Industry Committee on June 8th, 2006

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I'm working on that side.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

We have two more members. We are a bit over time. We started about 11:05. So what I'd like to do, if it's amenable to members, is this. Mr. Van Kesteren, perhaps you could put your questions, and Monsieur Vincent, perhaps you could put your questions before the witnesses, and then we could have the witnesses answer both members at the same time. Is that's okay?

[Some hon. members]

Agreed.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

I had two questions and I'm going to narrow it down to one. I think I'm going to go with the free trade. I want to get Mr. Adams' perspective on that.

Do you share the perspective that's shared by the other three manufacturers that this has a negative impact for Canadians?

[David Adams]

I knew you'd ask that question, Dave.

In looking at the free trade situation with Korea, obviously I have Korean manufacturers that are part of my association and other manufacturers that are part of my association. I think, maybe taking a different point of view than Mark has taken, if you look at the impact strictly on Canada and not worry about access to Korea, what I would say is that if you look at who's likely to be most adversely affected by that, it would probably be the two Japanese automakers in Canada, which are producing product that's directly competitive with the type of product that would be coming from Korea. However, the position of our association is that we are for free trade, for rules-based free trade, and that's best done through a multilateral context, but I think everybody is aware of how slow that multilateral round is moving with the Doha development round.

[The Chair, Conservative, James Rajotte]

Okay, one more brief one.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Are there other negative impacts in comparison between the automakers--for instance, pensions that are hurting you and giving you an unfair...?

I'm going to ask the question to you, Mark, or one of the other witnesses.

[Mark Nantais]

When you talk about pensions, these are all part of the high costs, legacy costs, that exist with companies, such as DaimlerChrysler, Ford, and General Motors, that have been around for a century providing literally tens of thousands of employees with a very high standard of living. It's something that's evolved over time. Those costs are huge. Part of their restructuring in their plan going forward is, how can you compete in a global market and still carry that additional cost associated with your employees?

Clearly a lot of focus is on that going forward: how do you reduce those legacy costs and remain competitive in a fiercely competitive market? I'll let them speak further on this, but clearly it's one of the things that have to be dealt with as we go forward, because new entrants into Canada, if they're importing from abroad, don't have those costs. So you can see there's a huge differential there on those in Canada who have those costs and those who don't.

If I may pick up on your last question, the Canadian Automotive Partnership Council actually issued a recommendation that Canada really give serious consideration as to how to go forward with the FTA in a manner that does not adversely affect the auto industry. And that included not just the companies here today, but also Toyota and Honda, as well as parts makers. So there's a broad industry support, and a concern, about moving forward with the FTA.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go briefly to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman. I'd also like to thank the witnesses for joining us here this morning.

I'd like you to clarify something for me. You talked about being able to compete with other countries. I note here that it takes you 22 hours and 27 minutes to manufacture a vehicle. Productivity in Canada is 4.6% higher than in the United States, and 39% higher than in Mexico. We talk about the value of the dollar and of US companies like General Motors. Our Canadian dollar is worth 90 cents US. You are in fact competitive withe respect to US manufacturers.

Which countries are considered direct competitors of yours? How can we help you become more competitive? You're already number one in this category. The Oshawa Number 2 plant can turn out a vehicle in 15.8 hours, while the Oshawa Number 1 plant can accomplish the feat in 17.9 hours. In my estimation, we're already leading the way here in Canada when it comes to automobile manufacturing. What kind of competition do you face from other countries?

[Lorraine Shalhoub]

I think in terms of comparing productivity, you have to be careful with respect to what the product mandate is at any one plant when they're looking at the productivity numbers. For example, when you're building a truck or a more complex vehicle, your productivity hours are factored differently.

[Robert Vincent, Bloc, Shefford, QC]

What about light vehicles?

[Lorraine Shalhoub]

It depends on the vehicle, right, and whether it's a light vehicle or a truck or a heavyweight, or whether they're building multiple vehicles and numerous parts. That's all factored into those elements. You have to be careful when you're looking at those in terms of which vehicle was being produced at which plant at which time.

But that said, the biggest concern is with respect to the emerging markets and low-cost producers--the countries like China and the other emerging markets where we can't compete on a wage basis because there's no comparison. When you look at the fact that the majority of the vehicle content and purchase is with respect to your labour costs, and you're trying to compare that with a country like China or other countries that have significantly lower wage costs, that's where the competition comes in.

[David Paterson]

I might add that in general none of the companies represented here compete against countries; they compete against each other as businesses. And we're all present in most of those countries around the world as well. It's a truly global industry. So the question really becomes, what can a jurisdiction do to take maximum advantage of its competitive advantages to attract that type of business, which offers such a disproportionate number of jobs and wealth within a country?

I think through the Canadian Automotive Partnership Council process we've made a really good start at identifying priorities and working away at many of those priorities. We just really need to keep focused.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll probably finish it there. Unfortunately, we're about 10 minutes past, and we have the aerospace industry following immediately thereafter.

We want to thank you very much on behalf of all members. I think, as you see, there were some very substantive questions, a lot of interest in the industry and your perspective.

We will have all the material translated and distribute it to the members. Also, if there are any further recommendations you would like to make for this committee, please feel free to forward them to me, and I will ensure all members get them.

Thank you very much for coming before us today. We look forward to seeing you again.

We are adjourning this meeting.