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

[Mark Nantais]

You're right about the California situation. There is now a court injunction against the state proceeding with its regulation, on the basis that it doesn't have the authority to do that. It is a federal authority to regulate fuel economy.

They're also waiting for litigation going on in the other states that are looking at California and are now on a similar basis. When those court cases are heard, then the court case will go forward in the state of California.

In terms of California, we should really be talking about going forward here. When we talk about alignment with the dominant North American standard, we're talking about alignment with the U.S. reformed CAFE in our industry, and I think Mr. Adams will agree with me on that. When you look at just how stringent that is, because it is an entirely new program, everybody has to do heavy lifting across all market segments and types of vehicles. But with the State of California, hybrid vehicles won't comply now. They just couldn't make the standard because it's so stringent. It's not technically feasible and it's not economically feasible. The U.S. EPA agrees with us on that.

So as we go forward, the dominant standard, as we see it, is a U.S. reformed CAFE. When you add an integrated approach, a broader, more comprehensive approach, to all these other initiatives that we talked about, in terms of supportive policy, that's where we can make some real emission reductions going forward here.

[The Chair, Conservative, Laurie Hawn]

Thank you, sir. We'll have to move on.

Mr. McGuinty, for five minutes.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for appearing.

It's too bad our format precludes, Mr. Chair, a more immediate debate among the witnesses themselves, because I think that's what Canadians would really benefit from. That is, hearing whether there is a higher degree of consensus among them as individual witnesses, or not.

In some instances I've seen our environmental representatives nodding in complete disagreement with each other, and sometimes I've seen them in complete agreement with each other. I've seen our domestic and North American manufacturers nodding in disagreement with our international manufacturers, and so on and so forth. I'm going to do my best to help illuminate the differences, and maybe come to some points of consensus.

Is it fair to say that all of you agree that we need new standards? Yes. Is it fair to say that all of you could live with new regulations for standards? More or less? Great. Is the real difference, then, in the kinds of fiscal measures that might be brought to bear to facilitate the transition to those higher standards?

[Buzz Hargrove]

And the timing. It's hard to do it without the timing.

[David McGuinty, Liberal, Ottawa South, ON]

And the timing and the implementation of it.

Is it fair to say that most of you would agree with the potential? The Prime Minister, to a certain extent, pre-empted the work of this committee at lunch today by announcing that there will be regulations in 2011. We thought part of the debate here was to examine that on the merits of the idea of regulations, but apparently we're going to have regulations in 2011, so that's a done deal.

Can we assume it's a done deal? Right, okay. So the timing, then, and the fiscal measures that we might design going forward to achieve those new standards are what's at play here. Is that the right thing for Canadians who are watching to understand?

[Buzz Hargrove]

In my mind it is, yes.

[David McGuinty, Liberal, Ottawa South, ON]

Could I get some comments from a few of you on that?

[Buzz Hargrove]

I've said that from the outset. I believe we need regulated fuel efficiency standards, but it's how they're applied. If you do the average, then you advantage one company and you advantage imports over what we're building in Canada.

Again, I remind you that 80% of what we build is the large vehicles. Our engines are large engines. Our transmissions are large transmissions. Our stampings are large stampings. It's not because we asked for them, but because the Auto Pact, in 1965, said that companies must produce in dollar value whatever they sell per vehicle. If you sold a vehicle for $10,000, you must produce one of equal dollar value. The easiest way to comply was to put the large trucks, the large cars, the large engines into Canada to meet that. Even though the Auto Pact is now gone, we developed such an expertise that they still put those operations in Canada.

[John Bennett]

We're not asking for regulations for what's made in Canada, we're asking for regulations for what's sold in Canada. The vast majority of those vehicles that Mr. Hargrove's members build are sold in the United States, they're not sold in Canada. A fuel economy regulation for vehicles sold in Canada wouldn't much affect what's manufactured in Canada.

[Buzz Hargrove]

General Motors has announced a new Camaro in Oshawa. Jim Flaherty and I were there celebrating it, as were a whole lot of other politicians of all stripes. General Motors has made it very clear that if they can't sell that vehicle in Canada.... If all we can do is build it here and sell it in the U.S., which is what my colleague here is suggesting, does anybody really think that same company is going to say okay, we'll put all the jobs in Canada even though we can't sell there? Let's get real here.

[John Bennett]

That's not what I said. What I said was that what they're actually doing is selling those cars in the United States, they're not selling them in Canada.

You've heard the numbers already. Clearly, the vast majority of the vehicles that are made in Canada are shipped out of Canada. The regulation we're asking for is on what's sold in Canada. That has a different effect from an effect on what's manufactured.

[David McGuinty, Liberal, Ottawa South, ON]

Let me put a question to Mr. Ogilvie. He had his hand up a second ago.

Mr. Ogilvie, you said that we need a national benchmark, that it should be gazetted by 2008, that it should have legal effect by 2011, and then you rhymed off a number of what you called “complementary measures”.

You chaired our former government's “issues” table, effectively, on transport, and you did a very good job at it. You were in the middle of reconciling all these competing interests on behalf of Canadians, which was very difficult. Tell me about some of these complementary measures, because this seems to be where the debate really is landing.

[The Chair, Conservative, Laurie Hawn]

And do it In 40 seconds, if you can.

[Kenneth Ogilvie]

I want to make the point that it's not just technology that makes fuel efficiency happen. It's also the way consumers operate; it's fuels; it's a whole bunch of other things that we do.

The standard is something to drive the efficient technologies in front of the consumer, but you have to get the consumer to buy these things. The more you get the consumer to shift—with information, with labelling, with incentive programs, with education, with some coherence of government policy, and with stakeholders—the more the consumers are going to shift that market on their own. One thing the auto sector can't object to is the consumer. The consumer will decide.

So we don't have to just harmonize everything with the United States, for example; we have a lot we can do that's unique to Canada. We can design around some of these problems that are being brought up, if we have proper attention to them in the design process. I don't see them as militating against the standard. I just see them as issues that are put on the table and resolved in a proper process, which I don't think has to take five years' time, frankly; I think a year to 18 months.

[The Chair, Conservative, Laurie Hawn]

Thank you.

Mr. Warawa, you have five minutes, please.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

Again, thank you to the witnesses. This is very enlightening.

When a vehicle is manufactured, is it manufactured because that's what consumers want, or do they want it because that's what you've built? It's the chicken or the egg: which came first?

[Buzz Hargrove]

You can't manufacture what people don't want; you can't sell it. You can manufacture it, but it doesn't work.

[Mark Warawa, Conservative, Langley, BC]

Let me preface my comments.

I had a perfectly good vehicle, a 2005 mid-sized one, and it had decent fuel economy, but I thought I had a responsibility to buy something much more fuel-efficient, so I did. I thought I would like to buy a hybrid.

I couldn't test-drive a hybrid. I had to put my name on a list, and when one came in, in about three months, if I liked it, I could keep it; if not, it would be made available to somebody else.

So I ended up buying a hybrid, and I like it—it's a very nice vehicle—but there was additional cost to make that conversion, and it wasn't necessary, because I had a perfectly good and fairly new vehicle.

The other thing that makes me a little puzzled is that in the newspaper I looked at before flying back on Sunday, there was a full-page ad on new vehicles from a new dealer, and there were three vehicles being advertised. They had 425 horsepower. I thought, that's a lot of horsepower. They were mid-sized vehicles similar to the one I had. I think mine had about 170 or 150 horsepower, or something like that. But 425....

I go back to my original question. Do people want 425 horsepower because it's been built, or are you building it because that's what people want?

What sparked this interest is a comment made, I believe, by Mr. Nantais, that the cost of fuel is low in Canada. I've visited Europe, and yes, the fuel costs are over double what we pay here, and they drive much smaller cars. We just experienced some dramatic increases in fuel prices, yet vehicles such as the Hummer experienced dramatic increases in sales. So here, fuel prices are going up, yet people are still buying bigger and more powerful vehicles.

As the Government of Canada, we have a responsibility and a commitment to reduce greenhouse gas emissions, to make the air cleaner for Canadians. We are moving from voluntary to regulatory, yet Canadians are buying bigger and more powerful cars. Would somebody like to cast light on the apparent inconsistency here?

[Mark Nantais]

I would love to do that.

First, large SUVs—perhaps what you're talking about here—really only constitute about 2% of the Canadian market. Those vehicles become the poster child for anything that's anti-environment. The reality of the matter is they only represent about 2% of our products in Canada.

As I mentioned, 30% are compact and sub-compact, and generally speaking Canadians buy more fuel-efficient vehicles. While we have experienced fairly sustained increases in the price of gasoline, prices here are still very low in global terms, as you pointed out.

But what we have noticed—and we have data to show this—is that as the price of gasoline went up, people started to respond, not only in their vehicle purchases, but they started to drive less. Quite frankly, when people pull back on the annual distances they travel, that is where you get the most reductions. There is an obvious correlation that as prices go up, people not only drive less, but also start to make different decisions about the types of vehicles they drive.

So I would suggest that your perception that we're buying more and more larger vehicles is not quite accurate at this point in time, based on what we see in the marketplace.

[Buzz Hargrove]

Mr. Chairman, I would like to add that there's been a huge drop-off in individuals buying trucks just for the sake of driving a half-ton truck. Those sales are now more steered to farming, construction, and so on. There's a huge drop-off in individuals buying just for the sport of it—SUVs, including the Hummer—because of gasoline prices.

There's also a very limited market. We're going to build a Camaro in Oshawa. At best, we'll build to 80,000 to 100,000 units, not enough to support even one assembly plant. We're also building the Charger, which Chrysler added last year to its assembly plant in Brampton. We're building about 40,000 units. It's a muscle car, with 400 horsepower. There's a limited market, but it's a drawing card to get people into the sales room, so you can sell them something—and it really does. That's why it's advertised as such.

But as Mark pointed out, 2% or less of vehicles in Canada are SUVs anywhere near the size of the Hummer. Over 30% of our market—one of the best in the world—is small vehicles.

[The Chair, Conservative, Laurie Hawn]

We'll have to move on.

Monsieur Lussier, you have five minutes.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Mr. Nantais, you mentioned in your submission that automotive builders had developed 70 advanced technologies.

What is the current situation with respect to manufacturing electric automobiles? Are some companies prepared to move forward with the production of electric cars?

[Mark Nantais]

Regarding the electrification of the car, we went through a phase in the early 1990s that didn't quite work out so well. Battery technology did not evolve at that time as far as we would have liked, in terms of meeting customer satisfaction criteria, such as range, durability, reliability, and so on.

We've made tremendous progress in terms of new battery technology. So you're going to see more electrification of the car. You're going to see plug-in type hybrids. At the last Detroit auto show we saw several different types of technologies, all focused on the electrification of the vehicle. This is only one type of technology we're looking at. As I said, there were 70 new ones there. More variations are going to come forward, and this is what competition is all about.

Companies move forward on the basis of technical preparedness, so they can meet customer demands that change quickly in the marketplace. That's the name of the game as we go forward. That's why we all compete very fiercely in terms of the marketplace.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Mr. Adams.

[David Adams]

Yes, Mark highlighted the fact that all the companies are competing on an aggressive basis in a global fashion. What you find is that some companies have chosen different technology streams as their lead stream. In the case of some of the Japanese manufacturers, it's been hybrid technology. In the case of some of the European manufacturers, it's been diesel technology. In the case of the North American manufacturers, there's been a focus on E85 alternate fuel technology. But those aren't the sole technologies that are being embraced.

In terms of electric technology, which you're referencing, the real issue at hand is the battery technology that still needs to be developed and refined. I don't know that much about it, but my understanding is that Canada does have a resource base in battery technology. From my perspective, this is something that should be encouraged in Canada.