Evidence of meeting #27 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was automotive.
A recording is available from Parliament.
4:45 p.m.
President, Canadian Vehicle Manufacturers' Association
To continue to follow the current process for a new border crossing as quickly as you can.
4:45 p.m.
NDP
Brian Masse NDP Windsor West, ON
That's the big thing.
The other thing I want to note though is that Japan, South Korea, and China haven't emerged by accident in this industry, and it's similar with the growth now in Mexico and now in the United States. There have actually been concerted government programs and plans to actually win the industry in itself. I think we've been too soft as a country on a number of different things. First of all, on the automotive innovation fund, the mere fact that we have to renew it is embarrassing. Why do we have to continue to renew a fund that has never exhausted? That should show us something right there. We don't need any new money for it because it's not working in their current context.
The other thing too is non-tariff barriers. How important are those things in the trade agreements? I'll leave it to both of you for a final word. Look at Korea, for example, and South Korea in particular, obviously. We open up a market that you can't sell into. What good is that?
4:45 p.m.
President, Automotive Parts Manufacturers' Association
In the Canada-Ontario automotive investment story, you talk about parties of all stripes at both levels of government do really well in crisis. So the world is falling apart in 2009, and Canada comes up with $13 billion to keep the industry there. An OEM says they're going to close shop unless we come to the table. We come there. We've shown an ability that when the sky is falling, to keep it up.
Other jurisdictions treat this like sports franchises. You want a sport franchise, you sell your city and why that league is going to do good business there. Do you have the customers? Do you have access to market? What are the other portfolios you could sell? Then they bid. We end up bidding but we end up begging to be at the table and then being outbid.
On non-tariff barriers, I know Mark has a lot to say about it. I'll just say this. Our very public problem with some of the terms of the rules of origin in the newly negotiated TPP were that it didn't recognize two instruments that Japan uses to keep North American product out. One is a displacement tax. If you buy a vehicle that has more than two litres of displacement and typically, let's say the three and a half litre basis that North American vehicles come with, you pay 37,000 yen a year. Then on a one-time basis, there's a weight tax. If it's over the typical weight, it's another 37,000 yen. By the way, you're welcome to sell your product over here but the consumer is going to get nailed for 74,000 yen. They're not going to buy it.
4:45 p.m.
NDP
4:45 p.m.
President, Automotive Parts Manufacturers' Association
I'm on the record on that one.
4:45 p.m.
Liberal
The Chair Liberal Dan Ruimy
Thank you.
We will have part of another round because there are some questions that folks still want to ask.
We are going to go to Mr. Baylis. You have seven minutes.
October 17th, 2016 / 4:45 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
I'm going to touch upon the first thing, Mr. Nantais, that you brought up on regulatory innovations and how some regulatory activity could be an obstacle. Also on alignment, can you expand on that? First of all, which regulator are you speaking about and what are you looking to see? What would be helpful in that area?
4:45 p.m.
President, Canadian Vehicle Manufacturers' Association
Overall, the most helpful thing could be.... The Regulatory Cooperation Council was initiated back in 2011. That was put in place really to remove differences in regulations between Canada and the United States in the interests of improving the competitiveness of industry and consumers, because ultimately consumers benefit. In our case, regulations as it affects the vehicles, so technical regulations, differences between Canada and the United States, primarily speaking, need to be removed. We've made considerable progress since then, but we still have a way to go.
I'll give you an example. It would have cost the industry over $300 million on the minor difference between a particular regulation between Canada and the United States, something which really wouldn't have affected public safety. There's an example where we can avoid costs by removing differences in regulations. We have touch points on virtually every aspect of the vehicle when it comes to regulations, with remission and safety, whatever.
The other piece of this that we haven't really talked about here that does actually tie into what Mr. Masse said with respect to the border is the Beyond the Border initiative. We need to make sure that the border is as efficient as possible, that we remove the impediments in customs procedures and regulations while ensuring that we maintain security. The U.S. has always maintained that security trumps everything. We don't disagree with that, but our industry after 9/11 was one of the first ones to come forward with trusted trader programs.
4:50 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Are you satisfied with the Regulatory Cooperation Council as it's working now? Is that doing its job? Does it need to do more, faster?
4:50 p.m.
President, Canadian Vehicle Manufacturers' Association
No, we believe it is doing its job. It has done its job to date. There's always room for improvement, but our most important point is that it needs to continue.
Our regulatory agencies should be working together, right from the point of research that goes into a regulatory development through to the actual promulgation of that regulation.
I don't think we'll ever fully align on legislation because of the differences between the U.S. political system and our political system, but right from the early stages of regulatory development.... We have niche capabilities here, through Transport Canada and Environment Canada, as does the U.S. with NHTSA and the department of the environment. We should be capitalizing on our respective capacities, working together on these things. That doesn't mean giving up our sovereignty per se, but I can say that it has real efficiencies from a cost standpoint for both industry and government, and ultimately it has consumer benefits.
So please continue with that program.
4:50 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Okay.
Mr. Volpe, you mentioned an example in which Ontario won the first Lexus outside of Japan, and then you mentioned a couple of other examples in which we were global leaders. What was it that brought us those wins, and how can we use that ability to attract new business?
4:50 p.m.
President, Automotive Parts Manufacturers' Association
The context is geography and proximity to market. The most lucrative market for any retailer is the U.S. northeast, and it doesn't hurt that you're part of this collective Great Lakes-Midwest manufacturing cluster. No one is going to be able to change geography. The reason we won the Lexus product was that we also have a very.... Canadian plants have won 38% of J.D. Power Initial Quality awards even though we have 14% of production. From the machine tool, die and mould making businesses to the volume suppliers to the final assembly, we have quantifiably demonstrable quality advantages. It's a culture of quality that's better than most of our competition has.
When Toyota Motor Manufacturing Canada talked to Toyota in Japan, it said, "We're going to build where we sell. We're going to do a Lexus in North America," and the argument was that this is a brand in which quality and precision are number one. It said, “Where's the place we can take the least chance and be closest to our northeast U.S. market?” That's why we won.
4:50 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
There is the combination of the geography—we're in the right place—and that particular advantage of quality. As far as being in the right place goes, we can't change that, but if we're competing with, for example, the U.S. southeast, or Mexico, we're in a better geographical place, but we're losing those. We still have the quality, so what is it that we're losing then?
4:50 p.m.
President, Automotive Parts Manufacturers' Association
The human beings that help make those decisions are site selectors. Our industry is a cluster business. If you've had eight investments in Mexico over the last five years and you get hired as a site selector for JLR, you'll say, “The freshest examples of wins and the freshest information on packages are in the U.S. southeast and Mexico, so I'm going to put those on my short list. Do I need to add a long list? Maybe I'll add something from the Great Lakes.” Who's the most active one there? In people's mindset, it's probably Michigan, so we haven't made the long lists in the last five or six years.
I say five or six years, and that was after the extraordinary step that both the federal government and the provincial government took by stepping in to save the industry. The reason we're not getting there—and I'm going to be nice—is that at both levels of government, I'm not sure we understand that there are people who are doing that work for the OEMs, and that you have to chase those specific people and say, “here's our offering.”
We put up programs, and we say come in and play.
4:50 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
We're not actively and aggressively out there. We're not proactively out there selling it.
4:50 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Quickly, with reference to the automotive innovation fund, you made a lot of statements about how it doesn't compete. Would it be possible for you to put together a simple document that says that this is Canada's deal, and these are the deals that we're competing against, and this is where we're behind? Could you put together something very specific, and then pass that to our chair? I'd like to read something exact instead of just broad statements that we're not there. I'd like something that shows in exactly which areas we're not there.
4:55 p.m.
President, Canadian Vehicle Manufacturers' Association
That specifically is hard to do on the basis that some of these jurisdictions don't disclose that, companies don't disclose ultimately what the deal was, so to speak.
I mentioned earlier in my remarks the Canadian Automotive Partnership Council. I strongly urge the committee to review the report “A Call to Action II”, which will speak in large measure to these things. More recently, some of the CAPC recommendations that have been developed, as well as the work of the automotive adviser, Ray Tanguay, are all things that would speak specifically to that issue. I don't think we'll give you specific numbers per se, but there has been publicly reported data that can be made available.
4:55 p.m.
President, Automotive Parts Manufacturers' Association
I would briefly add that Ray Tanguay, who is the adviser both for Canada and Ontario, has compiled those numbers, but I haven't seen them published publicly yet. If you contact him, he's tracked as many deals as we can with the public numbers that are available.
4:55 p.m.
Liberal
The Chair Liberal Dan Ruimy
That would be great, thank you.
We're going to move to Mr. Nuttall. You have seven minutes.
4:55 p.m.
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
Frank, I'm delighted that you asked that question because I think one of the things we're missing—it's all through the government—in this report right now is measurables. You start talking about these things all the time and it's really just air. Until you can really define it and bring it down to what the business case is versus other jurisdictions, whether it's in auto or anything else, it might as well just be throwing the dart in the air and hoping it hits the board.
Mr. Volpe, I apologize that I haven't asked you questions, but there was one other thing which Mark said in the first five minutes that I want to address, regarding the changing face of auto manufacturing.
GM is a prime example. They are investing in, I believe, 51% of Lyft, re-engineering, if you will, the plan to hire 1,000 engineers, mostly in Ontario. Seeing that move forward, are we in the process of leaving auto manufacturing behind? Is this a fundamental shift to R and D by GM and away from auto manufacturing in Ontario over the next five years, for the duration of their plan to hire their engineers and put all this into play with the self-driving vehicles?
4:55 p.m.
President, Canadian Vehicle Manufacturers' Association
It's a shift, but I don't think it's a shift away from manufacturing. We still have to manufacture vehicles. We've most recently heard announcements in conjunction with the collective agreements. These are new commitments by these companies in terms of the manufacturing, and so too are commitments to this new Internet of things in the automotive industry, which is unseen and unknown. It is part of the future.
I think what we're seeing here, aside from the commitments to assembly, are commitments to the new side of the business, if you will.
4:55 p.m.
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
With the technology that's coming down, and is quite frankly already there, we're just trying to figure out how we—I mean your companies—are working with the government to try to figure out how this is accepted into the current transportation systems, etc.
Is it your understanding that by having the R and D and technology here for the self-driving vehicles, we will put forward the best case for the manufacturing of those vehicles? Is there a benefit to us in retaining the manufacturing of those vehicles by having the R and D here as well?