Thank you, Mr. Chairman and committee members. Welcome to Windsor, the automotive capital of Canada.
My name is Bill Storey. I'm a founding partner at MidWest Precision Mould in Windsor. My partners and I established MidWest in 1986. We are mould builders who produce plastic injection and compression parts for the auto, home appliance, toy, and gardening equipment industries.
Our industry has been in a serious and threatening downturn for the last three to four years, and getting worse. At our peak, we employed 55 skilled trade workers. Today, our current number of employees is 25, which is a 56% reduction in our workforce. The number one competitors in our industry for many years were mould builders in the United States. This area of Windsor and Essex County has always been known for its quality and timely delivery of moulds and dies. With that in mind, our customers in both Canada and the United States felt confident in having their various projects done here.
As I stand here today, all of that has changed. We're now dealing heavily with cheap offshore pricing, mainly from China, and it is devastating our industry. Many tool shops have closed or are in the process of closing. Windsor currently is at the top of the list in unemployment in the country, and it shows no signs of slowing down in affecting this manufacturing sector. We are an industrial city, and industry is leaving the area at an alarming rate. Some of the major companies that we used to build many moulds for include Black & Decker, Kodak, IBM, Rubbermaid, Little Tikes, MTD Products, Mattel Fisher-Price, and Graco Products, just to name a few. All of these companies have moved their manufacturing facilities to, or are dealing directly with, China. They now make the entire product in China and sell the finished goods to the Canadian and U.S. markets.
This trend is growing at a rapid rate. We've been trying to find ways to compete with this low-cost competition in order to survive but have met with a few obstacles--the high Canadian dollar, high energy costs, high fuel costs, and extremely low wages in China. As an example, tool makers in China earn the equivalent to roughly $200 Canadian per month at best.
I'd like to speak for a moment on so-called “joint ventures” with Chinese firms. Please find attached a letter from Industry Canada regarding the very concerns we are speaking of this morning. On the second page, third paragraph, you'll find a section under “China Strategy”. Industry Canada explains what some companies have done in order to protect themselves from the fierce Chinese competition. Please keep in mind that Chinese firms have absolutely no interest in North American firms joining them in building moulds or dies for the Chinese market. Their only interest is building our moulds and dies for the North American market. Industry Canada seems to feel that by teaming with a Chinese mould or die builder, this will open opportunities for us in China. This is not the case at all.
China works, in my opinion, under protectionist tariffs. Currently our auto parts are subject to 28% tariffs once arriving in China. Further to this, no automobile that is built outside of China can be sold in the Chinese market without 85% of the parts in the vehicle being made in China. DaimlerChrysler is currently in the process of finishing an assembly plant in China, a Chinese joint venture to supply the North American market with Chinese-built vehicles. Where are current regulations regarding Canadian content entering our market from offshore automakers? In order to level the playing field in this market, in my opinion, we need an auto pact with China, Korea, or any other offshore country that would surely find our open market attractive.
I'd like to explain what is happening in our industry when a mould or die supplier wishes to work with a tier one supplier or directly with a North American-based automaker. I'll use the example of a major North American automaker we are currently dealing with. In the process of a new vehicle going into production in the spring of 2007, this company has implemented target pricing. They set a budget for every level of build for this vehicle. In our case a tier one moulder that will supply the automaker with moulded parts from the moulds we will build has approached us. We were given a target price that the automaker is willing to pay for our moulds. This price comes from a firm that the automaker hired to come up with said target price.
Should we agree to take the project on, we would then pay a fee of 15% of the target price to the hired firm. Since we cannot build the moulds for that price, we are forced to get prices from mould build companies in China, at their recommendation. They will build these moulds in China for approximately 60% less than the target price. This is a China strategy that Industry Canada suggests we should get involved in. We have lost 56% of our workforce, and this China strategy will only succeed in depleting it further. If this is the strategy of our industry in the future, here are the ramifications of this strategy:
We will require very few employees, as the moulds will be built in China. We will become nothing more than a depot. By that, I mean a building where the moulds can be shipped to after arriving from China. We will need only a small number of employees to unload the moulds and clean and inspect them prior to shipment to the end-user.
We will no longer require our many suppliers from whom we purchase components and products for the mould build. We will no longer require new machinery or upgrades to it. We will no longer need computer software upgrades to run the machinery.
This will be the China strategy. Industry Canada seems to feel statistics do not support our concerns. If this is the case, why then did the Government of Canada, along with the United States and the European Union, file a complaint on September 15 of this year with the World Trade Organization regarding China's imposition of illegal barriers to the sale of foreign-made auto parts to China?
Furthermore, it is my understanding that Canada financially aids China in the amount of $30 million or so to aid them in the making of everything from baseball bats to toys. It would appear to me that these are my tax dollars aiding our industry here in Canada to lock their doors.