Transport Committee on March 8th, 2012

[The Chair, Conservative, Merv Tweed]

I call the meeting to order.

Good morning, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number 26.

Our orders of the day, pursuant to Standing Order 108(2), are for a study of innovative transportation technologies.

We have a number of witnesses joining us today: from Fleet Advantage Inc., Mike Greene, president and CEO, and David Dennis, executive vice-president and managing director, business development; from Chrysler Canada Inc., Larry Robertson; from Enterprise Holdings Inc., Ryan Todd; from Delphi Group, Bruce Dudley; and from AUTO21, Peter Frise.

We've had a little bit of a discussion, so I know you know what the drill is. I'll ask you to make your presentations, and then we'll move to questions from the committee.

Please begin, Mr. Dennis.

[David Dennis, Managing Director and Executive Vice-President, Business Development, Fleet Advantage Inc.]

Thank you for the opportunity to speak with you here today. On behalf of Fleet Advantage, witnesses in attendance, including Chrysler, Enterprise, and Delphi, and many others who could not be in attendance today, we sincerely appreciate the interest of the committee in our story. We hope that what you hear today you will see as an opportunity.

With your permission, and in the interest of time, I intend to focus on the key elements of the document you all have versus going through it in its entirety. If there are no objections, I'll just focus on the highlights.

My name is Dave Dennis. I'm the managing director and executive vice-president of business development for Fleet Advantage. Our parent company is InsightAction. We are essentially a business intelligence organization engaged in gathering and converting data into actionable insights to optimize asset performance for a variety of sectors, which are identified in the statement that you all have. Most pertinent to our conversation today is the work we do at Fleet Advantage in optimizing transportation and fleet asset performance.

In December of 2010, we were asked by the Canadian Renewable Fuels Association to first identify the barriers in making higher-blend ethanol available in retail and then to help them navigate those barriers.

We knew that the fleets we were working with could benefit in their efforts to reduce GHGs with the availability of alternative fuels like higher-blend ethanol, so we naively took the challenge on and started our conversations with the largest independent retailer of petroleum in Canada, Canadian Tire.

Canadian Tire had many questions that pertained to the entire alternative transportation and energy supply chain before they could responsibly move forward with the availability of any alternative transportation energy solution—questions that required expertise and perspectives from infrastructure, automotive manufacturers, and many, many more.

To be clear, at Fleet Advantage we're not experts in alternative transportation energy. We are a data-driven organization, and as such remain essentially fuel-agnostic. We knew that solely focusing on the Canadian Renewable Fuels Association's focus on ethanol would compromise our ability to do the broader work we thought was required. We quickly learned that this effort wasn't about an independent solution; rather, it was about interdependent solutions based on many varying factors involving the entire supply chain. We also learned that there was a huge void, inasmuch as no one seemed to be stewarding this conversation.

You can feel free to challenge me on that later, during the question period.

Now, largely financed by ourselves, we've been doing this benevolent work in terms of meeting with very senior leadership in every one of the segments that Canadian Tire had asked us to speak to, so that we could bring some intelligence and some collaborative input together.

What started as an ethanol project quickly grew to include other alternative transportation energy solutions as a result of the conversations we were having. We quickly observed that each, independently, had significant challenges, and all were at different stages of development in terms of being commercially viable as a transportation energy source. We also learned that they were quick to cast stones at one another in what must be a very difficult struggle for limited resources.

Our observation was this: why fight over a market that doesn’t exist yet, instead of working together to create conditions for a market that all could participate in? We have heard many make the statement, which I'm sure you're no stranger to, that there are no silver bullets. Then why are so many behaving like they're waiting for one?

Let’s acknowledge that each solution is imperfect but can contribute to the whole in different ways. Let's also acknowledge that this community of alternative transportation energy solutions is completely interdependent of a much broader community—the retailer in terms of availability, automotive manufacturing, fleet leadership, and public policy-makers, just to name a few.

The idea is simple: break down the barriers just enough so that this seemingly disparate community of influencers and stakeholders can collaborate for mutual value and agree to some needle-movers that would enable Canadians to benefit in every aspect of an alternative transportation energy supply chain that touches the economic well-being of many sectors, including energy, transportation, agriculture, technology, retail, and manufacturing, with different focuses by geography and utility. Such an alternative transportation energy supply chain could build on existing expertise to develop new business opportunities for Canadians, and in so doing create new jobs.

What about the promise of exporting leading technology, not to mention the health benefits that we would all benefit from?

I have to believe there is value in a private sector single-source entity like this alternative transportation energy community—which we've dubbed ATEC—that deals with this matter holistically to enable access to a collectively prepared perspective that touches such a diverse community of important influencers and stakeholders.

If the members here today see value in accessing this alternative transportation energy community, we will, together with our private sector partners, formally create ATEC as a not-for-profit entity that will be privately funded, so we're not here to ask for anything other than your ear. We just need to hear clearly that you support the notion in terms of an alternative transportation energy community coming together to provide input.

Think about having at this table a group that represented availability, such as Canadian Tire, working collaboratively with suppliers of new technology. I think of an immediate example of government fleets that create their own fuelling depots. That probably isn't necessary. Just reaching out to the various retailers that are available and working on a deal would mitigate that incremental expenditure.

There are many other examples that I've included in my notes, just to name a few.

We have here with us Enterprise Holdings. They represent over one million cars globally, and many cars in Canada, that are controlled under a central decision-making authority. They are representative of fleets that exist out there, not dissimilar to the North American fleet association and many other fleets we work with. You can work with them to steer support for an infrastructure to get things started.

We have supply in terms of the various technologies that exist out there; we have demand in terms of the fleet leaders we can talk to, who represent 10% of the vehicles on the road today; and we have availability in terms of the retailers we're talking to, just to name a few. These are businesses coming together to collaborate for mutual value. This is the private sector coming together to work with government in assisting the process of aligning private sector needs with public policy to create new business opportunities and jobs for Canadians.

Our proposal is simple: if the members here see value in creating a group of key stakeholders and influencers that are representative of an alternative transportation energy community, we'll build it for you.

That's essentially the end of my statement. I'm not sure if we go to questions or if Peter speaks next.

[The Chair, Conservative, Merv Tweed]

I'm going to ask Peter to present—

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I have a point of order.

[The Chair, Conservative, Merv Tweed]

Go ahead, Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I just noticed that we have a very large roster of witnesses—

[The Chair, Conservative, Merv Tweed]

There are two presenters.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. I think it would be most helpful if we could just find out what the innovation is that they're proposing, why it's good, and what we need to do.

[The Chair, Conservative, Merv Tweed]

Go ahead, please, Peter.

[Dr. Peter Frise, Chief Executive Officer and Scientific Director, AUTO21 Network of Centres of Excellence, Auto21 Inc.]

My name is Peter Frise, and I'm the scientific director and chief executive officer of AUTO21, which is Canada's national automotive research network. I'm a mechanical engineer and I helped found the first automotive engineering program in Canada, at the University of Windsor, in 1998.

As many of you will know, the automotive market has rebounded quite strongly in recent months, which is good news for all Canadians because of the important place this industry holds in our economy. However, the auto industry faces a new challenge following on the heels of the recession in 2008 and 2009. This new challenge is the rapidly changing fuel economy regulations, known as the corporate average fuel economy, or CAFE standard, in the United States, which is mirrored here in Canada by our drive to reduce greenhouse gas emissions, or GHGs.

CAFE standards are an extraordinarily complex topic, but essentially, to be eligible for sale in the United States, new cars are required to achieve a 40% better fuel economy by 2016 relative to their 2010 ratings. This is an improvement at a rate that is many times the usual rate of progress in fuel economy. There are moves afoot to enhance fuel economy even more radically by 2025.

Here are the numbers: the present CAFE requirement is about 9.26 litres per 100 kilometres, or about 25 miles per U.S. gallon. In 2016 it will move to 6.6 litres per 100 kilometres, or 35 miles per U.S. gallon, which is a 40% change from 25 miles per gallon; by 2025 it could go to 4.3 litres per 100 kilometres, which would equate to about 54 miles per U.S. gallon.

This is a very complex topic, but those are the round numbers.

These regulatory changes represent very strong challenges to the entire automotive value chain. Achieving these improvements will take far more than evolutionary changes in future vehicles, for a number of reasons.

Aside from driver behaviour, the largest factors in vehicle energy consumption are the weight of the vehicle and the aerodynamic efficiency of the vehicle. Studies have shown that a 10% decrease in vehicle weight can improve fuel economy by 2% to 4%. A 10% to 11% aerodynamic improvement can result in a 5% fuel economy gain.

This depends on what kind of driving you're doing. On the highway, aerodynamics are more important. In city driving, weight is more important. It doesn't matter what kind of car you're talking about. Whether it's a big car, little car, or electric car doesn't matter; those numbers are good for just about any kind of car.

A 10% decrease in vehicle weight is an extremely tough goal to achieve, but even that amount will not get us to where we need to be. The other difficulty is that decreasing vehicle weight can have a major impact on the cost of vehicles, the efficiency with which they can be manufactured, and most importantly, with occupant safety.

This balancing of vehicle performance with safety and cost is a critical factor in the future competitiveness of every nation's automotive manufacturing sector. That is why every entity participating in the automotive industry must become more innovative and bring new ideas and technology to the market at an unprecedented rate.

Personally, I am concerned that Canada's automotive parts industry is entering this era when innovation is even more important than ever before at a time when studies have shown that business investment in R and D in Canada is low; as well, our innovation support programs are also comparatively smaller than those of competitor countries.

For that reason, each of the major automaking countries is providing some form of very active R and D assistance to its own industry to ensure they can meet the challenges of CAFE by bringing lighter, more innovative products to the market, while maintaining vehicle safety at reasonable cost targets, and thus win new contracts to supply parts for future car models.

AUTO21 has been a major Canadian success story in the innovation landscape. The key to that success is the requirement that each project have an industry partner that co-invests in the project with AUTO21 and stands ready to take the knowledge from the research teams and commercialize it for Canada.

The co-investor requirement is what we call a market pull approach, and the requirement for an external partner is called a knowledge receptor strategy. They are foundational to how AUTO21 commercializes research. We know where the knowledge is going before we even start the project.

The market pull-knowledge receptor approach, coupled together, is used by AUTO21. It's quite different from many other Canadian programs. We feel it's foundational to how future progress will be made in this industry and in many others, such as aerospace, information technology, telecommunications, and so on.

In conclusion, let me say that I believe government investment plays a vital role in supporting innovation in the economy by providing specialized people and facilities that industry simply does not need all the time but can certainly benefit from on a periodic basis. Those people and facilities are often at universities and in public sector science labs, so organizations like AUTO21, which can broker relationships and help to buy down the risk of R and D in Canada, can often help make the difference between innovations being developed here or abroad and whether our country benefits from them or people in other countries.

As a follow-on strategy, I can tell you that the AUTO21 board of directors is developing a follow-on program to AUTO21 when it sunsets in 2015. We are presently in active discussions with industry to make sure this program will work for industry, and we would welcome an opportunity to talk about our plans with the government as well.

Let me just say also that I'm quite happy to talk to your committee about particular innovations as well.

Thank you very much.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Ms. Chow is first.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Thank you.

My question is along the lines of Mr. Poilievre's. Is it the Transport Canada certification that is the barrier? What is the barrier that would make it difficult for a company that has discovered or has proven that a certain technology works?

I'll use an example that I know very well, trucks. We know European trucks have side guards that, because it's aerodynamics, reduce greenhouse gases. The fuel reduction is about 10% on average, some are even at 20%, depending on the design. That's just one example. There are many other types of examples.

What is the barrier? Is it the certification of Transport Canada, or is it the lack of manufacturing in Canada, or is it synchronizing it with the U.S. market? In this case there's no manufacturer in Canada that does it. It's mostly European. It's German, Dutch, etc.

What is it precisely? I've heard from both of your presentations that you're saying people are not working together. Your line, I think, Mr. Dennis, is that it's not in the market yet, so we should wait. You said why fight over a market that doesn't exist yet, versus working together to create conditions for a market that they could participate in. What are those conditions that would create the market? Is it Transport Canada or the minister saying that a technology works and then providing some initial funding? What kinds of barriers are in your way?

I know it's a vague question, but both of your presentations did not zero in on the precise problem.

[David Dennis]

I appreciate the question. Understand, we have come here with two different perspectives that actually are aligned.

We fell into a conversation quite by accident to enable the fleet leaders we work with to find other ways to reduce their harmful emissions. That conversation really talked about the need for private industry to take control of a collaborative strategy to properly advise....

The questions you have here today can be properly answered with a collaborative input. Our first notion that this was taking shape was when we sat with the president of Canadian Tire Petroleum. He said nobody has talked to him about any of this. They want to participate; they just don't know how.

When we've gone down to Chrysler—and Chrysler has been incredibly generous with their time—they've pulled together an entire global sustainability team for two or three hours at a time. It's not dissimilar to GM and others.

What has occurred to us—and openly we acknowledge that we're novices in the conversation, and perhaps that gives us an advantage—is that nobody is bringing these stakeholders together. We had an event last week where we presented to the energy, trucking, and auto caucuses, and they seemed to get it right away.

We brought with us a kind of community that's representative of the broader stakeholder community we're talking about, and they all say the same thing: “We think we owe you some direction. We think we owe you some collaborative input. We'll never agree to everything, but we think we can agree to a few fundamental things.”

Today we're not going to be able to give you the clarity and pinpointed direction you require, but I have absolute confidence that's exactly what the stakeholders of this community intend to do.

I'm hoping that provides a little more colour and texture.

[Olivia Chow, NDP, Trinity—Spadina, ON]

I've met with the trucking association—the president and their staff—twice. They said they're open for any kind of technology as long as it's proven that it's aerodynamic, it will save fuel, and the payback period would be two years or three years, not 20 years.

Then they would be game. They'd be willing to do it. However, they're waiting for the manufacturing industry to jump on board, and then Transport Canada. There seems to be no platform where they can all get together and say, “Okay, it's been working in Europe for 10 years. How come it's not here?”

[David Dennis]

I completely concur.

[Olivia Chow, NDP, Trinity—Spadina, ON]

How does it start, though? Where does it start? How does it get pulled together?

[David Dennis]

Thanks to our present CEO, we've spent several hundred thousand dollars of our own money. There's no financial return or reward for this, just so you know. We've continued to do this because we felt that it needed to happen and in our humble opinion it was a travesty that these stakeholders weren't getting together.

Let's use your exact example. Wouldn't it be wonderful if the trucking industry, in collaboration with the customers who utilize their services and other stakeholders, came to the table and addressed the issues of the day? It's democracy taking place. Everybody gets input. You'll never agree to everything, but what we discovered....

To illustrate the point, we've created a movie. We presented it to the Canadian Renewable Fuels Association conference. By the way, we don't make movies. We videotaped it and pulled it together.

However, to illustrate the point, we said, “We're sitting here with these global leaders, influencers in Canadian business in a wide variety of industries, who all have a collective interest. What if we asked them three unaided questions? I wonder what they would say.”

So we did. We asked them three unaided questions. This included the global leadership from Chrysler; Enerchem, out of Quebec, in terms of some of the wonderful things they're doing; Iogen; and the University of Michigan. We said, “Do you care about sustainability?” Everybody answered differently, but kind of the same.

We asked, “If right now we pour petroleum products into our fuel equation, how do you see the future?” Everybody hasd different ideas, but there is a consensus that brews there as well.

Then the last question we asked was, “What needs to happen?” They all said essentially the same thing.

That was just one example. We're saying we're never going to agree to everything, but there's this hunger, this thirst, to bring a community together to figure out how to navigate this.

[Olivia Chow, NDP, Trinity—Spadina, ON]

What role does the government play?

[The Chair, Conservative, Merv Tweed]

I have to stop you there now.

Go ahead, Monsieur Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

I get the feeling that our witnesses today want a group hug.

It sounds like a group hug now. Maybe I just didn't have my coffee yet.

Mr. Dennis, I am trying to understand. So you are saying that the private sector partners are ready to make their contribution. You are actually telling us to use you. Is that correct? The message that you are sending is that you are ready to be part of the solution, but that you are waiting for the government to take action. Is that the message you are sending today?

[David Dennis]

Thank you for the question.

I don't think we're waiting for anything. What we've discovered is an appetite to proactively participate in a solution and get involved. One of the things we've shared in terms of some of the stakeholders at the table today, and many others, is that I don't think we can come with our hands out. We have to come funding our own initiative and our own collective input. We have to be representative of private enterprise and the private marketplace to enable policy-makers to responsibly navigate.

It's as simple as knowing we have an appetite, through the people you would want to talk to.... Boy, I can't imagine what you do when all these people and special interests groups are pulling you 17 ways from Sunday and somehow you have to find your way. This is an opportunity for one-stop shopping for you to get the popular wisdom or will of broad industry.

[Denis Coderre, Liberal, Bourassa, QC]

In other words, you would like recommendations in order to be able to find solutions. So it is a question of structure not of something specifically related to innovation. You would like a type of PPP or

a one-stop shop where we can all discuss together and have one place to discuss and decide, right?

[David Dennis]

Yes.

[Denis Coderre, Liberal, Bourassa, QC]

You might have your group hug afterward.

The Liberal party believes in that. I think we're all part of the solution because you're creating the cars and all that.

Let's be more specific, then. Which one should we focus on? We're at the table; everybody is here now, and we can all talk together. Let's go to some specifics. You spoke about ethanol. I'm not sure it's working that much on an environmental basis. I'm from Quebec, so electricity might be in order. Natural gas is an option; it's great. Where should we go first? Should we just have a bunch of options?

You're from the private sector, so you know that time is money too. You have to be focused. Where should we focus?

[David Dennis]

That's another excellent question.