Good morning, Mr. Chairman and committee members.
It's an honour to be here testifying on behalf of the Valiant group of companies.
Valiant, founded in 1959 by Michael G. Solcz, is a fully integrated manufacturer supplying automated production systems, industrial parts cleaning systems, and plastic injection and casting production toolings for the automotive, aerospace, construction, and forestry industries. Currently Valiant operates in 17 facilities located in Canada, the United States, Germany, Austria, the Czech Republic, Poland, and Belgium. The company employs over 1,200 highly skilled employees globally.
It's no secret that the Canadian manufacturing sector is facing some significant challenges. One of the most constant themes in any discussion on manufacturing in North America will invariably include the impact of emerging markets on the profitability and competitiveness of domestic manufacturers. We combine that with the effect of a strong Canadian dollar and rising input costs, and the impacts on our economy have been devastating.
To help this struggling industry, the Government of Canada must ensure that Canadian manufacturers have the support and infrastructure necessary to not only weather short-term economic downturns but also a changing global economic environment. It would be deeply troubling for Canada to lose such a critical economic sector because of a lack of government support and action. Valiant's customers are demanding lower, more competitive global prices on all products, programs, and services. These price reductions are driven by the fact that our competition in emerging markets such as China, India, and eastern Europe not only enjoy significant labour cost advantages but also significant government subsidy advantages, thus allowing them to offer their products and services at a much lower cost.
We can look at the Globe and Mail report on business article this morning about parts makers being hit again by the foreign onslaught. It's a common theme. It's daily. It's something that many within this sector, within this region, face on a daily basis in terms of economic challenges and adversities. These challenges have forced Valiant and many companies like ours to look for new ways of doing business. We realize that the Canadian manufacturing sector cannot solely depend on deep cost-cutting initiatives to sustain profitability in the long term. Canadian manufacturers must look beyond cutting worker wages and embrace the innovation paradigm. Valiant believes that the MTDM sector in industry must work with all stakeholders to create opportunities to remain cost-competitive.
I am proud to report that Valiant has had some success in developing and marketing new and innovative technologies. New high-performance niche product developments like Valiant's Valu-Flex vehicle framing system, our four-plus-one roller hemming system, and a hydrodynamic pulse nozzle for a parts washer application are just some examples of how Valiant, and we at Valiant, have created value for our customers and have increased Valiant's global competitiveness through investment in innovation and research development.
However, given the current economic climate, it is becoming more difficult for Valiant and for like companies to make these investments and remain globally competitive. Valiant offers some recommendations on what can be done to strengthen the manufacturing sector in Canada, but given the time constraints this morning, while I could talk for about six weeks on the subject, I'll make some key observations about the recommendations submitted in our report.
We recommend the expansion and/or the creation of a loan financing system that bases repayment on future cashflows derived from product and process innovation. This system must better reflect industry needs and include shared costs for capital investment and administrative and skills development expense. Governments must be willing to accept the financial risk with manufacturers to help improve global competitiveness through increased productivity. We require programs that help companies gain the financial resources to invest in the latest technology and equipment to improve our global competitiveness.
New kinds of research resources are needed to support Canadian manufacturers. While it does have some strengths, the current Canadian infrastructure for supporting industry innovation fails to meet the needs of the MTDM sector. Research and development support vehicles, primarily driven through university-based research, need to focus more on commercialization as opposed to pure research, and must represent leading-edge practices and be linked closer to industry needs. This disconnect needs to be fixed immediately.
It would be prudent for the federal government, given the substantial budget surpluses, to make changes in parallel with provincial governments and enhance investment tax credits and credits for capital acquisition, which would immediately help to offset costs, improve competitiveness, and increase government revenue.
One of the inadequacies of the current SR and ED tax program is the treatment of capital cost allowances. These allowances should be increased significantly and must be done immediately.
Governments must continue to use investment vehicles to encourage growth in the manufacturing sector. The Province of Ontario's successful automotive investment strategy, as well as the former federal Technology Partnerships Canada program, must be continued and enhanced. The federal government must tie these recommendations into a comprehensive actionable policy dealing with the automotive and manufacturing sector.
We don't believe at Valiant that government intervention, subsidies, and investment alone will fix the competitive problems that exist today.