Thank you very much, Mr. Chairman.
Good evening, and thank you for inviting me here to speak to the 2011 federal budget priorities on behalf of the Canadian Vehicle Manufacturers' Association.
Throughout their significant Canadian operations, the auto industry directly and indirectly employs about half a million Canadians in a wide range of activities, including manufacturing, sales, and research and development. They directly and indirectly remit billions of dollars annually to the government.
Over the past several years there have been very dramatic changes in the global industry brought about by the global recession and its huge impact on overall sales volumes for vehicles and the related drop in vehicle production, as well as significant impacts related to changes in government policies and regulations. Canada was not alone in experiencing the impact of these realities. However, these changes are bringing new opportunities, on which the industry is now focused, and the CVMA believes that the government should similarly focus its priorities on these in order to strengthen and encourage the growth of Canada's auto industry.
The manufacturing industry is global in nature, and governments around the world recognize the economic importance and spinoff benefits that a strong automotive manufacturing sector provides to both local and national economies. Despite the automotive restructuring, significant global overcapacity continues to exist, and manufacturing facilities that are not globally competitive continue to be at risk.
As a result of consumer demand and changing vehicle technologies, auto assembly plants require continuous, high-capital investment to remain globally competitive and attract new model mandates for production. In order to maintain auto manufacturing and attract the essential new investments to keep these plants globally competitive, the overall business environment must be conducive to large-scale investments, including competitive incentives, and efficient taxation and regulatory regimes.
In recent years, changes to the taxation system in Canada, in particular the elimination and lowering of capital and large corporation taxes, have been helpful in continuing to attract investment. However, the recent increase in employment insurance rates, while lower than originally proposed, will substantially increase auto manufacturing operational costs in Canada. Based on the most recent auto sector wage data publicly available, CVMA estimates that the rate increases will cost auto manufacturers roughly $28 million and their employees an additional $20 million in 2011 alone. These are additional business costs that are difficult to absorb in a highly global competitive environment and difficult economic times.
At the same time, the U.S. is introducing a series of actions aimed at securing domestic manufacturing jobs. These include a variety of policy focuses, including a $25 billion loan package being offered to automakers by the Department of Energy for investment in the design and production of fuel-efficient, advanced technology vehicles. These supports were the result of U.S. EPA estimating that meeting the very aggressive new vehicle GHG emission standards will cost auto manufacturers in excess of $115 billion.
In Canada there have been no investment supports established to date. Previously, the federal government established a $400 million fund that successfully helped attract over $10 billion in new automotive manufacturing investment between 2002 and 2007. To ensure that Canada secures a portion of this ongoing investment in manufacturing and research and development, Canada needs a competitive national fund to provide effective incentives to attract automotive investments. As such, the CVMA recommends that the 2011 budget introduce a globally competitive federal investment incentive program that will signal Canada's strategic intention to be globally competitive in attracting new manufacturing investment.
While manufacturers are researching and introducing new vehicle technologies to the market aimed at reducing GHG emissions and improving fuel efficiency, it is critical to support consumers' adoption of these technologies as well. The federal government introduced the counter-productive ecoAuto/green levy program in 2007. While the rebate portion of the equation has been eliminated, the green levy remains and penalizes primarily domestic manufacturers by adding up to $4,000 on a new vehicle purchase price. This actually discourages consumers from purchasing new vehicles equipped with more advanced safety and environmental technologies.
Instead of taxing new vehicle purchases and discouraging fleet turnover, the government should consider programs aimed at encouraging consumer adoption of these technologies. As an example, the U.S. is currently offering consumers a tax rebate of up to $7,500 on a wide range of advanced technologies. The CVMA recommends the introduction of similar consumer incentives for the purchase of these technologies.
That concludes my remarks. I'll certainly be pleased to answer any questions the committee members may have.