Industry Committee on Nov. 23rd, 2006

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

But the industry was down and then came back in the 1970s and 1980s—

[Patrick Persichilli]

This isn't cyclical; this is structural. This is the myth that all of us in this room need to get a clear understanding of today. This is not a cyclical problem; it's a fundamental structural issue that is driven by a changing global economic landscape. The 1980s and the early 1990s are not what we're experiencing today.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

Can I go to the 18-month issue? I think that's likely caught most of us.

It's the auto parts people that you're supplying to who are putting the squeeze to you, basically. They take many things out of it. How do you compete with that? Is there something beyond...?

I'm looking for some direction. You don't have lien protection. Are there other countries, or...? What does the United States do? I am told 85% of our automobiles go over there, so that's our largest trading partner. What happens over there, for example?

[The Chair, Conservative, James Rajotte]

We'll hear from Mr. Moynahan, and then Mr. Bernard.

[Dan Moynahan]

EDC plays a huge role in our exports by helping us cover our receivables. But again, we're still financing this for 18 months.

Actually, this 18-month PPAP was begun, to my recollection, by one tool shop in this city that was trying to put up some huge numbers. Because they wanted to get the huge numbers, they would say,“You don't have to pay us for 18 months.” Once they got a flavour for this, they just continued it. That same shop is in great difficulty today.

The 18 months is something the banks have to learn to deal with. The banks will only take so much risk. They'll share the risk, but it has to be shared even more by the banks. The banks only do things when they're completely secure and have no risk at all.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

What is your industry—

[The Chair, Conservative, James Rajotte]

I'm sorry, but Mr. Bernard wanted to make a statement as well, and actually, we're over time.

[Ed Bernard]

As is shocking to everyone in this room, the decisions are not made in the local banks here in Windsor any more about how our accounts are allowed to function. When these issues go up to Toronto, to the banking credit managers there, they just shake their heads and ask us, “Are you guys nuts?” But we really don't have a choice about this, because we're being pitted against each other by our customers: “Well, Dan's shop is doing it. If you want to be a player, if you want to quote, you have to do this.” We're also being told that if we want to quote on a domestic job, we have to provide them with quotes from LCC—“low-cost country”—content. We have to get for them Chinese quotes that compete with our own quotes, in order to have them take a look at our quotes.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Shipley.

Our final questioner will be Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you.

I think we have a serious problem and, in trying to solve it, we have created others. I will give you some examples.

The government pays for missions to China, in which Canadian industries participate. We are trying to understand how these industries can make more money by having their products manufactured in China, which means that they have to give up part of their market to that country. This is the first problem.

Moreover, in my opinion, the automobile pact with Korea will not be beneficial to subcontractors.

In addition, as Mr. Persichilli said earlier, we are now talking about tax credits. However, we will have to start making money and paying taxes to make it worthwhile. If we fail to make any money, we do not pay taxes. Therefore, tax credits are useless.

We are also talking about innovation. Within a year or two, this word will be overworked. It is used for any circumstance.

Lastly, with regard to intellectual property, when new discoveries are made, it takes so long to secure protection those other countries and individuals, even here in Ontario, can copy the new product. We would have to get to the root of the problem, I guess.

I am asking you the following question. How could we get to the root of the problem in order to get out of this crisis? We have to admit it: the industry is in a crisis and it is not a superficial crisis. It is really a deep crisis. Earlier on, we were talking about education. Even with all the education in the world, if the fundamental problems are not solved, we will not succeed.

What can we do to, at the very least, stabilize the crisis and then find a way out? This is what I want to know from you.

[The Chair, Conservative, James Rajotte]

Who would like to start here? Mr. Bernard?

[Ed Bernard]

We've registered in the last five years five patents, and we're named as co-inventors on numerous patents with our customers. We're supposed to have intellectual property protection through copyright of our designs, but our customers, great Canadian companies like Magna International, take our designs and give them to our competitors in South Korea and China and ask them if they can build our designs cheaper. So you're right; there are costs we're incurring for which there is no recovery and from which we cannot profit.

Again, this is something we have to become organized over, to protect this intellectual property. If we think innovation is the solution but cannot protect what that innovation gives us, then we have no solution.

[The Chair, Conservative, James Rajotte]

Mr. Parent.

[Gary Parent]

I think it's not only the governments that are funding, as the example was raised on the Chinese, it's also corporations. They're garnering the profits that are made in North America--the U.S. and Canada--and they're investing heavily in China. Don't forget, India is in the wings waiting and Korea is already making some things. A lot of our profits that are generated in North America are being obviously invested offshore, and that's where the governments have to come into play. That's where the protection.... They're only investing in China today because the government is forcing them to invest in China.

We need the governments of the day, both in the United States and in Canada.... And I want to just issue one warning to the committee, if I can: look out that window and look across that river, and be careful when we're talking about protectionism, because all the United States has to do is issue protectionism on their particular market and Canada is going to be isolated from their market as well. You're absolutely right--80% of the vehicles that are produced in Canada are shipped to the United States--and we have to be careful in what we're doing, absolutely, but we also have to join with the United States possibly and garner some protection for Canadian and U.S. auto workers and manufacturers. It's our innovation and our expertise that's being exported. Our brains are being exported offshore, and we have to come to grips with that as a country, as a region, both in the United States, Canada, and even Mexico.

Remember our fear in 1988 when we negotiated the U.S.-Canada Free Trade Agreement and then expanded it to NAFTA and Mexico? Our fear was Mexico, and now Mexico is not even in existence, per se. It's China and India and Korea waiting there, and we have to have the protection of this government and the United States government for auto workers and manufacturing or we're going to be lost in the globalization of this world.

Free trade is good, but fair trade is better. Pardon me. Free trade is not good. Fair trade is better. Pardon me. Misquote. Misquote.

[The Chair, Conservative, James Rajotte]

You're on the record.

[Gary Parent]

I hope the other is too, that I misquoted.

[The Chair, Conservative, James Rajotte]

It will be, yes.

[Gary Parent]

Fair trade has to be paramount when we're talking about protection for our manufacturing industry. What kind of society do we want in North America? Do we want a call centre mentality, or do we want manufacturing that gives good-paying jobs? The auto industry is the economic engine of this country. People in this country have to understand that, and we have to do everything we can to protect it, as a government, as a society. Unless we do that, our manufacturing industry in Canada--complete--is going to be jeopardized, because the people who are sitting at this table, their jobs and their plants are going to be exported offshore and we're not going to have a society that we all want.

[The Chair, Conservative, James Rajotte]

Thank you.

We're well over six minutes.

Thank you very much. I think that was a good note to end on. Thank you very much for your words, for your time here today. We certainly appreciate that.

We will have your submissions translated, and if any of you have any further recommendations to make to the committee, please do so and we will ensure that we get it in the report to be presented in mid-December.

We will suspend for a couple of minutes to have the next group of witnesses come forward to the table, but thank you very much for your time today.

[The Chair, Conservative, James Rajotte]

We'll resume sitting. We have our second session, which is scheduled to go until 11:30. I suspect we may go a few minutes later, if that's okay.

We have four witnesses with us. We are limited to an hour and fifteen minutes, so we have a very short time.

We have Mr. Mike Hicks, North American sales manager, president of the Canadian Association of MoldMakers, Incorporated, from DMS Corporation. Welcome.

We have Mr. Ed Kanters, the chief financial officer for Accucaps Industries Limited. Welcome, Mr. Kanters.

We have Mr. Peter—

[Peter Hrastovec, Chair of the Board, Windsor and District Chamber of Commerce]

Hrastovec.

[The Chair, Conservative, James Rajotte]

Peter Hrastovec, chair of the board, Windsor and District Chamber of Commerce. Welcome.

And we have Mr. Bill Storey, partner and director, MidWest Precision Mould Limited. Welcome.

We'll go exactly in that order. You have up to five minutes each, and then we'll go immediately into questions from members.

Mr. Hicks.

[Mike Hicks, North American Sales Manager, DMS Corporation; President, Canadian Association of MoldMakers]

I want to thank everybody for having this today. I didn't want to hear the first part of this, because I have my own thing to say, but without manufacturing in Canada, we're nothing, so we support all manufacturing. I am here today representing the mouldmaking interest in this community, but again, we support all manufacturing.

I want to start out by saying that we've always enjoyed the long-standing relationship with all levels of government. Our group has always embraced working with the government. We've had some really quality people. I can't say enough good things in that regard; we've had a good relationship with the government.

I want to start out be saying, too, that I have three things to say. I want to talk about the challenges, but I also want assurances from the government that they are going to continue to work with us. I'm not totally sold on that. Also, I have some solutions, and hopefully this fact will be brought out in the question and answer period.

Our shops employ, as you've probably heard earlier, a highly skilled workforce, and we continually work with post-secondary institutions like Sinclair College and the University of Windsor. Our CAMM office is also located in the Ford Centre of Excellence, and we thank you for your contribution to the Ford Centre of Excellence. We have worked together with those institutions; we have continuous tours at the University of Windsor; we work with the engineering department; we go to the research area; we have our meetings sometimes at Sinclair College.

Our companies, as you heard earlier, work with the OYAP program. They also work with the Moulding Youth for Industry program. Our shops employ different levels of skills. These are world-class skills. The moulding of youth program is also a great program. It gives people a second opportunity in life if they fall through the cracks. It gives them a second opportunity to better themselves.

Also, the mouldmaking industry is vital to this area. It provides many spinoff jobs. Any of our mould shops deals with accounting firms, with law firms, with steel suppliers, and machinery people. The spinoff jobs are tremendous. That is something you really have to keep in mind.

Our mould shops are huge supporters in this community, too; they give back. You probably heard from the CAW; they give back to this community. Our mould shops also give back, in quiet ways. I don't want to name-drop, but you've probably heard of Tony Toldo in this area. He's one of our really prominent mould makers; he's given back to this community. So they also give back to our community.

Our shops are also large exporters to the United States, and with their proximity, obviously, here to Windsor and our cultural similarities, it makes a good trading partner for us.

Most of our shops are using advanced technology, and we're continuously upgrading our systems and that type of thing. You've heard that we're constantly upgrading our shops. Our shopowners and our managers are resilient.

You were alluding earlier to our having been through some problems and their having self-corrected. I really thought some of our problems would self-correct. I've written articles for papers and so on. I don't have all the answers, but I've been in this trade for 25 years and I've seen a lot. I thought some of these problems would correct themselves, but they're not doing so, and that's why I'm glad we're here today.

Among the challenges facing our industry—again, you've probably heard them—are border issues, our exchange fluctuations, cash flow problems—and you've heard that—bankruptcies of our OEMs, rising commodity prices, a shortage of skilled help—and that still is an issue for us.

But you're going to hear more in depth from some of my colleagues, probably, and you've already heard it: the offshore competition is just tremendous. That's the area that I felt would self-correct; that the old “you get what you pay for” type of thing would sort of work itself out, and all the problems that go with it.

However, for some countries—you've heard China mentioned—there's an ITC investigation. There's a website; it's USITC.gov, if you want to put that down for the record. I have a hard copy with me. I'm not going to show it today, because I know there are rules here, but the work has already been done for you. They've examined the toolmaking industry throughout the world.

In 2002 the U.S. government was looking within themselves, because they're faced with the same challenges. They did a study. They deemed Canada's only advantage was the exchange rate. They know we have quality shops here. They deemed us as fair competitors. I know Mr. Parent was mentioning protectionism and so on, but the U.S. government has recognized the toolmakers in Canada to be fair competitors to them, and again, the exchange rate corrects itself.

So the studies have already been done. They've done China, they've done Taiwan, Korea, the United States toolmaking market. It's all there. There are statistics. There are also statistics from Windsor and the shops here and so forth. Again, I have a copy of that.

Things that are happening in China--we'll elaborate later, I'm sure--are that they're receiving tax funds, cash grants, preferential loans, violating WTO, and so on and so forth. On competitive conditions in the United States, that's part of the USITC. Hard copy is available again from me.

I do want to mention one thing that we were against. Last year the Canadian government hosted a Korean trade delegation. They invited South Korean toolmakers to Toronto and there was an airport hotel at which they met with our Canadian OEMs. That's one of the reasons that I'm not totally sold on this. And I don't know if the Canadian government agenda is to create more free-trading partners, hopefully not sacrificing our industry. The second thing is, I know you're trying to create more commodities markets, so hopefully you're not going to sacrifice on manufacturing.

I have a couple of solutions—

[The Chair, Conservative, James Rajotte]

We're over time here, Mr. Hicks.

[Mike Hicks]

Okay. Hopefully we'll get to the solutions during the question-and-answer period.