Industry Committee on Oct. 28th, 2009

[Dale Finch]

From our perspective at NATA, there are a couple of areas we're concerned with.

First, Bill C-273 refers to the Canadian Environmental Protection Act, CEPA. Traditionally, CEPA is an area first of provincial jurisdiction, unless the federal minister can demonstrate why there should be an intervention. We feel this could very well lead to the provinces challenging the agreement, and as that is being sorted out, it could drag the service and repair industry into a period of years during which we couldn't get that information.

It also uses the Competition Bureau as a sort of policing agency, and that, in our belief, is not exactly what the Competition Bureau is charged with. This again can lead to confusion and a period of no information.

And today it is so important, especially in collision and glass repair, because a brand-new vehicle could be involved in an accident immediately. Without that information, the car has to go back to the dealership. In some cases that can be many thousands of miles, even, that the vehicle has to be put on a tow truck.

So it's imperative to us. We see that a period of wrangling over whose jurisdiction it is will create that problem; that's from NATA's position.

[Scott Smith]

If I could just add to that a little bit, Bill C-273 has broad-based language specifically because it's legislation. We wouldn't know what the specific differences are between Bill C-273 and the agreement until the regulations are put in place. That being said, the agreement is voluntary; it doesn't require a hammer of legislation because it's voluntary. That's the fundamental difference. This piece of legislation will have an enforcement aspect to it; the agreement doesn't have an enforcement aspect to it. They're expected to work together.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I believe it is Mr. Finch who brought up the following matter. You spoke of the United States. In what way is the present agreement, that we have and that we are discussing, similar to or different from what has been in place in the United States for a decade, according to your comments?

[Dale Finch]

The language in the U.S. and Canadian versions is basically the same. The difference is in the subcommittees and the acknowledgement by the Canadian agreement of collision and glass repair. The agreement in the U.S. was made by the Automotive Service Association, the ASA, a large mechanical repair association. They're not necessarily focused on collision and glass, and that's the small difference. We feel in Canada that it addresses the overall industry.

Thank you.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I had understood that it is not all of the associations that are participants, that some of them were excluded. Could you tell us if all vehicle manufacturers would come under the agreement? I presume that the answer is yes, but I would like to hear you confirm this for me.

Are there other associations that are not party to the agreement but that could eventually become so?

[Mathew Wilson]

I'd be happy to answer that—and David as well, I believe.

From a manufacturer's perspective, there is one big difference. In Canada, for 99.9% of the vehicles sold here, those manufacturers will be covered under this agreement and have already signed their letters of commitment to the minister. In the U.S., there are some exclusions to the process. Actually, in Canada, in most cases, there's actually a broader agreement, because it does cover more companies. I think that's a good news story from a Canadian perspective: it is much broader and does include a much bigger piece of it.

The 0.1% that's missing--I forget, but I think there's one outline. It's like a Lamborghini or a Maserati dealer, or someone like that, who sells about 10 vehicles a year in Canada. So it's not something that independent shops are probably going to be investing heavily in anyway. There are typically very, very specialized repairs that need to be done to those.

[The Chair, Conservative, Michael Chong]

Okay.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

I want to start, if I could, by pointing out to the vast numbers of Canadians who will be listening to this on the Internet that what we're seeing today is an example of the way Parliament can work and parliamentarians can work together.

We have an issue here that has been around for some time. An NDP member of Parliament who's concerned about the issue brings forward a private member's bill, and we see a large number of MPs from all parties who, while they may not necessarily support the specifics of the legislation, support the spirit of the legislation and the idea and want to hear more, so we bring it to a committee.

We had the opportunity over the summer to benefit, of course, from discussion. We saw the minister initiate this discussion through the letter sent in the spring, a letter that was asking for an industry-led voluntary solution, but then we saw a summer of a lot of conversations going back and forth, members of all parties having conversations with each of you to get our heads around the issue. We saw three organizations, at times, and sometimes four organizations, working hard to come up with this solution.

Let's make no mistake about it. It was hard work, and we know there was some tension and some negotiation involved to get all four groups sitting at the table today in agreement with this voluntary solution. Here we have a result, it seems to me, that is better than the proposed legislation—and I don't mean that in any disrespect to the member who moved the legislation. I think it is a good thing that we've had this discussion.

I want to commend all of your organizations for working so hard to get to this point. Of course, I'll take the time to commend my minister, Minister Clement, for the work that he did, and I'll commend Brian for the work that he has done on this issue.

It's very difficult, when you invest so much into a private member's bill, to at some point withdraw that bill, as Brian has indicated he's going to do. So I commend Brian for that as well.

I have a couple of questions, if I could, starting with Dale Finch and Marc Brazeau.

One of the groups that this voluntary agreement really is all about is not represented here at the table—that is, consumers.

Could the two of you speak to the benefits of this voluntary solution? How will this solution benefit consumers out there?

[Dale Finch]

The biggest issue with consumers is that, especially in rural areas and in areas where, sadly, dealerships have left the marketplace recently, many communities don't have access to all makes. It's only in the major centres, and this is so important.

If you're in a position where even if you can drive your car, if it needs repair, sometimes you have to drive 300 or 400 kilometres. If you can't drive your vehicle, it has an effect directly on the consumer, because the consumer has the expense of towing the vehicle, and in the case of vehicles being in an accident, that cost is also borne into insurance premiums. It increases the cycle time of the vehicle, because it has to be moved, and again, there's a cost to insurance companies and it drives premiums up. So anything you can do to help in that situation is obviously a very good thing.

The other piece is that many times when vehicles are repaired following a collision, you can get the vehicle up and running, but the airbag system has not been rejuvenated because of this very situation we talk about. So there's an extreme amount of pressure to have that vehicle driven to the dealership for those 300 or 400 kilometres, and we as industry don't feel that it's a good thing to put workers in that position.

So, overall, this is a great thing for consumers as well as workers in the industry.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you.

Mr. Brazeau.

[Marc Brazeau]

When we started this process of identifying potential solutions and quantifying the problem—because that's where we started four or five years ago, as we saw the problem coming—and when we engaged organizations such as CAA, which represents millions of motorists across Canada, they took a keen interest in this issue. They really felt that if the aftermarket were not provided with access to the information and the tools, a supply and demand problem would be created in the marketplace. And as Mr. Finch suggested, we were most concerned about the rural areas.

I can use the example of Mr. Rota's riding. I'll use the example because I'm originally from that riding. If I drove a Honda and lived in New Liskeard, Ontario, the closest Honda dealership would be in North Bay, which is 125 to 150 kilometres away. When we looked at the total number of shops located in the rural areas versus the vehicle population, there was a significant disconnect. The ratio was very high. Not having access to that information was going to create a serious situation, especially in the rural areas.

The other point to consider is that consumers love going to the aftermarket. Every year J.D. Power does a customer satisfaction index, and year after year, aftermarket facilities—our members—rank consistently high in customer satisfaction. So we wanted to ensure that consumer choice and consumer experience would be maintained; that's why we felt the consumer voice needed to be heard on this issue. And I think it was heard, especially through CAA.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I now want to address a question to Mr. Wilson and Mr. Adams, if I may.

We're all well aware in this committee of the challenges that have faced the auto manufacturers over the last year. It's a difficult time to come forward and give something up, as you've done in this case under this voluntary agreement, so to speak. Perhaps you could speak to the balance that's been struck here. I imagine there would be a concern about giving up too much proprietary information, or IP—and of course that was addressed by Mr. Valeriote a little earlier. How does this deal strike the balance between serving consumers and on the other hand not giving up too much proprietary information?

[David Adams]

Maybe I should let Matt take it first, in terms of the state of the industry. Whether domestic or international, all vehicle manufacturers have been impacted by the current state of the economy and of the industry, as you've highlighted. It's important to highlight too that we're not talking about all vehicle manufacturers giving something up. As has been highlighted in the testimony, probably about half of the vehicle manufacturers were already making this information available and doing so willingly. That speaks to the fact that when an individual company comes to this country as a new distributor, for instance, they structure their business affairs in the way they think makes the most sense for their effectively and efficiently serving their customers. At the end of the day, that's what it's all about. Some of them have done this by making the information broadly available; others by saying that they'd like to have the consumer come back to their dealership.

In terms of the balance you spoke to, one of the things we wanted to ensure was that the manufacturers' intellectual property was respected in the agreement, and from our perspective, that wasn't the case under Bill C-273. We think we've put a box around this under the agreement and that the balance exists there. I think all of us here agree that all we wanted to do was make sure that the information necessary to repair and service vehicles is available to the aftermarket. As for the intellectual property to reverse-engineer parts and do other things to improve the performance of vehicles, as Mr. Valeriote mentioned, nobody should have any interest in that, in taking vehicles out of compliance.

All we want to do is make sure that the information is there to repair and service vehicles, and we think we've struck the balance between respecting the manufacturers' intellectual property and ensuring that the information is available.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Adams. Thank you, Mr. Lake.

Mr. Wilson, we'll go to you briefly before we go to Mr. Masse.

[Mathew Wilson]

I would just say that David is right that all manufacturers, no matter where they were globally, have had significant problems in the recent downturn.

The issue of balance was a big problem for our industry. I think we've stuck to a fine line, in that we needed to also protect, as I mentioned in my remarks, the rights of dealers. Franchisees in Canada have certain rights, under their franchise agreements, around warranty work and other things, and that was critical for us to protect in this agreement.

As to other areas, Mr. Brazeau spoke about what goes on in Europe. In some cases, there are big movements afoot to push warranty work into independent shops as well. That's a big problem for us. I'm not suggesting that's what the intent was here at all, but it is a concern for our industry. The warranty work is something that's protected by the manufacturers; they're actually responsible for those vehicles under consumer protection laws and environmental laws and other laws. We want to make sure that this is protected and that the rights of the franchised dealers are protected, but with the end goal, as we said right from the beginning, that consumers have increased choice and improved access to the service and repair industry in Canada.

That really was a fine balance, and I think we've struck it pretty closely in the agreement we've made.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Wilson.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Chair, and thank you, gentlemen, for appearing here today.

Thank you, Mr. Finch. I forgot to recognize you in my comments, and I've missed a few other people, but I'll stop there and just leave it at that. Excuse me.

I have a question for Mr. Finch and Mr. Brazeau first, though.

When I went around the country, what I found was that in the aftermarket shops you found ambulances, police cars, school buses, and other vehicles that were outside the bailiwick of the major manufacturers but are very important to society. They are also very important for those facilities to repair. But they also relied upon other vehicle repairs from the mainstream auto manufacturing sector. What I became concerned about was that some were on the brink.

Are you comfortable with this agreement right now, that there is enough of the problem solved that it won't be an impediment to business, and those shops that we have our municipal fleets and so forth in getting fixed will be able to survive?

That is one of the things that doesn't get a lot of attention, but you really notice it as you tour the aftermarket. I couldn't go to a place without finding some type of service vehicle for the public sector.

[Dale Finch]

That's a very good question, Mr. Masse. The exclusion in the agreement that addresses fleets is directed at vehicles that would not ever be allowed to be on Canadian roads under law. There are some vehicles—for example, a vehicle that Toyota builds for the salt mines in Ontario—that have never been put on the road. They're only for mine use. Manufacturers wanted that to be recognized so that somebody doesn't come along and try to get information that's not available through normal means.

A very typical example, though, is the Ford police car, which does make its way onto the roads as taxis, and so on. Although that vehicle is not sold to the public, the information is available out there. Very clearly, for anything such as ambulances, where there is chassis and engine information, that's shared.

That is a very good point, because the aftermarket really relies on a lot of that type of fleet work. So we're very comfortable with that.

[Marc Brazeau]

One of the outcomes of our meetings, Brian, when we met on October 15, was specifically that issue. It wasn't clear to us initially whether fleet vehicles would continue to be repairable in the aftermarket. We spent an entire afternoon walking through the agreement. We identified the material concerns that we had. At that meeting, the car companies and NATA came forward with an interpretation guideline that allowed us to deal with the flash download information.

We were certainly a lot more comforted by the fact that fleet vehicles were better defined in that meeting. It was acknowledged by the car companies that they were not looking to withhold information from the aftermarket to repair municipal fleet vehicles, whether it be a Ford Taurus or any other vehicle, that the aftermarket would have access to that information, and as Mr. Finch alluded to, it would only apply to a very specialized vehicle that is not made available for consumers. It's either a military application or an application that may be very industry-related that you would not find on a typical Canadian road.

We are comfortable that the agreement does address the need for us to have access to that information, and that has been acknowledged as such.

[Brian Masse, NDP, Windsor West, ON]

Mr. Wilson and Mr. Adams, it has been a very busy year, and unfortunately the timing of this bill was such that you were juggling it with other matters.

I had a meeting here on Parliament Hill with Mr. Mondragon, the CEO of Ford. There were actually representatives of CADA there as well, who had a serious interest in this bill and this deal. We talked about the fact that the United States has a different system in place than Canada.

At the end of the day, with the voluntary agreement, how close are we going to get to what exists in the United States? As a consumer, I want to know that, because I think it's very important to have consistency, especially since the industry often calls for consistency with the United States for other standards.

[Mathew Wilson]

Absolutely, and I can say that it was our intent from day one, in drafting this, that it be as close as possible to what the U.S. did.

There were several reasons for that. First, as I mentioned, we knew it worked. As you stated, there was an agreement in the U.S., and it worked to provide the information that people needed. But the second part of it, purely from a business perspective, is that a lot of companies need to build on what the U.S. has in order to be able to buy this information in a cost-effective manner in Canada. It's expensive to develop the necessary solutions, so in a lot of cases—I'm not going to say 100% of cases—there will be piggybacking on U.S. systems. Therefore, the information that's made available needed to line up very closely.

At the same time, the way that NASTF was written didn't really work, in some cases, for Canadian interests. So if you put the two documents side by side, you are going to notice that there are some structural differences. In some cases, because we didn't really care for the very awkward way in which it was written, we took the opportunity to clean it up. In other cases, we pulled out specific references to U.S. legislation that just didn't make sense—not that we weren't following it anyway, but it just didn't make sense in the Canadian context. We Canadianized the agreement.

In intent, which is the important part, it is identical to the U.S. agreement, certainly from our perspective.

[David Adams]

I think Matt's right. If we go back to first principles, when we had a discussion with all four parties back on April 29, the AIA made it clear that they weren't interested in moving forward with any voluntary agreement unless it was similar to the NASTF agreement. As Matt said, we tried to get it as identical as possible.

Some of the awkward wording Matt mentioned I think actually resulted in some of the misunderstanding of what the agreement actually said. We got that clarified in the meeting we had with the AIA on October 15.

[Brian Masse, NDP, Windsor West, ON]

One of the concerns I have.... I'll say this to Mr. Adams because they have a good example.

There are other entrants to the market that are coming forth, like the Chery from China and so forth, and other vehicles that are emerging. We know those aren't inclusive of the agreement.

I'll give the example of Kia. Kia doesn't produce any vehicles in Canada, but there are a lot of Kia vehicles in Canada. We're relying upon decisions made in a foreign country to provide this information. What would happen and what would we do if, for example, they decided to pull out of this agreement alone? What would it mean for your other members and the group here? That's where I have some trepidation on what we have.

[David Adams]

I think that's fair. I think you've been upfront, Mr. Masse, with identifying that as one of your concerns with the agreement. From our perspective, inasmuch as we can't bind our members to the CASIS agreement, neither can Mr. Brazeau nor Mr. Finch bind their members to the agreement.

At the end of the day, we have to rely on the good faith of the companies that are involved. The member companies, whether they be my members or Mr. Wilson's members, have each provided a letter of endorsement from their CEO saying they are committed to uphold the provisions of the CASIS.

Could a company at some point change its mind and say it doesn't like it and pull out? I suppose that's possible, but I know in my own organization these decisions weren't taken lightly. They weren't necessarily made in Canada. They were made in other jurisdictions around the world. It's not just a Canadian decision that's been made.

With respect to new entrants, that's also a valid concern and one that you have raised with us before. I think what will happen is that any new entrant coming to the marketplace is going to join either my association or Mr. Wilson's association, and a requirement of joining the association would be that you have to sign onto this agreement and participate likewise.

[Brian Masse, NDP, Windsor West, ON]

I do want to publicly acknowledge that it was a good decision for the minister to reconvene CAPC. I think that's important.

Can that also be a pressure vehicle to ensure that this agreement is lived up to in spirit for new entrants and those that are part of it? It's good that you do have some government representation on your committees, but there's also observation and participation in CAPC. Is there a role for CAPC to play to ensure that this volunteer agreement is lived up to?