Good afternoon, everybody. I'm Jerry Kroll, chief executive officer of Electra Meccanica Vehicles in Vancouver, which is a Vancouver-based electric vehicle manufacturing company with operations in Vancouver, New Westminster, and Victoria, with approximately 15 employees, the majority of whom are mechatronics engineers and staff. Since 1959 the company has been building hand-built sports cars of great note.
We are currently setting up for the mass production of our newest vehicle and first mass market vehicle, the Solo, which is an innovative, one-person electric commuter vehicle, similar in the environmental footprint to the Tesla, with zero emissions, but with the unique characteristic of being a one-person commuter car.
Our story is one of innovation and experience, using the 57 years of our history of manufacturing hand-built sports cars and turning it to the 21st century of avoiding fossil fuels in vehicles and creating a vehicle for the 83% of commuters who travel by themselves less than 30 kilometres each way currently in a fossil fuel vehicle with four to seven seats.
We are local. We are a Canadian company. All of our designs are house produced. All of our technology is Canadian technology, and we have over 50 years of experience among ourselves.
If you're looking at the slides, there's an image of the Solo. We are now nearing a production, which we can do at our existing facilities, of between 10 and 20 vehicles per month. This is good. It shows people the technology. They can experience it, but it's not going to make much of a difference in battling global climate destruction. For that we need to ramp up our production, ideally in Canada, with something similar to the clean industry development loan that was provided by the U.S. government to Tesla, resulting in a company, Tesla, with an over $30-billion market cap, employing over 10,000 people in clean business technology, and building arguably the best car in the history of the car.
We are either going to receive support in building our vehicles and assembling our vehicles in Canada for mass production, or we will have to go offshore to India and China to meet the kind of numbers, 100,000 plus per year, to make a difference.
EV sales in Canada were up by 32% in 2015. Our cars, although not even displayed yet, but rather just the images of them, have procured for us over 20,500 reservations. That's over $400 million of potential business that we can either manufacture in Canada and deliver from here, or manufacture offshore and deliver around the world without ever touching Canadian soil. As proud Canadians, we would rather have the jobs here in Canada than have the product we've designed manufactured offshore.
Our R and D department will, one way or the other, remain in Vancouver and remain in Canada. The opportunities and challenges looking forward is that while Canada remains a place for innovation, and a place where new ideas come forward, the manufacturing sector does not seem to be supported that much in Canada, resulting in products being manufactured offshore. A policy looking for Canadian innovation that addresses more than just manufacturing products, but manufactures clean energy products for tomorrow's economy, would make lots of sense.
Recapping the template we're seeking to emulate here in Canada, in 2010 Tesla received a milestone $465-million clean energy loan from the U.S. government. They have grown the company to in excess of a $30-billion market cap and have repaid their entire loan three years early with interest. It's a textbook example of support leading to jobs and industry in a country, in California, a place not known for automotive manufacturing.
Other countries, like Norway, have enormous support for electric vehicles but primarily targeted toward the consumer purchasing the vehicles with tax credits and having the allocation to drive in HOV lanes.
In Canada, we have tax credits in B.C. for the buyers, tax credits in Ontario, but for the actual manufacturing of electric vehicles in Canada, there is no support I'm aware of.
The proposed solution would be financial support following the template so successfully executed by Tesla in California, having fleet demonstrations in support of export of this fine product, and manufacturing support in the form of loan guarantees, low-interest loans for major purchases being done offshore, and then expert support for other areas, which could be targeted with a clean energy, small footprint commuter vehicle.
That's my presentation.
Good afternoon. My name is Jerry Dias. I'm the national president of Unifor. With 310,000 members across the country, we are the largest union in Canada's private sector, and more than one-third of our members are in manufacturing.
Unifor represents 86,000 members in advanced manufacturing, including auto assembly, auto parts, aerospace, shipbuilding, public transportation equipment, electronics, food and beverage, and the list goes on. We have another 45,000 members in value-added resource manufacturing industries, including metals, forestry, and petroleum products.
On behalf of these members and their families and communities, I welcome the opportunity to share our views on the challenges, opportunities, and policy needs of this absolutely vital sector of the economy. I think it is also important to note that this conversation here on Parliament Hill is long overdue. It is certainly refreshing to see a government in Ottawa prioritize the manufacturing sector in the work of this standing committee, identifying manufacturing as of strategic importance to the economy, and to work with colleagues from all parties to realistically assess the situation, craft solutions, and make progress.
I cannot emphasize enough that this is such an important change in outlook. As you will hear in my remarks, you all have an incredibly important role to play as policy-makers to build the success of Canadian manufacturing.
I am sure that by now you have been well briefed by all of your policy experts and have been hearing from every witness at this committee about the importance of manufacturing, so I will not spend too long on that, other than to add my voice to those that keep reminding our elected representatives about the vital role of manufacturing in the wider economy: 11% of GDP, 1.7 million direct workers in decent jobs, two-thirds of Canada's exports, and 80% of private R and D spending. I want to emphasize that manufacturing is in fact not yesterday's industry, but rather it holds the potential for our future.
Given the latest crash in commodity prices, oil prices in particular, I hope that the lesson has finally been learned that Canada needs a balanced economy. We cannot sustain just by digging stuff up and selling it, nor can we just serve each other coffee and sell each other shoes in the service sector and call it a viable economy. Canada needs to make things. We need to apply our knowledge and expertise, we need to add value to our resources, and we need to continue to be world leaders in advanced technology, productivity, and innovation.
By the way, we already do all of this. I am here today after a lost decade for Canadian manufacturing. We have lost a lot of ground and squandered a lot of opportunities. Although manufacturing in Canada is very diverse, a common thread just about everywhere over the last decade has been the near complete failure of federal policy leadership, a period in which more than 450,000 manufacturing jobs have been lost, or nearly one out of four. In all that wreckage, tens of thousands of our members lost their jobs. Over this period, the former federal government's stance toward Canadian manufacturing was overwhelmingly characterized by the absence of effective and balanced industrial policy, a lopsided focus on unsustainable commodity exports, an absent monetary policy that made current surges and crashes worse, and an ideologically driven and naive international trade agenda. At its most critical moment, this absence of leadership coincided with the global financial crisis and recession, as Canadian manufacturing experienced steep cuts to capacity, staggering job losses, and declining investment, resulting in a structural shift that has dealt Canada out of far too many next-generation investments.
Despite these damaging actions and consequences, the resiliency of Canadian firms and workers shows that these strategic sectors still retain world-leading advantages here in Canada: enjoying top quality, seeing record levels of productivity, benefiting from a dedicated and highly skilled workforce, and operating with internationally competitive cost structures.
I am sure you have been hearing many voices and many perspectives throughout these hearings. I would like to offer just a few words about the role of the labour movement and the voice of workers in this conversation. Our interest in the success of Canadian manufacturing is, of course, at one level, about our members' jobs and livelihoods, but over many decades we have seen the larger picture and pushed hard to partner with industry, as well as governments, for policies that support innovation, enhance productivity, spur investments, and bring leading-edge technologies to Canada.
At times we hear from some commentators that somehow labour is just a special interest or even that we are a barrier to the success of Canadian manufacturing. I suggest that there is no one more interested or more invested in the success of the manufacturing sector than our members. We are far more invested than stockholders or government policy-makers.
Beyond our paycheques, our members are also proud of the work they do, proud of what they make, proud to contribute their skills, efforts, and knowledge to the success of their employers.
You have in front of you Unifor's formal submission to this committee entitled “Strong policies: the missing ingredient for Canada's manufacturing success”, which lays out a series of specific proposals in several key industries important to Unifor. I will not walk you through all of this in detail at this stage, or with the time I have here this afternoon. I will leave it for you to go over more carefully, and point out that there is a long list of specific, concrete, and actionable proposals. Rather, I'd like to use the short term to raise six broad points for you to think about in terms of manufacturing and the role of government.
First, I would like to emphasize that Canada already has a dynamic and innovative manufacturing sector that is the envy of the world. We are home to nearly every kind of advanced manufacturing, from automotive to aerospace, biotechnology, electronics, public transit, and more.
We have world-leading manufacturing that adds value to our wealth of natural resources in the metals, forestry, food and beverage, and petroleum products industries. We are integrating into a continental market with the world's most valuable economy. We have among the highest-skilled workforce in the world. We are home to dozens upon dozens of operations of leading global firms, and have developed strong clusters of innovation in several sectors. From that standpoint of economic development, what we have already, everybody around the world wants. It is incredibly valuable, which means we need to understand that governments in every other country in the world are busy trying to get it.
My second point is that Canada is missing a huge opportunity and needs to deepen the connection between value-added manufacturing and our wealth of natural resources. Canada is blessed with an abundance of natural resources of every kind: oil, gas, minerals, forests, agriculture, and more. Yet for far too long we have been in the position of a global supplier of raw materials, and not pushed far enough with pursuing much more value-added manufacturing.
Just think about the missed opportunities for every major resource we have. In the metals and mining industry, why are we so content just to dig it up—so much of it—and ship it out as raw ore for others to refine in turn into valuable metals and products? Why are we not world leaders in every aspect of metal production, fabrication, and leading the world in lightweight materials technology? In forestry, it is the same dynamic. We ship our raw logs and unprocessed pulp around the world. Why don't we lead even more as the global supplier of all paper products, wood products, and advanced environmental building materials? Why are we not the world's leader in furniture manufacturing?
In energy, we are too content to focus on exporting unprocessed resources, rather than focusing on refining products here in Canada and supporting stronger petrochemical and plastics industries. Canada needs to prioritize the strategic advantage we have in natural resources to ensure that we add value, and that more of the benefits stay here.
The third point is that the terrain for manufacturing success around the world is increasingly about policy. We have so much potential, but it's not being realized. Around the world we see manufacturing success. We are increasingly seeing strong and sophisticated policies. We see active public partnerships and strategic investments. We see a leadership role for government and labour force development. We see smart and creative leveraging of access to natural resources that is designed to secure long-term economic development. In every other leading manufacturing jurisdiction, we see a strong role for active government to develop and possibly even steer the long-term future. It seems that only in Canada do we cling to some naive belief that the only job of government in relation to manufacturing is to get out of the way. That kind of thinking may have been around for a long time, but not only is it wrong, it has never been true, even in the most supposed free market economies like the United States.
In global rankings of country brands and brand image, Canada always gets top marks. Certainly we have a strong economy and decent living standards for most citizens, and we are known around the world for being nice. That is certainly a good thing, but we are also naive. When it comes to important policy initiatives that deal with global corporations or trading with other countries, we are far too often known to be the boy scouts, believing a bit too much that everyone else is playing nice, and governments elsewhere are also just staying out of the way of industry.
Think for a moment about the role of government in the key economies of the EU. Think about Germany and France. Think about the role of government in Japan and South Korea. Think about all of Scandinavia. Think about government's role in manufacturing in China. Around the world, governments play a vital role in forging a vision, providing long-term direction, engaging with industry, and enacting strong policies. It is time Canada did the same.
My fourth point is that when it comes to manufacturing, governments in Canada at all levels need to get some guts. What do I mean by that? Not only do we need to up our collective game in terms of active policy, but we need to put in place the people with the mandate and resources to really engage with world-leading global manufacturers.
I hear from across the manufacturing sector that our approach is about having an open door, and that we are always ready to listen to potential investors, or that we're good at booths at trade fairs. But that's not enough. In many of the most important manufacturing sectors, those with the most valuable investments to make, with the biggest benefits to our economy, it is really the big leagues....
The key decisions are made around the world in Detroit, New York, Tokyo, Seoul, Frankfurt, New Delhi, Sao Paulo, or Beijing. These companies are looking elsewhere. They are talking to everyone and they're being courted by everyone. What I hear over and over again is that Canada just does not have the capacity to really engage with these global firms. This is no knock against the people we have in place now; they just do not have the right tools or mandate.
Governments in Canada are too afraid to lead and to play with the big players. That is in part why our policies focus so much on small and medium enterprises, and on incubators and hubs, and on university-industry research partnerships. All this is great stuff. Seriously, these are important, but it is easy stuff and it is not enough.
From where I sit, having watched more than 30 years of a political push for a certain kind of globalization so that money and technology can more easily move around the world, I find it ironic that those who really push these ideas are also the ones in Canada who do not want to play on the world stage that they have created. I encourage you not to be afraid to lead, to get some guts and to get out there.
Fifth, just to dispel any myths that may be out there, Unifor is entirely in favour of global trade. More than one-third of our members work in sectors that are dependent on trade.
Thank you, Jerry.
Good afternoon everyone. I appreciate the opportunity to share, from Ford of Canada's point of view, some of the challenges we're having with manufacturing in Canada.
To give a background on Ford Motor Company, globally we're an industry leader with 199,000 employees and 67 plants worldwide. We sell to more than 200 international markets around the world.
We were founded in 1903, so we have a very long history. Canada was the first international expansion for the Ford Motor Company. This happened a year later, in 1904. We have a very long and proud history as well. We have been a part of Canada's economic fabric for 112 years, providing high-quality jobs that build and sustain Canada's middle class.
Ford of Canada employs over 8,200 men and women. We have an assembly plant in Oakville. We have two engine plants in Windsor. We have two R and D centres. We have two parts distribution centres. We have sales offices across Canada. We also have Ford Credit Canada, which is our financing entity.
Ford makes purchases of over $5 billion annually from parts suppliers located across Canada, to support both our Canadian and our global operations. We have a network of 425 dealers that are located across communities, representing 19,000 employees.
Throughout our history in Canada, Ford has made significant investments to innovate and upgrade our vehicle and engine production to ensure that our Canadian operations are globally competitive and thriving. These investments in our manufacturing operations have also included substantial investments in research and development, and innovation in Canada.
Since 2000, Ford has invested over $12 billion in our Canadian operations, including a $500-million investment in 2008 to reopen our Essex engine plant, which was the only Ford plant in North America that reopened during the crisis. There were 21 assembly plants in North America that closed during the crisis, and Essex was the only one that reopened. The St. Thomas assembly plant closed in Canada. Jerry knows as well as we do how painful and how tough that plant closing was.
The good news is that Ford is currently completing a $700-million investment in Oakville to produce the Ford Edge and the Lincoln MKX. This is an innovative global platform for export markets. Today we are building the Ford Edge with right-hand drive and a diesel engine for export to Europe. This just started in December. We're quite excited about it.
Trade and the ability to export or import vehicles is fundamental to Ford's business. Today, on a global basis, Ford exports over 40% of the vehicles it produces worldwide. Even more important to Ford of Canada, 100% of engines built in Canada and 90% of our vehicles built in Canada are exported to 100 countries around the world. While the U.S. remains an important market for Canadian-produced vehicles, we have demonstrated that we can build products for markets around the world.
For example, in 2014, Ford exported to China 21,000 Edges which were built in Oakville. This represented an export value of over $600 million. Today, exports of the Lincoln MKX built in Oakville for China represent 30% of the MKX production in Oakville.
Ongoing investments to continually innovate Canadian assembly plants are critical to maintaining the competitiveness of the Canadian auto sector. Investments in new advanced technologies, processes, and innovation in the auto sector occur primarily during the investments to the present facilities that need to be upgraded. However, securing new investments for Canada has become extremely difficult, due to the fact that Canada has become a high-cost jurisdiction for manufacturing, especially given the realities of the global competition for auto investments.
Countries around the world aggressively compete to win and maintain automotive production mandates because governments recognize the importance of economic spinoffs that are driven by automotive production.
For example, a study by the Center for Automotive Research recently concluded that each job in automotive assembly plants will create anywhere from seven to nine spinoff jobs for the supply base. Our sector is highly independent on the supply base as well, so that's also very important
However, recently—I mentioned those investments, which we're really quite excited about—Canada has been unable to attract new auto investments at the same pace as other countries. According to a recent news article, in 2014, a total of $18 billion in new auto investments were announced for North America. Of this amount, $10 billion was announced for the U.S., $7 billion was announced for Mexico, and $1 billion was announced for Canada, of which Ford of Canada was a part. Clearly, we are missing out on an important opportunity.
Recent data from Statistics Canada indicates that for 2014, manufacturing was the second largest contributor to Canada's GDP at 11%—which Jerry mentioned—only behind real estate.
These trends are very concerning.
In order to maintain a vibrant and competitive global manufacturing sector, Canada needs a strategic plan that, first and foremost, recognizes manufacturing as a fundamental cornerstone of a healthy economy and that identifies policies to maintain and potentially grow Canada's manufacturing sector.
To be successful, all government policy at the federal and provincial levels should be evaluated through a lens that considers its impact on the cost of manufacturing in Canada, as well as the benefit to manufacturing in Canada. To achieve this, it is important that all stakeholders work together to develop the best possible case for Canada. Productivity will be critically important to achieving a globally competitive business case to invest in Canada as a high-cost jurisdiction.
For Ford, this means working with our partners at Unifor—we have a great relationship with Jerry—to achieve a labour agreement that delivers globally competitive operating costs, high levels of productivity and throughput, and flexible operating patterns that allow our Canadian plants to maximize capacity utilization.
Government also has a role to play. As mentioned, governments around the world aggressively pursue automotive investments because of the important economic spinoff benefits and because of the ability of the auto sector and manufacturing in general to create and sustain middle-class jobs. It is vitally important that Canada's strategic approach to attracting and securing ongoing automotive investments keep pace with competing jurisdictions around the world in order to be successful.
From Ford's perspective, we would like to provide just two very specific recommendations that we believe are important when developing a successful manufacturing strategy for Canada's auto sector.
First, we appreciate the extension of the federal automotive innovation fund. The AIF has been important in Ford's ability to secure recent investments in Canada. However, the structure of the AIF needs to be changed in order to make the AIF more effective and competitive with other jurisdictions.
For example, currently the AIF provides repayable contributions, or loans, which are taxed as revenue in the year in which the loans are received. This substantially reduces the value and the effectiveness of the AIF, which again is not competitive with other jurisdictions.
Second, trade policy matters. At Ford, we have demonstrated that Canada can successfully produce vehicles for export to countries around the world. However, a key component to the success of an export strategy is the willingness of the export market to allow Canadian imports. Ford has been selling vehicles in global markets for over 100 years. Based on our experience, not all countries are willing to open their markets to automotive imports. Japan and South Korea remain the two most closed vehicle markets in the world among auto-producing nations. This is a trend that stands out within the highly integrated global auto sector.
Ford supports free trade around the world because we see trade as it is, a business transaction that should provide for comparative advantages, enabling a business case to invest in Canada. Trade allows companies like Ford to leverage their manufacturing scale. However, in order to deliver real benefits to the Canadian economy and successfully support Canadian manufacturing, trade agreements should enhance export opportunities and level the playing field for Canadian manufacturers and workers.
Most recently, with the TPP and the South Korean free trade agreement, we were very disappointed with the outcomes of both.
The TPP specifically falls short on two very important points. Despite the highly integrated nature of the Canadian and U.S. auto sectors, Canada accepted an accelerated tariff phase-out of five years, five times faster than the auto tariff phase-out that was agreed to in the U.S., 25 years for cars and 30 years for trucks. Both of the U.S. tariffs are back-loaded. It is very uncompetitive with the U.S.
Also, the TPP failed to include strong and enforceable currency disciplines to address currency manipulation. We know there are governments that manipulate their currency, including the Japanese government. That is why we have been extremely strong in making sure we have currency disciplines in the TPP.
The bottom line is that the automotive terms in the TPP will not increase Canadian auto exports in any meaningful manner. Instead, the TPP puts the automotive manufacturing footprint, which already faces competitive challenges, at further risk.
We look forward to continuing to play a vital role in terms of anticipating whatever influence we can have on the outcome of the TPP.
In summary, manufacturing is critically important to Canada's economy, but we believe Canada is at an important inflection point when it comes to manufacturing. The year 2016 is going to be a critical year for manufacturing in Canada. We're going to work with our Unifor partners to make sure we get a competitive labour agreement, but we also look forward to working with all of you, our government colleagues, to achieve a manufacturing strategy that ensures that Canada's auto sector can and will continue to be a strong competitive cornerstone to Canada's economic success.
Thank you for your kind attention.
Thank you to our witnesses for being here today. One of the things you notice on the current list of automotive production is that Canada has slipped. If you look at the nations that are gaining, most of them have either a state-funded intervention, or they have questionable labour practices, or they have questionable environmental practices as a nation-state. What I'm a bit worried about is the fact that we don't concentrate when we do trade agreements, or when we do get into importing and exporting of goods and services.
I would open this to our friend in Vancouver as well to quickly note, what do your companies do to advocate for fair trade—I will include Mr. Dias, as well—with regard to the so-called labour gap?
I've worked at Chrysler. My father worked at Chrysler, and my grandfather worked at Ford. I've heard in not only just my time here as a member of Parliament, but basically since I was in the plant shop at plant three and plant six at Chrysler, that the labour cost was a disadvantage to their doing business.
I've seen Canada go from number two in auto manufacturing and assembly to number ten. To combat that, I believe it has to be more than just complaining about the labour disadvantage. It's about what companies do to talk about fairer trade versus the importation of materials, goods, and labour practices that are used to subsidize those imports.
I would close with the simple fact that asbestos is still being imported into Canada and used for brake pads. That's a classic example. That subsidized, harmful environmentally degrading product is being put by Canadians onto vehicles that are driven around on our streets, to be ground down onto the street elements, and to be washed away. Why are we even allowing that to be part of our importation process? It doesn't make any sense.
Maybe we'll let our friend from Vancouver start, and then I'd like to hear from our witnesses here with regard to what suggestions they have and what everybody is doing to improve fair trade that are true comparatives.
Mr. Dias, I agree with you that there's a role for the government to play to promote the manufacturing sector.
In the written brief that you have submitted, you mentioned aluminum. After I became an MP, I looked at aluminum manufacturing, and realized that during the last 15 years, we have set up one tiny aluminum smelter in Canada. During the same time frame, the oil rich Arab countries, in one 1,000 kilometre radius, have set up five world-class aluminum smelters.
You also mentioned a passing remark mostly on the small manufacturers in Canada. There's absolutely no funding available to new manufacturing start-ups in Canada.
The regional development agencies, in fact the western development agency clearly said flat out that they don't finance new start-ups. Who would finance then? They said BDC, and BDC has a $1-billion portfolio on secured loans. They have hundreds of millions of dollars to invest, but in their answer, they said they have prorated during the last year only $23 million to new manufacturing start-ups.
I fully agree with you that we need a manufacturing policy in India. In the oil rich Arab countries, they're adding value to the oil and natural gas. Every single industry and the development department in all these six countries have various charts. With all the blocks that are coming down from oil and natural gas, one colour, white, means the plant has already been set up. Green means a plant is being formed. Yellow means there is something that needs to be planned. We don't have any new manufacturing set up to be coming here.
What they have though is a clear industrial development policy that is also backed by the state institutions. The Arabian will start up a titanium dioxide plant costing $50 million, and if I have $40,000 of it, then the government is ready to step in with $60,000 of funding to promote that manufacturing.
Can you kindly expand in one minute the manufacturing policy you'd like to see in Canada?