Finance Committee on April 30th, 2009

Evidence of meeting #24 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was market.

A recording is available from Parliament.

On the agenda

Study on Measures to Enhance Credit Availability and the Stability of the Canadian Financial System

Committee Business

MPs speaking

Also speaking

Joseph Campbell President, Tricor Automotive Group

Elyse Allan President, GE Capital

Jean-François Bertrand Senior Vice-President, Capital Markets, GE Capital

Sara Anghel Vice-President, Government Relations and Public Affairs, National Marine Manufacturers Association Canada

Jeff Wilcox President, George's Marine and Sports, National Marine Manufacturers Association Canada

Jeff Hanemaayer Senior Vice-President, Canadian Recreational Vehicle Association

Pierre Major Canadian Recreational Vehicle Association

Brian Rodd President, Securcor Corporation, Tricor Automotive Group

9:30 a.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Maybe I'll leave it at that, because my time is short and I have one more question I'd like to ask.

We had Mark Carney here recently talking about how interest rates had come dramatically down and how he was pleased that in the private sector this trend had been mirrored. But we seem to have a case study in front of us, with Mr. Wilcox sitting beside Ms. Allan. If I heard you correctly, the interest rate you're charged by GE Capital has tripled at the same time the Bank of Canada interest rates have trended dramatically down.

Perhaps I could ask each of you to explain, because it seems like a bit of an anomaly when the general interest rates are trending down and yours have tripled, unless there's something specific to your company that you may or may not want to get into. Why have your interest rates charged by GE Capital tripled when the general trend, at least at the official level, has been so dramatically downwards?

9:30 a.m.

President, George's Marine and Sports, National Marine Manufacturers Association Canada

Jeff Wilcox

Floor plan costs in general, across the marine sector, have almost tripled, and in some places more than that. We compared where we were this time last year with a floor plan interest cost of about 3.5%. We're now approaching 8.5%, so it's about a two and a half times increase.

It's something we've talked about numerous times with GE. It seems to be that their floor plan costs have gone up. Their access to money has gone up, and therefore being a profit-maker, as well as everybody else, they've increased our costs.

9:30 a.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Maybe I could ask Ms. Allan that question.

9:30 a.m.

President, GE Capital

Elyse Allan

I would simply comment that, as was stated by Sara and Jeff, there were other people in the industry, none of whom are there any longer, and we're the only person left. Obviously, there's some risk in the industry that others have perceived. I would suggest that perhaps we see that and are translating it through in our pricing, not to mention that our own cost of capital, which is the reason why we are here, has continued to go up due to the lack of liquidity in the commercial paper and other forms of funding in the marketplace.

9:30 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

You have 30 seconds.

9:30 a.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Okay.

One last question, again, to Ms. Allan. On the Bank of England example in the commercial paper market, is that measure taken by Britain consistent with the direction in which Mark Carney said he is potentially moving? Is that possibly on the horizon for Canada?

9:30 a.m.

President, GE Capital

Elyse Allan

That, I would guess, you would have to ask Governor Carney. I would only say that when we look at the examples, we think it is a good example of the type of program we would recommend he consider.

9:30 a.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you.

9:30 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

Thank you, Mr. McCallum.

My thanks to the witnesses. Your comments were brief and members can ask a number of questions.

Mr. Laforest, you have seven minutes.

April 30th, 2009 / 9:30 a.m.

Bloc

Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC

Thank you, Mr. Chair.

Good morning to all the witnesses.

My question is for GE Capital. You said that you raise your financing mainly by selling asset-based commercial paper. Now, we know that this kind of investment was largely responsible for the problems and the major losses that a number of pension funds have suffered.

I was astonished to hear you asking for the Bank of Canada to come to your assistance, given that you sold this paper to government groups, specifically government pension funds. It did not work out, they lost money and you are now asking for state assistance. I find that peculiar.