OTTAWA - The best way to rescue Canada's battered auto sector is not through direct bail outs, but by giving consumers an incentive to buy new cars, the head of Ford Motor Co. in Canada says.
"What we need to do is provide and anchor in the sea and right now there is no anchor in the sea for our ship," Ford Canada chief executive David Mondragon told a parliamentary subcommittee meeting Monday night.
"There are great opportunities for governments to help the industry and the economy find the bottom."
Still, he said auto sales in Canada will likely fall 13 per cent this year over 2008, or 250,000 fewer vehicles, which will result in $20 billion in lost sales and $3 billion in lost taxes for governments. He added it could be far worse if Canadian sales drop as far as those that have occurred in the U.S. so far.
The recommendation highlighted testimony at the meeting that brought together representatives from the auto companies, workers and other industry interests in a search for solutions to the crisis in the auto sector.
All agreed that the industry is facing a bumpy year this year that without help could turn into a catastrophe, both the automakers and the Canadian economy as a whole.
Mondragon said a major reason sales have plummeted in Canada is because consumers can't get credit and because Ottawa's scrappage program is woefully inadequate.
The government's $12-billion credit facility to boost lease activity introduced in the budget is insufficient given than Canadians annually borrow about $60 billion to buy autos and trucks, Mondragon said.
But he was especially critical of Ottawa's miserly $300 scrappage program for older vehicles, which he said is so puny no one is using it.
The Ford executive recommended the incentive be boosted to $3,500 for anyone who scraps their 10-year or older jalopy for a new vehicle, a measure he said could spur 100,000 additional car sales this year.
There are about six million vehicles 11 years and older currently in use in Canada, and Mondragon said getting them off the road would be good for the environment since they cause 12-18 times as much pollution as newer vehicles.
Ford is the only auto maker of the so-called Detroit Big Three to have so far eschewed government bail-out money. General Motors and Chrysler have asked for about $10 billion from Ottawa and the Ontario government.
The bail-outs were defended by Canadian Auto Workers officials, who said the loss to the Canadian economy and even government revenues would be far greater if the automakers failed.
CAW economist Jim Standford said a study by the Centre for Spatial Economics estimated the loss of the Big Three producers would cost 600,000 jobs in Canada, reduce the country's gross domestic product by 4.4 per cent and deprive the government of $13 billion in taxes.
"That's enough to take us from a recession and make it look like a depression," said Standford.
On Monday, U.S. unionized workers at Ford Motor Co. approved contract changes that include freezing wages and cutting benefits.
In Canada, General Motors and the Canadian Auto Workers agreed to cost-cutting measures that University of Toronto business professor Joe D'Cruz estimates will save the Canadian operation $148 million a year.
Longer term, Standford and CAW president Ken Lewenza said Canada and the U.S. should seek a new auto pact that recognizes the integration of the industry.
He said the pact should seek to enhance North American content in vehicles sold in the continent, saying foreign automakers are getting a free ride by shipping cars into Canada and the U.S. without reciprocity.
