INDU Committee Report

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At the request of the Liberal Party of Canada, the Subcommittee on the Automotive Industry in Canada was formed in order to (i) identify the issues currently affecting the automotive industry in Canada, (ii) to gather information to help the Subcommittee, the government and Canadians better evaluate the reorganisation proposals of General Motors of Canada (“GM”) and Chrysler Canada (“Chrysler”), and (iii) to recommend measures that the government should consider as it attempts to address the issues faced by the thousands of Canadian jobs dependent upon the industry. 

The Liberal Party has chosen to include this supplementary report as it believes it cannot support much of the main report prepared by the Subcommittee (the “Report”). The Liberal Party believes the majority of the analysis contained in paragraphs 2 through 32 of the Report is predicated on information neither heard nor discussed by the Subcommittee.  Among others, the policies inferred in paragraphs 57, 59 and 61 highlight this concern.  Policy statements such as those on the impacts of a scrappage program on consumer budgeting, on low-income individuals, and the effects on sales of a GST holiday, while possibly correct, were never discussed by the Subcommittee. The work done by the Subcommittee does not enable it to make such determinations. 

Overall, the Liberal Party believes the work of the Subcommittee should be commended. Members asked important questions and were successful in raising significant issues in the public eye and in highlighting the complexity of the challenges posed by the industry.  We, and more importantly, the public, are now much more informed.  We are also now able to make significant recommendations to the government as to the questions and issues that it must address.

Challenges

1. Cyclical Issues: The downturn in the global economy has limited the availability of credit to both consumers and manufacturers and has adversely affected demand for cars all over the world.  The lack of available credit has affected the ability of car companies to borrow and limited the ability of financial institutions to lend for the purchase of new vehicles. This has adversely affected manufacturers throughout the automotive supply chain.


2. Structural Issues: The Detroit Three, in particular GM and Chrysler, face significant structural challenges from (i) high costs associated with wage, benefit and legacy cost obligations and (ii) declining competitiveness and market share due to changing global demand. These structural problems are not new, which makes the government’s failure to develop any comprehensive auto strategy over the last three years all the more unfortunate.


3. North American Integration: The auto industry in Canada is part of a highly integrated North American market for parts, manufacturing and sales.  The problems affecting the industry in Canada are indivisible from those affecting the American market.  Upwards of 85% of the vehicles assembled in Canada are sold in the US, and an equally significant number of vehicles bought by consumers in Canada are manufactured abroad.  Also, auto parts manufactured in Canada are routinely used in the assembly of vehicles in America and vice-versa.

Recommendations

First and foremost, the Liberal Party believes, in making its decisions on the provision of public funds to support the auto industry, the government of Canada must balance the need to protect Canadian jobs with prudent, principled, and wise expenditure of tax payers’ funds. While the work of the Subcommittee raised awareness of the challenges and issues that must be addressed, the Subcommittee was not mandated, and did not, conduct the comprehensive due diligence review required to recommend for or against the provision of public assistance to GM or Chrysler.  Examination of the proprietary information required to assess the viability of the long-term business proposals of GM and Chrysler was not within the mandate of the Subcommittee. The ultimate decision on the provision of federal public assistance to GM and Chrysler rests with the current Government of Canada.  We recommend that as the government makes its decisions with respect to the industry, GM and Chrysler, it carefully review and seek answers to all of the issues and questions that the Subcommittee identified.

In general, the Liberal Party is in agreement with the recommendations made within the main report. However, with regards to the need for greater coordination with its North American partners the Liberal Party believes the recommendation in the main report did not go far enough.   

The Development of a North American Auto Forum:

The highly integrated nature of the industry throughout North America requires the creation of a North American Auto Forum to engage industry and governments in formal discussions about issues affecting the industry.  The establishment of this forum would more meaningfully and formally provide governments and industry stakeholders a venue to collectively monitor the industry and would, through engagement, enable governments to develop harmonized continental policies and regulations affecting the industry.

In addressing the industry’s cyclical credit challenges and structural challenges, the current federal government has not engaged sufficiently with its North American counterparts. This failure has sadly forced Canada to be reactive to action in the US with little input into its outcomes. These reactive responses will not serve to protect the industry’s sustainability in Canada.  Rather, the Canadian government should be involved in the development and the co-ordinated implementation of policy with its North American counterparts.   Without the North American Auto Forum, the industry’s problems will continue to persist and will remain uninfluenced by the actions of the Canadian government alone.  The establishment of a North American Auto Forum could have, at this time, served to coordinate action to resolve issues related to the:

• Examination of the integrated viability plans of GM and Chrysler;


• Provision of emergency credit support for parts manufacturers and Tier 2 tool, die and mould parts suppliers;


• Consideration of a North American scrappage incentive;


• Development of border infrastructure to facilitate trade;


• Implementation of coordinated fuel, safety and emission standards; and


• Investment in the technology development and progression of the North American auto industry to address fuel and energy efficiency.

Such proactive measures by the government, fostered by the establishment of the North American Forum, would better serve the competitiveness of the Canadian economy and the maintenance of jobs.  Accordingly, and for the above reasons we urge the government of Canada to pursue the creation of the aforesaid forum.

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