other words, the U.S. government made its decision to provide support, and practically the next day the Canadian government made its decision to provide support. Making sure there's no daylight here, I made sure.... And this is the analogy I use. All the marbles are on a level table. The moment one country puts support on the table, it tends to tip the table toward it in terms of jobs, and all the marbles start to roll toward it. We didn't do that. We balanced the table to make sure all the marbles would stay on the table, and ideally speaking, all parts makers would continue to have a joint share, if you will, of both the Canada and U.S. parts market.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Nantais.

The last word goes to Mr. Adams.

[David Adams]

I just want to add that we've talked about 16% or 17% retention of production in Canada, but going back to what we've all said in our presentations, the real key is to improve vehicle sales throughput, because 16% or 17% of $10 million is a heck of a lot different from 16% or 17% of $17 million. If we go down the $10 million road, we're talking about a lot more job losses.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Adams.

Thank you to all the witnesses for your testimony. It will be valuable to us. We will use it in preparing a report and recommendations that will be submitted to the House of Commons by the end of the month. Thank you all very much for coming.

I'd also like to thank the committee staff as well as the translation staff for staying to such a late hour. Thank you very much.

The meeting is adjourned.