INDU Committee Report

Brian Masse, M. P.
Windsor West

NDP Dissenting Opinion

The global financial credit crisis has reduced the lending of banks and financial institution to businesses and consumers. As a result car and truck buyers can’t get loans to make purchases or leases. Sales in the North American market have fallen from 17 million vehicles to only 10.5 million. Every vehicle manufacturer in the world has been affected. This drop in revenue is what has created the crisis for the industry as a whole and has eliminated the funding necessary for their operations and their elemental role in the financing of consumer vehicle purchases. A government policy action is required to assist in this unforeseen industry crisis brought about by the failures in the global financial markets as a result of greed and deregulation.

Additionally, the lack of a comprehensive government sector strategy for the past decade has lead to the significant decline in the relative economic standing of the industry. From record trade surpluses in automotive vehicles and parts in 1999 to a growing trade deficit for the sector during past few years has tracked the policy neglect the previous and present governments have had toward the sector since the demise of the Auto Pact.

The NDP believes the committee report is deficient in addressing the requirements the industry needs. This short sighted and inadequate attempt by the committee demands a response. The following is the NDP’s recommendations to the government with regards to the necessary policy actions. The NDP recommendations are not inclusive of our overall policy but rather focus upon the mandate of the committee.

GOVERNMENT POLICY ACTIONS REQUIRED:

A new National Auto Policy to replace the former Auto pact

The Auto Pact was the core policy instrument of Canada’s auto strategy for 35 years. It was a powerful and effective demonstration of how regulations and protocols can make trade deals assist in the building of an industry. Companies had to assemble one vehicle in Canada for every vehicle sold here to obtain tariff-free access to the Canadian market while at the same time increase the percentage of Canadian value added content in their total Canadian sales. These rules established new assembly plants and promoted the expansion of Canadian auto parts sector. In 2001 the federal government eliminated the Auto pact to comply with a decision by a World Trade Organization dispute panel. This has precipitated a significant decline in Canada’s auto production. We have fallen from being the 4th largest vehicle assembler in the world to the 10th today. The fundamental policy instrument of the Auto Pact of linking market access to the investment in new domestic production and jobs needs to be brought back into force. This is what a new National Auto Policy, working with the United States, will establish in the restoration of balance in the North American vehicle marketplace. This is the essential component to ensuring long term sustainability to the vehicle production in Canada. No other automotive market place anywhere on globe has such an open market. This has lead to the lack of significant new value added investment in Canada by global manufacturers as compared with other countries with more regulated market access. The government needs take the necessary steps to establish this policy framework.

Automotive Sector Strategy

The government of Canada must immediately convene the Canadian Automotive Partnership Council on a regular basis. In 2004 CAPC produced a plan for the industry. The previous and present federal governments have not acted on this initiative at all.  This has lead to CAPC being almost operationally defunct. CAPC needs to be the part of the core of any policy development and implementation framework for a new national automotive strategy.

Extended Producer Responsibility

After the considerations and concerns raised during the sub-committee hearings, the government of Canada must conduct a study to develop a framework for the future establishment and implementation of Extended Producer Responsibility protocols and procedures

PPAP Payment Model

The deficiencies, defects, and the resultant financial instability created by the PPAP payment model for mould, tool, and die vendors to Tier 1 suppliers of the vehicle manufacturers was outlined during the sub-committee hearings and in the previous HOC Industry Committee Report on Manufacturing in Canada (2006).  Accordingly, the government of Canada must include the condition that any vehicle manufacturer/assembler receiving any financial assistance (loan or credit market support) eliminate the PPAP payment model from any supplier or vendor in their supply chain.

Parts Suppliers Financial Assistance

Parts Suppliers are an essential component of the automotive manufacturing sector in Canada. Their financial difficulties have arisen along with their customers, the vehicle manufacturers, due to the challenges in obtaining credit based on the outstanding invoices. To alleviate this market failure the Government of Canada must introduce a program to assist Canadian parts suppliers to the vehicle manufacturers. An example of this form of support is the recently instituted US Treasury initiative (Auto Supplier Support Program)

South Korean Trade Negotiations

After an almost unanimous consensus presented by witnesses at the sub-committee that any potential trade pact with South Korea would damage the Canadian and North American auto industry, the government of Canada must remove the automotive sector talks from any negotiations with South Korea.

Market Access

With vehicle manufacturing now a global endeavor there are countries around the world that do not meet the labour standards, environmental regulations and intellectual property protections that are established in North America. Accordingly, the violations are in effect a hidden subsidy to those manufacturers in those countries. This unfair trade advantage must be corrected and to do so restrictions on the import of vehicles from these countries into the Canadian marketplace must be implemented until compliance with the standards and protections in the areas of labour rights, the environment, and intellectual property are obtained.

Innovation

Research and development are essential for the long term sustainability and transition of the auto industry in Canada. Accordingly, the government must implement incentives and programs to attract the investments in innovation and next generation technologies the industry will need to produce in Canada so that production and assembly remains in this country. An example of this is the $25 Billion Advanced Technology Vehicle Manufacturing loan program administered by the US Department of Energy.

Credit Market Support for Consumer vehicle purchases/leases

Any governmental financial assistance that is provided for increasing the availability and accessibility of credit for consumer vehicle purchases/leases should be directed to the captive finance units of the vehicle manufacturers. A requirement as part of this assistance is that the loans or leases made to consumers is provided at the equivalent borrowing cost that the federal government pays. The operations of the Secured Credit facility that government plans to institute would have the same mandate as well.

Autoworkers

From the testimony and information presented at the sub-committee hearings it was determined that autoworkers in Canada are amongst the most productive in the world and that the crisis enveloping the auto industry had nothing to do with the workers in the sector. Through no fault of their own, autoworkers have become victims of the global credit market problems impacting corporations in every country including the vehicle manufacturers.

Bill C-273 the Right-to-Repair

Bill C-273, the Right to Repair legislation, should be passed by parliament and implemented immediately. This bill protects consumer rights, the environment, and public safety as well as ensuring a competitive auto repair marketplace is maintained in Canada.

Financial Accountability

All financial assistance provided by the federal government whether by direct loans or credit market support programs must have their complete and comprehensive documentation submitted for analysis and evaluation by the Parliamentary Budget Officer. This will provide a level of transparency and accountability to parliament of the government of Canada’s actions.