Evidence of meeting #122 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cost.
A recording is available from Parliament.
11:45 a.m.
Chairman, Canadian Association of Moldmakers
I'd say about $2 million. The original $2 million saw some very good success and some great programs so that steel and aluminum manufacturers were able to take care of our members.
11:45 a.m.
Liberal
Karen Ludwig Liberal New Brunswick Southwest, NB
Thank you.
I have another question for you.
You mentioned delivery times. When you're bidding on a project and you're making a commitment, you're hedging on pretty much a secure price, and the delivery times could be not seven weeks but seven months, based on the current circumstances. How do you see that risk being mitigated?
11:45 a.m.
Co-Chairman, Canadian Association of Moldmakers
I could tell you what the risk is. The risk travels all the way from the north to the south as far as vehicle production is concerned. I'm talking specifically about automotive right now. Automotive production relies heavily on gauging the supplier's ability to manage their subsection, and one of the largest things is obviously the root material to be able to create the parts and widgets that I need to supply on my line side to then ship to the automaker. A block of steel coming in any later than seven to eight weeks can be detrimental. The potential risk is that I will now be late in creating a plastic injection mould to create parts for a Honda Civic. I won't be able to put parts on that car, and it will be parked in a parking lot. I've seen charges come in from the OEM at $10,000 a day.
11:50 a.m.
Co-Chairman, Canadian Association of Moldmakers
Well, it's a penalty cost based on your inability to supply parts to the OEM.
11:50 a.m.
Liberal
Karen Ludwig Liberal New Brunswick Southwest, NB
Okay, great.
Did you reach out to the finance department for help? We certainly have experts here in the room we could direct you to directly after this meeting.
11:50 a.m.
Chairman, Canadian Association of Moldmakers
We have spoken to ISED. We had a meeting with Minister Bains, and we had a discussion about the threshold for SIF. They said they would get back to us with some type of program or response. We haven't received anything yet. In terms of the CRA, that's an ongoing discussion all the time. SR and ED, if we are given the opportunity, will have lots of engagement, and that's part of the problem.
11:50 a.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
I'm going to split my time with you, just so I can squeeze a question in.
I appreciate everyone being here.
I think everyone's in agreement that the best thing would be for these tariffs to be negotiated away. I don't think you'll find any argument around this table or from any of the stakeholders on that. Hopefully we'll get there sooner rather than later. In the interim, I think we need to have a program that is designed to do what it's intended to do. We've heard some feedback today that there are some improvements that should be considered.
What would be the ideal program? I know, Jonathon, you said that ideally we'd negotiate the tariffs away. Short of that, or until that time, what would an ideal support relief program look like?
11:50 a.m.
Chairman, Canadian Association of Moldmakers
We believe an alternative way for the government to engage is directly with the associations. If you engage with the associations, you can get direct access, at least in our case, to about 216 mould makers—about a third of steel fabrication employment—by dealing with us directly. And then go after certain specific materials to find out whether or not they can be produced in Canada.
What you don't know, which has been going on since January, is that we have had a flood of U.S. metal come into Canada. That metal is being consumed right now to subsidize the Canadian markets. We are very close to having that U.S. metal go away and be consumed. Once that is gone, there will be very few options. We've talked about how long it takes for steel to come over. We're using European sources, and it takes four to six weeks for us to get it in. And it's at a cost, which they know.
Canada is incapable of producing certain metals. Those metals are the ones we need to attack immediately. If you think the situation is bad now, it is going to get far worse once all that metal is gone.
11:50 a.m.
Co-Chairman, Canadian Association of Moldmakers
To add to Jonathon's comment, sir, I'd like to point out—and again, it's automotive-specific—as a tier one supplier and down the supply chain to tier two, we're also governed and mandated by the OEM to use a certain type of steel from a certain type of supplier, which doesn't help things. I just wanted to make that comment.
11:50 a.m.
Co-Chairman, Canadian Association of Moldmakers
The choices in some cases are non-negotiable.
11:50 a.m.
Liberal
The Chair Liberal Mark Eyking
We'll go back over to the Conservatives now.
Mr. Carrie, you've have the floor.
11:50 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
I want to direct my questions to Mr. Thibeault and Mr. Toupin. It seems that it's the smaller guys who are really hurting now and who are going to continue to hurt over the next few months if things don't get resolved. I think everybody was surprised that when the government signed this new agreement, these tariffs were still in existence. I think, in earlier testimony, people were telling us to either get a new deal or get the tariffs off. To have an agreement that still has the tariffs is surprising but also disturbing.
I just want to go back to your earlier comments. I believe you mentioned to me that the tariffs are basically eating up all your profits. Are you guys actually now profitless? Are you not making any money at all? You're nodding, so it's pretty much that situation.
My worry is how long you can continue to be in business at this stage. Over the summer I met with small businesses, and they were telling me then that they were right at the precipice of making these decisions, the same decisions that you are facing. They may be relocating. How much longer do you think smaller companies such as yours can hang on if we don't get this resolved? I know it's a tough question.
11:50 a.m.
Executive Director, Constructions Proco Inc.
We are very dependent on major projects. If, despite the increase in construction costs, we decide to carry out the major projects under way, such as the REM in Montreal, the Gordie Howe Bridge in Ontario and mining projects, we can work on them and the client will absorb the costs associated with the rate increase. However, if those projects are slowed by the increase, we will find ourselves in a market with many manufacturers competing for fewer projects, which will quickly result in significant financial problems for us.
11:55 a.m.
Vice-President and Assistant General Manager, Groupe LAR Inc.
In our case, it depends on the contract period. Our contracts often extend over a period of a few months up to three or four years. The ones that run until 2021 and 2022 will allow us to stay in the market a little longer.
However, it will be very difficult for us to get all the new contracts we need to continue. Those contracts will have to be tendered on a low profitability basis, but despite that, bids from foreign manufacturers will be at lower prices than ours.
We are in the same situation as Mr. Bilton described earlier. Given that 70% of our contracts are for steel-based projects and that the price of steel is 30% or 40% higher than that of our foreign competitors, it will be almost impossible for us to obtain future contracts. We will very quickly reach the end of the tunnel when our existing contracts are complete.
11:55 a.m.
Conservative
Colin Carrie Conservative Oshawa, ON
I appreciate your comments very much, because I think we really have to be cognizant that this is an urgent issue that we have to find an immediate solution to. We've heard from your colleagues that what's on the table right now from the government is a model that's flawed. It's not working. I'm worried that we're going to be seeing Canadian jobs just being shifted across the border. My colleague Mr. Hoback asked a question earlier. Are you aware of companies around you that have been approached by Americans to relocate to the United States, and what do you see that they're offering down there?
First of all, I want to say, I really appreciate your patriotism, working through this and keeping those jobs in Canada, but when it gets to a point where you're not making any profit in this country because of everything that's piling on right now.... What kinds of things are you hearing that they're offering to relocate to the U.S.?
Do you have any examples?
11:55 a.m.
Executive Director, Constructions Proco Inc.
In our field, competing companies are already established in the United States. They have already publicly stated that having a foothold on each side of the border provides them with significant benefits, as it allows them to make deals and avoid those tariffs.
There are some quite blatant examples, including that of Mr. Dutil from the Canam Group. He actually commented on this matter. He said that he had 18 plants, some in the United States and some in Canada, and, as a result, he is able to juggle and avoid the tariff issues.
11:55 a.m.
Vice-President and Assistant General Manager, Groupe LAR Inc.
That's right.
We have four plants in Canada. We must not forget that we are captive in a way, we are subject to the political risks and tax laws specific to Canada. As soon as a company has a foothold in the United States or elsewhere, it diversifies the political and tax risks. When the United States relaxed tax measures for SMEs, there was an advantage for companies to consider having a foothold there. The same applies to political risks.
Being captive of only one country increases the risks. Diversifying them in other countries makes room for flexibility to ship products to the United States or to another country, such as Brazil. It is easier to manage the risks, but the risks are there.
As you said earlier, we are first and foremost patriots. We come from a region. We want to create jobs in our regions. That is the mission we have set for ourselves. As soon as things become unmanageable from a tax or political standpoint, of course we will have to explore other options.