Evidence of meeting #10 for Industry, Science and Technology in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was automotive.
11:45 a.m.
President, Canadian Vehicle Manufacturers Association
I'll be very quick.
One of the main things is the huge increase in cost of materials, which is having a major impact on the supply chain.
The other thing that may be of interest to you is what individual provinces might do from a regulatory standpoint, and how that affects new vehicles and new vehicle designs. The Province of Quebec right now is engaged in an effort that will have a negative impact on suppliers in Quebec—
11:45 a.m.
An hon. member
Negative?
11:45 a.m.
President, Canadian Vehicle Manufacturers Association
Yes, a negative impact on suppliers in Quebec, and we'd be glad to talk to you offline about that.
11:45 a.m.
Conservative
11:45 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
First, I'd like to start off by congratulating David Paterson, from GM. I read in The Globe and Mail that according to J.D. Power we were number one again at Oshawa Plant No. 2.
11:45 a.m.
An hon. member
Hear, hear!
11:45 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Coming from Oshawa, I'm very proud of that.
But it does bring me to a question, because when I look at the quality of Canadian-built automobiles, we're consistently--whether it's GM, Chrysler, Ford, or Toyota--producing high-quality vehicles, and here I see for GM Oshawa 2, the plan is to close or revamp that facility.
The question I'm asking is what else the government can do to help in this globally competitive market right now. It seems like the workers are doing a great job putting out a quality vehicle, and still we're looking at these job losses.
I met with the CAW locally, and it's a huge concern for them. I was just wondering what you think we as a government can do, and do fairly quickly, to help in this globally competitive market.
11:45 a.m.
Vice-President, Government Affairs, General Motors of Canada Ltd., General Motors of Canada Ltd.
There are two things. The first thing I must do is congratulate my partner, Lorraine Shalhoub, for having the number two quality plant.
It is true that the quality and productivity ratings from third parties that Canadian plants are getting are amongst the best, and that's due to a combination of the companies and their workers working together and applying processes. So there's much to be proud of.
The second point is that there certainly have been no layoffs at all within Oshawa, and we're working through some changes and seeking to attract some major new investments, as you're aware. We're working on that. To do that, we have an uphill battle against the Canadian dollar and some of those aspects, and some of the other things that we've talked about here.
To overcome those, our quality and our productivity are key. We focus on those. We have to cut our cost base and make sure it's competitive with the best around the world. What government can do to help us in our R and D efforts is make sure that we're as competitive as possible anywhere in the world on taxation and on R and D, make sure that our border is something that we can get products across--because our parts go across on a regular basis--and continue on with the excellent support that we've had while we try to attract investments to make us competitive, especially in competition with other countries that provide very strong subsidies, whether that be the United States or other jurisdictions.
11:50 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
How would you say we're doing? In the CAPC report and on our report card initially, we saw where Canada was. It's been a couple of years. Would you be able to state on the record today how Canada's been doing overall with that report card over the last couple of years?
11:50 a.m.
Director, Public Policy and External Affairs, DaimlerChrysler Canada; Canadian Vehicle Manufacturers Association
There's been an absence of late with respect to getting CAPC up and running since the change in the government. We're hopeful that we can do that sooner rather than later.
There are some initiatives, and as some as you may know, we rate them red, yellow, and green, sort of similar to the stop light. Some initiatives have stayed yellow and red for some time. The border has been a huge frustration, I think, for all of the member companies here today in terms of seeing progress, and progress quickly. The border signifies that Canada is open. It signifies certainty to future investment, and for future investment coming forward, which sometimes takes some years before it happens. That is also true with respect to product mandate—planning for product mandate on this side of the border versus on the U.S. side of the border, securing suppliers, supplier base, and so on. So the border, and the openness and transparency of the border, are key in terms of investment and signalling to future investment for Canada.
On some initiatives we've seen red, yellow, and green. We're hopeful that we can move forward fairly quickly, because as I had mentioned and alluded to before, CAPC pulls all of the initiatives together from the subcommittee standpoint, whether it's trade, whether it's fiscal, whether it's regulatory harmonization, whether it's environmental, whether it's energy, whether it's investment, and so on, and that is very important to moving forward.
I must say, from a personal perspective, the U.S. companies have looked at it and said, “It's a great model. It would be nice if we could mirror that model.” So it has received a lot of accolades from our parent corporation.
11:50 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Very good.
I had a more specific question for Mr. Nantais. You mentioned a term, “tariff snap-back”. Could you explain that to the committee?
11:50 a.m.
President, Canadian Vehicle Manufacturers Association
Sure. Essentially, if one went ahead on the basis that if you negotiate an agreement to achieve certain levels of market penetration with vehicles into the Korean market and all of a sudden you either saw backtracking on that market penetration or stalling of that market penetration--depending on the schedule you agreed upon--then one would endeavour to pull back the reduction of the 6.1% tariff. In other words, you would snap it back to the level that it was at when you began, or to another level agreed upon that might also match the schedule of market penetration.
In other words, if you fail in the agreement, you snap back the tariff that would apply to Korean vehicles entering Canada.
11:50 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Could you comment on global overcapacity? Would you say it is increasing or decreasing at this time?
11:50 a.m.
President, Canadian Vehicle Manufacturers Association
I'm going to turn that over to member companies, or perhaps Mr. Adams, if he cares to comment.
11:50 a.m.
Director, Public Policy and External Affairs, DaimlerChrysler Canada; Canadian Vehicle Manufacturers Association
I think global overcapacity has remained consistent in the last little while. From DaimlerChrysler's perspective, we entered into a turnaround plan where we seriously looked at the number of manufacturing facilities we have on each continent, particularly North America. So we've reduced plants. We've sort of shifted. But of the two plants that we do have now in Canada, those plants are more productive and are running at 90% to 95% capacity.
So it's a question of looking at the efficiencies, looking at the flexibility in your plants and what you can produce. There's no question that the manufacturers have moved towards flexible manufacturing, which allows us to build multiple vehicles, a lessened number of that same model, but transition to models so that you can satisfy market demands quickly.
11:50 a.m.
Conservative
11:50 a.m.
President, Association of International Automobile Manufacturers of Canada
I think Lorraine is right, there is a significant global overcapacity problem, but I think that will be addressed over time as all the facilities move to flexible manufacturing--which may be a closing comment.
If you look at auto manufacturing in Canada, many, if not all, of the plants that we do have in Canada--the major plants, anyway--have moved to a flexible manufacturing basis. So I think that stands us in good stead for the immediate future anyway.
11:55 a.m.
Conservative
11:55 a.m.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
Thank you, Mr. Chairman.
Congratulations to all those who succeeded with J.D. Power and Associates. In a previous life, I worked for Toyota Motor Corporation in Toronto. We were selling some 65,000 units then. I left, and now they're selling about 170,000 units, which tells you how successful they can be without me.
I want to point out a couple of things that I think are of concern to the committee and to members on our side: the whole issue of access to the U.S. market with respect to...I believe you referred to FAST or NEXUS; the issue of providing products that are coming to and from the United States; and of course, the impact of the 90¢ dollar, not just on the manufacturing side but also obviously on the parts side.
Specifically, I spoke to Dennis DesRosiers some time ago regarding the efficiency of your industry and the overall lifeline of vehicles that you produce. Is there a danger right now that because you are producing products that last a lot longer, with warranties in many respects that are extremely generous, you may be in fact hitting a point of saturation that has little to do with currency but much more to do with the fact that in your products, as in the product I drive, which has 425,000 kilometres on it, with the same engine, the same transmission, you reach a point where the success of the industry may in fact be its downfall?
I'm not here to advocate for building lousy cars, but in fact there are only so many cars you can sell to a family that will last 8 to 10 years without having them return and buy your product down the road.
Maybe that's to David.
11:55 a.m.
Vice-President, Government Affairs, General Motors of Canada Ltd., General Motors of Canada Ltd.
The first thing I would do is to encourage you to buy a new vehicle to replace that old vehicle. The reason is that it's interesting to note that if your vehicle today is about 10 years old, on average it will emit about 22 to 30 times more in terms of smog-causing emissions than the vehicles there today. That's one of the reasons it's important to continue turning over the car fleet, quite frankly. One of the things we can do to seriously achieve the environmental improvements we're doing is to bring in the new technology that we're bringing in.
It is a hyper-competitive market within North America--there's no question--and all of this does line up with the capacity issues we're talking about, and certainly from the point of General Motors having to take some $7 billion out of our cost structure in the last year, which I'm pleased to say we have been successful in moving towards and are turning the company around as a result.
So we've had to be able to make those types of adjustments, whether it's to the Canadian dollar or what have you, and that's all part and parcel of the competitive nature of the industry we're in.
11:55 a.m.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
If I could just follow up on that, all kidding aside, should there be an incentive program by the government to get those 10-year-old plus vehicles off the road? Or should there be, as well, incentives for Canadians to purchase hybrid, new technology vehicles with low emissions?
11:55 a.m.
Vice-President, Government Affairs, General Motors of Canada Ltd., General Motors of Canada Ltd.
I think those types of things can be very valuable. In a sense, some of us in the marketplace have jumped into that with our own incentives. My company offers people $1,000 to trade in a 10-year-old vehicle to get them into a new vehicle because of the environmental benefit. It's another aspect of selling in the marketplace, but it also has an environmental aspect.
I think the key thing on environmental technology is to recognize that there's a broad suite of environmental technologies that are making an impact. My friends from Ford have a wonderful new hybrid vehicle that they're bringing out. We have eight new hybrid vehicles, but we also have new technologies in terms of cylinder deactivation that is going to probably, just in its application into pickup trucks that will be sold by General Motors, save more fuel than every hybrid sold in Canada.
We have a whole raft of new technologies that are coming forward into the marketplace, and we are wise to take a technology-neutral approach to the supports we have so that we can let the technologies that really make the best difference, and that people want to buy, move into the marketplace rather than picking winner technologies and trying to incentivize them against the others.
11:55 a.m.
President, Canadian Vehicle Manufacturers Association
Yes, perhaps I could supplement that, Mr. McTeague.
The other side of this too is that we need to think about the fuel infrastructure, the fuel itself and the fuel infrastructure. We've made some tremendous progress in the areas of gasoline quality and we're making more progress on diesel quality, but when we start to go into clean diesel and we start to go into ethanol there's still room to manoeuvre there. And that also is an area where the government might want to give some consideration as to how you ensure that the fuel infrastructure is there to service these vehicles, which would create all the momentum necessary to create more demand.
