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37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Thursday, October 23, 2003

0905

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mr. Brian Masse (Windsor West, NDP)

The Chair

Mr. Brian Masse

The Chair

Mr. Bill Murnigham (National Representative, Research/Pension and Benefits Department, Canadian Auto Workers Union)

0910

0915

0920

0925

0930

The Chair

Mr. Ken Lewenza (President CAW Council, Canadian Auto Workers Union)

0935

The Chair

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance)

Mr. Bill Murnigham

0940

Mrs. Cheryl Gallant

Mr. Bill Murnigham

Mrs. Cheryl Gallant

Mr. Bill Murnigham

Mrs. Cheryl Gallant

0945

Mr. Ken Lewenza

Mr. Bill Murnigham

Mrs. Cheryl Gallant

The Chair

Mrs. Cheryl Gallant

The Chair

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.)

Mr. Bill Murnigham

Mr. Dan McTeague

0950

Mr. Ken Lewenza

Mr. Dan McTeague

Mr. Ken Lewenza

Mr. Dan McTeague

The Chair

Mr. André Bachand (Richmond—Arthabaska, PC)

The Chair

Mr. André Bachand

0955

Mr. Bill Murnigham

Mr. André Bachand

Mr. Bill Murnighan

Mr. André Bachand

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

1000

Mr. Ken Lewenza

Mr. Serge Marcil

Mr. Bill Murnigham

Mr. Serge Marcil

Mr. Bill Murnigham

The Chair

1005

Mr. Serge Marcil

Mr. Bill Murnigham

The Chair

1045

The Chair

Mr. Brian Masse

1050

Mr. Ken Lewenza

Mr. Brian Masse

Mr. Ken Lewenza

1055

Mr. Brian Masse

Mr. Ken Lewenza

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 061

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, October 23, 2003

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): I call this meeting to order. Pursuant to Standing Order 108(2), we are carrying out a study on the status of Canada's automotive sector.

Today we have with us from the Canadian Auto Workers Union, Ken Lewenza, president of the CAW council, and Bill Murnigham, national representative of the research/pension and benefits department. So he's the number cruncher.

A vote will be held this morning, so I want to get right at it.

Mr. Brian Masse (Windsor West, NDP): I have a point of order. I know that CAPC was supposed to be here but cancelled. I want to know what the reason was and whether they're going to provide another date to testify.

The Chair: They decided to cancel at the last minute. They wanted to come as co-chairs. One of the co-chairs is in Japan, and the other co-chair did not want to represent them. They wanted to be together. One is from JAMA and one is from the North American industry. It's probably because of the short notice.

Mr. Brian Masse: They did confirm, though, and then cancel the day before. This is the minister's committee, and I'm having a difficult time accepting the fact that the minister's committee will not be making a representation.

The Chair: You're going way beyond the point of order, so I'm going to ask the witnesses to begin.

Mr. Bill Murnigham (National Representative, Research/Pension and Benefits Department, Canadian Auto Workers Union): Thank you very much, Mr. Lastewka.

Thanks very much to the members of the committee for having us here this morning.

With me is Ken Lewenza, who's the president of our CAW council and also the president of Local 444 in Windsor. I'm sure that he'll fill you in on who he is.

I do extend regrets from Buzz Hargrove, who was unable to make it this morning. A last minute engagement is keeping him away, and he sends his regrets to this committee.

I believe that the clerk has distributed to the members of the committee copies of our brief and a paper that provides more details on the automotive sector and our view of things as they're going forward.

I'll probably take 15 minutes at the most to go through some of our presentation. Then Ken Lewenza will make some comments as well. We'll take questions as the committee sees fit.

The comments we have are in a brief presented to you called “The Challenges Facing the Canadian Auto Industry”. It's divided into two sections: first, it's a read on the situation from our point of view, and, second, it contains highlights of some of the issues as we move ahead.

If I understand correctly, this is the second day of hearings on the automotive industry for this committee. The members have already heard some information about the situation today in the industry.

We would like to highlight the difficult situation the automotive industry finds itself in today. We're hearing regularly from some senior members of government that the industry is moving along just fine and there really isn't a huge need for government action. I can't emphasize enough how untrue we feel that is today. The industry is actually in a very difficult situation. Some people might say the CAW is here crying wolf and the industry is not in trouble. That's not true at all. In one way or another, our union has been watching and advocating on behalf of this industry for 50-plus years, way back to the 1930s, and on a number of occasions we've made some very thoughtful comments about the state of the industry and what the Canadian government needs to do to boost that industry.

Right now we again find ourselves in one of those moments when there's a big structural change happening in the industry, and we all need to pay attention. Let me highlight some of the structural changes and other things that are happening right now. You'll note that the industry is in its most serious and sustained downturn since the recession of the early 1980s. Vehicle assembly has declined by 15%. We've lost over 7,000 well-paid jobs in the industry and tens of thousands of other jobs in industries that supply the auto industry, in steel, rubber, glass, and so on. The linkages of this industry are self-evident to anyone who has paid any attention to the industry over the years.

I also note that this isn't just some kind of hiccup in the system. Over the last 15 months we have lost two major assembly plants in Canada, including one in Ste-Thérèse, Quebec, which was the only one in Quebec. That was an incredible loss for the Quebec economy in particular. A plant in Windsor closed this past summer, and a third plant is scheduled to close next summer in Oakville, Ontario. To put that in perspective, we've lost close to a quarter of our assembly capacity within a two-year period. That's an incredible change. You might think that this is just some cyclical hiccup and that when the economy comes back, we'll be in place to reap the benefits. But we've actually lost the ability to do so, as we're closing plants.

With regard to how this plays out throughout the whole economy, for every job in the auto industry another seven and a half are created throughout the rest of the economy. That's a fairly conservative number. And that isn't just our figure. I think the industry will back this up and so will government figures. Everyone understands the impact of that.

¿ (0910)

Looking at the issue of whether this is some kind of cyclical thing or there is something really structural going on in the industry, I can't emphasize enough that at this moment the industry is reinventing itself. This happens periodically. Economists and academics will argue for a long time over whether this happens every 10, 15, or 20 years. But right now we find that the industry is changing itself dramatically, and a new model of production is taking place.

With regard to this shifting around of the industry, the question is, are the effects being shared evenly? Are we getting more than our fair share of the pain, or are other countries performing better than we are? I think that if you look at some of the facts, you'll see that in percentage terms our assembly levels have declined twice as quickly as U.S. assembly, and the Mexican assembly continues to grow. When you look at the closures across the industry, you'll see that there's a lot of turmoil here and in the United States and Mexico. But Canada has borne the brunt of the assembly reductions.

In the United States they've lost plants, but they've also been gaining plants in the U.S. south. While it's a very painful process to lose a plant and get another one somewhere else, that has been happening. Canada's reduction in plants has not been offset by new plants elsewhere. The plants are going to the U.S. south, where they get public subsidies, and to Mexico, where their capacity is growing.

Take a look at where new investments are happening. The industry periodically sets up a new model of production and new plants to do that. Are they coming to Canada? No, they're not. On page 3 of our brief there's a graph outlining where new assembly plants have been built since 1990. I don't know that you'll find a better example of what's happening to Canada's fortunes in the industry than by looking at a graph like this. Since 1990 seven plants were built in the U.S. south. Mexico got six new plants. The traditional U.S. south, places such as Michigan and Ohio, have had four plants. What has Canada had in this period? One automotive assembly plant. So during the 1990s we have not been getting the new major investments in the same way we did in earlier periods. Where have the jobs and the new investments been going? Obviously, they've been going to the U.S. south, boosted by public subsidies and government involvement, and to Mexico, because of poverty-level wages.

Something else to highlight is our trade and where the automotive industry fits in the total economy. We hear a lot of talk from this government and from key figures in the Martin government-in-waiting about Canada's place in the global business environment, how Canada has to be a leader and has to win in certain industries. I can't think of an industry that's more important to focus on than the one we already have strength in, which is the automotive industry.

People still think of Canadians as the hewers of wood and drawers of water. The auto industry is one of the most high-tech, high value-added industries. Typically, Canada is still importing all sorts of high-tech equipment and machinery from around the world. The only place that's offset is in the automotive industry. Once that starts to decline, we start getting back to the kind of economy where a lot of the high value-added production is not being done in Canada but rather in the United States and Europe.

I think it's prescient that we're here today talking about trade and the impact of the dollar. A couple of things have happened. We might be finding ourselves in an actual deficit position in the automotive sector some time in the years ahead. This is an incredible turn of events, from a period when year after year we had a very high surplus in the automotive sector to one where we're getting close to possibly running a deficit.

Another issue I'll take a look at is the impact of the dollar. This is something we've spoken about before to other committees of the House and something we'll continue to speak about. The long-term effect of the higher dollar is also feeding into the mix for new investment, and this is clearly having a negative impact on the automotive industry. Because of the actions of the Bank of Canada in supporting a higher dollar policy through a number of mechanisms, this is having a negative impact on us. We will continue to speak in favour of a lower dollar policy.

¿ (0915)

In general, that's our view of the situation. I think that the committee will hear similar stories, whether it's from the union, the industry, or your own research, indicating that the industry finds itself in a very difficult situation. We find that it's a sustained downturn. Also, it's more than just a hiccup. It's a structural rearrangement. We had better make sure that as a nation we are out front working to ensure that this industry remains successful in Canada before the concrete sets in a new model.

I'll now highlight a couple of things we see as we go forward. The question is, what can we expect from government? What actions should government be taking in the months ahead on this critical sector for the Canadian economy?

Just to review some of the history, it has been a very long and difficult process for us as a union to get the entire industry as well as government to actually pay attention to the fact that something needs to be done in the auto industry. Going back a year or so when we started this discussion--and it was mostly we who started this discussion--we found that it took a lot of convincing for people to recognize how important this industry is. I think that we've finally come to the place, as evidenced by this committee and other events, where it is recognized that the industry is critical and something that everyone needs to pay attention to.

We know that CAPC, the Canadian Automotive Partnership Council, was supposed to be here this morning. Unfortunately, they have cancelled with very short notice. You would have heard a report from them. This is a very important initiative, which we think was created in genuine good faith to start addressing some of the issues around the industry. It brought together the stakeholders from the union, industry, and government. We've been actively participating in that process. You may hear more from us about CAPC over the course of the next few months.

We have participated very clearly in that process. But I think that now we have to move beyond the issues and get to some concrete policy measures. People with a lot more experience than I have can tell you what they've gone through with think-tanks and consultations. If CAPC starts to be seen as a way to politically manage the process around the industry and to let off steam, we'll have to think about our ongoing ability to participate in that process in the same way we did before. We do think that now is the time for government to start taking the lead on some of the actions, rather than having more discussions and consultation. It's really time for action.

So what are some of the actions we think should be happening right now? Again, you have in front of you copies in both official languages of our brief and our policy paper. The latter was released in May 2002, and it gives you a lot more detail. But I'm going to highlight three things we see as critical for government action. The first is around investment. This is something we've highlighted before. We think that the federal government needs to provide meaningful assistance and co-investment for major strategic automotive projects. We don't think that this has to be a handout. Investment in strategic areas of the economy can be tied to real performance measures, such as jobs, production, local sourcing, and other key elements. Through our lobbying efforts and our discussions, we found that the Ontario government has put in place a funding mechanism to consider new investments in the automotive industry, and I think that it is time for the federal government to do the same.

We're finding ourselves now with an incredible opportunity in Ford's Oakville complex. It is on the horizon. This is something that came to be a possibility through our efforts and negotiations in 2002. This is a perfect example of how the industry is reinventing itself. The Ford Motor Company, like other big companies in the auto sector, is looking to produce what's called flexible manufacturing plants. These are plants that don't dedicate themselves to just one or two products but can do several products at once, providing a whole new way of stability for the companies and also for the communities and the industry. Ford is seriously considering a significant investment in the Oakville complex. That's the same complex in which one assembly plant will be shut down next summer. Consideration is being given to reinventing that space for a new investment.

¿ (0920)

In our view, this is a real litmus test for the industry and for government action as well. If this investment does not proceed, it will send a very clear signal to the global automotive industry that Canada and the Canadian government are not particularly serious about maintaining this industry and our share of production in the years ahead. I can't stress that enough. There are many forms of this assistance, such as an expanded technology partnerships Canada program and infrastructure and technology assistance. There are many ways to address these issues, and I think that we have to be quite serious about that in the days ahead.

Another point I'd like to highlight in terms of government action is trade and trade policy. This has been something that government has been loathe to discuss at some points. But I think that, like it or not, an active trade policy is critical to winning new automotive investments in the years ahead. That's a view we've been pushing.

I think that the view we and others have at times is that Canada sometimes plays Boy Scout when it comes to international trade. We see very aggressive actions coming from the United States--for example, in the softwood lumber dispute, which is into year three or four now. We see actions coming from the EU as well. They use the tools of government to boost investment in the industry and the tools of trade to offer some level of support to their domestic industry and to encourage new investment as well.

We've seen our trade surplus decline sharply. The trend we're seeing now means that we could actually end up having a deficit in automotive trade some time in the next few years should this trend not turn around. That would be the first time since the early 1980s that has happened. One of the key mechanisms of the Auto Pact, which was eliminated by the World Trade Organization, was to keep watch on that kind of thing. If we were to find ourselves in that situation, I think we'd all be feeling quite upset by that turn of events.

In particular, we're seeing imports surging into North America, not only from Japan but also from Mexico, the European Union, Korea, and soon China. China is an interesting development in the automotive industry. The two major companies based in North America, Ford and General Motors, have each said they're going to start sourcing $10 billion worth of automotive parts a year from China, which is incredible if you look at the wage and cost structure in China and what that might represent in five and ten years from now. We need to say we can't give these people a blank cheque. They must be pressured to buy more automotive parts from Canada--we are a world leader in this industry, and we should be able to export from this nation--or invest in our facilities or they will face some trade penalties if they continue with these unbalanced imports into our market.

Part of the solution as well is that we need to consider the issue of NAFTA. This debate is emerging from the traditional quarters, such as the labour movement, but it is also taking place across the country these days. We think that NAFTA should be renegotiated to boost the level of production provided to all North American producers to offset offshore imports and to provide limits on automotive trade imbalances within Canada. We talked about the development of the Mexican industry as a low-wage source of competition and what that might mean for us. Now they find themselves in the same boat vis-à-vis China. All of a sudden Mexican auto workers are feeling quite threatened by developments in China. I think that there clearly is room to consider that NAFTA needs to be reviewed and renegotiated in a way that's going to provide some better support for our domestic industry.

Another point I'd highlight for government action is the action of the Bank of Canada. I think it's prescient that we're here today, the day after the report from Governor Dodge on the issue of the high dollar. This is having an incredible impact on our ability to export. I think that the Bank of Canada needs to set rate differentials between Canada and the U.S and to maintain our currency at a level that is comparable and sustainable.

¿ (0925)

We hear people say the high dollar is good for our industry because it's going to make us more productive and companies are going to start investing in new machinery and equipment and that the low dollar hurts the industry. Actually, the auto industry is the classic example of the opposite being the case. During the period of the lower dollar, the automotive industry invested rapidly. It is one of the few industries where clearly there can be no argument. The automotive plants in Canada are more productive than those in the United States and dramatically more productive than those in Mexico. So we already have a winner here, and the productivity question is simply a non-issue on a factual basis.

This policy approach of the Bank of Canada needs to be reversed, and quickly. In our view, the dollar should be targeted at or below 72¢. Again, that is not about providing us an unfair advantage. That's the point at which production costs in Canada and the U.S. become equal.

Those are the three points I'd like to highlight for the committee this morning.

Just to wrap up, we find ourselves in a really dramatic situation in the industry. Someone might wake up a few years from now and look back at the industry and say, what happened? Where did the plants go? Where did the jobs go?

Now is the time for some action. This is something we have been pushing and supporting throughout the course of the last few years. I think that it would be important if this committee could send the message to government that now is the time for some action.

Ken Lewenza has some comments he would like to make.

¿ (0930)

The Chair: Perhaps we could have some short comments, because we'd like to get to some questions before the bells start ringing for the vote.

Mr. Ken Lewenza (President CAW Council, Canadian Auto Workers Union): I'm going to be very brief.

I want to thank the committee for giving us an opportunity to make a presentation.

I do think that it's appropriate to recognize, as all of you would appreciate, Brian Masse for his work in our community and his contribution to the betterment of society. I want to thank Brian for his work in Parliament on behalf of his constituents and Canadians.

I also want to recognize Cheryl Gallant. As I walked in, she indicated to me that she had a lot of family in Windsor, Ontario, which is really the automotive capital. I would assume that based on some family dinners and outings, you'd recognize the importance of the auto industry to our community, our province, and our nation.

Bill raised a number of statistical issues. I want to raise a couple of compassionate issues as briefly as I can. The reality is that we left 2002 bargaining feeling pretty good about ourselves in the Big Three. For the very first time in bargaining, we forced major companies to invest significant dollars in our existing workplaces to ensure that we have a future in the automobile industry. On top of that, during the bargaining process the government insisted that there be a partnership within government in terms of government playing a role in ensuring that policies are adopted to attract investment in Canada. As a result of that, millions of dollars are being invested in Canada.

In Oshawa we've bargained a third shift because of production volumes. It was an initiative that came out of the union. The third-shift initiative wasn't driven by the employer groups. It was driven by the union to meet the production needs and create jobs and opportunities for Canada, which has helped the automobile industry significantly.

With regard to the DailmerChrysler group, which I can talk about specifically because I chaired the bargaining committee, there was a facility that built vans. The company decided to get out of the van business for whatever reason. As a result of a lot of discussion in the last five or six years, they agreed to put a new product in that plant, along with significant investment, providing that there was a partnership between government, unions, and employers. We did our part. We made significant changes in terms of how you would build an automobile today compared with the way we built it 10 years ago. We restructured a number of our collective agreements to deal with the incredible challenges in the industry as we move forward.

With due respect for the government members here today, I would say a lot of procrastination caused the company to ultimately cancel that project. If we had come out of the shoot with a partnership with government instead of going through a number of levels of bureaucracy.... I'm not too critical of that. I understand the nature of government. I understand the nature of getting your arms around that particular issue. But when a multinational corporation says we're going to invest over $1 billion in an assembly plant in Windsor, Ontario, all of us should give the attention needed to advance that. Everybody in this room who understands business knows that once you make the investment, once you stick your neck out of that shell, there's a time when the company cannot back off. During the six- or seven-month delay from bargaining to the ultimate decision, a lot of meetings took place. I know that for a fact. But, unfortunately, it fell through. I don't want to lay blame at this particular time, because the crisis at DailmerChrysler Corporation may have justified their decision. But I do believe that if we had come out of the shoot, we could have played a more progressive role in ensuring that assembly plant stayed in Canada short term and long term.

I just say to the folks in this room that we have lost a lot of jobs. We've lost 30% of our membership base in the last five or six years. This is not about the economy picking up in the next four or five years. This is about restructuring. We have to position ourselves to be the top auto producing nation in the world, which we were just a few years ago. That should be our ultimate goal, so that the jobs and income it generates and the taxes it pays to support the social benefits and programs we have in this wonderful country stay intact.

¿ (0935)

There's another area of concern that people don't talk about, but I'm going to brag about it for one minute. You can take a look at the loss of jobs, and then you can take a look at the loss of the benefits from auto workers to the communities. In Windsor, Ontario--and it would be the same for Oshawa, London, and Oakville, where there's a large automotive base--that community relies heavily on the generosity of our members. For example, the United Way in Windsor, Ontario, has a goal of $10 million, and $6 million comes from auto workers and manufacturers in the auto industry. So the decline of the auto industry has a negative impact on the economic fabric of that particular community. I don't think there's anybody in this room who doesn't understand that. In British Columbia there's the lumber industry and the impact those workers have had on the economy and what it means for them to be out of work today. The auto industry is incredibly important to the province of Ontario and this nation relative to their economic well-being.

I share Bill's point that the provincial government should put in money to entice investment. They've put in a strategy. We're far from completing the policies we would like to see as a result of that implementation, and we're far from seeing concrete results from that. But we do believe that the federal government can partner with the provincial government and play a key role in ensuring that government has a source of revenue to go to if they're going to invest in this province and this country.

I want to thank the committee for giving us the time, and I'm prepared to answer any questions that may be directed to us.

The Chair: Ms. Gallant.

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): Thank you, Mr. Chairman.

Through you to the witnesses, thank you for making the trip all the way up here.

You've done a thorough job in representing the interests of your constituents in the time allotted.

Over the past decade the current administration has deliberately promoted a low dollar policy to mask the country's shrinking productivity levels. Lower productivity is the result of this government's high-tax, high-spending, and high-debt fiscal policies. It has encouraged companies to link their profitability to the artificially low Canadian dollar. These companies and your constituents are feeling the pain today. A short-term solution at this point, the only lever we have, is to narrow the spread in the monetary policy. The Bank of Canada could lower the interest rates closer to the U.S. rates. But, ultimately, we have to get tax and fiscal policy right to improve the productivity. Can you suggest how we as legislators can improve productivity through fiscal policies?

Mr. Bill Murnigham: Thank you for the question.

I'm not sure that we would agree entirely with the assumption as to what has happened over the last decade in Canada.

I won't be able to address every issue on productivity. I can speak more about the automotive industry.

On the question about Canada's economy performing better by getting its fiscal house in order, we haven't found that to be a huge issue in the automotive industry. With regard to automotive investment, I'm not sure that the decision-makers, whether they be in Japan, Stutgart, or Detroit, are considering the condition of government finances to be the most critical issue. What we find instead is that ongoing strategic investment by industry is the key to productivity.

I think that the point about Canada losing out on productivity is absolutely false. I'll provide some information to the committee. The automotive industry is one of the few industries in which productivity is measured from A to Z, from front to back. They go inside the plants. They count the hours, they look at the workers, and they count the screws. It's studied within an inch of its life. Those studies tell us year in and year out that the Canadian industry has a higher level of productivity than in the United States and certainly higher than in Mexico. The most recent report indicated that the most productive assembly plants in North America are found in Oshawa, Ontario. Those came about by investments that were made during a climate of not being thwarted by a low dollar, but actually being supported by a low dollar. This argument about productivity and the relationship with the dollar could go on for a long time. I think that in one of our most value-added industries, the automotive industry, you should look at that experience more carefully, and you'll see that you're going to get the exact opposite answer.

¿ (0940)

Mrs. Cheryl Gallant: I did witness some of that productivity when touring one of the plants in Alliston, Ontario. At Honda they do whatever they can, as your companies do, to improve productivity.

I was looking at page 3 of your handout. We see that since 1990 the proportion of new plants built in Canada is substantially lower than for Mexico. Over the past decade the dollar hasn't been at the level it is right now, so obviously there are other factors contributing to this. In the presentation today from Mr. Lewenza, reference was made to the plant that did not get built in Windsor. Would you please explain the other factors you see as making the climate to invest in new plants in Canada less favourable than for the other countries shown on your graph?

Mr. Bill Murnigham: Certainly. There are a couple of things. With regard to Mexico, I don't think that you can underestimate the issue of labour costs. The hourly wage of Mexican auto workers all rolled in is somewhere in the neighbourhood of $5 U.S., and those are the best jobs on the block. This is one of our issues about NAFTA and about free trade agreements in general. If you set yourself up to be in competition with a low-wage zone, the only way you win is by ratcheting down your social conditions, not necessarily by any other factor. Mexico has that drawing card. If I can paraphrase Brother Hargrove, he says the United States used to have all the head offices and Canada had the comparative cost advantage over the years. We no longer have that. Mexico is now the lowest cost producer in the North American region.

There are other things that keep investment in the traditional areas, such as Michigan, Ontario, and the Ohio Valley. It's about geography. It's about the supplier base already being there and so on. You're not going to move the entire industry to the place with the cheapest hourly wages.

For Mexico in particular, those factors keep investment flowing there, along with serving the market that's developing in Mexico and Latin America.

In the U.S. southeast in particular--Alabama, Georgia, Tennessee, and so on--we have seen an incredible transformation in a decade in terms of plants. If we had been sitting in this room 15 years ago and someone had said that they're going to be building three million to four million cars in the U.S. south, you'd have said you're kidding. They're growing cotton, and they're making textiles. That is not where the automotive industry is going to be. Lo and behold, there it is. One of the key components of that has been very aggressive and active government support for investments, pulling in the linchpins and then everything grows around it. You see new investment. I'll just briefly mention one new investment, a Nissan plant in Mississippi. All of a sudden it has come on board, and then week after week, month after month, new suppliers and parts manufacturers are moving to that area. This was farmland five years ago. Again, you're seeing that active government involvement in keeping some of those jobs in the U.S. southeast.

Mrs. Cheryl Gallant: With the preservation of the wages and benefits of the people you represent in mind, another way to improve profitability and therefore the ability to sell more cars and keep more jobs in Canada would be to reduce other expenses. One of the major expenses for an operation such as auto manufacturing is electricity. Has the CAW investigated how the implementation of cogeneration would impact the job security of its members? There would be jobs in other areas, but they would certainly come under the umbrella of the CAW.

Mr. Bill Murnigham: Could you give me an example of cogeneration as it would apply in the industry?

Mrs. Cheryl Gallant: There are opportunities to have plants on site that would provide additional electricity, so that instead of depending solely on the Ontario market, for example, they would be producing electricity themselves for their own use and taking the excess electricity the plant does not use and selling it into the grid. Has that been investigated?

¿ (0945)

Mr. Ken Lewenza: Not from my perspective.

Mr. Bill Murnigham: No, we have not investigated that specific issue. What we have spoken about and recognize is that public control and ownership of the electricity system in Ontario has been a critical industrial policy throughout the development of the auto industry, and that system needs to remain in public hands. Instability in rates and in the reliability of electricity that would come to bear under a privatized system was something we spoke out against. We do recognize that stable and reasonably priced electricity is critical.

In terms of the cogeneration issue, I'm afraid I can't provide any more details on that.

Mrs. Cheryl Gallant: There have been some significant--

The Chair: Thank you very much. I must move on. I gave you an extra minute as it is.

Mrs. Cheryl Gallant: Thank you.

The Chair: Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, gentlemen, for being here today. It's a very interesting perspective.

I asked Mr. Nantais, when he appeared before us the other day, what his take was on the effect of the escalating value of the Canadian dollar on the industry, particularly on parts. I also raised the point that many have made about the productivity and success of our plants. These are wonderful achievements, and yet for some it may not be enough.

Could you elaborate on the long-term or perhaps even medium-term impact of a rising dollar? It is well beyond anyone's expectations. I don't think anyone could have predicted that this was going to happen. We know that the economy of the United States is starting to pick up. Is it a matter of fiscal policies? Is it a matter of the Bank of Canada tempering the rise of the Canadian dollar by, for instance, dropping interest rates? How do you see this impacting your industry, and what is going to be the long-term impact on jobs?

Mr. Bill Murnigham: I'll try to give a succinct answer. Those are big issues you've raised, asking us to look into a crystal ball and see the future. What we're finding now is that the dramatic upsurge in the dollar vis-à-vis the U.S. has been and continues to be a problem, which has been flagged by those of us in the industry, in terms of the competitiveness of our exports. We continue to see that as a problem, particularly if that trend continues.

In a nutshell, we would suggest that, like all the other tools of government, such as direct investment in industry and monetary tools such as the Bank of Canada, it should be continually gauged to provide the maximum benefit to all industries and in particular to industries that are critical to the success of the Canadian economy, such the automotive industry. In terms of what level the dollar should be at in five and ten years, that needs to be seen in relationship to our trading partners and their currencies. What needs to be continually reviewed is how that is currently having an impact in the short term on critical industries such as the automotive industry. In our view, the Bank of Canada should be taking steps to ensure that our dollar stays in a competitive range, which we peg at around 72¢.

Mr. Dan McTeague: Let me shift gears to the issue of sustainability. You're building a better vehicle. Your members are certainly putting in a lot more effort. We heard horror stories in the 1970s and 1980s about people buying a car and hearing a rattle, and inside was a Coke bottle with a note on it saying, “ I wondered how long it would be before you found this”. We heard from Denis DesRosiers from the industry that vehicles are going to last a lot longer. Part of the success of your productivity is that people are going to keep their vehicles a whole lot longer.

I also note that our plants, whether they be in the area my good friend Mr. Masse is from or my area, Oshawa, tend to be for large platform vehicles. With the ongoing concern about Kyoto commitments, which your union supports, and the concern about environmental impacts, how possible and sustainable is it for North American plants to continue to develop large platform vehicles, relative to the United States and other jurisdictions where they're building smaller vehicles, given that the Canadian market is more conscious of smaller, compact vehicles? Do you have some concern about the continual spiralling down in the number of employees you have at these plants, or can they be flexible enough to make the changes?

¿ (0950)

Mr. Ken Lewenza: I think that's a valid point. The automobile industry is changing. If 10 years ago somebody had said to me as a trade union leader that SUVs would still be the number one seller in North America, based on the environmental concerns we have, I would have said we were all crazy. But the fact of the matter is that it's still market driven, and customers still want the large vehicles.

Part of our bargaining strategy is to have alternative fuel products in the future. When we talk to the companies, we're not just talking about today. We're trying to position ourselves five, 10, 15, 20 years from now. What are people going to want 15 or 20 years from now? How do we ensure that the corporations invest in the technologies and put in the research and development to ensure that they're putting vehicles together that are going to meet the needs of the consumers, as the relationship between the environment and the consumer comes a little bit closer together? To the employer groups we bargain with we are constantly saying get in the state-of-the-art technology, put the research and development in there, partner with other leading people on the environmental concerns in manufacturing, and ensure that we don't leave ourselves out. We're pushing that. Obviously, that's in our best interests. I think that it's going to get more attention in the next few years than it has in the last few.

Mr. Dan McTeague: Along with your increase in productivity, I'm also aware of the fact that we have a number of advantages that attract and maintain investment in Canada--for instance, our pensions and health care. Those are benefits that may not be readily available to our trading partners. So it is certainly an advantage.

Some people say that in order to maintain the investment level we have here, Canada is going to have to lower corporate taxes, among other things. How does the union respond to that?

Mr. Ken Lewenza: I'm not in support of lower corporate taxes. There's no question about that. I think that we are positioned well in Canada compared with our competitors out there. I don't think anybody could argue that the taxes are a disadvantage in Canada relative to investment.

All of us in this room should be proud of our national health care program. I'd like to see improvements in the social fabric of the country to advance those economic advantages we have in this country, which help not just auto workers but every citizen in Canada. As wonderful as we believe this country is--and it is--relative to our national health care program, our social programs, and the compassion for one another compared with other countries, the reality is that we're still not getting that investment. That's why we're here, to ask what we can do over and above what we're doing today, again recognizing that the Canadian health care system is a very significant advantage in Canada and something we should all be proud of.

Mr. Dan McTeague: Thank you, Chair.

Thank you, witnesses.

The Chair: Monsieur Bachand.

[Translation]

Mr. André Bachand (Richmond—Arthabaska, PC): Thank you, Mr. Chairman.

I believe a vote is scheduled for around 10:15 a.m. in the House. Has that been confirmed?

[English]

I believe that we have a vote around 10:15. Has that been confirmed?

The Chair: Yes. We'll break five minutes before the vote.

[Translation]

Mr. André Bachand: I'll confine myself to a single question, to give others a chance to intervene as well.

In the French version of the larger document, you mention the direct subsidies awarded to the auto industry, among others things, and you point out that the Canadian Alliance and the Canadian Taxpayers' Federation advocate lower corporate taxes rather than direct subsidies. You've raised a very interesting idea, namely the establishment of a Technology Partnerships Canada facility for the auto industry. This program appears to be working very well, despite some minor glitches encountered by certain industries.

Would you like to see a certain amount of money allocated under this program to the auto industry? As my Liberal colleague was saying earlier, given the trend observed in the Canadian and global auto industry toward a “greener” industry, have you given any thought to what, in your estimation, would be considered a reasonable investment under the Technology Partnerships Canada program to meet future challenges?

¿ (0955)

Mr. Bill Murnigham: Thank you for your question. I'll try to answer it in French, but if I have too much trouble, I'll switch over to English.

As for an actual dollar amount, people are always hesitant about setting one because once that's done, companies always say that they should get that amount, and then, they ask for more.

We see Technology Partnerships Canada as a flexible program. The program must be adequately funded to ensure genuine, concrete initiatives and to attract investors. However, there shouldn't be any limits or minimums on allowable funding. We need to be realistic about that. In my view, the Technology Partnerships Canada program is working well in the aerospace industry which employs many people in Quebec. The feeling is that the program could work equally well for the auto industry. However, it's difficult for us and for the government to say exactly how much the industry should receive in the way of subsidies. Strategically, this is not the approach to take. The government could well say that our job is to attract investment, but we would prefer not to quote any dollar amount. We'll leave that to the government, which negotiates other things along the way.

Mr. André Bachand: Would you agree to see the auto industry component of this program reserved for “green automobiles”, that is for future motor vehicles or, as you mentioned earlier, would you want the program to target more conventional automobiles because this is the industry division in crisis? The program looks for value-added in terms of R & D in Canada. Would you be satisfied if subsidies were provided only for “green motor vehicles”, for example?

Mr. Bill Murnighan: We're still at the ideas stage. We believe a Technology Partnerships Canada facility should be established for the auto industry and we want certain themes to be explored. However, while we believe “green vehicles” are important to the future of the auto industry, it's also important to take into consideration regional development. We always hear how the auto industry is important to Quebec and we are working hard in this area, given the announced closure of the Boisbriand plant, an issue that we continue to work on. This is one of the important themes that we are focussing on.

We are also looking to the future of the auto industry. In addition to working at assembly plants, many of our union members assemble engines, especially in Windsor.

Why not build a new generation of engines? Why not take on a leading role in building environmentally friendly vehicles? We have always maintained that, and will continue to do so.

Mr. André Bachand: Thank you very much, Mr. Chairman.

[English]

The Chair: Mr. Marcil.

[Translation]

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Thank you, Mr. Chairman.

I was surprised by some of the statistics on automobile assembly plants. In 1999, Canada ranked fourth and then it dropped to seventh place in 2001. By 2005, it will probably be in ninth place. Only Brazil's industry is performing worse than ours.

In terms of auto manufacturers and import vehicles, Honda and Toyota employ approximately 6,000 persons in their Canadian plants. However, manufacturers like Nissan, Hyundai, Volkswagen and BMW do not have assembly plants in Canada.

Do manufacturers like Volkswagen, BMW and Hyundai have vehicle assembly plants in the United States? I don't believe Hyundai does because these vehicles are fully assembled offshore.

À (1000)

[English]

Mr. Ken Lewenza: That's a very good point. Volkswagen doesn't have any recognition in North America and certainly none in Canada. Nissan has nothing in Canada. They're starting to do some work in the southern parts of the United States, as Bill indicated earlier, along with BMW and others.

This is not really about nationalities or companies. I want to make that clear. This is about the Canadian economy. In lieu of saying where their plants are, I prefer to say Honda and Toyota, for example, are now doing some manufacturing in North America as a result of what we believe was a government policy that forced them to invest in this country to meet the Auto Pact requirements. We've lost more jobs in General Motors in St. Catharines than Honda and Toyota combined have in Canada. I think that the argument from Volkswagen and others in Canada is valid. That's exactly what we're saying. You can't have access to this market unless you contribute to the economy. So I don't want to be too specific about where all of their plants are, because they're cropping up in the southern parts of the United States faster than I can keep track of them. But the key is that we have to say to Nissan Corporation, which is a growing company, if you want to sell your product in our nation, you have to add to the economic value of our nation, which means creating jobs. Again, it's important that we understand that principle, because if we all understand that principle, we'll be a better nation.

[Translation]

Mr. Serge Marcil: That's one possible recommendation, Mr. Chairman.

Equally surprising was the fact that so many countries are now manufacturing automobiles. Canada has never tried to develop a domestic auto industry or a truly Canadian vehicle. Given our extensive expertise and the vast pool of auto workers in Ontario and even in my region, where virtually all GM motors are built, would it be possible to develop and build a truly Canadian product right here, perhaps in partnership with another auto manufacturer? We have a market right here in Canada, but we could also export a quality product.

Mr. Bill Murnigham: The idea has some merit, but with the sweeping changes in the industry, it would be too difficult for another small manufacturer to develop a product for a single market in mind. Corporate mergers are part of the industrial landscape which is today littered with multinationals. For example, Ford, Mazda, Volvo, Jaguar and Land Rover are all part of the Ford family. It's the same with Daimler-Chrysler and General Motors. The trend seems to be toward larger, not smaller, companies. However, perhaps niche markets could be developed for small industry players.

Mr. Serge Marcil: Take the electric car, for example. Hydro-Québec and other Canadian companies have collaborated extensively on this initiative. At least our expertise could be put to use developing a new product.

Mr. Bill Murnigham: That's true. We do have some expertise in light materials, particularly in Quebec. However, with respect to small automobile manufacturers, we sometimes see in Europe where small companies build automobiles for larger companies. For example, Magna builds vehicles for Daimler-Chrysler. Twenty years ago, Magna was a small parts company. Today, it's in the business of building automobiles. Therefore, it's possible. The fact that we didn't need a Canadian industry was one of our major policy themes. The dominant player was the US auto industry. Now, however, we have to contend with German, Japanese, American and other auto makers. The nationality of the auto maker isn't the overriding consideration. What is clear to us, however, is that auto manufacturers must contribute to the Canadian economy and create jobs for Canadians.

[English]

The Chair: Excuse me. I just want to announce that the bells were just for the start of the session. The bells for the vote have not yet started.

Monsieur Marcil, you have another three minutes.

À (1005)

[Translation]

Mr. Serge Marcil: The Goodyear plant in my region has a workforce of 1,500 and is currently up against some problems. We have been in contact with Goodyear in Akron, Ohio. I even received a letter from the company asking what the Government of Canada, the Government of Quebec and the municipality of Salaberry-de-Valleyfield were prepared to offer in order to keep the plant in operation. The company is weighing all of its options and trying to raise the ante. In my view, the US is a strong proponent of protectionism.

Earlier, you spoke about the Technology Partnerships Canada program. I do think people are open to ideas. What can we, as a nation, do to counter this kind of blackmail? More jobs are being lost in the Canadian auto industry than in the US industry. Jobs in the United States are enjoying more protection. Therefore, even if we do build quality vehicles in Canada that compare favourably to those built in the United States, the companies have no qualms about eliminating jobs here in Canada before downsizing operations elsewhere.

With respect to the tire industry, an agreement has just been reached with US unions in the Texas regions. Goodyear was offering to reserve a seat on the board of directors for an union official, in addition to capping jobs. If the company were forced to lay off workers, it said it would not cut jobs in the United States, which means that jobs in Medicine Hat, Ontario or Quebec would be on the chopping block.

How have the unions reacted to this agreement? What can we do to counter this type of dog-eat-dog bargaining? We could agree to put in $50 million, but the US would up the ante to $60 million and would be awarded the contract. When that happens, we can't blame the subsidy program. The real reason would be the money that the federal or provincial government, or the municipality, would be willing to give the company to draw it to the region. That's the real issue here.

Mr. Bill Murnigham: Clearly, it is a problem. As a union, we agree with a number of your comments. These are important issues. Sometimes, globalization is a factor that comes into play, particularly in the case of the auto industry. Competition for investment capital is keen, with municipalities constantly outbidding one another. Where will it end? This is indeed one of the problems we face.

However, we face an even bigger challenge. As a country, we have to demonstrate that we still have the means to grow a strong economy, to save our industries and our jobs, and so forth. When we look at the actions at the WTO level and other global changes, we realize that global competition is a constant. Therefore, we as a nation need to come up with short-term solutions for the auto industry and, for the decades ahead, we need to focus mainly on broad globalization issues, not to put up walls around the Canadian market, but to make it clear that we still call some of the shots and that we can take steps to protect our market, just as the Americans, the Brazilians, the Europeans, the Japanese and other around the world are doing.

I think that Canada is sometimes looked upon as a kind of boy scout when it comes to globalization and trade. In our opinion, there are no easy answers to these big questions, but perhaps we can come up with some solutions.

[English]

The Chair: Thank you very much.

It's time to go.

Mr. Masse, you will lead off when we return. You will have your full time then.

I would ask the members to return right after the voting.

À (1009)

À (1010)

À (1045)

The Chair: Mr. Masse.

Mr. Brian Masse: Thank you, Mr. Chair.

The first question I want to ask relates to a situation in Chatham with regard to International Truck and Navistar. During that situation we saw a strike, as well as strikebreakers being brought in, and there was a tragic situation where a worker was very seriously injured. I want to know what happened with the federal government in terms of participation and the provincial government so that things didn't work out at the beginning of negotiations. We had the actual situation over a few months, and then an agreement was reached to save the plant. What happened in that situation? What can we learn from that so that we can save jobs, which are really receiving unfair competition? I'd also note that it's very important to the community. Maybe I can get some comments on what we did right the second time around as opposed to the first time.

À (1050)

Mr. Ken Lewenza: For the committee's information, Brian is referring to International Truck in Chatham, which employed as many as 2,500 workers in manufacturing at one time. The spinoff jobs are fairly significant in that community. I compare the International Truck facility in Chatham with the DailmerChrysler facility in Windsor in terms of economic stability for that community.

We went through some very tough bargaining. There's a market decline in large trucks, and the corporation had the ability to move their truck facility to Mexico without any significant penalties being placed on them by the Canadian government. We bargained what I thought was a good collective agreement for the economic times. We made significant changes as a labour union. But the employer said it still wasn't enough to stay competitive with their Mexican counterparts. So after an unnecessary strike, and one that put one of my members of Local 444 on disability for a long time, but, hopefully, not for the rest of his life, a settlement was reached. Government played a role in intervening in that particular situation. Bargaining is tough. We recognize the role we play in collective bargaining. But the employer, along with the government, had to recognize that if they wanted to sell those trucks in Canada, they had to invest in Canada. That was the community's cry in terms of their moving out without showing any responsibility toward the community. I'm proud to say that after a long, unnecessary fight, which tore the community apart, as a result of our union and the inevitable provincial government intervention, that plant is going to be saved, and hopefully it will grow in the future.

Mr. Brian Masse: That existing plant is going to stay.

The graph on page 3 shows that one new plant has been built since 1990.

I know that the CAW is a strong supporter of the Kyoto agreement. The membership was very active in arguing for this action. If you go to the Environment Canada website, you'll see that 17 vehicles--this is off the top of my head--are recommended in terms of pollution and economy, and I think that only three of those vehicles are actually produced in Canada. My concern is that if we don't take advantage of implementing a strategic plan to create those plants in our nation, consumers eventually will be purchasing vehicles that are built abroad, which will mean losing jobs here and not having new plant development. I'd like to get your comments on the new plants and whether it's enough just to replace our existing plants with new, more environmentally friendly plants.There are two issues there: the growth that needs to happen in the industry and whether or not our existing structures will accommodate new technology.

Mr. Ken Lewenza: I don't think that the Big Three get enough credit for the technological advances we have made over the last few years to deal with the environmental issues.

I think you're right, Brian. It really relates to an earlier question. I think that in terms of our bargaining strategy, the union has the environmental concerns in mind relative to the future development of cars. What's a car going to look like 10 or 15 years from now? Are the Big Three playing a role in advancing the type of vehicle consumers are going to request in a few years? I think we're playing a proactive role.

I get furious when I see a Canadian institution advocating for products that are not built in our country and add no value to our Canadian economy and not giving us any credit for the work we've done.

In taking a look around this room, I can see that there are a lot of people who have been around a long time, as I have, and I can remember when we introduced cat converters. Some of the people in the multinational corporation employer base said, “This is going to bankrupt us. We can't afford this change”. But inevitably it changed. It has worked, and it improved the environment we live in.

Today a lot of attention is being given to the environment, and a lot of it is consumer driven. What our union is doing, and what the government should be doing, is working together to ensure through an automobile strategy that the corporations that play in the Canadian economy understand that the environment is going to be a key issue in terms of what kinds of cars are going to be sold in this country in years to come, which will force them to make the right decisions relative to it. I don't think that the Big Three are getting credit for a lot of the work we've done in the last few years. The offshore producers indicate that they have a smaller car so it's a better car. That's not always the truth. You can correct fuel economy by taking weight off a car, not just by downsizing it.

À (1055)

Mr. Brian Masse: You noted with regard to Navistar as well as Windsor the bargaining for new plants and redevelopment. You've also noted the initiative of the provincial government to set aside some resources for that. I find it disturbing that you have to bargain for new plants in this country. They're just not coming here, but they should be. The only way to do that is through collective bargaining. I think that we should have a more proactive strategy through a national auto policy. Even the CEOs in Canada have signed off on that. What can be done? Is CAPC a potential vehicle for a national auto policy? They're not here presenting today. I'm very disappointed that they're not part of the discussion today. Is that a possibility, or are we going to have to look at other opportunities?

Mr. Ken Lewenza: How fast we have to move to establish an automobile strategy to protect Canadian jobs for Canadian workers is yesterday.

The reality today is that the lifespan of a vehicle is not much longer than five years. You have to exchange that vehicle, upgrade it, and make the changes necessary so that it will attract consumers. That's happening on a regular basis. The corporations are making decisions today on investments that are going to happen five years from now in terms of making their facilities stable in whatever nation they're going to invest in.

In terms of CAPC, our union played a role in it. The discussions have been professional and constructive. I think that drove the fun out of the provincial government relative to recognizing the auto industry. But right now it's all lip service. We can talk in this room and at other committee hearings. We can have the partnership between the union, the employers, and the government. But if we don't see some sustained policy coming out of there and some concrete measures that are going to protect Canadian jobs for Canadian workers in this very important manufacturing industry, then we will be suggesting that we don't partake in that.

The Chair: I'm sorry, but we must conclude because the next standing committee is waiting to come in. In fact, that's what caused the noise at the back of the room. I want to apologize for that and for the interference due to the vote. But that's the way things happen on the Hill here.

I want to thank you both for being with us today. Keep in touch.

The meeting is adjourned.