Good evening, and thank you, Mr. Chair.
We appreciate the invitation to be here today in the context of your 2010 pre-budget consultations and hereby take this opportunity to convey to your committee that the wholesale credit crisis continues for the Canadian RV industry today.
As in 2009, as was previously conveyed, RVDA of Canada's 420 dealer members reported difficulty adequately financing their retail operations throughout 2010. This has had a detrimental effect on RV sales and an undesirable adverse ripple effect on employment, tourism, and tax revenue for the provincial and federal governments. Without adequate floor plan financing, RV dealers have not been able to maintain an appropriate number of RVs in their inventories to maximize their retail sales and profits.
In 2008 inventory in Canada had an estimated value of between $650 million and $750 million. As a result of the credit crisis, inventory levels were reduced by 30% to 40% in 2009, as dealers were not able to adequately finance their products. While inventories have marginally increased in 2010, the limited number of wholesale finance sources in the industry has adversely impacted the average dealer's ability to meet consumer demand and business needs.
Our industry recognizes and appreciates recent attempts by the Government of Canada to help alleviate the financial crisis, such as the $12 billion CSCF in 2009 and the $500 million VEFP program announced by the federal government in 2010 as part of the federal budget. However, to benefit from the program, we would first need to find a suitable lender whose sole barrier is the required capital to use the securitization platform under the program. Unfortunately, we have not been able to bring forward such an institution, despite continued solicitation of asset-based lenders, Canadian banks, and insurance companies. It is unfortunate that the RV industry, along with marine, power sport, and so on, which require floor plan financing, do not have access to captive financial institutions to finance the resellers, as in the automobile example.
Given this distinct difference, the RVDA of Canada strongly feels that it requires a more targeted, focused approach than any program currently in effect. To this end, the RVDA of Canada has held discussions with the BDC and both Industry Canada and the Department of Finance regarding a proposal that outlines a mitigated secondary loss guarantee for potential institutions that are reviewing our industry. Unfortunately, as of this date, it has proved unsuccessful. It has become increasingly evident that the barrier to enticing new lenders into our industry is not the availability of capital via the CSCF or VEFP programs. Rather, among lending institutions that are looking at wholesale lending to recreational product dealerships, not only in Canada but also in the States, it is the perceived risk in today's economy.
We are hereby requesting implementation of a program in Canada similar to what the U.S. government has introduced through the small business administration. Loan guarantees have been made available to a wide variety of lenders to the recreational vehicle dealerships in the States. Under this scenario, the BDC or other federal means of support would guarantee a secondary loss position above an institution's normal risk model. If provided, we would then be in a position to successfully entice suitable specialized wholesale finance lenders to fill the current credit shortfall.
The recreational vehicle industry is vital to the industry and to tourism in Canada and makes generous contributions to the Canadian economy. Without additional wholesale finance sources, the credit void has led to lower inventory levels, decreased product availability for consumers, and, for RVDA members, lower reported income. We believe this trend will continue until we can find alternative financial lending sources for our industry.
We are eager to work collaboratively towards finding a credit solution that makes sense for all stakeholders and the Canadian public. The RV market has stability, profitability, and a long history of low-risk loans. We therefore take this opportunity to provide the following recommendation.
The RVDA of Canada hereby recommends that the Government of Canada establish a wholesale finance lending program, solely dedicated to and for the benefit of the RV industry, either by providing funding or via a mitigated loss program that would assist and entice new financial institutions to our industry.
The increased promotion of the RV industry would be an important component of Canada’s tourism policies, highlighting new and exciting ways for Canadians to see the country at its best.
We also recommend that the Government of Canada establish a national tourism strategy that provides dedicated funding for the RV industry to ensure that RVing in Canada is recognized as a prosperous tourism activity.
In conclusion, please consider the following: the retail RV sector is not simply a one-time retail sale; RVing and the RV lifestyle make critical economic contributions to ongoing tourism and recreational spending.