The Government commends the work of the Standing Committee
on Industry, Science and Technology (“the Committee”) on their report, entitled
“A Study of the Crisis in the Automotive Sector in Canada.”
In the context of the North American market, the Canadian
auto industry has been a major success story in the last decade with domestic
production totaling twice the value of domestic sales. Few other countries are
as economically reliant on the auto sector. In 2008, the automotive sector
represented 12 percent of manufacturing GDP (gross domestic product) and 18
percent of manufacturing exports. While Canada’s automotive manufacturing is
largely concentrated in Ontario, this is truly a national industry with
thousands of jobs in every province directly tied to the automotive value
Through Advantage Canada in 2006, and more recently through
the 2008 and 2009 budgets, the Government was paving the way for a stronger and
more sustainable Canadian automotive industry. In 2008, Canada produced 2.1 million passenger and commercial vehicles. Investment averaged more
than $3.4 billion annually over the last decade, and Canada accounted for 16
percent of North American light vehicle production while representing only 10
percent of North American sales.
The Canadian automotive assembly industry has tremendous
direct and indirect economic impact across the nation. It employed 137,500
people in vehicle assembly and component manufacturing, and another 345,900 in
distribution and aftermarket sales and service. It is estimated that each
automotive assembly job creates 4.9 indirect jobs – well above the Canadian
manufacturing average of 1.2 indirect jobs.
The automotive industry employs thousands of engineers and
tens of thousands of highly skilled technicians. It represents an important
pillar in the knowledge-based workforce. Thanks to this workforce’s
world-class productivity, Canada has the exclusive mandate to produce 24
different cars and light trucks and has built up a supply base of more than 750
part manufacturers located across Canada with a significant portion of the
industry clustered in Ontario near Michigan and Ohio.
The auto industry is the cornerstone of much of Canada’s manufacturing base. The auto sector consumes about 28 percent of Canada’s rubber product manufacturing, 18 percent of Canada’s plastic product manufacturing, 18
percent of Canada’s domestic rolled steel, and 11 percent of Canada’s fabricated metal product manufacturing.
Canada’s automotive industry operates in a highly integrated
North American marketplace. The United States (U.S.) and Canada have been making automobiles together for more than 40 years, leading to integrated
supply chains and just-in-time inventory. For each vehicle, components move
back and forth 6-7 times across the U.S. and Canada border throughout the
In this integrated marketplace, the recent liquidity crisis,
downturn in economic activity and significant fall in automotive sales,
represented considerable challenges for the Canadian automotive industry.
These challenges were compounded by the major restructuring efforts already
faced by the industry in light of volatile fuel prices and the growing
investments required for new, greener vehicles. The automotive industry faced
an industry-wide credit and consumer crisis that involved a very large economic
footprint with multiple nations pledging support to these manufacturers.
That is why the Government was pro-active. Support for
Canada’s automotive sector, including restructuring assistance to Chrysler and
General Motors, was given under the guiding principle that it would be
proportionate and parallel with those announced by the U.S. Administration and
that it would maintain Canada’s share of North American production. The
Government recognized early on both the urgency of the difficulties facing the
automotive industry and the critical importance of the sector to the Canadian
economy and helped the automotive sector deal with the most serious economic
downturn ever witnessed in the global economy.
The government has taken full account of the Committee’s
recommendations and the following section addresses each recommendation
“Given the highly integrated nature of the industry, the
development of a coordinated North American approach is essential to ensuring
the sustainability of the industry in Canada. In order to effectively address
the current and future issues faced by the industry, the Committee recommends
that the Government of Canada further engage with its North American partners
and industry stakeholders on issues including: investment in innovation and new
technologies, investment in infrastructure, the implementation of harmonized
regulatory regime (including harmonized regulations regarding fuel consumption,
safety standards, and emission standards) the training and development of an
appropriate workforce, and other issues affecting the industry.”
Canada’s role as an automotive-producing nation must be
understood in the context of an increasingly global market and levered to
generate the greatest benefits for Canadians.
The auto sector in North America is highly integrated,
requiring an integrated approach. A car part, for instance, can cross back and
forth over the Ambassador Bridge between Detroit and Windsor several times
before it is finally installed in an assembled vehicle. Each trip means the
niche expertise of a particular company from Michigan or Ontario has improved
upon that product.
The Canadian auto industry is critical to the well-being of
affected workers and communities. It is also a vital component of the
diversified economy needed for future prosperity in Canada. Canada’s support is designed to help position the Canadian auto industry to prosper in a
new global marketplace that is both more competitive and more aligned to
To achieve these goals, the federal government has been
working closely with the governments of Ontario and the United States and has implemented a number of critical measures, notably:
The Governments of Canada and Ontario provided $3.775
billion to support the restructuring of Chrysler and extended a working-capital
loan and a medium-term restructuring loan to Chrysler in Canada in support of further restructuring. In conjunction with the U.S. Government, both
governments also supported a court-supervised restructuring of Chrysler through
joint Canada-U.S. debtor-in-possession (DIP) loans.
The Government of Canada and Ontario extended an interim
loan and a medium-term restructuring loan to General Motors in support of
further restructuring. In conjunction with the U.S. Government, both
governments also supported a court-supervised restructuring of General Motors
in the U.S. through joint Canada-U.S. debtor-in-possession (DIP) financing.
The total support to General Motors was up to US$9.5 billion. At the
conclusion of the court-supervised process, all of this funding transformed
into a loan of up to US$1.3 billion for General Motors in Canada; US$403
million of preferred shares in General Motors Company; and a 12 percent
ownership stake in General Motors Company.
As a condition of restructuring assistance extended to both
Chrysler and General Motors the Governments of Canada and Ontario required both
companies to have viable business plans and make significant commitments. As a
result Chrysler will be maintaining Canada’s share of North American production
and will also provide assurance that they will maintain a proportionate level
of product-related capital investment while encouraging training, and research
and development in Canada. General Motors will maintain the company’s share of
Canada-U.S. production and make significant capital and research and
development investments in Canada. The loans are proportionate and parallel
with those announced by the U.S. Government, and are to the benefit of the
companies’ workers, suppliers and consumers across the country. The support
provided to both companies is part of a holistic approach the government has
adopted for the auto industry, in order to enable it to restructure toward a
viable, sustainable future.
The Government announced the Canadian Warranty Commitment
Program, ensuring that the consumer warranties of new vehicles purchased from
Chrysler and General Motors were honoured during the restructuring period.
The Government helped automotive parts suppliers by
expanding their accounts receivable insurance. In April 2009 the Government of
Canada announced that it had added $700 million to Export Development Canada's
(EDC) Accounts Receivable Insurance (ARI) program available to auto parts
Canada’s Economic Action Plan has been given very high marks
internationally, particularly by the International Monetary Fund (IMF). The
Plan puts in place an unprecedented economic stimulus that will help Canadians
weather the global recession and emerge with an even stronger economy. The Plan
has been supplemented in important ways by provinces and territories and
through our combined actions with the new U.S. administration to support the
The Automotive Innovation Fund (AIF) was established in 2008
to provide automotive firms $250 million over five years to support strategic,
large-scale research and development (R&D) projects to build innovative,
greener, more fuel-efficient vehicles.
The AIF supports Canada’s environmental agenda in advancing
Canadian capabilities in fuel-efficient automotive technologies and greenhouse
gas reduction. The Fund demonstrates the government’s commitment to
implementing Canada’s Science and Technology (S&T) Strategy in an
automotive context. The AIF also provides an important complement to the
Government’s agenda to support industry competitiveness, outlined in a plan
called Advantage Canada: Building a Strong Economy for Canadians.
In September 2008 the Government of Canada announced its
investment in Ford Motor Company’s Renaissance Project to make Canada a major research centre for greener, fuel-efficient engine technologies. The
Renaissance Project includes the establishment of a new flexible engine
assembly plant in Windsor, as well as the creation of a new North America
Centre for Diesel and Advanced Powertrain Research and Innovation, which will
perform research into engine efficiency and new fuel technologies. The federal
government agreed to provide a repayable contribution of up to $80 million
through its Automotive Innovation Fund (AIF). The total investment among all
of the partners in the Renaissance Project could reach $730 million.
World class research strengths in Canadian universities
align well with the existing manufacturing base and the projected future
technologies for the automotive industry. The federal government is therefore
supporting collaborative research and development initiatives that will allow
Canadian industry and academia the ability to jointly take their work from
research to application.
AUTO21 is a national research initiative supported by the
Networks of Centres of Excellence (NCE) Program and funded through the Natural
Sciences and Engineering Research Council (NSERC) and the Social Sciences and
Humanities Research Council (SSHRC). Its objective is to increase the amount
of auto-related research and development in Canada by creating partnerships
among university, industry and government labs and researchers. AUTO21
currently supports more than 300 researchers across Canada working on 54
auto-related projects in a variety of areas. From 2000-01 to 2010-11, AUTO21
has been awarded $63.7 million from the federal government to fund projects
such as vehicle safety for children and the elderly, health and safety of auto
workers, new manufacturing processes and materials for future automobiles, new
fuels and types of powertrains, and the integration of advanced electronic
systems into cars and trucks to improve safety, comfort and convenience.
The Canada Excellence Research Chairs (CERC) program was
launched in 2008 to strengthen Canada's ability to attract the world's top
researchers and develop ambitious research programs. CERC will establish 20
prestigious research chairs in universities across the country. Each chair
will receive up to $10 million over seven years to conduct research in areas of
strategic importance to Canada. At least one chair will be allocated to
research that is of direct benefit to the automotive industry.
The Canada Research Chairs program stands at the centre of a
national strategy to make Canada one of the world's top countries in research
and development. The Canada Research Chairs program invests $300 million per
year to fund 2000 Chairs in eligible degree-granting institutions across the
country to attract and retain some of the world's most accomplished and
promising minds. Chairholders aim to achieve research excellence in
engineering and the natural sciences, health sciences, humanities, and social
sciences. 24 chairs are conducting research in fields relating to automotive
safety, manufacturing, alternative fuels, computer systems, engineering and
On April 16, 2009 the Federal Government launched Automotive
Partnership Canada (APC), which will provide $145 million in research funding
over five years to support significant, collaborative R&D activities that
will benefit the entire Canadian automotive industry. Proposals funded by APC
will support leading-edge university or government researchers in Canada, and must be clearly driven by industry needs and involve active industrial
participation. This initiative is a partnership between the federal granting agencies
and research programs, which have identified collaborative, industry-driven
automotive research as a priority.
Automotive Partnership Canada will enhance Canadian
automotive research capacity, fuelling made-in-Canada innovation, increasing
our ability to compete internationally and bringing long-term benefits to this
important sector. The program will support R&D projects in specific areas
determined by an Industry Task Force, including alternative fuels,
next-generation manufacturing, advanced power trains and lighter or more
sustainable materials. The government of Canada is investing in R&D not
only because it will lead to greener, better-performing vehicles, but because
it will create jobs and strengthen the economy for future generations.
Through the $33 billion Building Canada Plan, the Government
of Canada continues to make strategic infrastructure investments that
contribute to a growing economy, a cleaner environment, and strong and
prosperous communities. The Plan represents the largest federal commitment to
public infrastructure in over fifty years.
The Building Canada Plan includes the $8.8-billion Building
Canada Fund for investments in critical national priorities, such as the core
National Highway System, clean water, sewage treatment, public transit, and
In addition to the Building Canada Fund, the Plan also
contains three national targeted funds: the $2.1-billion Gateways and Border
Crossings Fund, the $1.25-billion Public-Private Partnerships Fund, and the
$1-billion Asia-Pacific Gateway and Corridor Initiative.
Given the high degree of integration that characterizes the
Canada-United States automotive sector, the Government of Canada (through the
Gateways and Border Crossings Fund) has invested in several key border-related
infrastructure projects that will help to facilitate more efficient cross
border trade including: an initial $400 million to support the construction of
an Access Road to the new Windsor/Detroit international crossing; $62 million
to reconstruct the Canadian Plaza at the Queenston-Lewiston Bridge;
and most recently in Budget 2009, $13.5 million for
improvements to the Canadian plaza at the Bluewater Bridge in Sarnia; and $1
million for plaza improvements at the Peace Bridge between Fort Erie and
In addition, the Government of Canada, in partnership with
the Provinces of Ontario and Quebec and the private sector, is developing the
Ontario-Quebec Continental Gateway and Trade Corridor. A corresponding Gateway
Strategy will be released in Fall 2009 and will include infrastructure, policy,
and regulatory actions to optimize and build upon the region’s world-class
transportation and trade system.
Regulatory harmonization is a key issue for the Canadian
automotive industry. To reduce costs and in consideration of the integrated
nature of the automotive sector in North America, the automotive industry has
long advocated for regulatory harmonization between Canada and the U.S.
Vehicle safety standards, vehicle emissions of air
pollutants and greenhouse gases, and fuel standards are areas of regulatory harmonization
that are of particular interest to the Canadian automotive sector.
Transport Canada develops the Canada Motor Vehicle Safety
Standards (CMVSS) under the authority of the Motor Vehicle Safety Act
(MVSA). Canadian vehicle manufacturers support full harmonization of safety
standards with those in the U.S. given the integrated nature of the North
American auto sector. While the majority of regulatory differences have been
addressed in the past year, certain safety standards, such as occupant protection
in frontal impacts and vehicle immobilization standards, remain different
between Canada and the U.S. Over the last 18 months, Transport Canada has amended at least 17 additional motor vehicle safety standards to align/harmonize them
with their U.S. counterparts. It is expected that all of the Canadian safety
standards will be harmonized, to the extent possible, with those of the United States, by the end of 2010.
Environment Canada is responsible for the regulation of
light-duty vehicle emissions of air pollutants and greenhouse gases.
Environment Canada has developed and will continue to develop a series of
regulations to reduce smog-forming air pollutant emissions from all vehicles
and engines in alignment with the world leading national standards of the
United States Environmental Protection Agency. This includes smog-forming air
pollutant emissions from new passenger cars and trucks, motorcycles and buses,
small spark-ignition engines such as lawnmowers and chainsaws and for off-road
diesel engines used in applications such as construction, mining, farming and
forestry machines. As well, new regulations are being developed to address
smog-forming air pollutant emissions of recreational marine engines and
off-road vehicles such as snowmobiles, off-road motorcycles and all-terrain
Environment Canada and the United States Environmental
Protection Agency are also implementing, under the Canada – U.S. Air Quality
Agreement, a joint workplan on vehicle and engine emissions control to reduce
administrative burden through cooperation in the sharing of information and
data on vehicles, engines and testing including development of new emissions
testing procedures and collaboration on research and development.
Regarding fuels, Canadian regulations controlling sulphur
content in both gasoline and diesel fuel are also fully aligned with U.S. requirements. Low sulphur levels in these fuels are required to ensure the effective
operation of advanced emission control systems on vehicles and engines. National
standards on benzene are comparable to U.S. standards. In addition, drafting
of Canadian regulations on renewable fuels with an approach similar to the U.S. is under way. This will include the development of a renewable fuel regulation that
would require an average renewable fuel content of at least 5 percent, based on
the volume of gasoline, to be implemented by September 2010, and a 2 percent
renewable fuel content for diesel fuel and heating oil, to be implemented by
2011 or earlier, subject to technical feasibility.
On April 1, 2009 the Government of Canada announced that it
is proceeding with the immediate development of regulations under the Canadian
Environmental Protection Act, 1999 (CEPA, 1999) to limit emissions of
carbon dioxide (CO2) from new cars and light-duty trucks to take effect
beginning with the 2011 model year. Under CEPA, the Government has the
flexibility to align with U.S. national standards as they emerge, which is
crucial to achieving a harmonized approach that takes both our environment and
economy into account. President Obama recently announced a new U.S. national plan to establish more stringent standards to increase fuel economy and
reduce GHGs from cars and light trucks of the 2012-2016 model years. These
national standards will require a GHG emission performance that is equivalent
to an average fuel economy of 35.5 miles per gallon by 2016, four years ahead
of schedule established by Congress in 2007. The Government is committed to
continue working to harmonize our standards with the U.S. and to establish
common North American standards for reducing greenhouse gases from new
Human Resources and Skills Development Canada (HRSDC) has a
number of programs and initiatives in place to address both short term and
longer term labour market needs of the automotive sector. Although most
programming is targeted to individuals, through the Sector Council Program, the
Department engages industry and other stakeholders.
The Sector Council Program works directly with employers and
other stakeholders to develop and implement forward looking human resource
strategies for a given sector. There are two sector councils in the automotive
sector, one for manufacturing – Council for Automotive Human Resources (CAHR) –
and one for the aftermarket – Canadian Automotive Repair and Service Council
(CARS) CAHR includes Ford and Toyota among its board members, Chrysler and
General Motors as affiliates and has linkages with American organizations such
as the Centre for Automotive Research (CAR) and the Great Lakes Manufacturing
Council. CAHR has undertaken a number of projects geared to developing skills
within the automotive manufacturing workforce. Of interest include their
ongoing transitional skills project, which will provide tools and resources to
enable workers (current, future and displaced) in the automotive manufacturing
industry to adapt to changes in their work environment and to continuously
upgrade their knowledge and skills, and a project CAHR is undertaking in
partnership with the Province of Ontario to examine alternative approaches to
workplace training for specialty-skilled workers. CARS is a not-for-profit
organization and Canada's leader in human resource development and training for
the automotive repair and service industry. CARS provides human resource and
learning tools that are convenient, accessible and custom designed for
automotive repair. Notable CARS initiatives include the new Advanced Technology
Training Curricula Development project that will introduce 24 new courses for
the automotive repair sector An existing project includes the “CARSAbility”
website, an online professional training needs assessment tool, which
integrates an assessment question bank, employee skills portfolios,
occupational standards, and an inventory of training available to address skill
deficiencies. HRSDC has provided $6.85 million in funding to these two
councils over the last two fiscal years.
Although responsibility for labour market programming rests
largely with the provinces and territories, the Federal Government provides
funding through Labour Market Development Agreements (LMDAs) for employment
insurance (EI) eligible workers, and Labour Market Agreements (LMAs) for
low-skilled workers and unemployed workers not eligible for EI benefits.
Complementing LMDAs and LMAs, Budget 2009 introduced a two-year Strategic
Training and Transition Fund which targets support to employed workers and
those not eligible for EI benefits.
The following HRSDC programs help insure an adequate supply
of skilled workers for the automotive sector.
Work-Sharing helps employers and workers avoid temporary
layoffs during economic downturn by allowing EI eligible workers to work a reduced
work week, thereby allowing employers to retain skilled workers which will be
needed when the economy swings upward again. Opportunities also exist to link
work-sharing with training initiatives. As of July 2009 there were 235 active
Work-Sharing agreements involving 21,151 workers across Canada in the automotive sector.
The Red Seal Program facilitates the interprovincial
mobility of skilled trades-people, who successfully meet national standards in
their trade, recognized by all jurisdictions. In 2008, 2,852 Red Seals were
issued to tradespeople in the automotive aftermarket.
The Apprenticeship Incentive Grant is a taxable cash grant
of $1,000 per year or level, up to a maximum of $2,000 per person. It is
available to apprentices in the designated Red Seal trades upon completion of
their first and/or second level of their apprenticeship program. Since the AIG
was launched in January, 2007, over 100,000 grants have been issued,
approximately 7,600 to apprentices in the automotive sector.
The Pan-Canadian Foreign Qualifications Recognition (FQR)
Framework was announced in Budget 2009. The Government of Canada committed $50
million over the next two years to support its development, in partnership with
provinces and territories, in order to recognize immigrants’ international
To develop a skilled workforce in a broader sense, HRSDC
supports the following:
The Office of Literacy and Essential Skills focuses on
improving the literacy and essential skills of adult Canadians by developing
literacy and essential skills tools, conducting research, developing policy,
and working with partners at all levels of government and with external
stakeholders. Some initiatives focus on developing literacy and essential
skills in and for the workplace.
The Canada Student Loans Program provides loans and grants
to Canadians attending a University, College, Trade School, or Vocational
School, if they need help financing their education. Budget 2008 provided
investment of $350 million in 2009/10, rising to $430 million by 2012–13, that
will reach 245,000 college and undergraduate students per year when it takes
effect in the fall of 2009.
The economic downturn has put considerable strain on all
industries, including the automotive sector. Recognizing the importance of
skills and training to help workers directly affected by the downturn, the
Government has provided additional assistance in Budget 2009 through the
Canadian Skills and Transition Strategy with enhancements to Employment
Insurance and funding for skills and training, which includes the following
during the next two years:
- Increasing all regular Employment Insurance (EI)
benefit entitlements by five weeks, and the maximum benefit duration to 50
weeks from 45 weeks.
- $500 million to extend EI benefits for those
participating in longer-term training.
- Extending work-sharing agreements by 14 weeks,
to a maximum of 52 weeks.
- Investing $500 million in a Strategic Training
and Transition Fund to provide support to workers whether or not they are EI
eligible. The Government of Canada is providing Ontario with $103.2 million
- Providing additional $60 million over three
years for the Targeted Initiative for Older Workers (for a total of $220
million 2006-12), and expanding it to include workers in small cities; the
Targeted Initiative for Older Workers is a federal/provincial/territorial
cost-shared initiative that supports unemployed older cworkers in communities
with chronic high unemployment and/or those dependent on a single downsizing
- Investing $40 million a year in the
Apprenticeship Completion Grant, a taxable grant of $2,000 for registered
apprentices who complete their program and receive their certification in a
designated Red Seal trade.
“The Government of Canada has proposed to implement a $12
billion secured credit facility aimed at easing the restrictions on credit in
the industry and measures to increase access to credit for auto parts
manufacturers. The Committee recommends that the Government of Canada
implement these initiatives as soon as possible. Immediate action would help
ease the restrictions faced by producers and consumers in the industry and
should serve to foster demand in Canada.”
The Government announced in Budget 2009 the Canadian Secured
Credit Facility (CSCF) which provides direct support for vehicle and equipment
financing. Through the Facility, the Government will purchase up to $12
billion of asset-backed securities (ABS) backed by loans and leases on vehicles
and equipment to stimulate economic activity in Canada and promote renewed
investor participation and confidence in the vehicle and equipment financing
CSCF funds were allocated to participating firms through two
auction-like allocations. The first allocation of CSCF funds in May 2009 was
conducted through two tranches. The Large Enterprise Tranche was targeted at
Canadian firms that have used the term ABS market for financing, including the
financing arms of major auto and equipment manufacturers. The Small Enterprise
Tranche, with a lower minimum transaction size, was designed to reach smaller
market participants. These companies are now well-positioned to increase
lending volumes backed by their CSCF commitments. The CSCF was developed with
two allocations to permit potential changes in terms and conditions to reflect
changing market conditions. The Government engaged market participants for the
second allocation in August 2009 and has allocated the remaining CSCF funds. Firms
have until the end of December 2009 and the end of March 2010 to sell ABS into
the Facility under the first and second allocations.
Market observers have indicated that the CSCF has
contributed to lower spreads and an improvement in market sentiment for auto
and equipment ABS in Canada. Some participants are reported to have used their
CSCF allocation as a backstop to obtain funding from private lenders or through
ABS sales outside of the CSCF. The Government continues to monitor access to
financing for groups like vehicle and equipment dealers who may not be able to
take full advantage of the CSCF.
“That the Government of Canada consider introducing new
vehicle incentive programs to stimulate consumer demand in Canada in consultation with provinces, territories and the Government of the United States. Any such programs should recognize the potential effects on the aftermarket
The Government of Canada has already created a national
vehicle scrappage program as an environmental initiative. The primary goal is
to reduce smog-forming emissions by accelerating the retirement of personal
vehicles of model year 1995 and older. Secondary goals of the program include reducing
greenhouse gas emissions by promoting sustainable transportation alternatives
(such as public transit), and preventing the release of toxic substances in the
environment by ensuring the responsible recycling of vehicles. The vehicle
scrappage program supports the Government’s Clean Air Agenda and ecoTRANSPORT
strategy by offering incentives to Canadians to voluntarily retire their older
The $92 million Retire Your Ride vehicle scrappage program
was announced on January 30, 2009 by the Honourable Jim Prentice, Minister of
Environment, and is managed by the Clean Air Foundation. The number of weekly
applications for Retire Your Ride continues to grow steadily. It appears that
the program is well placed to meet its current goal of retiring 100,000
vehicles between April 1, 2009 and March 31, 2011.
Clean Air Foundation and its network of local delivery
organizations offer Canadians rewards for retiring their vehicles of model year
1995 or earlier. These vehicles are targeted because they generate 19 times
more air pollutants than vehicles of model year 2004 and newer. Rewards vary
between provinces, depending on the incentives offered by the local partners
involved and may include: a choice of options to encourage the use of environmentally
friendly transportation, such as discounts on public transit passes, bicycles,
memberships in car-sharing programs, discounts on the purchase of a vehicle of
model year 2004 and newer, or $300 cash. The federal contribution to these
incentives is $300 per vehicle scrapped.
Retire Your Ride also ensures that all old cars retired
through the program are safely dismantled and recycled in an environmentally
sound manner. Environment Canada developed a national code of practice for
vehicle recycling with the Automotive Recyclers of Canada to ensure high
environmental standards and consistent practices across Canada are used on retire the old vehicles scrapped under the program. Recyclers
participating in Retire Your Ride are required to follow this code.
Since the program was launched, over 95 percent of
participants outside British Columbia have selected $300 cash as their reward. In
British Columbia, the national scrappage program is complemented by
substantial provincial funding allowing for incentives with a value of $1000 to
$1500 to be offered. About 70 percent of participants in British Columbia are
selecting a rebate on the purchase of a replacement vehicle (current value up
to $1250, up to $2250 until early August 2009) as an incentive. Other
incentives include up to 2-years of free transit, rebates on bicycles, and car
Results from a survey of Retire Your Ride participants,
conducted by Environics Research for the Clean Air Foundation between mid-June
and mid-July, were positive. Nearly 9 out of 10 participants were satisfied or
somewhat satisfied with the value of their incentive. Over half said the
program prompted them to get rid of their vehicles sooner than they might
otherwise have done. Very few participants considered options other than
retiring their vehicle, such as keeping it, trading it in, selling it or
transferring the ownership. 7 out of 10 respondents have already bought or say
they plan to buy a replacement vehicle. Of those, about 60 percent are looking
to buy a used vehicle. Those who do not plan to replace their vehicle say they
will adapt to one less car in their household or use public transit. Overall
satisfaction in the customer service experience with Retire your Ride was high.
The Canadian Warranty Commitment Program was put in place on
April 7, 2009 as a federal initiative that ensured consumer warranties on new
vehicles purchased from Chrysler and General Motors would be honoured.
In the event of a failure by Chrysler or General Motors, an
auto service provider would have been appointed by the Canadian Warranty
Commitment Program to supply the warranty services to honour consumer
warranties over a 12 month time period. The program covered the participating
automakers’ warranty on every new vehicle sold during its restructuring period.
With the government supported successful restructuring of
both companies and the wind down of the parallel program in the U.S., the
Government of Canada has announced the winding down of its warranty backstop
programs for Chrysler and General Motors. This reflects the companies’
stronger financial and competitive footing and their ability to fully meet
their warranty commitments on their own.
“The Committee recommends that the Government of Canada
ensure that any provision of public funds to industry participants would be
subject to a strict reporting regime aimed at holding recipients accountable to
the people of Canada.”
The governments of Canada and Ontario co-operated to provide
financing to Chrysler and General Motors to support restructuring of both
companies while maintaining Canada’s production share in the Canada-U.S.
The support to Chrysler and General Motors included working
capital loan and a medium-term restructuring loan to the companies’ Canadian
operations. In conjunction with the U.S. Government, the Government of Canada
and the Government of Ontario also supported a court-supervised restructuring
of Chrysler and General Motors in the U.S. through joint Canada-U.S.
The Governments of Canada and Ontario received a combined
2-per-cent ownership stake in Chrysler and a 12-per-cent ownership stake in
General Motors and gained the right to appoint an independent director to the
boards of the newly restructured companies.
As a condition of interim loans extended to both Chrysler
and General Motors, the Governments of Canada and Ontario required both
companies to have viable restructuring plans and were asked for significant
commitments, for example to pay their debts owing to suppliers in a timely
manner. With Chrysler, the completion of a deal with Fiat, gave both
governments the assurance needed to commit taxpayers’ dollars to help usher in
a promising new future. General Motors committed to making capital investments
totaling more than US$2 billion in the Canadian operations over the life of the
agreement, and to investing US$1 billion in research and development in Canada.
The following are examples of conditions placed on Chrysler
and General Motors that ensure that the Governments of Canada and Ontario are able to exercise rigorous oversight over taxpayer money.
- Amounts owing to automotive parts suppliers are
to be paid according to reasonable automotive sector commercial terms and
conditions, including timing.
- Limitations on dividend payments, executive
privileges and compensation, and on luxury expenses.
- Interest-bearing notes must be provided.
- Reporting of significant financial, production,
and material transactions.
“That the Government of Canada review the other issues
raised in the auto subcommittee.”
The government reviewed other issues in the report including
restructuring of Chrysler and General Motors, assembler financial assistance,
support for automotive parts manufacturers, and an automotive industry
strategy. The Government has taken a comprehensive approach to the automotive
sector to position the sector for long-term success.
The governments of Canada and Ontario worked together, in
partnership with the United States, to support the automotive sector. Combined
support by the Ontario and federal governments, provided through loans and
other instruments, totaled more than $14-billion.
On April 30, 2009, the governments of Canada and Ontario announced they were co-operating to provide $3.775 billion to Chrysler to further
the companies’ efforts to restructure, while maintaining Canada’s 20 percent production share in the North American market.
On June 1, 2009, the governments of Canada and Ontario announced they were co-operating to provide US$9.5 billion to General Motors to
support the companies’ efforts to restructure while maintaining Canada’s production share in the Canada-U.S. market and making a significant investment in
research and development.
The funding provided to both companies is part of a holistic
approach the government has adopted for the auto industry, in order to enable
it to restructure toward a viable, sustainable future. It is also parallel and
proportional to the funds that were provided to both auto companies by the United States government.
The federal government asked for significant commitments
from both companies and their stakeholders, and is pleased they made the tough
decisions necessary to put themselves on a more steady footing. The decisions
made by all stakeholders as part of this process were not easy, but they were
necessary to ensure our share of North American production.
In April 2009 the Government of Canada announced that it had
added $700 million to Export Development Canada's (EDC) Accounts Receivable
Insurance (ARI) program available to auto parts suppliers.
Combined with EDC's previous ARI exposure of approximately
$550 million for auto parts suppliers, the additional $700 million brought the
exposure to $1.25 billion, an amount proportional to a 20 percent share of the
US$5-billion Auto Supplier Support Program announced by the U.S. Government in
In 2008, EDC provided a total of $4.2 billion in commercial
facilitation to 595 Canadian companies in the auto industry through its
financing and insurance products and services. Of this amount, $3.2 billion was
in the form of ARI.
In Canada's automotive industry, ARI is used to protect the auto
parts suppliers selling to the auto manufacturers, such as Chrysler and General
Motors. Auto manufacturers usually require parts suppliers to enter into
agreements with guaranteed delivery obligations that can range up to 60 or 90
days, regardless of the automaker's financial situation. With ARI, auto parts
suppliers can insure the amount of parts supplied under the contract.
When EDC insures receivables for a Canadian company, it
provides security for their banks, and banks can then lend to the Canadian
company against that security. This benefits Canadian companies by giving them
the ability to offer more flexible credit terms to their buyers. By not having
to self-insure, Companies are able to free up working capital.
The federal government recognized early on both the urgency
of the difficulties facing the industry and the critical importance of the
sector to the Canadian economy. That is why it took action to support the
automotive sector through this difficult period in a number of areas to help
automotive companies, automotive suppliers, and Canadian consumers.
Chrysler and General Motors received loans to support their
restructuring efforts in Canada and both companies have since emerged from
court supervised restructuring. The Government of Canada has every reason to
believe that these companies will be competitive, and that they are now in a
position to operate a sustainable and viable business that will keep
production, innovation, and jobs in Canada.
Automotive parts suppliers have benefited from $700 million
that was added to Export Development Canada’s (EDC) Accounts Receivable
Insurance (ARI) program.
The Canadian Warranty Commitment Program was established to
ensure consumer warranties on new vehicles purchased from Chrysler and General
Motors were honoured during restructuring. Furthermore, a $12-billion Canadian
Secured Credit Facility was launched in a timely manner to improve credit
availability for consumers to purchase and lease new vehicles.
To ensure Canada’s strength in the highly competitive
automotive manufacturing industry, the Government of Canada has made
significant investments in high value-added R&D activity to help create the
next generation in automotive technology. Initiatives such as the Automotive
Innovation Fund (AIF), Automotive Partnership Canada (APC), and support for
collaborative R&D activities like AUTO21 that bring the best academic minds
to bear on industry challenges, are necessary to ensure the transformation of
the automotive sector. They are also key to strengthening Canada’s position as a leader in developing the car of the future.
It is clear from what has been noted above that the
Government has and remains sincerely committed to supporting the automotive
industry and those individuals, families and communities affected by the
industry through both short and long term strategic planning. Canadians can be
assured that the Government will continue to engage with the auto sector and
work to ensure the industry has a strong and vibrant future in this country.