Industry Committee on June 1st, 2006

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

Thank you, Mr. Chair.

Thank you, gentlemen, for participating.

I can testify to what you stated earlier, Bill, in regard to some of the government incentives that have worked. My riding is Chatham—Kent—Essex, and we make a good truck. I think that is testimony to the fact that we're making 200 trucks a day. We almost lost that industry. And because of the incentives and the working together with the union--

[A voice]

The Liberal government.

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

Yes. I think everybody agreed that this was money well spent, and the result was as I said.

However, I'm in the car business, and I think of the competition that the Japanese have brought into the scene. I think back to the 1970s, when we produced this iron—we used to call it iron—and I look today and see the innovation. I see the technology that's come largely because of the Japanese. It's forced the North Americans to produce a better car. Ultimately, the consumer is the one who benefits from that.

I want to ask this question. When I look at southwestern Ontario—I live right along the 401, I and see these trucks humming by, just plowing this stuff into the United States--I really think we make a good product. For whatever reason, they like North America, the auto manufacturers.

Correct me if I'm wrong, but isn't a lot of their productivity shifting to the Asians, to the Toyotas and Hondas? Do we not produce as many cars now as we did at one time? And should we be afraid of that type of competition, which ultimately results in a better product for the consumers?

I don't have much time, and I don't want to spend all of it as an intro, but leading from that to the Koreans, I agree that presently it doesn't look like.... It's a one-sided agreement—I agree with you. But is the possibility not there that if we open up our markets, the Koreans will have to start building their products here? I would suggest that this would happen, because their plant in.....

To finish that off, I look at an example like Britain, which stuck its head in the sand regarding its auto industry for so many years. Ford bought Jaguar from British Leyland, BMW bought the Mini, and so on. There's nothing left of it, which resulted from the fact that they didn't allow the free market to drive their market. Correct me if I'm wrong, but was there a protectionist government that tried to save it at that time, and the end result was total destruction.

Can't we build a good car? Don't we have the possibilities? Can't we allow the free market to let that happen? And will we not in the end produce more cars and have a better product?

[Peter Kennedy]

Well, we do build a good car. There's no question about the quality and the productivity of the Canadian auto assembly industry, and there's no question that the penetration of the market by the Japanese producers has forced the North American producers to be much more cognizant of design and quality and fit.

But they come into that market with the direct opposite of some of the factors we're experiencing today. We talk about the value of the Canadian dollar. Well, the Japanese government has controlled the value of the yen for decades. They were able to bring vehicles into this market and sell a lot of product on this market because of the distinct advantage they had with currency.

All of that aside, our auto production is in decline; we peaked in production in Canada in 1998. But it is acknowledged we build more vehicles for export, primarily to the U.S., than we do for sale here in Canada.

To get back to your basic point as to whether or not we can build a good-quality vehicle, I think that's a given. If you take a look at the J.D. Power awards and the Harbour studies, Oshawa is the number one shining example of both quality and productivity in North America, which includes the offshore producers, the transplants.

[Bill Murnigham]

Again on that point, the Canadian workforce has proved itself not only for the big three traditional manufacturers, but with Toyota's selecting Ontario as the site for its new plant. That would speak to the fact that of course we can build a good car—in fact, among the best in the world.

The one point I would add is that sometimes there is a debate about the nationality of the home producer. That's never been the source of debate for Canada. Canada's never had an auto industry domestically. We've had an American industry, and now we have an American, a German, and a Japanese industry.

Certainly Japanese vehicles can be built here and sold here in Canada in an open market, but the issue is that the market is not open. North America has the most open penetration of any major vehicle market in the world. Over 20% of vehicles sold in North America are built outside North America, and that includes Mexico. In Japan it's 5% and in Korea it's under 1% of vehicles that are built outside those countries. Again, it's not a question: Japanese consumers I think would like to buy North American-made vehicles, frankly, but they have not been allowed in. That has been the history. In fact the automakers have abandoned that strategy, largely.

So it's not a question about that. Certainly global trade can help foster productivity and innovation in an industry, but the question for a nation is, what are you going to do to balance that trade for the benefit of your economy? Obviously it involves jobs, and that's employment for the nation. So I think it's partially that.

On the point about the future and whether we will be building as many cars, the latest predictions are that despite the announcements we've seen, we're going to have a net decline of around 7% in auto production by 2012. A lot more of it will be transplant production—Honda, Toyota, and maybe others—which make a lot fewer and buy a lot fewer domestic parts still to this day, so the employment impact will be down.

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

We were presented with some statistics, and one of them was the relationship of our productivity with that of the United States. I'm curious. What happened in the period bewteen 2000 and 2005, when we dropped...or actually, we didn't drop so much as they rose. They had a significant rise, and we had a significant drop.

Can you comment on that?

[Bill Murnigham]

I know some of these aggregate figures for the whole economy; maybe we'll come back to them in a second. In the automotive industry you get aggregate figures that come from measurements from the national accounts of nations, and so on, and it's a little bit abstract.

One of the most detailed studies that exist on productivity in the automotive industry is the Harbour set of studies. They send an army of people into every auto plant in the world to measure widgets, and how many bodies there are, and how long everything takes, from brushing your teeth to putting the screws on. In their study, which is the bible in the industry, Canadian plants come out at the top not in Canada, not in North America, but in the world. The Oshawa plant was I think down somewhere below 17 hours per vehicle, and that made it the most productive plant, likely, on the planet.

So you see these countercurrents. You see that these aggregate figures will tell us that Canada's productivity in relation to the Americans may be declining. That might have to do with investments in other sectors. In the auto sector, that line of thinking doesn't go too far. As to the reasons behind some of those broader figures in Canada, I would suggest again, as my colleague mentioned, that finding proactive ways to support investments in new technology in manufacturing and other sectors would maybe change and reverse some of that trend. But again, and on the whole historically, Canada's productivity is mounting. Perhaps America's is mounting that much faster.

[The Chair, Conservative, James Rajotte]

We'll go to Ms. Chow.

[Olivia Chow, NDP, Trinity—Spadina, ON]

We know the rising cost of energy is a problem. What do people think of the east-west grid question, the building of it? And second, investing in manufacturing alternative-energy sources, whether it's solar panels, wind power, green cars, etc., is that an area where we should focus, and if so, how? Particularly to export to India and China, because they need these kinds of energy sources too.

What about the east-west power grid, plus this kind of investment?

[Pierre Laliberté]

You're raising an interesting point, because it's clear that one way to ward off some of the pain is clearly to be less dependent and use less energy per unit of production. On that score there's plenty of room for government to provide incentives and expertise, to the extent it can be pulled together, to allow industrial producers to become more efficient. That's win-win-win all the way. If anything, this should be a moment where those sorts of things are being taken forward.

On the east-west grid, what I find amazing about Canada is that we are an energy-rich country, but we don't have an energy policy. Our neighbours to the south need energy, and they have an energy policy, which is essentially based a lot on what we send them. I was amused this past weekend when the Premier of Quebec was boasting, “We can be winners too. We'll export some hydroelectricity.” We too can export energy to the U.S.

Why the hell would you want to send to your competitors down south something that could be the basis of a comparative advantage? Of course you get some revenues out of it, but then again you don't add any value to it. In Quebec the aluminum sector is energy-dependent, but it provides good jobs; it provides spinoffs and all of that.

We need to start pulling those elements together. Certainly the grid should not just be about power. It could be about power, but it could also be about gas and oil and all those things. We need to start a Canada-first thinking about these things, to think of the future, think of what we could do with it. When it comes to gas, we're going to be using gas to get some oil out of the tar sands. We could have many more derivatives from gas than that.

Again that requires a certain leadership and a certain management, a husbandry of the resource. In Quebec, you can bet your pants that if you suggest they ought to send their electricity to Ontario rather than the U.S., you're going to get some resistance. However, you could pull it all together and say “This is going to be a win-win. There will be some oil for you too.”

We have the basis for something that could be very productive and forward-looking, but we don't because we're in Canada.

[Bill Murnigham]

Thank you for the important question.

On the question of an east-west grid, I'll echo the points of my colleague Pierre to some degree. It becomes a question about energy sovereignty and sovereignty of the two nations in the Canadian Confederation. It's very important that we're not just allowing our resources to be dominated by another nation. We're talking about manufacturing. This will become important as we go forward.

Why can we not envision a certain kind of national policy on energy that would be directing our natural resources towards building the economy, rather than getting back to this argument about sending all of our resources south of the border? Why not use them to the maximum advantage, as we have here, to build an economy?

On the question of alternative energy and so on, I can speak about green cars and developments in the automotive sector in particular. I cannot imagine why Canada and all of its leaders would not see this opportunity for Canada to get in front of this sort of technology, hoping that it's not almost too late in some areas. I don't know. If the world is going to move to wind energy, why shouldn't Canada position itself to be the greatest manufacturer of turbines, if we're going to be producing other kinds of alternative energy sources?

Whether or not we have some of the world's largest engine-building facilities, why are we not ensuring that we're on the leading edge of those new technologies? If the world is going to move towards hybrid engines or some other sort of thing in the auto industry, why wouldn't we be in front of that?

I think it's these sorts of manoeuvres or moves. The market itself doesn't necessarily allocate in a way that's going to be favourable for Canada. It requires government leadership and intervention to make that happen here. It would be a lost opportunity. We have that experience.

One of the specific sectors in the automotive sector is in light materials and manufacturing. We have the base for this in Canada in the aluminum sector, and at the same time the automotive parts industry and other secondary manufacturing in that sector, and in aerospace. This kind of thing takes somebody to help screw those pieces together and ensure that Canada is working to reap the benefits of this change in the economy.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Chow.

I know we're are over time and we're imposing on your time. Mr. Fontana has asked for a very short question. I have never heard a very short question from Mr. Fontana, but I'm willing to.

[Joe Fontana, Liberal, London North Centre, ON]

I appreciate that we're running over time, colleagues and Mr. Chairman.

I agree with 90% of what you said. It's very insightful; we ought to look to an energy policy and an industrial policy that encompass a lot of what you've indicated. Now that the work has been started, I would hope that this committee may find some value in exactly those kinds of opportunities that exist for the Canadian economy.

I have one question with regard to the auto sector. It is very competitive. I think we are the world's best. In fact, we could look at production and the cost of production here. Could we open up our exports into the Japans, and so on? I'm sick and tired of our being the only one that allows everybody in, and then when we try to get a Canadian product into Japan or anywhere else, we're restricted--maybe not by tariffs, but by non-tariff barriers that don't allow the Japanese to buy good Canadian-made cars. They want to, I know. Korea is a good example.

I think we ought to stick to our guns and say that we get reciprocity or you get nothing. At the end of the day, I think it's important, because they want that rich $350 billion market of North America. I think we ought to push back and essentially tell them to let us start selling our goods, and then we'll consider whether we ought to open up totally.

If we're going to continue to be the most competitive in the world in terms of the auto sector, I know on the human resources side that in seven to ten years we'll have 30% or 40% of our workforce retired, yet we've heard from the Chamber of Commerce and many others that although we can talk about capital or talk about technology, the fact is we have to be talking about human resources in this country.

What do you believe we need to do to make sure we can continue to be competitive through having the people and the skills we need to move forward?

[Peter Kennedy]

One of the most frustrating things I encounter is the catchphrase that people use about their employees being their number one resource. You heard presenters earlier today talk about the fact that we are in a crisis today, as it relates not only to skilled trades, but to certain other semi-skilled trades. As long as I've been involved in the labour market—going back to 1972—we've been talking about the exact same things.

It seems to me that all governments in that intervening period of time have taken a somewhat different approach in trying to resolve a fundamental problem. I don't think it's been for lack of trying, but I do believe it might have been for lack of focus.

One of our recommendations here today is to continue participation in the Canadian Automotive Partnership Council. Aerospace was mentioned, and we had a similar endeavour up and running in Canadian aerospace partnerships, which brought the stakeholders together to deal with these very issues. I think it's important that this continues. But until we're prepared to put money on the table for legitimate training, I'm afraid that we're going to be talking about it again 30 years from now. There has to be a definitive commitment in terms of funding for bona fide e-training programs.

[Pierre Laliberté]

I can add to this. It's as if everyone wants trained and skilled workers, but no one is really willing to go ahead and train a buffer of skilled workers, if you see what I mean. And when you need them, they're not there. Also the problem we have is a junction between the school system and the trades.

In Quebec, we see increasingly that skilled training goes on parallel to the school system. It is essentially forcing the school system to adjust, because as you know, a lot of it is a matter of credentials. As long as the school system doesn't recognize some of the skills that people gain on the job and find ways to make that happen, and until we find a way to free people off the line to go and get some more training, we will have that problem.

A lot of it is a matter of resources. There's no reason why it should not all come from the three sources that we know: the company itself, the government, and the person being trained. I can share your frustration. I feel like I've heard about this for twenty years now. Maybe now is the time to move on it, since there's a crying need, but many suggestions and recommendations are being made.

[Joe Fontana, Liberal, London North Centre, ON]

We had about $3.5 billion on the table for training. I'd like to think that the Government of Canada, and maybe the industry committee, might want to talk a bit about that.

I'm eternally hopeful.

[The Chair, Conservative, James Rajotte]

Monsieur Malo asked for a brief follow-up.

Again we're imposing on your time. Is that okay for a brief follow-up?

[Luc Malo, Bloc, Verchères—Les Patriotes, QC]

Some people around this table have suggested that money from the employment insurance fund should be used to improve training programs.

What do you think of that?

[Pierre Laliberté]

The CLC made that proposal at least five years go.

Ultimately, we observed that workers wanted to have access to training, but that it wasn't easy. Why would they agree to devote three months, six months or a year to development training, when they had to feed their families and there weren't necessarily any job opportunities? There's always uncertainty.

Consequently, in our view, employment insurance becomes a natural mechanism for motivating people. And leave is already offered for various reasons. So why not consider introducing training leave within the employment insurance system, to which workers would be entitled after contributing for a minimum number of years? In any case, we could find an arrangement that corresponds to that. We've calculated that every worker could accumulate a training leave bank that could be used for personal development.

In addition, employers could use that bank by offering training opportunities to workers who, at the same time, would receive an income paid by the employment insurance system. In such cases, an employer could perhaps add to that by granting a supplementary benefit, as is done in the case of health insurance and maternity leave.

So the benefit of that arrangement would be that it would offer flexibility. In addition, we would be able to provide tools for workers who, in some instances, don't necessarily have the flexibility to take charge of their own occupational training.

I believe the previous government was beginning to show that it understood this issue, but it didn't go very far. We hope to get more interest out of the new government, in view of the needs that are now so obvious. That's definitely a good way to use an existing tool, that we can equip with new accessories.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentations. Thank you for staying the extra time; we really appreciate it.

If you have anything further.... I know you both have presentations; they will be translated for all members and distributed to them.

Thank you.

The meeting is adjourned.