International Trade Committee on June 1st, 2017

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

From what we've heard about any tariff being imposed on parts going back and forth across the border, can you envision something like that? What would that mean to those parts? If a part is coming over and gets a tariff from the U.S. and then there's a tariff going back the other way, how would that even work? Would that be possible?

[Scott MacKenzie]

To Stephen's earlier point, at some point I think a company would make a decision as to whether it's worth it and then make a decision on whether they just want to import an entire vehicle. For instance, Toyota makes vehicles in Japan. Would it be cheaper for Toyota to bring a Japanese-built vehicle into the Canadian or U.S. market and pay a 2.5% tariff on the vehicle into the U.S.—or 6.1% into Canada—rather than looking at the 3,000 parts we have in a car and paying a 2.5% tariff or otherwise on every single part for every single time it crosses the border?

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Sure.

We've had a great deal of success in terms of landing assembly plants here in Ontario with Toyota and Honda. We've mentioned Alliston and Woodstock/Cambridge.

In terms of the ingredients that have made that happen, for you to be able to go to the global table and say that where we have a competitive advantage.... Sometimes it's a low dollar, or it could be the workforce or the infrastructure that's there, the supply chain, etc. Can you take me through a bit of that? How do they all stack up? What's most important? What would be number one for you?

[Scott MacKenzie]

Manufacturing cost per unit is how we're judged. We compete within Toyota for manufacturing mandates and we get compared to other jurisdictions. For instance, if they make a RAV4 in Japan or in Russia or China, how much does it cost us to make that, versus some other jurisdiction?

It could be the cost of labour, which, again, is your Canadian dollar. It could be the cost of electricity. It could be many factors, but where we generally do well is in our manufacturing efficiency, such as, for instance, spreading out fixed costs over more units, so the more efficient you are in your production, the better you are; our reputation for quality; and, our reputation for delivering the orders that are made by our sales company.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Our economy is doing quite well. Unemployment is down to 6.5%, I believe. Our growth rate has really taken off, especially here in Ontario. We've heard that there are some shortages of skilled workers. Has it been an issue for you finding talent? I know that we're attracting a lot, but has that been an issue?

[Scott MacKenzie]

It has been a challenge. I wouldn't say that it's held us back in any way or affected us directly in a negative way, but yes, it is hard. An example is skilled trades. We require the skilled trades, and finding people quickly is a challenge. I wouldn't say that we have a shortage right now, but it's definitely harder to recruit and bring in those people.

[Stephen Beatty]

Also, the skills requirements are changing now, and we're competing against other high-tech sectors for valuable employees who have good training and experience. We have to pick up the pace in the way that we attract people to the industry generally.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Would you say that the technology triangle there, with the Kitchener-Waterloo area, would be a driver? Would it be something that you can take to the global table?

[Scott MacKenzie]

Absolutely, and I should have mentioned it earlier, but one of the aspects where we're particularly strong is local innovation around manufacturing technologies. We have a lot of local partners—suppliers or technology providers in our area—that we draw from. Other jurisdictions simply don't have that. Our operations in the U.S. can't compete with us in terms of local innovation.

[The Chair, Liberal, Mark Eyking]

Thank you. That wraps up our time.

I have a couple of quick questions. You might already have answered these questions.

First, for Toyota and Honda, how many vehicles a year does Toyota produce in Canada?

[Scott MacKenzie]

Last year, it was slightly over 600,000.

[The Chair, Liberal, Mark Eyking]

That's over 2,000 a day.

[Scott MacKenzie]

Yes. We have three plants: two in Cambridge and one in Woodstock. We build a car every 55 seconds in two of those plants and every two minutes in the other plant.

[The Chair, Liberal, Mark Eyking]

Would it be 70% U.S. and 20% here? Also, how much would go to Mexico? What's the breakdown?

[Scott MacKenzie]

Toyota doesn't currently ship a car to Mexico. We have in the past.

[The Chair, Liberal, Mark Eyking]

Okay.

[Scott MacKenzie]

About 81% goes to the U.S., and the rest remains here in Canada.

[The Chair, Liberal, Mark Eyking]

What about Honda?

[Hanif Nori]

Last year, it was just over 400,000. We have three plants in Alliston. Out of 400,000 cars, some 100,000 cars are sold in Canada, so every three cars go to the U.S. We build the Civic and the CR-V. As I was mentioning earlier regarding the CR-V, the subcompact SUV market tends to be the market that is growing a lot right now, so a lot of our demand is for the CR-V.

[The Chair, Liberal, Mark Eyking]

Thank you. That's impressive. From the two of you together, a million cars a year are coming out of Canada. That's pretty good.

That wraps up our time, folks. Thank you for coming and for the presentation. We're going to work hard to continue this great trade relationship with the other countries and, hopefully, expand it. We'll be sending you a copy of our report as we wrap it up.

We're going to suspend now and go in camera. We're only going to be a few minutes, folks, because we have seven items on future business on the agenda.

Thanks again, folks.

[Proceedings continue in camera]