Public Accounts Committee on April 3rd, 2017

[The Chair, Conservative, Kevin Sorenson]

Good afternoon, everyone, and welcome.

This is meeting number 50 of the Standing Committee on Public Accounts. I remind everyone today that we are televised as we hold our hearing on “Report 4, Oversight of Passenger Vehicle Safety”, of the Fall 2016 reports of the Auditor General of Canada.

Appearing before us we have, from the Office of the Auditor General of Canada, Mr. Michael Ferguson, the Auditor General of Canada; and Richard Domingue, principal.

From the Department of Transport we have Michael Keenan, deputy minister; Laureen Kinney, assistant deputy minister, safety and security; and Kim Benjamin, director general, road safety and motor vehicle regulation.

I understand that each of our witnesses has an opening statement before we turn to questions by members of our committee. I will invite our Auditor General to proceed with his opening statement, please.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you.

Mr. Chair, thank you for this opportunity to present the results of our audit of the oversight of passenger vehicle safety by Transport Canada.

Vehicle safety technology is evolving faster than regulations and standards. Transport Canada faces challenges in exercising its important role of keeping passenger vehicles safe. An up-to-date regulatory framework and the proper oversight of passenger vehicle safety help to ensure that Canadians are driving the safest vehicles possible.

We examined whether Transport Canada's regulatory framework and its oversight of vehicle safety defects and recalls were adequate to respond to emerging safety risks and issues in a timely manner. We noted a number of significant deficiencies in the regulatory framework, including a lack of timeliness, an absence of broad stakeholder consultation, and outdated regulations.

We found that Transport Canada did not develop motor vehicle safety standards to respond to emerging risks and issues in a timely manner. For example, Transport Canada's regulations did not allow vehicles to be equipped with advanced headlights that are controlled by software. At the same time, however, unregulated semi-autonomous vehicles are being driven on Canadian roads.

We found that, in general, Transport Canada waited for the National Highway Traffic Safety Administration in the United States to develop new or amended standards before proposing regulatory actions in Canada. This reactive approach created significant delays in implementing new standards, and meant that some passenger vehicles were not equipped with the newest safety features available in other countries, such as the aforementioned advanced headlamps. There were lengthy delays—sometimes of more than 10 years—from the time that Transport Canada started to work on an issue to the implementation of new or amended standards.

Prior to making proposed regulations public in the Canada Gazette, Transport Canada consulted with manufacturers but did not engage broadly with stakeholders such as consumer associations, medical associations and police. Manufacturers may have exercised disproportionate influence on regulatory decision-making.

We found that some important standards were not working as intended, or were outdated. For example, Transport Canada was aware that child seat anchorages could fail under certain conditions, but it had not proposed a new regulation or issued an advisory by the audit completion date. The department stated that introducing a unique-to-Canada requirement for anchorage strength in passenger vehicles would be detrimental to trade.

We also found that Transport Canada did not plan or fund its research and regulatory activities for the longer term. As a result, the department could not prioritize resources and spending decisions accordingly. For example, between April 2012 and December 2015, the department purchased 98 passenger vehicles for research testing. As of December 2015, 24 of these vehicles, costing over $500,000, remained untested. The department told us that unpredictable funding contributed to this situation.

Finally, we looked at Transport Canada's oversight and analysis of public complaints and manufacturers' recalls. Overall, we found that the department adequately assessed complaints from the public to identify vehicle safety defects. However, the department did not request information about critical safety issues that manufacturers were investigating. As well, manufacturers issued 318 recalls between 2010 and 2015 for safety-related issues that were not brought to the department's attention.

Furthermore, the department did not have the authority to assess whether manufacturers implemented effective processes for identifying and reporting safety defects. This limited the department's ability to investigate defects and better protect Canadians.

We found that Transport Canada adequately assessed vehicle manufacturers' efforts to complete safety recalls. However, manufacturers had difficulty identifying, and contacting owners for some recalled passenger vehicles, especially the owners of older vehicles. Transport Canada has agreed with our seven recommendations and has prepared a detailed action plan.

Mr. Chair, this concludes my opening statement. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson.

We'll now move to the deputy minister, Mr. Keenan. I believe this is his first time appearing before the public accounts committee. We thank you for being here today, and we look forward to your comments.

[Michael Keenan, Deputy Minister, Department of Transport]

Mr. Chair, thank you very much for the welcome. I'm happy to be here today, and look forward to the opportunity to discuss the Auditor General's 2016 “Report 4, Oversight of Passenger Vehicle Safety”.

I'd like to thank the Office of the Auditor General for a very thorough and comprehensive review of our motor vehicle safety program. The department welcomes this review. It's a key opportunity for us to improve the performance of our safety program by rigorously identifying areas for improvement. The safety of Canadians and their confidence in the motor vehicle safety regime is a key priority for the Government of Canada.

The safety of motor vehicles in Canada has been steadily improving over the past three decades. In the early 1970s, there were approximately 6,000 deaths and 25,000 serious injuries every year from motor vehicle collisions. At the time, there were approximately 12 million registered vehicles and about 13 million drivers. In 2014, the last year for which there is complete data, Canada had about double that, 25 million drivers and 23 million vehicles, but the number of fatalities had declined to 1,800 and serious injuries to 9,600. In essence, the number of vehicles, drivers, and number of kilometres driven have about doubled, and the number of Canadians killed or injured has fallen by 60% to 70%.

To support continued improvement to motor vehicle safety, Transport Canada develops standards and regulations for new and imported vehicles, tires and child restraints. The department also has a robust safety defect program, which entails the assessment and investigation of public complaints and other indicators that help the department identify vehicle safety issues.

It also has a recall program to oversee manufacturer defect notifications, and follow-up to ensure that defects are remedied. The audit focused on these three areas.

In general, the audit noted that there were some areas where the department did a good job and other areas where there was clearly a need for improvement. The audit noted that not all standards and regulations were developed in a timely manner. In addition, it was felt that the department did not consult widely enough on proposed changes, often just consulting manufacturers in the early development of regulations.

In response, Transport Canada has committed to publishing additional information on planned regulatory amendments on its website, and to seeking broader involvement of other stakeholders and experts, such as the insurance industry and other key players, in the pre-consultation phase of the process.

Another concern identified by the audit was that the department did not have complete and timely collision and injury data and did not demonstrate how research informed the development of safety regulations. In Canada, the collection of collision data, such as basic collision characteristics, crash configuration, vehicle type, etc., is conducted by police officers and reported to provincial and territorial governments, who provide Transport Canada with data to populate the national collision database.

The department is assessing this data against its regulatory needs and developing an action plan to improve data quality and timeliness. Transport Canada is also committed to increasing the transparency of the use of data in the development of regulations. The process to codify this transparency has been implemented, and a summary of the assessment of evidence and research will be more clearly outlined in the regulatory impact analysis statements that are published as part of the regulatory process in the Canada Gazette.

The report noted a need for a long-term operational plan and stable sustainable funding. The department is working on the development of such a plan for the crashworthiness research program. The development of this plan will include an assessment of the linkages between research and the regulatory planning processes, and a review of program priorities. This longer-term operational plan is intended to improve the funding sustainability of the program.

One always likes to look on the positive side, where I would note that the OAG indicated that Transport Canada adequately assessed complaints from the public to identify vehicle safety defects. In particular, it recognized that in 2016, departmental officials identified a potentially dangerous defect in the rear seat belts of the Toyota Rav4 vehicles. The implicated seat belts had the potential of rupturing during collisions and causing death or serious harm. The discovery of this defect led to a recall of nearly 150,000 Rav4s in Canada. Globally, over 2.7 million vehicles have been affected by the discovery of this issue in Canada. The OAG found that the program adequately assessed and tracked manufacturers' efforts to complete safety recall campaigns.

Transport Canada also continues to work to identify means to help improve those completion rates, including the development of improved messaging on the importance of having the remedy completed. It is also envisaged that the proposed changes to the Motor Vehicle Safety Act contained in Bill S-2 will help to improve recall completion repair rates, by providing the minister with the ability to order the manufacturer to bear the financial burden of conducting the repair to the vehicle.

An issue with the defect program that was noted in this audit is the lack of information regarding manufacturers' internal investigations to identify safety defects. This is an area that needs to be addressed, and the issue is one of the major ones that would be addressed through the passage of Bill S-2. That bill is working its way through the parliamentary process, and the department continues to support it to help ensure that the safety benefits of the changes in that legislation can be realized.

It was also recommended that the department request manufacturers to provide information on their safety processes. We have made the request to manufacturers and will review the information as it is received to determine how to incorporate it into the defect program.

Motor vehicles are very important to the social and economic well-being of Canadians. The social costs of these collisions are estimated at $36 billion annually, to say nothing of the impact on Canadian families.

Transport Canada works to help limit the impact of vehicle defects on this number and to support new vehicle safety technologies, which can help mitigate the severity of a crash, should a crash occur, or ideally increase the collision avoidance capabilities of the driver/vehicle operation.

In addition, we will work with our provincial and territorial partners to improve road safety through the road safety strategy 2025. With these efforts, including the action plan and response to the Auditor General's report, together we can make Canada's roads safer as we work toward our aspirational goal of zero fatalities on our roads.

Mr. Chair, we look forward to the committee's questions and comments. Thank you very much.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll go into the first round of questioning with Ms. Shanahan for seven minutes, please.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much, Chair.

I'm glad to be back here with the committee and to see you back with the committee as well. Thank you very much.

I'm also glad to see the representatives of Transport Canada back here, and you, Mr. Keenan.

Where do I start? This report disturbed me greatly when the Auditor General first presented us with all the reports we have on a regular basis. Why? Not that I know anything about cars—I just know how to drive one—but because of the confidence and the trust that Canadians have in Transport Canada to ensure that the cars we are driving are safe. So, yes, I certainly agree that cars are a lot safer. I think we can applaud manufacturers for taking that responsibility seriously.

I find it interesting that you will be consulting with the insurance companies. Let let us not forget that insurance companies are interested in reducing the payout of claims, so they have a special interest. I find it interesting that other stakeholders who have a vested interest in the safety of Canadians have yet to be consulted.

I deplore the fact that the very reason for the vehicle safety regulations is to prevent accidents from happening, which seems to have slipped from the operations and mandate of Transport Canada. In saying so I go to the Auditor General's report. In paragraph 4.22, the Auditor General's office states:

We found that Transport Canada did not maintain an up-to-date regulatory framework for passenger vehicle safety. There were lengthy delays, sometimes more than 10 years, from the time work began on an issue to the Department's implementation of new standards or changes to existing ones. We found that Transport Canada had discussions with manufacturers prior to announcing its intention to implement or modify a particular regulation in the Canada Gazette, Part I. These consultations often went beyond technical feasibility issues, which contributed to these delays. Finally, we found that Transport Canada did not systematically consult with other important stakeholders, such as vehicle parts and equipment suppliers, insurance companies, medical associations, and police.

What were those discussions with the manufacturers about, and why were the other stakeholders not consulted?

[Michael Keenan]

Thank you for the question. In fact, thank you for about four questions, I think. I'll work my way through them. I apologize, because I probably was too brief in my introductory comments.

I'll start with the question about the consultations on the regulatory process, where you ended. It was one of your key themes. As you indicated, the Auditor General found some faults and weaknesses in how we consult and whom we consult. The department has committed to change the process by which it develops the regulations. First and foremost, the regulations are put into the public domain through the regulatory process. There's an initial draft regulation that goes out through the Canada Gazette for all Canadians. There's an official comment period, during which we take comments from all Canadians. Then a final set of regulations is published in the Canada Gazette.

I think what you're referring to is the fact that in the preparatory work, in developing the initial set of regulations for public comment, the department does work closely with the manufacturers, because these are the people we're regulating. In the regulatory process, having a dialogue between the regulator and the “regulatee” is a key part of developing proper regulations.

I think it's fair to say that in that process, we were not going out and proactively seeking comments from a larger group of people. In response to the Auditor General's report, we're putting in place a couple of key changes to rectify that. First, we will be publishing on a website our regulatory plan for the next three years. I think we're doing three years at a time. Then all Canadians will be able to see where we intend to strengthen safety regulations in motor vehicles over the next three years. It gives them an opportunity to identify a regulation that's important to them and to provide their perspective to us.

In addition to that, when we're in this pre-regulatory phase, we will be making a point of proactively reaching out to, quite frankly, the kind of stakeholders you listed in your question, saying, “We are working on this issue. Do you have any views on this particular issue? If so, please us know about those views.”

So we're making a concerted effort to put in place a regime wherein very early in the regulatory process—because there's work that has to be done before one gets to a set of draft regulations—we're telling everybody about what we're doing, and we're—

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I hate to interrupt you, Mr. Keenan. It's not my style. But I want to address just one comment that the Auditor General makes about the CMVSS 210.2 and the problems with the child restraints: “The Department indicated to us that introducing a unique-to-Canada requirement for anchorage strength in passenger vehicles would be detrimental to trade.”

How was that kind of preconsultation with industry helpful to Canadians?

[The Chair, Conservative, Kevin Sorenson]

We have one minute left in this question.

[Michael Keenan]

There has been a long history in the evolution of the regulatory standard for child safety seats in Canada and the United States. The maximum weight that regulators allow for children in the child seats has crept up over the years. Canada has acted in a similar fashion to the United States, usually a bit after the U.S., in increasing those weights, but at the weight of 65 pounds, which I think is 30 kilograms, Canada came to the view that having children in child seats above 65 pounds was not conducive to effective safety and that they would be better off in booster seats using seat belts. The U.S. came to a different view. They have increased their maximum weight for a child in a child safety restraint system—

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

That may be well and good, but it's not what we've had explained to us here.

[The Chair, Conservative, Kevin Sorenson]

Our time is up on that one. I imagine that we'll come back to that.

Welcome, Ms. Block. It's good to have you here. You have seven minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair. I appreciate the opportunity to be here. I have an opportunity to ask questions of our departmental officials when they come and speak to us at the transportation committee, so this is a rare opportunity for me and I thank my colleagues for giving me the opportunity to answer questions as well. Perhaps we'll get back to Ms. Shanahan's questions a little sooner than she might think because she asked one of the questions I had wanted to ask.

I've gone through the report. I have a number of questions I'd like to ask and I'm going to go through them in the order that they appear in the report.

In a follow-up to the question by Ms. Shanahan, I am also concerned by the report's comment on the anchorage systems and, in particular, about the last point:

While Transport Canada discussed the issue with passenger vehicle manufacturers, it had yet to propose a new regulation or issue an advisory for child restraint users. The department indicated to us that introducing a unique-to-Canada requirement for anchorage strength in passenger vehicles would be detrimental to trade.

Why is Transport Canada making safety decisions based on the impacts that regulations could have on trade and not solely on safety? Perhaps you could also speak to Transport Canada's role in handling safety and the manufacturers' role for figuring out how to make money within the safety regulations that Transport Canada might set.

[Michael Keenan]

Thanks for that question. It cuts to the heart of our mandate.

Mr. Chair, I would like to say that it's great to see the honourable member. I think it was a week ago in the other committee that we were exchanging views.

I think you ask a really important question. In the work of Transport Canada, we have a safety mandate, an environmental mandate, and an economic mandate. Fundamentally, the safety mandate comes first. It comes first in the priorities in the work of the department. It comes first in the articulation of priorities that our minister makes, both in public and through his direction to departmental officials.

On the child restraint system, there is a comment in the Auditor General's report about the impact on trade, and to be honest, I wasn't sure about the basis for that. It clearly was communicated by somebody in the department to the Auditor General. What I can tell you is that in the safety standards for vehicles, there is a strategic priority in harmonizing our safety standards with the U.S. However, the child restraint system is one area where we don't harmonize with the U.S. and where we have taken a different standard. We have articulated a different maximum weight for a child in the child restraint system, and the reason we have done so is that, in our estimation, there is greater effective safety in having children who weigh more than 65 pounds, or 30 kilograms, to be out of a child safety seat and in a booster seat using the three-point seatbelt in the car.

As for issue of the performance rating for the anchor that Canada has, it is the highest type of performance rating for anchors in the world. We could certainly change it, but our view is that changing the anchor and then putting heavier children in child restraint systems with the anchor is not conducive to safety. A better safety result is achieved by getting them in the booster seat with the three-point seatbelt. We do work on this issue in the department, and I invite my colleagues to correct me if I'm wrong, but we and many partners in the country try to publicize this, but the installation of child safety seats has to be done correctly. There are different manufacturers with different requirements, which change by weight, and there is an effective safety issue with having those child seats put in properly. For the larger children, you avoid that risk by getting them in a booster seat and the three-point seatbelt.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

I do appreciate the need for Canada and the United States to have standard safety regulations that are aligned, because of the trade across our borders, but I want to follow up on your comment about not being sure why that observation might have been raised as a result of the audit the Auditor General's office was conducting.

It would be of concern to me that perhaps folks working in Transport Canada don't understand where trade and its impact fit in terms of safety. As you've pointed out, that's your number one priority, and yet something hasn't been implemented because it would be detrimental to trade. That's somewhat concerning to me to find that this would be a reason given to the Auditor General for why something would or would not be happening.

Because I'm running out of time, I'm going to go quickly to another question I had on paragraph 4.44 on page 15 of your report. Maybe it will get followed up on by someone else. On the recommendation about developing new or modifying existing standards, is legislation required to get provinces and other private and public agencies to provide collision and accident data to Transport Canada?

[The Chair, Conservative, Kevin Sorenson]

Be very quick, please.

[Michael Keenan]

First, we believe that we can make progress in getting more information more quickly from some of our key partners through dialogue and engagement, as opposed to compelling it through legislation. We're executing a plan to do that in response to the Auditor General's correct observation that we don't have the latest, most complete data.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

Thank you, Ms. Block.

We'll now move to Mr. Masse.

Welcome to committee. It's good to have you here.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

It's very timely for me to be here, coming as I do from Windsor, the auto capital of Canada, across from Detroit, Michigan, where we've seen a number of different Canada-U.S. issues related to recalls. I'd like to ask the Auditor General a question.

Overall for consumers, when you look at our two regulations that are in place, it has been very challenging for consumers in Canada versus consumers in the United States. In fact, for the Prius, for example, the recall legislation in the United States led to fines and penalties. Consumers had their vehicles picked up from their homes, fixed, and returned. There was investment in the United States related to that as well. Meanwhile, over here in Canada, there don't seem to be the same types of powers. In fact, the Minister of Transport can't even issue a recall.

One of the things I'm looking at in your submission is point number 10 on information about critical safety issues and manufacturers. Between 2010 and 2015, there were about 318 recalls for safety-related issues that were not brought to the department's attention. From this, it seems to me that the industry standards in terms of expectations for recall appear to be quite different for the consumer in Canada versus the consumer in the United States. Would it be fair to say that we seem to be a laggard when it comes to consumer rights, recalls, and what our response is as a federal authority?

[Michael Ferguson]

Thank you, Mr. Chair.

I can't do a comparison of the Canadian system and the U.S. system. That wasn't what we did in the course of the audit, but certainly in terms of the recall issue, one of the things we identified was that manufacturers have information about things that consumers are bringing to their attention, things that they are investigating and don't always let Transport Canada know about. We felt that would be an important source of information for Transport Canada to be able to better understand what the possible defects are.

Really, in terms of the 318 recalls that you referred to, I think that was essentially the context of the issue we were raising. There's more information available out there, information that exists in the hands of the manufacturers, and that information would be important information for Transport Canada, to help inform their knowledge of possible defects.

[Brian Masse, NDP, Windsor West, ON]

Along with that, your paragraph 4.11 is interesting. We can look at the Volkswagen situation, for example, and safety recalls and passing that information on to a vehicle owner who sells a vehicle. It's the value of the vehicle. In your work, what did you find? What were the pros? Or what was Transport Canada good at? Are there still deficiencies there for passengers, I guess—and for enforcement—in terms of knowing whether recalls have been carried out on vehicles when you're trying to sell a vehicle to someone, for example? Are we exposed on that front?

Once again, here's what we're looking for. If you go out to purchase a used vehicle, how much public awareness is there? How much of a role does Transport Canada seem to be playing in passing those recall information items to new owners? It does affect safety, and a recall does affect a sale, hence Volkswagen's response most recently.

[Michael Ferguson]

Mr. Chair, starting at about paragraph 4.101 in the report, we go through a number of things that are happening with safety defect notifications, recalls, and those sorts of things. In paragraph 4.108, we start about the vehicles and we say that “an average of nearly 8 in 10 vehicles were repaired following a recall notification”.

In fact, in this area, we found that Transport Canada was doing a number of good things that the manufacturers tended to follow, working within the timeframes and the standards that had been established for bringing safety defect notifications to Transport Canada's attention, starting the work on recalls, and then getting as far as they could get in terms of recalls. But we identified that, because vehicles cross borders, and after a number of years, when the vehicles are older, it can be harder to identify where they are. That seems to be one of the main impediments that still exist to getting that recall repair rate above the 80% where it currently is.

[Brian Masse, NDP, Windsor West, ON]

That's very helpful, because there are so many sales that go back and forth amongst consumers, as well as between Canada and the United States.

Subsequent to that, Mr. Keenan, it is noted in your assessment here that a number of vehicles have not been evaluated. They are newer vehicles. The reason I raised the issue of Volkswagen, and the cost and the value, which connects all this, is that the resale value is based upon mileage and a number of different things expressed related to emissions and so forth. You have 24 vehicles purchased that are apparently still in the department without research and testing.

Can you give us an example of what types of vehicles were purchased? This is item number 9 in the speaking notes submitted by the Auditor General here. It says, “As of December 2015, 24 of these vehicles, costing over $500,000, remained untested.” What types of vehicles are you not able to get the testing for? Are they ones with more autonomous driving or ones with emission improvements? What types of vehicles can you not get to the testing, and is it because of lack of staffing?

[Michael Keenan]

Thank you, Mr. Chair.

The member correctly noted that the Auditor General found that as of December 2015, we had an inventory of 24 vehicles that had yet to be examined. As of about two weeks ago, that inventory was down to two. Those two vehicles were a Mercedes SL 400—kind of expensive, but we had brought it in to test the avoidance system on it—and I think a Nissan LEAF, on which we had been working with the NRC to evaluate its battery performance.

We are just bringing in now a batch of about 30, I think, which we just bought. We are always going out and buying a batch, and then we get them in. We work out a plan to maximize the information we can get from them before we crash them.

[The Chair, Conservative, Kevin Sorenson]

Thank you. Our time is up.

It sounds like an interesting job: buy 30 cars and then do certain tests before you crash them. I have a son who would probably enjoy working at a place like that.

All right, we'll go back to Madame Mendès.