Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 6th, 2007

[The Chair, Conservative, Laurie Hawn]

Thank you, Mr. Hargrove.

Sorry, Mr. Bigras, your time is up.

We'll go to Mr. Cullen.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

The witnesses will see that our time is extremely limited here. It's a broad topic, and I know you've made submissions, so we'll be looking at those as well.

There are a couple of things I want to start with. Because we're dealing with this bill that deals with the potential for bringing in mandatory standards for fuel efficiency in Canada, I want to focus on what that means for Canada, particularly on the jobs front and on the consumer front. Those are the two that seem to be getting notice. It almost gets to a point of being a given. The parties in this place are beginning to be seized with the issue of the environment. Mandatory seems to be on the way.

I'll ask Mr. Hargrove just a simple question. Do we have a national auto strategy, an industry strategy, here in Canada?

[Buzz Hargrove]

No.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

This brings us to an interesting point, because part of the criticism--and I want to bring Mr. Ogilvie into this conversation--is that people are worried and concerned about what the possible effects will be on the industry with the idea of regulations coming forward, particularly in the absence of any type of strategy that may compensate or try to deflect job losses or actually increase the industry.

My question is to Mr. Ogilvie to start. You talk in your deposition about having a regulation standard that's on par with the leading standards. We've seen different references. I think there's some discrepancy about who has the best--I know it's a bit of apples to oranges, sometimes. Is there any advantage for Canadians--for the environment, certainly, we know--in having the better standards for auto? Is there any advantage, economically, for us to seize upon attaining the best standards in North America or in the world?

[Kenneth Ogilvie]

I think there are really good prospects for that. Again, I argue that we should dig right in really hard and right now, and in a year's time or so, put this together.

There's no question that the world is moving towards more efficient vehicle technologies. The entire global market is going that way. So how can we lose by having an intelligently designed standard and a set of complementary measures to move the technology onto the market? That is what the standard will do; it'll increase the supply of fuel efficient technology. But then we have to push consumers along and we have to turn the stock over and we have to do research and development. If you put that together as a package and look at our own unique circumstances and design it properly, I have no doubt that we can make it a winner, not a loser.

Will there be some adjustments? Probably. But that's what you look at in designing the standard. Personally, I don't believe that, in fact, we're going to be better off sitting back and waiting on this one. I think we're going to be much better off digging in and thinking our way through it. I think we have all the intellectual capital in this country to do that, and in fairly rapid order.

We are short on data. I make the point that we don't have the kind of data the United States gets because of their corporate average fuel-economy standard. They do compel the information to be put on the table. We're short on data, so we're going to have to make some judgment calls. But I have no doubt that we can design a standard that works for us and the environment at the same time.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Hargrove, I have a question to you, with respect. You brought up the discrepancy between the intention of consumers and then decisions they make when they're standing at a dealership or making choices. There have been allusions to how to either remove barriers or give incentives to Canadians when they're seeking to purchase a new car to allow them to buy into a more efficient, less polluting car. I know there's yet some debate about what the tool actually looks like. Again, as we're approaching this bill, which we find desperately wanting, there is an opportunity to put suggestions forward and get them adopted in this place that would allow that. Do you have any that come to mind?

[Buzz Hargrove]

Yes. I thought I laid that out, Mr. Chairman, committee members, in terms of putting incentives on the table. For someone who owns a car that is 10 or 12 years old, a very small number keep it because they love it, or for some reason they like old cars, but most are keeping it because they can't afford a new car. If you said to them, look, the government is willing to forgive, for example, the GST on that vehicle, ask the provincial government to forgive the provincial sales tax if it's built in North America, and then you ask the companies to provide a further incentive to buy the vehicle that's made in North America, then you can see the down payment becomes the incentive. They don't have to raise huge capital to pay down, they can handle the payments, which in today's interest rate environment would be fairly low, and most even lower-income families could then look at getting rid of the old clunkers and getting a vehicle.

That is the quickest way--and there's not anyone who can contest this--to get the old vehicles off the road and get new vehicles in the hands of people who drive those old vehicles. Dismantle and remanufacture them, create jobs by tearing the vehicles apart, recycle, and put them back in the system. That's the quickest way to reduce greenhouse gas.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

There seems to be some conversation about the way the cars are designed. If they're thought about at that point when the car is no longer in use it would make the dismantling job creation possible, rather than just crushing them and sending them off to the yard.

Mr. Nantais, you said there was no coordination or virtually no coordination between government departments or in government to buy some of the vehicles that we're talking about today. None whatsoever? We don't buy in bulk? The departments don't talk to each other? We have no green car buying?

[Mark Nantais]

Oddly enough, some time ago there was a Senate bill, Bill S-8, which actually set a target of 25%. I don't believe the government has ever achieved that. From what we can determine, from department to department there is no coordinated approach. if you've got 20,000 vehicles out there that are purchased every year, yes, it's high volume. Think of how many more vehicles and how much pull you could create if government departments, municipal governments, and provincial governments actually coordinated that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

There's something in this debate that Canadians don't tolerate, and it is a sense of hypocrisy from government, the attitude of saying go and buy greener cars and maybe even pay a little more for them, but we in government won't do it ourselves.

[Mark Nantais]

That seems to be the case.

[The Chair, Conservative, Laurie Hawn]

Thank you.

Mr. Watson.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair, and thank you to our witnesses for appearing here today.

I'm going to ask for brief answers if at all possible because of the short questioning rounds and we've got lots to cover.

I note that industry and labour are both at the table here today. I think that's very important and underscores our serious shared concern, along with the MPs at the table, that we get action on pollution and greenhouse gas reductions.

I'm going to try to direct my questions as much as possible. I recognize the proceedings are also televised today.

I'll start with the AIAMC. Mr. Adams and Mr. Nantais, you may want to chime in on this one.

I understand the industry's preference for voluntary agreements. Are you opposed to mandatory fuel efficiency regulations?

[David Adams]

I think the government has made it clear to us that's the direction in which they're heading. Mr. Nantais outlined in his remarks that the industry has a successful history of achieving their objectives with voluntary standards. With respect to mandatory standards, the devil is always in the details in terms of how those get implemented. California was referenced earlier on.

I think our real challenge in Canada, if there is a standard that's put in place, is how do you prevent things like leakage at the border? We're operating in a free trade environment, and if consumers want what consumers want, and if we regulate vehicles that aren't available in our economy, they will go elsewhere to get them, across the border, and that defeats the purpose of the regulation in the first place.

[Jeff Watson, Conservative, Essex, ON]

Does that mean you are opposed or not opposed to being regulated?

[David Adams]

Our preference certainly is for a voluntary standard. We have a voluntary agreement in place that we will achieve. If we have to be regulated, as the government has intended, we will be regulated.

[Mark Nantais]

In the Prime Minister's speech today at noon, he confirmed that they are moving to regulation in model year 2011. I therefore think it's almost academic unless something changes.

Clearly, if the regulation is coming forward, as we have said, we're an integrated industry. That integration that took place in 1965 brought forward literally tens of thousands of jobs, not just in assembly, but in the supply chains. Our parts suppliers are not just in Ontario, but right through into the province of Quebec in a very significant way, and that share still is significant. We want something that recognizes and continues to recognize that integrated approach, which provides benefits to the industry, provides real benefit to consumers, and will provide benefits in terms of the environment.

The new, reformed CAFE in the United States is something that is no longer an average, where you have a higher-consuming vehicle and a lower-consuming vehicle. No. We have what we call a footprint approach. Every vehicle segment, based on its footprint, has to make improvements, so everybody in every segment must do some heavy lifting. That's a huge difference. It's now applied not just in the passenger cars, but in the light-duty trucks as well. There's a significant difference as we go forward here, which is why we promote a line of approach with the U.S. reformed CAFE.

[Jeff Watson, Conservative, Essex, ON]

Thank you very much.

Our government certainly believes in achievable results. Mr. Hargrove, in your presentation you mentioned achievable standards. I want to talk about the short-term window and the position the auto industry finds itself in today.

You mentioned Ford. Of course Ford has announced the closure of two plants, the Windsor casting plant and the Essex engine plant. I'm going to ask you a question about the possible effects on the Windsor engine plant.

In the short term, if the standards outpace the ability of technology to put into the vehicles, particularly with respect to engine technology, what does that mean for a plant like the Windsor engine plant, which has 2,500 employees? Can you talk just very briefly about what a typical research and development cycle looks like for the auto industry, from the time they get the idea for something to it actually being in a vehicle?

[Buzz Hargrove]

Let me give you the example that was outlined to me recently. If we were to move to the California standards by 2009, that would mean the Silverado that we build in Oshawa and is built in three other General Motors plants in the United States could not be sold in either California or in Canada. So 20% of the market is gone from General Motors. That means we have four assembly plants and one is going to go.

Common sense would tell you that if a country says you can't sell something in Canada and you have to close one plant, you are not going to close a U.S. plant and keep the Canadian plant open when you can sell the vehicle outside of California. So the answer is that there is a direct correlation between what the government does here on the large vehicles and the large engines in the short term, without giving some time to accommodate this.

I'm for regulation. I'm for the government living up to the 2010 commitment and the letters of understanding, but in terms of regulating beyond that, 25% by 2014 would be a very significant improvement. It would have to be phased in. It wouldn't all of a sudden be a 25% improvement in that one year.

[John Bennett]

Can I please add something here?

With respect, the California regulations would not prevent any vehicle from being sold in California. It's worked on a wholly average process.

[Jeff Watson, Conservative, Essex, ON]

I'd actually like to ask a question about that to the panel. I want to move along to the question of the dominant North American standard. We've talked about where we set the standard. The U.S. federal government regulates fuel economy. We've talked about regulations for fuel economy as well. The states regulate vehicle emissions, which could be an entirely different thing.

First of all, I'd like an update on where the California standard is. I understand there's an injunction. Perhaps you might be able to bring us up to date on that.

And what would this dominant North American standard mean? Should it be based on fuel efficiency, which will have a direct correlation, I would believe, to vehicle emissions improvements as well? Can we talk about that?

[Buzz Hargrove]

If Mr. Bennett is right that we can sell everything we build regardless of size and the fuel efficiency of it, in California and Canada, regardless of those standards, then what are we arguing about? Why wouldn't anybody go ahead with it?

[John Bennett]

I've been asking that for years.

[Buzz Hargrove]

The reality is that our information says that can't happen. Why would you have a fuel efficiency standard when some of the biggest gas guzzlers are the Silverado built by General Motors, the Tundra built by Toyota, and the Ram built by DaimlerChrysler? Why would you have a standard that says you can continue to sell all those vehicles and then try to define it as meaningful? I don't think that's accurate.

[Jeff Watson, Conservative, Essex, ON]

Mr. Nantais, Mr. Adams, you can shoehorn in on that.