Good afternoon, honourable members. It's certainly a pleasure to be here.
I'm here actually representing Fiat Chrysler Automobiles Canada, Ford Motor Company of Canada, and General Motors Canada. Together, these companies are responsible for approximately 60% of all the production in Canada. They are also among the largest multinational companies in the world, exporting their products to 100 countries around the globe, and producing award-winning quality vehicles from Canadian plants that are among the most productive in North America.
We are very pleased that the committee has undertaken a manufacturing study, and in doing so, recognizes that auto manufacturing has been a foundation for economic growth, and sustains a healthy middle class because it is highly productive and provides high added-value, high-paying jobs.
In fact, the auto industry accounts for roughly 115,000 direct jobs and about 500,000 direct and indirect jobs across the country. For every one assembly job, there are seven to nine other jobs created in the economy. No other manufacturing sector has such a high job multiplier. Our direct contributions to GDP in 2014 were over $18 billion, and our exports of motor vehicles and parts totalled some $87 billion last year alone.
Innovation in the auto industry is advancing at an unprecedented speed in its products and in its business models. The next five years will bring more change than what we witnessed in the last 100 years, and we do not see that pace of innovation slowing down. The automobile is the most technologically complex item a consumer will purchase, and the consumer is the ultimate benefactor of advanced vehicle technology in safety, fuel efficiency, and comfort.
New rapid advancements in technology, changes in consumer preferences, and new entrants into the global auto sector are inspiring new automotive products, services, and business models that will be increasingly electric, digitally connected, autonomous, and part of the sharing vehicle economy.
There is a tremendous opportunity for Canadian assembly plants to have strong quality performance and to remain at the forefront of innovation, while enjoying the same technological advantages as other plants across the globe through their embracement of global manufacturing systems.
Canada needs strong advocacy for its manufacturing sector in order to achieve its economic goals. The committee has requested input on what would strengthen, protect, and promote Canada's manufacturing sector to inform this manufacturing study. We are here to supply whatever information we possibly can to help you.
You may be aware that the Canadian Automotive Partnership Council, whose mandate is to lead a forward-looking and proactive effort to position Canada as a leading jurisdiction for automotive manufacturing, has submitted a response to the Canadian innovation strategy which provides detailed recommendations of what factors will support innovation in the automotive manufacturing sector. CVMA certainly supports those recommendations.
Today, I'd like to focus on four areas that would demonstrate the government's commitment to the manufacturing sector as a key economic driver for Canada, and increase competitiveness on a global scale.
First, we should improve access to capital and financial incentives. The terms of the automotive investment fund need to close the gap against competing jurisdictions, and ensure that Canada has the most competitive tools available. Most competing jurisdictions offer non-repayable contributions in many different forms, including cash grants, refundable tax credits, and infrastructure and training credits and grants, with contribution levels that can exceed 50% of the total investment spending. No additional taxes are incurred as a result of the incentives. The conditions are flexible and performance-based. Project evaluation and approval is nimble and responsive to applicants' business realities and investment cycles. Furthermore, lowering the investment threshold investment to $25 million from $75 million would certainly help increase innovation.
We also recommend that the current form of the scientific research and experimental development tax credit be revised to be more responsive. Research and development programs that are flexible and responsive to the needs of the industry and administratively efficient would help support the innovation agenda by promoting auto research excellence, and the opportunity to build on the existing research capacity. A research tax credit that is truly supportive of innovation must be robust and reflect the true cost of advanced auto manufacturing research and development, inclusive of capital equipment, and be based on a broader definition of innovation versus the current definition of science.
Second is a welcoming regulatory and intellectual property environment. While governments can assist their emerging technology champions to grow, their policies and regulations can also stifle innovation. Regulators, agencies, and institutions can have strong impacts on the decisions of global OEMs to undertake R and D activities in a given jurisdiction.
Canada's governments need to take a strategic approach that comprehensively addresses the specific innovation needs of the auto sector. Going forward, it would be important to identify and track regulations that encourage or dissuade automotive innovation in Canada and to propose solutions that enable investment in automotive innovation.
Industries like the automotive industry which are fully integrated with the U.S. will benefit competitively by aligning regulations and removing regulatory differences. In fact, there are material cost efficiencies for both companies and governments with this approach, ultimately benefiting consumers.
North American harmonized standards through the efforts of the Regulatory Cooperation Council enable auto manufacturers to continue to design and build once for the North American market cost efficiently, while ensuring consumers are able to purchase the greatest choice of new vehicles that are equipped with the most comprehensive safety systems and meet the most stringent emission requirements in the world. We strongly urge the government to maintain its commitment to the RCC.
Third, we need to negotiate trade agreements that are fair and balanced, providing actual benefit to Canada's auto sector.
As the government works toward furthering opportunities to expand Canada's exports, we need to ensure Canadian companies are provided opportunities to fairly compete in foreign markets on the same equivalent basis as foreign companies have in Canada's domestic market.
The CVMA submits that there are important core principles for trade policy. The first is that free trade agreements must result in fair and free trade. Second is to focus on opportunities that will support and enhance Canada's industrial and commercial strengths. Third is inclusion of currency disciplines to ensure that market access provisions in a final agreement are not undermined by a country's inclination to manipulate its currency, given the intersection of trade and finance. Fourth is to create a level playing field for Canadian companies by removing market-distorting non-tariff barriers in advance of tariff reductions.
The industry is following with interest the efforts toward a successful passage of the CETA this fall as it represents actual growth opportunities for us. Our members, as multinational companies doing business around the world, are committed to working with the government to ensure Canada's free trade agenda supports and provides benefits to the sector, and positions Canada as that globally competitive automotive producer.
Last, we need to keep the costs of doing business low. We need to provide long-term certainty to companies which make global investment decisions as many as 10 years out. As I have said, increases in the costs of doing business have a negative impact on our competitiveness as a determinant in terms of decisions to place new investment in various jurisdictions.
One of the examples most recently is the pan-Canadian framework on climate change. It will be important in that regard to collaborate with the provinces and ensure the federal government establishes a floor on the price of carbon that does not add to the costs that are already being imposed on us by the provincial cap and trade program in Ontario, for instance. Another would be the proposed increases in CPP employer contributions, which really are payroll taxes, adding costs that would not be present in other jurisdictions.
We support efforts to address the effects of climate change globally, but measures will need to be collaborative and balanced to support competitiveness and avoid unintentionally hurting overall auto manufacturing competitiveness, primarily with our primary trading partner, the United States.
Higher costs to operate in Canada could lead to new or expansion of plants with the associated jobs landing elsewhere instead of in Canada. This is otherwise known as carbon leakage and we would lose on two fronts: the environment and the economic job-related benefits.
Finally, there are critical times in our business when specialized expertise is required for new product launches, emergency production equipment, installation and repair, as well as after-sales service. Sometimes this can be on very short notice. CVMA member companies are global companies which have global teams that provide specific expertise and any delay to get temporary foreign worker expertise to Canadian facilities has repercussions on our productivity and on future investment decisions.
Delays to get expertise across the border, as needed, can lead to a shutdown in production and result in costs and lost revenues of over $1.5 million per hour. The CVMA members would welcome opportunities to work with government to address these deficiencies in the temporary foreign worker program and replace it, perhaps, with a new "global talent” visa or "trusted employer” visa program.
Honourable members, that is a very quick overview that would support auto manufacturing in Canada. I certainly look forward to answering any questions you may have. Thank you.