Transport Committee on May 2nd, 2022

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you.

I will remain with the automakers, and anyone can answer. Please jump in.

Can you describe what actions you or your member companies have taken to make your supply chains more resilient? We've heard what you would like to see from the government, but what have your members done to make the supply chains more resilient?

[Brian Kingston]

Sure. I'm happy to start on that.

Automakers are investing hundreds of millions of dollars into, first of all, building an electric vehicle supply chain as part of the integrated North American automotive market, and with that, more resiliency is being put into the auto supply chain.

One simple example is the semiconductor shortage I mentioned. Automakers have been making announcements with respect to joint ventures and partnerships with semiconductor manufacturers to have a more direct line of sight into that manufacturing process. In addition to that, in the United States the CHIPS act is going forward with $52 billion to enhance U.S. domestic chip manufacturing, which will have a very, very positive impact on the North American industry. A lot is happening to make automakers' supply chains more resilient.

[Annie Koutrakis, Liberal, Vimy, QC]

Is there anyone else who would like to chime in?

[David Paterson]

I'll chime in.

I'll build a bit on something Dave Miller said. We are facing waves of inconsistency, so you get what you plan for. In terms of resiliency, we work very closely with incredible partners in the rail industry and others to be able to very quickly respond when things take place.

To your earlier question, the impact was hundreds of millions of dollars because of the Ambassador Bridge. It's not just the Ambassador Bridge. We face rail strike threats and blockades, and we have to be able to respond to these things quickly. The more that you can plan in advance for these things, the better.

One other aspect, building on what Brian said, is that with a technology change to electric vehicles, for example, the supply chain will change as well. While we have sourced engines and transmissions for 100 years, we're going to now source batteries. The batteries will need to source minerals. Some companies have different strategies for how to approach that, but in our case it will involve more ownership or investment in some of the aspects of that supply chain.

As we would describe it, we have these enormous tiers of suppliers—often three or four—but we'll be more engaged and even take equity positions, as we're doing in Quebec, where we're building cathode active material processing.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you for that.

My next question is to the Vancouver Fraser Port Authority and Prince Rupert Port Authority. I'm in the process of hosting various supply chain summits, regionally and thematically. In these supply chain round tables, we often hear from other port authorities that we need to give more attention to automation.

What would need to happen in order to achieve greater automation? Are you aware of other ports in the world where this has already happened? If so, how has this affected their respective supply chains?

[David Miller]

My colleague Mr. Rogge may want to add to this as well.

We have what we think is a pretty good mix. We have terminals that are partially automated. We think it's worked out quite well. We have a good relationship with our unions and we have a model that we think is quite successful., so we're not particularly looking for or pushing for greater automation. It varies from terminal to terminal, but it seems to have worked well.

Greg, I don't know if you have anything you want to add.

[Greg Rogge, Director, Land Operations, Vancouver Fraser Port Authority]

Yes. Thank you, David. I think you're right on.

I would say that one example would be the Centerm terminal project that's ongoing right now. It's been in process for about a year and a half now. That particular project is aiming to increase the footprint of the terminal by 15% but improve its throughput by 60%. A lot of that is through optimization.

That's the kind of activity we need to see more of. You're seeing significant improvement in throughput and optimization through relatively modest increases in size, and—

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Ms. Koutrakis.

Next, we go to Xavier Barsalou‑Duval.

Mr. Barsalou‑Duval, you have the floor for six minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

My first questions are for Mr. Gervais, from Lion Electric.

You mentioned earlier that, during the pandemic, you used strategies like stocking more of some products needed to put together your orders and getting more suppliers.

First, do you feel these hardships will continue over the long term, or is it a short-term situation?

Second, in your opinion, to what extent do you feel the government could introduce policies to help you deal with these types of situations?

[Patrick Gervais]

With respect to the entire supply chain, Lion Electric sourced large numbers of essential products like motors, suspensions and batteries. However, we didn't anticipate the shortage of certain items, like glue and all sorts of electronics.

I will give you an example. We developed a partnership with Promark, which became ProEV. ProEV did some new product development to make electric harnesses. It's a Quebec-based company and it received tens of millions of dollars in foreign investment so that it could sell the products it developed all over North America.

Whenever we run into a problem in our supply chain, we try to work with people nearby to resolve it.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

I see that Lion Electric prefers shorter supply chains.

For the company and the industry, what are the benefits of having a shorter supply chain?

Also, what kinds of government policies, if any, should be introduced to support shorter supply chains?

[Patrick Gervais]

To accelerate the electrification of transportation, we truly believe there are several factors involved: legislation, incentives, the supply chain and speed.

Regarding the third factor, the supply chain, if you develop more local expertise, you're going to increase volume and reduce costs. We aim to do that.

We want to create ecosystems. We already have a lot of expertise and knowledge in this area. In Canada, we're very innovative.

Policies that promote local business development would help expand our local expertise and supply chain. I'm not necessarily talking about Canadian companies. I believe we also need to attract foreign investment if we want foreign businesses to set up shop here.

I'm talking about the chain from ore and critical mineral development to recycling. We feel it's very important to attract investors, to get people to set up shop here and increase production volume. That will lead to reduced costs. The sooner we do that, the more competitive we'll be in the local and international markets.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

If I understood correctly, you feel it would make sense for the government to introduce local procurement policies. I want you to elaborate on that, but before you do, I'd like to circle back to one other point.

Other witnesses before the committee have said that it would be appropriate to adopt carbon pricing on imports, since the manufacturing conditions aren't necessarily consistent from one country to another. This would take into account the legislative framework and current realities, while helping to address climate change and support industry.

I'd like to hear your thoughts on those two recommendations.

[Patrick Gervais]

In our opinion, it makes sense to bring in legislation that will foster product development and manufacturing in Canada. As we've always said, you have to build where you sell. That's really important to us.

We will certainly support policies that help foster green development.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

My next question is for the General Motors representative. However, should Mr. Gervais wish to chime in, I will let him, because this also concerns him.

Mr. Paterson, you stated that General Motors was going to move toward vertical integration, and even offer financial interests to suppliers.

What does that really change for you? To what extent would local sourcing, or at least short supply chains, be an issue or a vision you develop?

[David Paterson]

I will answer your question in English.

The investments we're making are being made with our suppliers and in joint venture. These are new supply chains in many ways.

In the electric battery world, much of the supply of what has gone into electric batteries has been sourced traditionally from Asia, in places ranging of Indonesia to China, etc., so we have a really historic opportunity to localize the electric vehicle battery industry in North America. That has all kinds of geopolitical benefits. It has business benefits and the like, but they have to be predictable. They have to be competitive..

The good news is that Quebec is extremely competitive for the processing of minerals because of our abundance of affordable, low-GHG power and excellent infrastructure, etc. We've been incredibly impressed with Quebec and the work that is being done there. We will develop our supply chains in partnership there.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Paterson.

Thank you very much, Mr. Barsalou‑Duval.

Next up, we have Mr. Bachrach.

The floor is yours. You have six minutes.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Mr. Chair, I'd like to begin my questions with Mr. Veldman from the Prince Rupert Port Authority.

Obviously the port of Prince Rupert is a very important player in the northwest, which is the beautiful part of the world that I get to represent. I really appreciate the time that Mr. Veldman has spent over the past several years sharing with me some of the port's plans and the impact that it has on our region.

Mr. Veldman, going back to the challenges in British Columbia around the flooding, I understand that the port of Prince Rupert was able to play a role in ensuring that the west coast supply chain was kept as intact as possible. Could you speak a little bit about the role the port played?

[Ken Veldman]

I can. Thank you, Taylor.

Obviously there was a very unexpected event there. Especially with our partners at CN, we were able to divert several shipments that otherwise would have been bound into and out of Vancouver for a number of products, including agri and coal containers. Certainly a lot of additional resources were dedicated to that, not just from a port perspective but from a railway perspective, to ensure that we were able to be part of that solution in terms of keeping that commerce moving and responding as effectively as possible during that time.

In a larger sense, what it really spoke to was the value to Canada of developing that redundancy, if you will, on the west coast. The value of ensuring that we have the capacity and capabilities to manage those situations as nimbly and as effectively as possible was really brought home.

Certainly that isn't just in case of emergency. The reality is that capacity competitiveness and having flexibility and options for shippers—not just in terms of a geographic supply chain that's being used, but different modes—adds value at the end of the day to our exporters and our importers. On an ongoing basis, that's going to be really key for Canada's future, especially when you start to look at the development of the Indo-Pacific region.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Veldman.

Just following up on that, I know the port of Prince Rupert has some bold plans for expansion. As we see more and more challenges around extreme weather, around potential risks like future pandemics, could you speak and share with the committee how the expansion plans that the port of Prince Rupert has increase the resilience of the supply chain on Canada's west coast?

[Ken Veldman]

I absolutely can.

As I said in my opening remarks, we've seen remarkable growth over the last 10 to 15 years, really to the benefit of Canada, and we expect that our next decade will be just as dynamic. Certainly on the intermodal side of things, we're seeing already significant expansion again. Our partner, DP World, will be completing a container terminal expansion in July of this year that will add significant capacity, and we are entering another phase of expansion at Fairview container terminal. As well, we have entered into a feasibility assessment agreement with DP World to look at an additional terminal in the future that would bring another 2 million TEUs of capacity to the Prince Rupert gateway.

But it's not just all an intermodal story. It's also very much a bulk story, and in particular as we see Canada transition to being a leader in lower-emission or zero-emission energies, the export supply chains for that are going to be absolutely critical. Prince Rupert has been playing a leading role already, particularly in terms of LPG exports and propane. We've had two terminals developed by both AltaGas and Pembina within the port of Prince Rupert in the last two years.

As we start to look at future fuels, whether that be other LPGs, whether that be methanol, etc., we're very well placed to be able to do that. One of the things that makes us really well placed is our very sustainable approach to development, both environmentally and with our partnerships with indigenous communities, but there's also the fact that we've got room to grow. That room to grow, as you've heard from my colleagues in Vancouver, is a challenge in Canada, and certainly the north coast of B.C. does offer some really unique opportunities to be able to do that and do it within a master infrastructure plan that we continue to execute here to ensure that it's done sustainably and safely.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Veldman, and thank you, Mr. Chair. I've got a couple of seconds, but probably not enough time for a question.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Bachrach. I appreciate that.

Next we have Mr. Muys.

The floor is yours, you have five minutes.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you, and thank you to all the witnesses for your perspective today. I appreciate that.

Just driving around in Ontario, I've now heard radio ads twice for car dealerships, and I know we're talking to the manufacturers in different parts of the province that actually referenced supply chain issues. It struck me that the heightened awareness of supply chain issues in the public consciousness has come down to the fact that it's now in radio ads on local radio stations.

I'm just curious, because these were from car dealerships. They are obviously an important part of your distribution network and they have important roles in communities in terms of fleets for businesses and tradespeople and people who are building critical infrastructure. What are you hearing from your dealers? What are you saying to them, and what are some overall thoughts on the fact that it's come to that?

[David Adams]

Maybe I could start.

Yes, the supply chain issue has become a common verbiage, from Home Depot to car dealerships to everything else these days. What it's indicative of is the fact that manufacturers have obviously conveyed to their dealers the challenges around securing product. This is owing to comments that Mr. Paterson and Mr. Kingston and I myself made concerning the issues relating to the pandemic. The most obvious challenge has been chip shortages, but the industry has really been fraught with all sorts of different challenges.

Mr. Gervais mentioned glue, for instance. There have been a myriad of different supply chain challenges. This is obviously causing production delays for vehicles of all sorts, whether they be EVs or ICE, which is resulting obviously in lower inventories at dealer lots, which is probably the reason dealers are notifying their consumers that they will challenged to supply vehicles for the foreseeable future.