Evidence of meeting #2 for Industry, Science and Technology in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was million.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Richard Dicerni  Deputy Minister, Department of Industry
Paul Boothe  Senior Associate Deputy Minister, Department of Industry

4:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

This committee knows that procurements go both ways. For instance, there was a contract, I believe, in 2001, signed with General Dynamics in London from the U.S. military that was something like $4.6 billion. What are the rules as far as forcing companies to have manufacturing done in a specific area, to choose our area over--

4:05 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

We have to be careful of trade treaties and unfair market protection. That's one side of it. The rule is it's dollar for dollar. We're looking for qualitative investments. That means jobs and opportunities for Canadians and Canadian firms. That's the kind of commitment we hold them to. In a lot of cases, these companies are coming up with ways of saying that as part of their commitment they will give a Canadian firm a contract and at the same time that provides an entry for the Canadian firm to bid on other contracts in other countries or to be part of the general supply chain of this international supplier of military equipment, whatever that might be. It is potentially a real win for a Canadian company to get something like that, because it opens up new markets and new doors for them.

4:10 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Maybe if we can continue on with that sector, obviously I'm much affected by the auto industry as well. You've alluded to just how hard hit the auto industry is, specifically the Detroit three, and that is very important to our region.

I wonder if you could just tell us a little bit more about your plan on how the government is working to get the auto industry back on track and how it will remain viable in the future.

4:10 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

Sure. I think everybody is in agreement now that the domestic, the Detroit three, have to restructure and it is going to mean changes in what they produce, how they produce it, and where they produce it. As Premier McGuinty has noted, that probably means job losses in Ontario. There's probably no way to get around that when you're used to supplying 17.1 million cars for North America and right now we're down to 9.5 million cars. The industry is not sustainable the way it is. We're trying to help them along the track of restructuring, so that they can come out viable, producing cars that are for the market or for a range of markets, both in Canada and the U.S., in an integrated way. And we obviously want to preserve the 20% rule, the 20% of productive capacity, that we have right now. That was the whole gist of the Prime Minister's and the Premier of Ontario's intervention.

The only other thing I would say is that we acted because we knew that once the United States made the decision that these companies would not be going bankrupt, our choice was crystal clear. We either participate in the restructuring of that industry or we have the risk of not being a player any more. I think it was a wise decision by the premier and the Prime Minister, and it helps us protect the fact that we've got many parts suppliers and others down the supply chain that rely upon the industry being located here as well as elsewhere. Does that mean there isn't going to be any pain? No, there will be some pain. We don't know where or how or when, but I think I should honestly signal that we're not out of the woods. At the same time, we have the best chance possible to preserve as much as we can.

4:10 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

I will pass that time on to my colleague.

4:10 p.m.

Conservative

The Chair Conservative Michael Chong

Sure.

February 10th, 2009 / 4:10 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

I will follow up on that with one last question. Can you give a bit of an update in terms of where we are in discussions with the individual automakers here in Canada?

4:10 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

Ford neither asked for support in Canada nor in the U.S.A., so they are not part of the mix. Chrysler and GM did. In both cases we went through a period of due diligence with them where their books and their data centres were open to us. We did that ahead of the Americans. In the case of GM, after the U.S. package was announced, they asked us to defer flowing the funds in Canada because they had enough to keep liquid, but in return for that, have the long-term discussion, which inevitably we were going to get into at some point or another. In the case of Chrysler, we're still in the short-term and long-term discussions, and those discussions are ongoing. I can report to this committee that they're happening, and they're happening in good faith. There are issues that have to be sorted out. I will be reporting to Canadians when we have something to report. We have a deadline of February 20 to get the long-term restructuring plans and what it means for Canada. That happens to be three days after they table a similar report in the United States. Therefore I think there will be some clarity on the situation in the days ahead.

4:10 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you, Minister.

Mr. Masse.

4:10 p.m.

NDP

Brian Masse NDP Windsor West, ON

Thank you, Chair.

Thank you for coming on short notice, Mr. Minister. We appreciate that, because we just asked the other day.

I would like to talk a bit about the Navistar situation. Given the hardship the region has faced, wouldn't it have made sense to provide support for the retooling? As you noted specifically in your comments, you're getting a promise back for $270 million of future development, but as you said, in different parts of Canada. So the area that's suffering so badly now that could have really benefited significantly from this investment may not see a single dollar of that back into the region. So why not support an actual retooling, especially given the employment insurance cost is going to be larger than the retooling and also because the region is so hurt right now?

4:15 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I think you hit the nail on the head as to whether retooling was an option. There would have to be a massive retooling of the plant, because it's not set up to do the kind of military hardware that would be required for this particular contract. I'll make an assumption; granted it's an assumption, but I'm sure Navistar would have looked at that, would have found it to be economically unfeasible and so consequently made another decision. At the same time, that's perfectly within their right, so long as they invest dollar for dollar in the Canadian economy down the line as the contract moves forward.

Believe me, it's very sad to see that plant in the distress it's in. It's not something we take lightly, but the facts of the case are it was not able to produce the kind of vehicle that was necessary for the Canadian military.

4:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

You're confirming today that the Government of Canada did not do any type of analysis to determine whether or not retooling was an option, especially given the capital cost reduction allowance programs that have been launched. Is that true, that there has been no Government of Canada analysis of the Navistar retooling option?

4:15 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I can't really answer that question, because I only represent one department in the government.

4:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

Okay, your department then.

4:15 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I can tell you an IRB agreement was arrived at with that company, and they are currently within the four corners of that agreement.

4:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

The Xstrata situation is a good example. You can have an agreement on something and then virtually overnight it has to be reworked. The potential could be with Navistar as well.

Would you at least commit that Navistar would be mandated to provide this region with that reinvestment?

4:15 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

You're suggesting demands that I'm not sure I have the ability to follow through on. I sympathize with the situation. The situation with Xstrata is completely different, because it involves legal undertakings that were made under the Investment Canada Act and the interpretation of those legal undertakings over the last five to seven days. So let's not mix apples and oranges.

4:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

That's fair enough, but I guess there's a bit of frustration from this side, as there doesn't seem to be a plan in all of this.

I want to move to the auto industry. You were very clear, coming out publicly, even before meeting with the union, demanding that they live up to the agreement, and this is the Auto Industry Financing and Restructuring Act from Congress. You've asked them and others to live up to that agreement. What direct impact did you have or contribute to this American legislation? I find it highly unusual that we would have agreed to a process that we have no public or other types of parliamentary involvement in, in terms of a foreign nation's legislation. What involvement did you have on this? Because you're asking for concessions from the union to follow the U.S. piece of legislation.

4:15 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

The terms and conditions, the terms sheet that was released on December 20 when Premier McGuinty and Prime Minister Harper made their announcement, indicated several areas that would follow, dovetail, similar language with the United States rescue plan, including executive compensation, for instance, but also making sure that our costs were competitive with North American standards. So I think that's what you're referring to, if I understand your question correctly.

Our engagement with the Americans, with the American Congress, and with the American administration has been to continue to make the case that this is an integrated industry and that if you want this industry to survive and thrive it has to continue to be able to integrate its parts supply chain and its assembly supply chain across the border as seamlessly as possible. And if you want American cars to be built in America, you need Canadian parts and Canadian talent and Canadian innovation. So that's been our one-note band. I think it's an important message to continue to get across. We've made great progress in getting it across to various sectors within the American political system, but we will continue to do so.

4:15 p.m.

NDP

Brian Masse NDP Windsor West, ON

I'm sure you're aware of the advanced technology vehicles manufacturing loan program in the United States. You've asked the people here to do their part, be it the union to make concessions or wage cuts, but in the United states they have a $25 billion aid program for new innovation and technology. Our response to that has been your department's $50 million over five years--$250 million--program. Since the other partners are being asked to do their part, what will be your response?

The United States has $25 billion in that pot already, and we pale in comparison to that response. If you're arguing that people have to do their part and take a wage cut, which is going to affect many families across this country, what is your government going to do to make up the incredible difference between the $25 billion versus the $50 million per year?

4:20 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I'd say a couple of things.

First of all, Canadian production and assembly is competitive on a number of different levels. We have to remain competitive, and it's up to the CAW to discuss that with management. I think that's the appropriate place for that discussion to take place.

You mentioned the $250 million auto innovation fund. You're quite correct; I think that is important. I'm hopeful that certain announcements will be made fairly soon on that. But there's also--

4:20 p.m.

NDP

Brian Masse NDP Windsor West, ON

What about the fact that it's so small compared to the American competition? It's not even in the same league.

4:20 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I think you have to look at competitiveness across a whole range of indicators. That's one indicator, but there are other things we do that make us competitive. I believe our budget, our economic action plan, which includes reducing the cost of business, accelerating capital cost allowances, and making it easier to retrain workers--you didn't support that budget, and I respect that--will allow us to be competitive across the board.

4:20 p.m.

NDP

Brian Masse NDP Windsor West, ON

You can ask others to do their part, but you refuse to do yours in a comparative--

4:20 p.m.

Conservative

Tony Clement Conservative Parry Sound—Muskoka, ON

I wouldn't characterize it that way.