Thank you very much, Mr. Chairman, and thank you as well, honourable members, for inviting me here today for this important discussion.
I represent Chrysler, Ford, and General Motors Canada. Collectively our members account for approximately 60% of all vehicles produced annually in Canada. We operate five assembly plants and multiple engine and components plants, and have roughly 1,300 dealerships across the country.
Why does auto manufacturing matter to Canada? I'm not going to go through my entire list. Let me highlight a couple of things, if you wouldn't mind.
First off, motor vehicles are the number one manufactured good. We directly employ about 115,000 employees and each of those assembly jobs creates nine other jobs in the economy. It has a job multiplier second to no other manufacturing sector.
We directly contributed over $16 billion to GDP in 2013. We uniquely have the ability to generate very high value-added jobs. The auto trade itself accounts for nearly $100 billion in two-way trade between Canada and our primary trading partner, the United States.
The Canadian auto manufacturing industry plays a critical role in Canada's economy through its ability to provide jobs for families, contributions to the fiscal sustainability of communities, and literally millions and millions of dollars of tax revenues to all levels of government. The industry contributes to a vibrant research, development, innovation, and commercialization presence in Canada. CVMA member companies' auto research facilities undertake leading developments in powertrain, lighting research, fuel economy and light weighting, cold weather testing, and stationary emissions reductions, as well as advanced vehicle engineering, design, testing, and analytic activities.
Canada's competitiveness in research and development, innovation, and commercialization, with emphasis on commercialization, is directly related to its competitiveness as an auto manufacturing jurisdiction of choice. Given the increasingly aggressive competition for automotive investment globally, it is critical that the government have informed discussions with industry, such as we are having today, related to our competitiveness. What is important is that we look at competitiveness challenges as connected dots and not view issues in isolation.
Auto manufacturing and research are a continuum and Canada needs to be competitive on both of these fronts. As such, the automotive investment fund, the scientific research and experimental development credits, and the accelerated capital cost allowance need to be compared and be responsive to aggressive incentives offered by other jurisdictions as part of connecting the dots.
Before we focus on the challenges, I want to highlight a couple of the advantages that Canada offers for investment. First off, Canada has a strong foundation of automotive assemblers and suppliers with proximity to North American markets. It has leading-edge automotive research and development facilities in these selected fields. The government has kept corporate tax rates low, which has been especially important. The government's support of Canada's apprenticeship system leads to a well-trained automotive workforce, including the skills trades. All of these factors lead to Canada's well-deserved reputation for quality.
The government's continued support of the Canadian Automotive Partnership Council, CAPC, also provides benefit in that all five manufacturers here in Canada come together with labour, researchers, and levels of government to collaborate in the best interests of the industry as a whole. CAPC released an important report a year ago that examined the current global competitive environment and provided recommendations to both the public and the private sector that would better equip Canada to compete in this time of heightened global competition for auto investment. I sent the “Call to Action II” report to all of you last November. I would encourage you to refer to that report as part of your deliberations.
The office of automotive and vehicle research at the University of Windsor reported that automakers spent $17.6 billion around the world in 2013 to increase vehicle-making capacity, but virtually none of this was placed in Canada. Save and except for today's Ford announcement, which has been in the works for some time, this marks the third year in a row that Canada has missed investment decisions, underlining the need to put invigorated focus on ensuring the right incentives and policies are in place to support Canada's competitiveness for auto investment going forward.
Given the intense global competition to attract these economically beneficial automotive investments, it is critical for Canada to have a competitive investment support strategy in place to secure reinvestment in its existing automotive production footprint.
The automotive investment fund has an important role to play in commercialization. It needs to evolve into a predictable investment support program that is competitive with other jurisdictions to ensure that Canada has the most competitive tools, including the magnitude and form of the AIF, which is a fully repayable loan, its tax treatment, required conditions, and speed of approval.
Additionally, the current AIF tax treatment, which stipulates that the repayable loan must be taxed in the year the loan is received, results in a federal incentive that is uncompetitive when compared with cash incentives offered by other jurisdictions in North America and globally. By changing the tax treatment, there would be virtually no cost to the government, as the loan is currently taxed in the year received and deducted from expenses in the year it is repaid.
As such, the net revenue impact to government is zero, but the tax treatment does significantly reduce the benefit to industry. I would encourage the government to consider this closely as part of your deliberations.
The fact that several large investments were made outside of Canada should be a signal to Canada's automotive innovation fund that it needs to evolve in order to become competitive. Making an enhanced and globally competitive AIF permanent would also improve Canada's ability to compete for future investment decisions by providing certainty and predictability in a business climate where these decisions are made.
Mr. Chairman, I'll stop there. We do have other recommendations in terms of accepting the CARI proposal, which is in our submission, and a few other comments with respect to SR and ED credits and how they should also evolve in response to other programs in other jurisdictions that are getting new investment.
Thank you.