Transport Committee on Sept. 28th, 2017

[Ian Jack]

How interesting. There are a few things there. I think this legislation will go a fair way toward redressing an imbalance that we have right now with the United States on this. I think it would be normal business practice to address an issue in a jurisdiction where you have larger liability and worry less about the jurisdiction where you have less liability, so that may play a part. I'm not in the industry, and we think it's reasonably balanced, but of course we don't speak for business. Our job is to speak for the consumer on this and to make sure they're getting a fair shake.

We're in to meet with Transport Canada on a regular basis. Is this everything we would ever want in a piece of legislation? Of course not, but I think it does move forward finally, and of course there was an attempt under the previous government as well to do this, to give us equal recall powers to the States. Our bottom line is simply that we are very supportive of that and then we look forward to getting into whatever the next round of improvements to this legislation may be.

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

Okay, thank you.

[The Chair, Liberal, Judy Sgro]

Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

More questions, that's good. We heard from our last set of witnesses the fact that being so closely tied to or needing to harmonize with the United States holds us back from developments that we see from foreign carmakers. They're coming up with new technologies that could enhance safety, but we seem timid to accept those new technologies on our own without the complementary regulations being in place in the United States.

Would you see the inverse of the authorities that this bill would give to the transport minister to approve new technologies, which could be introduced in Canada in advance of the United States and that would improve the situation here? Is that technically feasible, given our proximity to the U.S. market?

[George Iny]

It's technically feasible and desirable to the extent that you're not compromising public safety. Definitely one example is lighting. The Europeans were way ahead of the States and Canada for a long time. Some of the manufacturers already market vehicles in Europe. We could have allowed a European standard as an alternative to the Canadian-U.S. standard.

That's a good idea and it has been discussed at relatively high levels. People from Canada have gone to Europe and sat on bodies where this is talked about. If we need more of it—the worry always is that you're going to dilute the protections, but I don't think that's a real risk, that someone is going to shop for a standard in a country with low standards if you do that.

[The Chair, Liberal, Judy Sgro]

Our time is up for this particular panel.

To all of you, thank you very much for being here.

I'll suspend for a moment while we get the next panel up.

[The Chair, Liberal, Judy Sgro]

I'm calling the meeting back to order. Welcome to our new panel.

We have the Canadian Automobile Dealers Association, the Canadian Vehicle Manufacturers' Association, and the Global Automakers of Canada.

Welcome to all of you. Whichever one of you gentlemen would like to start the testimony?

Keep to your five minutes so the committee can get in lots of questions.

[Mark Nantais, President, Canadian Vehicle Manufacturers' Association]

Thank you very much, Madam Chair.

Good afternoon, members of the committee.

I'm here representing Fiat Chrysler, Ford, and General Motors, which are my member companies. In Canada, these companies operate five assembly plants, multiple parts and components plants; as well, each has research and engineering facilities with mandates for advanced vehicle technology development, including partnerships in related software development.

CVMA members remain committed to the development and manufacture of safe automobiles, proactively enhancing occupant protection technologies in the event of a crash, as well as many new and innovative advanced driver crash assistance technologies to improve safety by helping the driver avoid crashes in the first place.

We support Bill S-2. We continue to share the government's objective to advance or enhance the safety of Canadians and provide additional regulatory flexibility to support the introduction of advanced safety technologies as well as innovations as outlined in the bill.

In our written submission, we have identified four areas that have practical and business implications and need reconsideration, particularly since the bill includes the ability to delegate some existing and proposed ministerial powers. Our recommendations do not detract from the safety objectives of the bill.

We offer the following recommendations, which are really there to improve clarity and, in so doing, provide for more effective policy implementation and efficient administration.

The first is with respect to proposed new section 10.61, power to prohibit offering for sale—defect or non-compliance. Manufacturers sell, wholesale, new cars to dealers that are privately owned independent businesses; manufacturers do not sell vehicles to consumers, retail. The proposed language inappropriately holds the vehicle manufacturer or importer, which do not sell vehicles to consumers, criminally and administratively responsible for the actions of another independent business entity, namely the dealer, to sell vehicles under a recall and stop-sale order to consumers.

Vehicle manufacturers and importers should not be held criminally or administratively responsible for the actions of independently owned and operated new car dealers. The proposed language to prohibit offering for sale defective or non-complaint vehicles should more appropriately be applied to dealers, which are the entities that sell vehicles to consumers. Doing that would be more consistent with the United States' responsibilities and requirements.

We would recommend that this provision be revised to give the power to order vehicle manufacturers and importers to issue a notice to the dealers to remedy the vehicle prior to the first sale.

The second recommendation concerns proposed new section 8.1, power to order tests, analyses, or studies. We recognize that this unique-to-Canada power is proposed to collect information quickly for the purpose of verifying non-compliance or defects in certain cases where information is not voluntarily provided. We believe, however, that the proposed language is very broad and risks being misused beyond the specific intent, with the potential outcome being to order any test, analysis, or study in any scenario, potentially downloading Transport Canada's compliance and audit responsibilities onto companies in lieu of the department's oversight responsibilities.

This wording needs to be updated to clarify the intent of the provision, which is to order tests, analyses, or studies to verify non-compliance, and to include the notion of “reasonableness”.

Our third recommendation concerns proposed new subsection 10.4(1), correction date. CVMA members strive to provide the most accurate and up-to-date recall information to vehicle owners. The act currently requires that an initial recall notification letter be sent to vehicle owners no later than 60 days following the notification to Transport Canada. If the parts required to repair the vehicle are not immediately available at the time of the first notice, a follow-up notification letter is sent when parts become available.

At this preliminary stage of recall, information on availability of repair parts may not be available, and estimates of the date for parts availability may be revised multiple times. The end product of this, of course, is that you could end having multiple letters going out to consumers. Consumers tend to become less sensitive, or desensitized, to those notices. It loses its importance, and they tend to avoid the importance of that notice to begin with. This undermines public confidence in the system. We don't want that, and we don't believe Transport Canada wants that.

Prescribing the requirement in the act also prevents the leveraging of communication technologies that may be better suited for providing information in a more timely manner, such as manufacturer web-based recall lookup tools that our members already have in place.

This additional requirement is not needed in the act and can be addressed under section 15 of the motor vehicle safety regulations, which define all the information required in the notice to the minister and the notice to vehicle owners.

Our last recommendation concerns dealer compensation. Based on Mr. Fraser's description of the proposed amendment that he plans on introducing, we would welcome such an amendment that satisfies the concerns of both dealers and OEMs, original equipment manufacturers. CVMA members currently address compensation for new vehicles under recall with their independent dealerships in a fair and equitable manner, both in Canada and in the United States. We will continue to do that, and we continue to be open to further discussions to deal with their concerns.

Madam Chair, those are my remarks. I would be glad to answer any questions. I am hoping we can get some support for our recommendations in this specific case.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Adams.

[David Adams, President, Global Automakers of Canada]

Madam Chair, committee members, I appreciate the opportunity to be with you today to discuss the important issue of motor vehicle safety and the proposed amendments to the Motor Vehicle Safety Act, as contemplated in Bill S-2. I am not going to bore you with the details of the promotional spiel on our association, but suffice it to say that we represent the international automakers in the Canadian marketplace—essentially, everybody but Mark's members.

At the outset, I want to say that safety is of paramount importance to each and every one of the GAC member companies. As I noted before your colleagues in the Senate last fall, our members have consistently been at the vanguard of the introduction of advanced safety technologies, such as the three-point seat belt, electronic stability control, and advanced lighting, currently the subject of CMVSS 108, which I also made reference to in my testimony to the Senate, and for which we are still looking for a final regulation from the department.

I was pleased to be at Tuesday’s meeting of the committee on Bill S-2 for part of the time. A number of the committee members expressed concern about the rapid pace with which technological innovation is happening in the automotive industry. I concur with you that the pace of change is both unprecedented and disruptive. In this regard, the Global Automakers of Canada supports the flexibility being afforded by Bill S-2 to accommodate adjustment to this rapid change with respect to propulsion, connectivity, and automation technologies. This flexibility, used prudently, should allow Canada to better stay at the forefront of new technological advancements and any regulatory regime required to support them.

I also want to comment briefly on the sections of the bill that are intended to bring Canada into greater regulatory alignment with the United States. The members of the Global Automakers of Canada support the recognition of U.S. standards across the NAFTA region, as our plants in the three countries are geared to serving the larger U.S. market, and building once for all three countries has the benefit of reducing complexity and yielding economies of scale.

That being said, vehicles meeting the UNECE global standards are similarly safe and often incorporate advances not yet adopted in the United States. We therefore believe that Canada should retain the flexibility to recognize other advanced standards, in addition to FMVSS, in order to deliver the greatest benefits to Canadians and to ensure that we are able to meet our CETA obligations.

Without such consideration, Canadians are being shortchanged. Transport Canada not only faces increasing regulatory irrelevance but also misses an opportunity to play a leading role in the North American regulatory framework, not by adopting a unique Canadian standard but rather by critically assessing standards in the rest of the world—i.e., the UNECE standards, as well as those of the United States—to ensure that Canadians are not being denied leading safety or environment technologies simply because the U.S. is unprepared or unwilling to embrace such standards. Canada can be, and frankly should be, innovative in its regulating, as well as capitalizing on the regulatory co-operation provisions with respect to regulations and standards in both the United States and the EU.

The association’s members support amendments to the Motor Vehicle Safety Act that would provide meaningful improvements to public safety. However, additional regulatory burden without benefits to the motoring public should be avoided.

The question was raised by a member on Tuesday with respect to whether the collection of more data would assist in improving safety. The members of the GAC are not against the provision of additional data, provided it is reasonable and useful, and ultimately improves safety. The experience of the United States has demonstrated that the identification of safety defects is often a very complex task and data alone is insufficient for that task. The U.S. gathers a tremendous amount of data, but that data did not help with respect to the early identification of some of the defects related to recent high-profile recall situations.

In this regard, our members do have a concern with respect to proposed subsection 8.1(1), which Mr. Nantais also referenced, which provides the minister with the power to order a company to “conduct tests, analyses or studies...to verify compliance with this Act, that the Minister considers necessary”. This is a wide-ranging, Canada-unique power that provides the minister with unfettered discretion to order these tests with no consideration as to the cost to the company, nor the potential charter implications of asking a company to conduct and pay for work that may subsequently be used by the government against the company.

This clause is problematic, and if the language cannot be tightened up in the legislation, then we believe regulations should be developed to provide guidance as to what conditions would justify such a request, what framework would be used to standardize expectations over how those requests are filled, and who would assume the costs of such tests.

There are other sections in this bill as amended by the Senate that raise concerns for our members, but my time has expired. Based on conversations amongst the committee and two years spent on this bill, I think time has expired in terms of moving the bill forward as well.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Adams.

Mr. Hatch.

[Michael Hatch, Chief Economist, Canadian Automobile Dealers Association]

Thank you, Madam Chair, and thank you all members of this committee.

My name is Michael Hatch, and I'm the chief economist for the Canadian Automobile Dealers Association, CADA. We're the national association, as many of you know, for franchised new car dealers and truck dealers in Canada, with more than 3,200 across the country in virtually every town and community, employing over 150,000 Canadians in well-paying jobs.

We greatly appreciate the opportunity to bring the voice and concerns of our dealer network to this committee as it considers Bill S-2, which is a very important bill for our industry, both the retail and the manufacturing levels, as you will see this afternoon.

I'll say off the top that CADA supports this bill and hopes that it becomes law in a timely manner. We supported a similar bill under the previous government, and we appreciate the multipartisan support that it appears to enjoy.

I'm going to begin with a few points about recalls in general. First of all, recalls are increasingly common in today's vehicle market. That's no secret. It is a function of many factors. More cars are on the road. There's greater complexity in the components of new vehicles, and there's an improved system within the industry to identify issues that could necessitate a recall. These are all good things.

The volume of cars on the road and their complexity will inevitably lead to more not fewer recalls in future. The vast majority of them are handled well by manufacturers and dealers, and consumers' problems with their vehicles are solved in a timely and efficient manner.

Our proposed amendment to this bill in the Senate had four components: to ensure that manufacturers will continue to be responsible for the recall process; to ensure that dealers face no new obligations under the act; to extend buyback provisions to dealers in the event that a vehicle cannot be repaired; and, finally, to provide for manufacturer-paid reimbursement of dealer carrying costs in the event of long and lasting recall situations. I'll get into a little more detail on that last point.

We expect that the amendment to be moved at this committee will accomplish most of these objectives, and I thank Mr. Fraser for his comments earlier referring to that very amendment. We look forward to the specific language that it contains.

Dealers don't sell their inventory on consignment. The moment that a car arrives at the dealership, it becomes the property of the dealer, who must finance and maintain millions of dollars worth of inventory at any given time. When a vehicle is rendered unsellable due to a long-lasting recall where a fix is not immediately available, dealers bear a significant cost. Inventory must continue to be financed and maintained, and in these low-frequency cases—admittedly low-frequency—yet high-impact cases, dealers can be stuck with cars for months or more.

Imagine, for example, paying a mortgage on a million-dollar home every month, but you can't live in it or rent it out and you still have to pay the property taxes and keep the lights on. This, in effect, is the situation that dealers face when inventory is rendered unsellable for months or more on end due to long-lasting recalls. Again, these cases are rare, but very high impact when they do take place for our dealer network, which again consists primarily of small and medium-sized businesses across Canada.

Our amendment, among other things, sought to address this by providing for manufacturer-paid reimbursement of dealers' carrying costs over the period of the recall according to a formula. We arrived at this formula by consulting with our American counterparts where such dealer protection is enshrined in federal law.

I would note also, as all of you know no doubt, that part of the government's rationale for pursuing this bill is legislative harmony with the United States. Our amendment was inspired by the same motivation.

Our proposal was straightforward. Under a recall scenario, the manufacturer would be compelled to either make the fix available in a timely manner or buy the vehicle back from the dealer at the original dealer invoice price. In rare cases where the fix was delayed, the manufacturer would be compelled to reimburse the dealer for carrying costs over that time period for the vehicles affected, as is the case in the United States.

In subsequent discussions with the government, alluded to by the minister here a couple of days ago, on Tuesday, we arrived at a compromise position that we hope to be reflected in the new amendment to be tabled at this committee. Again, we look forward to the debate of this amendment in this forum.

Ultimately we want this bill to pass as the important piece of consumer safety legislation that it is. We will continue, as dealers and dealers associations, to pursue a legislative solution of the fundamental imbalance that exists between manufacturers and dealers in the context of long-lasting recall situations, but not as part of this bill.

As I've said, recalls will continue to increase in frequency, so this problem for dealers is not going to go away. We support the bill and don't want to stand in the way of its eventual passage, but we will continue, again, to pursue a legislative solution to protect dealers saddled with inventory when recalls drag on for months or sometimes even years.

Thank you very much to all members of this committee. I look forward to any questions that you have and I will do my best to answer them.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll got to Mr. Lobb, for six minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

It's nice to see some familiar faces here at the table today.

The part I wanted to ask about to start off is proposed section 8.1, on tests, analyses, or studies. If we look at the ministry of the environment and the Canadian Environmental Assessment Act.... There is a case in my riding where the department and the minister have continually asked OPG for more and more and more information, and every time they provide more information, they get more requests for more information and scientific data. I guess everybody is trying to do their jobs, but I look at this and I can see your point. When is it enough information? When is there enough data? Who pays for it? How do both sides agree on what the solution is?

I wonder if you can provide us with some thoughts and details on this and on your discussions with the department or the minister on this.

[David Adams]

Maybe I'll start. The discussions we have had to date have somewhat focused on the idea of reasonableness, that the process will be reasonable. Fair enough, but there's a difference in the thinking on what the letter is and the legislation. There is a wider ambit of ministerial opportunity there, and we want to ensure that it is used in a reasonable way.

Who pays for it? My understanding is that in the U.S., those tests and analyses are paid for by the government after it pursues an initial discussion with the manufacturer.

Mark may have better insight on that provision. It's just an issue and a concern because of the unfettered power.

[Mark Nantais]

If I may just elaborate a little bit, our concern is not so much the cost. Our concern is the misuse and the broad application, where you could be asking for information that really isn't relevant to the issue at hand.

Second, we would be concerned about people trying to pursue their information in lieu of the compliance testing that Transport Canada has to do as part of its audit program. We would have more concerns about the misuse of that and the expansion of that than about something like cost.

Clearly, it is important that Transport Canada has the audit function and retains that rather than shifting it onto original equipment manufacturers, potentially anyway.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I don't mean to put David on the spot, but I brought this up at our two meetings. You would represent Volkswagen. I'm pretty sure it would be one of the organizations you represent.

[David Adams]

Yes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

If we look at the recall, this doesn't touch some of the issues Volkswagen had with its diesel engines, dating back a couple of years. Is it something you think the other department should look at, or should we be sending notes back to the minister that this is something that needs to be addressed immediately? Should the ministry have the ability to do a recall when we have a significant emissions issue on a particular engine?

It's bad for business for Volkswagen. I know that. What's the conclusion on what we should do to protect the environment and the consumer on an issue of emissions?

[David Adams]

Emissions recalls are the subject of discussions with Environment Canada currently. We're still trying to work through what the final disposition will be in that regard. It is not unreasonable to say that there should be, as you say, some awareness around emissions recalls as well.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Okay, I will leave it at that. I can see your concern, though, when the department says, and I don't care what government is in, “Trust us, we'll be reasonable,” because a lot of those people come and go, and they aren't covering the cost. Now, if they want to cover the cost, fine, but if it's for you to continually prove that you are in compliance and you've corrected the problem, I see an issue with that.

That's it.

[The Chair, Liberal, Judy Sgro]

All right, thank you very much.

Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Let's continue on that same topic. Can you give us an example of where you believe that Transport Canada has just been on a big fishing expedition, to the grief and misery of your company? We'll start with you, Mr. Adams. You were talking about testing.

[David Adams]

I can't give you a specific example. I think we're talking about a new authority and, as noted in my remarks, a Canada-unique authority for the minister to undertake that testing. We're really talking about a situation at this point that hasn't been explored yet, so it would be a concern about the language as it exists now and the recommendation to either fix the language or, as I said in my remarks, use the regulatory framework to address the concern.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

So it would be your understanding that the minister, through Transport Canada, could require you to do the testing. Is that right?