Industry Committee on Nov. 22nd, 2006

[Paul Hyatt]

I could name Ford and Honda; they're all large companies.

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

Yes.

The committee is looking at the issue of intellectual property, perhaps not today but in the wider context of manufacturing. It seems to me that those of us who are concerned about copyright and about the privilege of companies being able to ensure that their product remains.... This may be a bit of a stretch, and it's an example that there are limits to where the intention by some of us is going.

Could you give me an idea of when you believe this started? You cited the tire example. I was very interested in that because I know that if I'm not mistaken, most tires go 60,000 or 70,000 kilometres, which is one-eighth the lifetime of a vehicle—certainly of a vehicle that I might drive. Considering that this is the case, from a consumer critic's perspective, I'm extremely disheartened to know that I don't have that choice.

When did this practice begin? And why are they not offering you the opportunity of at least paying a royalty for access to their product?

[Paul Hyatt]

That's a concern. In the last few years, car companies have not really made the profit margins that they wanted on new cars, so now they're concentrating more on service. I think we're all aware of that.

Unfortunately they are now designing cars that only they can service, which puts the consumer at a very large disadvantage. This is very interesting because of two things. Number one, the General Motors, Fords, and so on of the world will also have to have that information from Honda and so on to repair cars.

So it started a few years ago, and it increases every year. For instance, in 2008 these will all be on every vehicle. So it continues.

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

I am astounded. I think if Canadians knew there are companies treating American repair shops differently from Canadian ones, they would be aghast. We've heard from some car companies who want harmonization in terms of standards and regulations. It would appear to me that this test may be failing some of those companies, and perhaps a nice, quick little letter might solve the situation.

But I want to deal with that specifically, because obviously I have a lot more people in my riding who are mechanics or are repairing products than people who are retailing or marketing the products. Having had a bit of an experience with one of the companies you just cited, I am deeply concerned, and I think it would be incumbent on this committee to look at this issue a lot more intensely, if we can.

Could you please give me an idea about where this will lead in two, three, or four years from now? If you're saying that this practice will continue into 2008, and many of the companies jump in, how do you see your industry? Would this be the death knell of your industry, including the tire and the tire repair industry?

[Paul Hyatt]

That's true. Our business has been here for 65 years, which we're celebrating this year, and we're very proud of that. Our stores are very well equipped, and our training programs, which come through TIA, the Tire Industry Association, are the best in the world. We travel all around the world to give these training programs. Our technicians are well trained. We have the most up-to-date equipment. There are times when we are locked out and cannot go further with a repair. This is happening more and more often.

I was going to suggest to you a little earlier that I envision, somewhere down the line--and this has to do more with Oshawa and Oakville and Windsor--that an Asian company will be coming in and saying that they will offer thousands of service points whereas their competitors will give several hundred service points. Which car would you buy? That's the trend that's coming, and I fear for some jobs in Canada on the OEM side.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

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

This is to your colleague beside you, Mr. McLean.

I know how expensive it is to grow a product. I know the quality that's behind it, and I know, of course, something about temperature control valves, especially when my wife does, in fact, flush the toilet downstairs and I'm in the shower.

I want to ask you specifically whether you are concerned about imports--cheaper imports--and products that may be inferior that may go into products, such as the question of stainless steel. Are these all locally sourced?

[The Chair, Conservative, James Rajotte]

Answer just briefly, Mr. McLean.

[Bill McLean]

Very briefly, yes, we do see, first of all, knock-off imports exactly copying our products, which we chase back through the proper channels. And we do source our materials locally--our stainless steels and brasses. We buy heavily in North America. But we do see goods come in that are copies of ours or inferior products that try to replicate the standards that are required.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Monsieur Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, everyone.

My question is for Mr. Barry.

The Canadian economy is currently experiencing strong growth, mainly because of the western energy and oil sector. Conversely, the manufacturing sector in Quebec and Ontario seems to be struggling with growth.

Could you share with us your vision of the state of the manufacturing sector in Canada?

[Jonathan Barry]

That's a good question.

I would like to see our manufacturing sector in Ontario and in Quebec able to compete. I'm going to use an anecdote for you concerning one of the customers I have in my base who I deal with a lot, and it's been in the press. It's Maple Leaf Foods.

If you look at Maple Leaf Foods, they're very significantly in the hog business in Canada. They are the biggest producer in Canada and one of the biggest in the world. They had a crisis in their hog business. They couldn't compete on a global basis. And the only way they could end up competing was by sizing their hog business to relate back to their value chain, which goes up, as you know. And all of us, as consumers, in the grocery stores see Maple Leaf ham or related products.

I use that example because that's an example of a company that looked at the value-added areas in their entire value chain and saw that they could compete only where they had control of the value chain all the way up to the consumer, to what you and I buy. So on a global basis, in their hog business, which is purely Canadian and is perhaps the best example I've seen, the hog is born here, bred here and fed here; the feed is grown here; all the drugs are produced here, and in fact most of them are owned by Maple Leaf Foods and related organizations. It is gate to plate, truly. The fact that we can't compete on a gate-to-plate basis in that business is a concern to me.

The good news out of that is that they sized it and got to the value added. So a long way of answering what my vision would be is to say that I think we need to focus on the value-added areas within manufacturing where we truly can compete. What are the areas where we can enhance and invest and foster investment in our manufacturers along the supply chain, where we can truly make a different product or differentiate a product that's going to get to market profitably in Canada?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Let me be more specific.

Current economic growth in Canada -- or at least the public image of that growth -- has resulted in what is known as “Dutch Disease” effect. I don't know if you are familiar with that expression. Increases in a country's oil prices can produce some adverse effects.

Do you feel that Canada is taking the right steps at this time to ensure that the economy as a whole shares in the benefits stemming from this growth? Could a greater effort be made to ensure that the manufacturing sector in Ontario, Quebec and the Maritimes, for example, derives greater benefits from the growth currently being enjoyed by the West? Like me, do you recognize that there is a problem here?

[Jonathan Barry]

No, I think Ontario and Quebec are significantly struggling right now. Certainly my colleague in Quebec would absolutely agree with me. In fact, we don't even have a manufacturing sector in Quebec anymore. The business was in Bell Canada or the focus business. It's had significant impact. I think there absolutely is growth out west, and that's great, but I don't know that I see it being shared across the country and I certainly don't see it in the manufacturing sector in Ontario and Quebec.

I do think we need to do things. Some of the things we talked about today are things we absolutely have to address to help get us focused on the competitiveness of the sector and do what we can to foster some of that competitiveness on a global basis.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Hyatt, I believe that we already met in Ottawa to discuss this matter, although I can't be certain of that.

Could you explain to us again how it is that in the United Stated, an agreement was concluded between companies and other users of computer equipment, such as yourself, while in Canada, no such agreement was reached?

Why were different approaches taken and what lessons should we draw from this experience?

[Paul Hyatt]

An association called ASA made an agreement with the manufacturers, and it was a handshake agreement. There was no enforcement, and the OEM people give what they must give. However, they are forced to give by the EPA all emission codes. They're not forced to do this in Canada, so the States are ahead of us in that respect.

They are championing the Motor Vehicle Owners' Right to Repair Act of 2005 in the States, and it was before the House committee. Unfortunately, they had an election and the Democrats were put in and the chair of that committee now is the representative from Detroit. I think it's on the back burner at this point.

We feel a handshake agreement is not correct. It's not good for the consumers, because the consumers are still locked out.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Carrie, for six minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair, and I'd like to thank all of the witnesses for coming here this evening.

My first question is to Mr. Sloan. You mentioned that you do have a significant amount of exporting to the United States. Do you have a problem with any regulatory harmonization issues between Canada and the United States in your industry?

[John Sloan]

No, actually, we don't. That hasn't been an influence for us either in our operations or anywhere in the business. It's simply been the ease of getting things back and forth for the day-to-day border operations.

[Colin Carrie, Conservative, Oshawa, ON]

You mentioned attracting and maintaining human resources. What are your ideas on how the federal government could fit in to help you maintain and attract people to your company?

[John Sloan]

There are probably three areas.

I said that manufacturing is not normally a destination of choice for our professionals when they get out of school, but as far as raising the stature of that part of our economy goes, a large percentage still has a lot of beneficial effects that it spreads through the economy. Raising the stature of manufacture as part of our total engine would be helpful. There are a lot of people who can participate in that. But certainly making it more public that the federal government is even interested in that instead of having given up on it would help, I think.

Secondly, to the degree that we shape the curriculum in the schools to produce people who understand manufacturing economics and what we need to do to be competitive--which is more than just the technical skills, it's things like lean manufacturing, as we talked about earlier--if there were some incentives or assistance we could give to the universities to include that in their curriculum, that would certainly be helpful.

[Colin Carrie, Conservative, Oshawa, ON]

Okay.

[John Sloan]

Then as a large part of our workforce, we try to bring students in. We have a large program in which we bring in students after the third year of university. They stay with us for 16 months. They take a year off school for an internship program. Part of that is to help them put a little money in their pockets so they can finish school, and part of it is to expose them to our business and our industry in the hopes that we can attract them in the long term. That's an investment on our part, because when they come in, we have to put a lot of time and effort into training them. If we could get help with the expense of that part of our workforce solution, that would be helpful also.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

My next question is for Mr. Barry.

One of the things we've heard about is the paper burden that businesses face. I wonder if you have heard of a government program called BizPaL.