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.