Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 9 - Evidence, November 22, 2016
OTTAWA, Tuesday, November 22, 2016
The Standing Senate Committee on Transport and Communications, to which was referred Bill S-2, An Act to amend the Motor Vehicle Safety Act and to make a consequential amendment to another Act, met this day at 9:30 a.m. to give consideration to the bill.
Senator Michael L. MacDonald (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, this morning the committee will continue its study on Bill S-2, An Act to amend the Motor Vehicle Safety Act and to make a consequential amendment to another Act. Today we have two panels of witnesses. In the first hour we shall hear from auto industry associations and in the second hour from consumer groups.
I would like to welcome our witnesses on the first panel. We have David Adams, President, Global Automakers of Canada, the GAC; and John White, President, Canadian Automobile Dealers Association. Joining us later will be Mark Nantais, President of the Canadian Vehicle Manufacturers' Association.
I now invite the witnesses to make their presentations. Each witness has been asked to make a five-minute opening statement; afterwards honourable senators will have questions.
David Adams, President, Global Automakers of Canada: Mr. Chairman, honourable members, I appreciate the opportunity to be with you today to discuss the important issue of motor vehicle safety and the proposed amendments to the Motor Vehicle Safety Act as contemplated in Bill S-2, the proposed Strengthening Motor Vehicle Safety for Canadians Act.
By way of background, the Global Automakers of Canada is the national trade association representing the Canadian interests of 15 of the world's most respected automakers and 27 brands. Our mandate as an association is to advocate for sound public policy to support a competitive and sustainable automotive market in Canada.
In 2015, the members of the association represented 56 per cent of the Canadian market. The members directly and indirectly employ some 77,000 Canadians, and two of our member or their affiliates also produced 43 per cent of the vehicles manufactured in Canada.
Our members have been at the vanguard of the introduction of advanced technology vehicles, whether the technologies are environmental, such as conventional hybrids, plug-in hybrids, battery electric vehicles or hydrogen fuel cell electric vehicles; or safety technologies such as the three-point seat belt and electronic stability control.
After more than 40 years of improvements in passive safety technology to mitigate the severity of human injury when motor vehicle accidents occur, the industry is now facing diminishing returns in this area and has consequently shifted its focus to the development and integration of active safety technology intended to assist in the avoiding of motor vehicle accidents altogether. Indeed, the advanced driver assistance systems of today are the building blocks of tomorrow's automated vehicles — something Bill S-2 is also trying to contemplate.
While many of the provisions under the bill are intended to bring Canada into greater alignment with the United States, which the GAC supports, we must also be cognizant of the full implications of greater alignment with the United States. If the goals of greater alignment are to reduce the frequency and duration of regulatory misalignment, wherein delays in developing Canadian regulations introduce unnecessary risk to consumers and greater burden on both industry and government, we very much support this effort. However, if more comprehensive and rigid alignment with the United States on safety standards reduces Canada's flexibility in bringing to market a broader array of eco-friendly advanced technology vehicles and vehicles with advanced safety features approved under other robust regulatory regimes such as the United Nations Economic Commission for Europe — UNECE — standards, we believe Canadians are being shortchanged and that Transport Canada is losing an opportunity to play a leading role in the North American regulatory framework.
A case in point is the issue of advanced front lighting systems and adaptive driving beam technologies, currently being debated for inclusion under CMVSS 108. These technologies, which have been successfully utilized in Europe and elsewhere for the last decade, represent the largest step forward in automotive front lighting in more than 70 years.
Enhanced peripheral lighting for urban and rural driving, improved road illumination, lighting in adverse driving weather conditions, enhanced visibility of traffic signs and roadside obstacles are just of the many benefits of this technology.
The precious seconds provided by these systems means more time to steer around obstacles or brake, resulting in fewer collisions and fewer fatalities. Canada has longer, darker winters and less dense population centres than in the United States, therefore we believe Canada should retain the ability to introduce such technologies with their obvious safety benefits, even if the United States remains unready to move upgrades and improvements to its own FMVSS standard. In this sense, Canada can be innovative in its regulating as well as capitalizing on the regulatory cooperation provisions contained within the Canada-EU trade agreement.
The members of the Global Automakers of Canada believe that safety of their customers is of paramount importance. The association's members support amendments to the Motor Vehicle Safety Act that will provide meaningful improvements to public safety. However, additional regulatory burden without tangible benefits to safety for the motoring public should be avoided, as compliance costs and reporting diminish the resources that companies can dedicate to advancing vehicle technology.
The experience of the United States is instructive in this regard and has demonstrated that identification of safety defects is often a very complex task and that data alone is not sufficient for this task. Consequently, we recommend that the government take time to examine the issue and decide whether a balance of evidence would support following the U.S. course at this time.
Finally, mandated safety changes as well as the disruption to the automotive industry that is occurring through the rapid introduction of new technologies threaten to leave drivers behind as public education lags the pace of change. The government should examine its role in ensuring road safety through better coordination with the provinces and consistent efforts to educate the public. A case in point: Minister Garneau recently announced that backup cameras would be made mandatory in 2018. We view this as a positive step forward, but they also change driver behaviour. If the government chooses to mandate these technologies, then it also has an obligation to remind drivers of the need to perform mirror and shoulders checks as well.
While there are a number of specific issues our members have with the proposed amendments to the Motor Vehicle Safety Act, most of our concerns revolve around clarification on certain terms and clauses required to facilitate the development of the associated regulations to the proposed amendments to the act. To that end, our members request that the department undertake an extensive consultation with the industry as the regulations are developed in support of these legislative amendments.
Thank you very much.
John White, President, Canadian Automobile Dealers Association: Mr. Chair, honourable senators, thank you very much for inviting me before this committee to represent the Canadian Automobile Dealers Association, the CADA.
CADA is the national association for franchised automobile and truck dealerships that sell new vehicles. Our more than 3,200 dealers represent a key sector of Canada's economy. Auto dealers are predominantly small business owners who provide stable jobs in nearly every community across Canada, collectively employing over 150,000 people in stable, well-paying careers.
[Translation]
Our members sold more than $100 billion in goods and services to Canadian consumers last year, a number that is growing strongly in 2016. Our members are the largest retail sector in the country by combined volume, but classic small businesses are the ones taking on enormous risk and capital expenditure.
[English]
CADA has always shown concern for safety and fairness to the consumer. As part of that commitment, CADA sits on the board of directors for CAMVAP, the Canadian Motor Vehicle Arbitration Plan, a program that allows disputes between consumers and vehicle manufacturers to be resolved through binding arbitration.
As part of our ongoing commitment to safety and taking care of the consumer, we support Bill S-2. In supporting this bill, we would like to strongly recommend some key improvements which apply to vehicles in dealer inventory. CADA wants to ensure there is a remedy for the consumer and that dealers receive compensation from the manufacturer when a defect notice is issued. This would mean an obligation from the manufacturer to compensate for parts and labour associated with the repair; an obligation for manufacturers to compensate dealers with 1 per cent of the price they paid for such vehicles per month, prorated from the receipt of the notice until the vehicle is repurchased or the remedy is implemented; and an obligation from the manufacturer to either repurchase vehicles subject to defect recalls or to provide a remedy for dealers to implement immediately.
The Government of Canada and the Canadian auto industry have been working to harmonize auto policies with the United States for many years, and we support this process. Our industry is integrated on a continental level, and regulatory and legislative harmony between Canada and the U.S. should be a primary objective in the sector. CADA and the manufacturers have many times called on governments to harmonize with the United States, and recall legislation should be no exception.
The provision that local dealers are seeking already exists in the United States. CADA visited Washington to meet with our American counterparts, and it's our understanding that this approach is working well in the U.S.
With this new government power over the recall process now being considered, there needs to be a counterbalance to ensure that auto dealers who are caught in the middle of a complex, expensive and time-consuming process are treated fairly as the small business customers of the manufacturers.
Automobile dealers are not structured like others in the retail sector that receive inventory as accounts payable, consignment or other similar means. Automobile dealers take out large loans to pay for vehicle inventory in advance. I cannot stress this enough: Vehicles on dealers' lots are not sold on consignment. Dealers' inventory is worth millions of dollars and cost thousands of dollars per month to carry, maintain, protect and ensure. Once a recall is issued, many of these vehicles become unsaleable and sit on dealers' lots depreciating, as the recall process can stretch on for months at a time.
As it stands, some manufacturers voluntarily issue compensation for recalls but many do not. It is subject to the discretion of the manufacturer and the leadership of that manufacturer at any given time. The relationship between a manufacturer and a small dealership is not a partnership of equals. Adopting the amendment that we are proposing will enshrine in statutes the equity and fairness we seek for all dealerships across Canada, not just those that happen to partner with a manufacturer who decides to pay compensation to dealers for the burden of recalls.
We urge you to adopt our amendments, and I thank you for listening to our position. I'm more than happy to take questions later.
Thank you.
The Deputy Chair: Thank you.
We will now go to questions, starting with Senator Doyle.
Senator Doyle: Thank you for your presentations today. I have a couple of general questions.
I've heard it said that Canada's laws about automobile defects have not been very effective in the past. Hopefully the bill will make a difference. Some people say that in the area of public policy and public safety issues we have been far behind the times in comparison to U.S. Would you agree?
Mr. White: As it pertains to this?
Senator Doyle: As it pertains to recall and defects.
Mr. White: As it pertains to this, I believe the government is taking a great step in catching up with other jurisdictions, such as the United States and other markets. This is definitely an opportunity to catch up.
Senator Doyle: Does the U.S. have greater powers with respect to recall than we have here in Canada?
Mr. White: Yes, they do.
Senator Doyle: In what regard?
Mr. White: It's my understanding that the U.S. government can issue a recall, can issue a "do not sell" action at their discretion for vehicles that have safety or non-compliance issues. Those powers are utilized quite broadly in the United States.
Senator Doyle: Would we have that in our bill?
Mr. White: My understanding is this bill would give the power to the government to do so, yes, sir.
Senator Doyle: How will car manufacturers in Canada be impacted? Will they be positively impacted or negatively impacted in any way because of this bill?
Mr. Adams: If you look at the difference between Canada and the U.S., Canada has generally taken a policy of following the U.S. in terms of its public policy, aligning with what the U.S. is doing both with respect to safety legislation and environmental legislation.
To your earlier point about whether we behind, yes, in some cases we are behind because our regulatory system needs time to catch up to where the U.S. has gone. The point I was making in my remarks is that there is no problem in harmonizing or aligning with what the U.S. is doing provided that still gives Canada the ability to regulate with some flexibility as it traditionally has done.
Senator Doyle: Are you concerned about the growing level of protectionism in the United States? There seems to be a lot of talk recently about protectionism in the United States. Will it affect your manufacturing sector here in any way?
Mr. Adams: It's early days and we don't know at this point what the disposition is of the president-elect, but all we can rely on at this point is what has been made public. It is a step in the right direction, as reported in The Globe and Mail today, that while the TPP agreement was on the president-elect's list for the first 100 days, there was no mention of NAFTA. Certainly, from a manufacturing perspective, Canada, the U.S. and Mexico are integrated on a North American basis for sure and I think any disruption to that agreement would be problematic.
Senator Doyle: You mentioned that the manufacturer does not always pay for the defect. I thought it was the opposite. I thought the manufacturer always paid for the defect if a dealer has to recall a vehicle because of a manufacturing defect. Is that always the case?
Mr. White: What I would like to do is differentiate what we're looking for with a car that is in a dealer's inventory before it's sold and what happens once a car is sold.
In terms of a recall, a manufacturer will pay for the job in terms of parts and service at a prescribed rate. That compensation happens. The manufacturer issues a recall to the consumer, and the consumer comes into the dealership. The dealership then conducts the repair and makes their claim back to the manufacturer. It's at different levels depending on the manufacturer, but the dealer is compensated from that perspective.
Where there is some compensation or not is with vehicles that are unsellable as it pertains to a recall and there is no part or there is no remedy, and there is nothing required or enshrined to compensate the dealers. From that perspective, what is happening now is that certain manufactures will provide some level of compensation or not to a group of dealers at their discretion.
Just to clarify, for the repair, the dealer is compensated.
Senator Black: Thank you, gentlemen, for being here. This is really interesting, and who would have thought this could be as interesting as it is.
Mr. Adams, you have heard the suggestion for an amendment that Mr. White has made on behalf of his organization. Do you support that?
Mr. Adams: To go back to what the minister said in his remarks to this committee, he believed that was outside the ambit of this bill. I think in terms of looking at the relationship between the dealers and the manufacturers in Canada, it's a symbiotic relationship — one relies on the other.
To Mr. White's point that some do and some don't, I think manufacturers who are not assisting their dealers are incredibly short-sighted in terms of the fact that you have a longer-term relationship over a longer period of time.
The other thing that needs to be considered is that more and more these days the individual dealer is going by the wayside and you are seeing more and more groups of dealers appear on the horizon as time goes on. Certainly the practices of one manufacturer vis-à-vis another would be known to a particular dealer group, for instance, that would represent seven, eight or nine different manufacturers.
I don't know, but I would presume that in most cases the manufacturers are providing some type of compensation to their dealers in that regard.
Senator Black: Yet we heard this morning that that is not always the case because of the inequity in bargaining strength. I am quite taken by the argument that there is an unfair burden placed on the individual dealer. I get that if it's a large organization, perhaps it is a little different, but I am quite taken by that. If various manufacturers are not inclined to be supportive, perhaps we need to help them get along that line.
Mr. Adams: As I said earlier, a manufacturer who is not assisting their dealer in that regard is incredibly short-sighted. It doesn't do anything for the relationship going forward, because in most cases you are in a relationship for the long haul; it's not something that will be a three-year relationship and it's over with.
As I say, it may be happening. I can't testify to that. But I think that if dealers aren't being compensated, then it doesn't wear that well in terms of the manufacturer.
Senator Black: I'm going to take from that that you would understand if this committee were to support such an amendment.
Mr. Adams: I think you have to look at it that the essence is to provide the dealers the same benefit as what is in place in the U.S. I think the dealers are regulated under the Motor Vehicle Safety Act in the United States as well. I'm not sure that the dealers want to be regulated under the Motor Vehicle Safety Act.
Senator Black: That leads to my next question to Mr. White. What is the practice in the U.S. vis-à-vis your proposed amendment?
Mr. White: The proposed amendment is enshrined in the legislation in the United States.
Senator Black: Oh, is it?
Mr. White: Yes, it is.
To clarify, the formula that we are proposing in the spirit of harmonization is the same principle in the U.S. legislation that's based on the same formula.
Senator Black: For clarity's sake, not only for me but for the folks who are watching this, if I have a dealership in Flint, Michigan, and vehicles on my lot are recalled, I am compensated by the manufacturer of those vehicles along the lines set out in the legislation.
Mr. White: The manufacturers are required to provide the compensation.
Senator Black: That's very helpful. Thanks, gentlemen.
Senator Mercer: Thank you, gentlemen, for being here. We do appreciate it.
Mr. Adams, you commented on Mr. Garneau's recent announcement that backup cameras would be mandatory in 2018. I think this is a great thing.
You went on to talk about an obligation to remind drivers of the need to perform mirror and shoulder checks. I also agree. However, I would put some of the onus back on the manufacturers. Think of an ad for any of the bigger automobile manufacturers where backup cameras are involved in the ad. Nobody in those ads ever does a shoulder check. They use the camera as their eyes out the back. Anyone who has ever driven one of these vehicles — and I have — if you try to use just the camera, you will be in deep trouble, because the peripheral vision is not there on either side, depending on which way you might turn.
I would hope that we don't give the impression to the people watching — or maybe the message needs to be carried back to the manufacturers that in their ads, to promote safety, shoulder checks are required even with the backup cameras.
Mr. Adams: Thanks very much for that. I appreciate that statement. You are absolutely right; a whole education effort needs to be undertaken not only with backup cameras but with a myriad of other advanced technology. Some people will say, "Well, I have lane keeping assist on my vehicle," and they might think that's just a lane departure warning. One is maybe a light or a sound when you leave a lane; the other is an actual physical correction to bring the vehicle back in the lane. But if people don't know the difference between those two technologies, it is problematic.
I would agree; I think we all have a piece in this education effort for the consumer, ourselves as manufacturers, the government, other perhaps not-for-profit organizations and the dealers. Mr. White may be able to attest better than I can, but most consumers, when they go to pick up a vehicle, the last thing they want to do is spend another 45 minutes having somebody take them through how all the different pieces of the vehicle operate.
Senator Mercer: They know how it operates.
Mr. Adams: Everybody assumes that they do; you're right. Thank you, though, for that. I appreciate that.
Senator Mercer: Mr. White, you gave us a list of things that should be happening with respect to recalls.
I actually have a vehicle that is under recall right now. I received a notice from the manufacturer telling me my vehicle is recalled, but they said, "Don't bring it in right now, because we don't have the wherewithal to fix it because we don't have enough parts." In that letter from the manufacturer — and I read it very carefully — they did not say, "Don't drive the vehicle." But I would suggest that if I were a young father with children in the car with me on an ongoing basis, that I shouldn't drive the car. That would be my assessment. But the manufacturer doesn't say anything to me about not driving the car. He just says, "We need to fix it. It's a safety issue, but we don't have the parts. We'll call you when we have the parts." Should the responsibility not be on the manufacturer to give sound advice to the consumer about continuous operation of the vehicle?
Mr. White: Yes, I would agree that that would be helpful. I am not familiar with your specific situation, but communication and information are key. Often it will depend on whether this issue is safety related or compliance related. Again, there are many circumstances. But, yes, the manufacturer should have the responsibility of clearly articulating that situation to the dealer so that, of course, the dealer can provide guidance to the customer, as the first point of contact.
Senator Mercer: The suggestion that advanced peripheral lighting for urban road driving improves road illumination makes perfect sense to me. Are you suggesting that it should be in legislation that we move to that type of illumination in automobiles today?
Mr. Adams: What I was suggesting in my comments is that right now, because we're primarily following the U.S. in terms of how we are regulating, if the U.S. is of the view that they're not in a position to move forward at this time with advanced lighting, that seems to restrict Canada from being able to do so now. My recommendation would be to allow the flexibility for Canada to incorporate advanced lighting into its own regulations here and now.
Senator Mercer: However, let's remember that if you buy a car in this country, there is automatic lighting in the car when you turn it on and pull away, whereas in the United States there is not. I know that when I visit the United States, people say, "You have your headlights on." Of course I have my headlights on because that's the way the car is built; it's a safety feature. I wouldn't want us to assume that just because our American friends say they can't do it, or they don't like it, that it's the right thing to do. If we should be going with this advanced peripheral lighting, then maybe we should be going that way. Maybe we should be leaders and not followers.
Mr. Adams: I agree we should be leaders and not followers. The fact is that for a lot of this advanced lighting, it's already in the vehicles that are in the country today; it's just turned off. It has been programmed so that the advanced lighting features are inoperable in Canada.
The same concerns have been raised about people wanting to take these vehicles down to the U.S. with this feature that is not available in the United States. It can be taken to a dealer and those features can be turned off again. But the view is that we shouldn't be depriving Canadians of features that are available elsewhere in the world.
Senator Mercer: Particularly if they're safety features, and advanced lighting is a safety feature. If you drive long distances on interstate highways — four-lane highways — over long periods of time, it's quite helpful to have advanced lighting. It gives you another indication of what is going on in the distance as you approach another vehicle.
The Deputy Chair: Our third witness has arrived. He made a great effort to get here this morning. I hope his delay wasn't automotive related.
Mark A. Nantais, President, Canadian Vehicle Manufacturers' Association: Air Canada has a rather unique way of disrupting some of the best-laid plans. I apologize to the entire committee.
The Deputy Chair: Well, they disrupt them but they haven't stopped them. You have the floor, Mr. Nantais.
Mr. Nantais: Thanks so much, and again I apologize.
I represent the CVMA, and our members include Fiat-Chrysler, Ford and General Motors. I won't go through the economic importance of these companies or the industry itself except to say that they represent about 60 per cent of all Canadian production in Canada.
We share the objectives of Bill S-2 to further protect Canadians and provide additional flexibility to support the introduction of advanced safe technologies and other innovations. I will probably add a few more comments to your question, Senator Mercer, in that regard.
In particular, we support Bill S-2 amendments that provide a clear, more rigorous and transparent process for exercising a number of Ministerial Powers to Order, recognition of the rapid pace of technological change through enhanced ability to provide exemptions to standards where new technologies provide equivalent or increased safety benefits relative to those that conform to prescribed standards, and extended time limits for interim orders that can be used to promptly align Canadian requirements already enacted by other governments.
We have identified three priority areas of concern that have practical and business operational implications, particularly since the bill includes the ability to delegate some existing and new ministerial powers contemplated in the amendments.
First off, proposed subsection 10.61, "Power to prohibit offering for sale — defect or non-compliance." We support the policy objective of prohibiting the sale of non-compliant or defective vehicles. However, manufacturers do not directly control the retail sales of vehicles to consumers. New vehicles are sold wholesale to new car dealers that, as independent entities, take ownership of the vehicle and make the final sale to the retail customer. CVMA members already advise dealers not to sell vehicles with open recalls until the remedy or corrective action is completed, and dealers may also be subject to significant liability should they choose to sell a vehicle under recall.
The proposed power inappropriately places the onus on the vehicle manufacturer or importer to exercise an authority over privately owned, independent businesses that are out of the manufacturer's immediate control. In our view, it is completely malapropos to hold manufacturers or importers criminally responsible for the actions of independently owned and operated new-car dealers. Accordingly, we would recommend that the power to prohibit the offering for sale should be revised to the power to order vehicle manufacturers and importers to issue a notice to dealers to remedy the vehicle prior to the first retail sale.
Next, proposed subsection 8.1, "Power to order tests, analyses or studies." We recognize that Transport Canada is proposing this unique-to-Canada power to address the need in certain cases to collect information quickly or for the purpose of verifying non-compliance or defects where information is not being provided voluntarily. However, the current language is very broad and has the risk of being misused beyond the specific intent to order any test, analysis or study in any scenario. Therein lies our concern.
The language needs to be updated to clarify that the intent of this provision is to order tests, analysis or studies to verify non-compliance and that it include the notion of reasonableness. The suggested language changes that we've mentioned have been outlined in information that we provided to you in advance.
Third is proposed subsection 10.4(1), "Correction date." CVMA members strive to provide the most accurate and up-to-date recall information to vehicle owners. The act currently requires that an initial recall notification be sent to vehicle owners no later than 60 days following the notification to Transport Canada. If the parts required to repair the vehicle are not immediately available, a follow-up notification letter is sent to the vehicle owners when parts become available.
However, as required by the act, a company will notify the minister of a recall "upon becoming aware of a defect or non-compliance." Often, at this preliminary stage of a recall, information on availability of repair parts simply may not be available.
In the preliminary stages of a recall or with complex recalls, estimates of the date for parts availability may be revised multiple times, theoretically then requiring companies to send a notice each time a new estimated date is established. The proposed requirement to provide an estimated correction date will create unrealistic consumer expectations and/or potentially misleading information, ultimately desensitizing the public to the importance of the original notification and actually undermining public confidence in the system.
Stipulating this requirement in the act prevents leveraging communication technologies that may be better suited for providing information in a more timely manner, such as the vehicle identification number-based recall lookup tools on the Internet that CVMA member companies have in place.
This new requirement is not needed in the act and can be addressed under existing section 15 of the Motor Vehicle Safety Regulations, which defines all the information required in the notice to the minister and the notice to vehicle owners.
Transport Canada has the authority to request information to confirm the earliest correction date under paragraph 11(1)(a) of the act. The proposed requirement for earliest date could be added to section 15 of the Motor Vehicle Safety Regulations and could also include a requirement for a company to provide, upon request, any information or documents the minister considers necessary for verifying that the date provided is the earliest date for which the correction can be made available.
Furthermore, there is active development under way on regulations necessary to implement certain Bill C-31 amendments. In fact, we have not even implemented all the requirements under that bill as yet, but there are also other tools to enhance the provision of information to consumers.
In closing, CVMA members are committed to ensuring the safety of Canadians, and we want to ensure that the proposed amendments are able to meet the objectives as set out in the act in a practical and implementable manner.
I would be remiss if I did not come here to say that more progress could be made in this context. I am referring to the fact that Transport Canada could expand its authority under the act to go beyond the manufacture and importation of vehicles to include replacement parts such as windshields, brake lines, brake fluids or replacement airbags. These are areas that are covered off in the United States and would provide meaningful progress to additional safety to Canadians in this country.
Thank you very much. I would be pleased to answer any questions.
The Deputy Chair: We'll begin with questions, picking up where we left off.
Senator Greene: I'd like to ask Mr. White and anyone else can chime in after that.
I'm sympathetic to the amendments you want, but could you explain to me in detail the current U.S. legislation regarding dealer compensation only applying to recalls from the government rather than a voluntary manufacturer recall? Is that right?
Mr. White: It's my understanding that it applies to both.
Senator Greene: It applies to both in the U.S.? Naturally, it would apply to both here.
Mr. White: Basically, the government has the authority to initiate a recall; the manufacture can do so voluntarily. The protocols under whether a recall is voluntary or mandatory are the same.
Senator Greene: And the compensation level is the same?
Mr. White: There is no discrepancy between the two of them.
Senator Greene: In U.S. law?
Mr. White: Yes, sir.
Senator Greene: Could you tell me what the value of your amendment is worth to the automobile dealers?
Mr. White: No, I cannot. It's not something that I've looked at but it's something that we could perhaps try to estimate.
Senator Greene: What are the issues involved in a recall in which compensation at a certain level is mandated versus a recall when that's not the case? I'm specifically looking at the issue of the amount of time it takes to negotiate an agreement with the manufacturer over a recall issue.
Mr. White: I'm not 100 per cent sure that I clearly understand the question. Would you mind reframing it, please?
Senator Greene: In a situation where there is no compensation agreement, how long does it normally take to negotiate one?
Mr. White: The short answer, sir, is that it depends. Normally, it's not a negotiated process. It would be a top-down process where the manufacturer, if it chooses to offer some sort of compensation at some point after a recall is called or a do-not-sell order is initiated, would choose to send a notification out to their dealer and indicate what the compensation will be.
In some cases it doesn't happen. Then the dealer, through the dealer councils — you will not get each dealer to negotiate individually with the manufacturer — or some advisory body would make a request to the manufacturer and say, "Can you help us? How long will this recall go on, and when will we have our parts or the remediation?" Sometimes it's a software fix. "And could you please provide assistance?" Normally that would be the give-and-take that would transpire. Ultimately the decision is with the manufacturer as it's their money that is being spent to support this.
Really, it depends on the situation, the manufacturer and who is running that specific manufacturer at that point in time. That's why this amendment clarifies it and provides for the same ground rules for all involved.
Senator Greene: Could this process take months, normally?
Mr. White: Without getting into the specific details, sir, we have had some cases over this year where we would have had one manufacturer come back after a couple of weeks. In another case for a similar issue, which affected more than one manufacturer, they decided not to provide the support. Then there was a third manufacturer affected by the same issue who, after 30 or 40 days or so, came back with some level of support, which was different from what the other manufacturer would have done. It's inconsistent.
Senator Greene: Are the dealer councils organized on a provincial level or some local level?
Mr. White: Both. It depends on the size of the dealer body. If I'm looking at my counterpart Mr. Nantais and his members, they have a high dealer count and they would have, perhaps, regional or provincial councils that roll up to a national council. It's either a council, an advisory board or a communication team.
With some of the smaller manufacturers, normally, no. It's a national board with, perhaps, similarly to you here, provincial representatives sitting on that board.
Senator Greene: Would anybody else like to answer?
Mr. Nantais: John White is correct. Operationally, in the United States, my understanding is these sections have been rarely used because of the commercial relationship that exists between dealers and manufacturers. Yes, it may vary depending on the sales and service agreements and the relationship they have and may be worked out through dealer councils. There are many variations.
We have to remember that in the United States dealers are also subject to the act and subject to fines if they retail a vehicle that's under an open recall. It's a combination of all of these things.
As I said earlier, our view is that this is a commercial relationship, and the bill is not structured to address commercial relationships. It's focused purely on safety and vehicle manufacturers and importers, where we think it should be. We think the amendments we have here would do —
Senator Greene: Are you saying you would support the amendments if they were in a different bill?
Mr. Nantais: No. We are saying that B2B relationships are something that should be worked out between the dealers and manufacturers. But we are also saying that in terms of the power to order, manufacturers and importers should be ordered to notify dealers there is an open recall and they should not sell that vehicle during that open recall. We do that already by virtue of that relationship, but for the purpose of consistency, maybe we should have something like that, where the minister has the ability to make that order and manufacturers and importers must notify their dealers that they should not or cannot sell during an open recall.
Senator Eggleton: Thank you for your presentations.
All three of you have the job of marketing automobiles but you come at it from different perspectives and interests. We've certainly heard from the auto dealers association about what they think needs to be amended in the bill and we have both Mr. Adams' and Mr. Nantais' comments on that.
Mr. White and Mr. Adams, what do the vehicle manufacturers have to say about whether the three amendments Mr. Nantais presented negatively impact the interests of your members?
Mr. White: First of all, from our perspective, we support the bill as it is written for the exception of the amendments we are looking to enshrine in the legislation. We are supportive of the act.
As it pertains to the comments that my colleague Mr. Nantais has made, I understand where he is coming from in terms of wanting to have some sort of shared responsibility. Again, we'd have to look at what his proposal is, but at a high level, I understand where he's coming from.
We also need to ensure that the communication from the manufacturer to the dealer is clear and timely because recalls do not always come with a do-not-sell order. In the case of a recall that is for compliance or safety, yes, these often come with do-not-sell orders but in other cases there are recalls that transpire. I want to clarify for the room that there is not always a do-not-sell order here.
From that perspective, and as it pertains to the commentary that Mr. Nantais and Mr. Adams made from a technical and technology perspective when it comes to the bill, our association really does not have a position. Whatever advanced technologies come into our vehicles, we want to ensure our dealers have the appropriate training and parts and are able to adequately respond to the customers' needs from that perspective.
We will defer the technical elements of the bill to the expertise of the two manufacturers.
Senator Eggleton: Mr. Adams, do you have any comment on what the Big Three are asking for here?
Mr. Adams: In terms of the amendments that Mr. Nantais has outlined, we would be supportive of those amendments as well.
In terms of looking at issues specifically, as I think he highlighted, one of the amendments was testing and the unfettered power around ordering testing of any kind. You can think that that will be used in a reasonable and rational way, but there is no guarantee of that in terms of the wording in the bill at the moment. That's a concern of our members for sure.
As to the other amendments he proposed, I would see no objection to those either.
Senator Eggleton: Let me go back to Mr. White. I understand your case for vehicles that you're paid for or you're financing and that are going to be held from the market because of the repairs that have to be made. When repairs are because of defects, manufacturers logically are responsible for them. So you say the repair costs are covered by the manufacturer. But you are carrying an inventory and there are some costs in carrying that inventory.
Mr. White: Correct.
Senator Eggleton: Do you have any numbers on that? You are asking for the same thing that exists in the U.S. Do you have any numbers either from them or from yourselves that show how significant this is?
Mr. White: It's not something that I have with me today. However, these are numbers that we can provide to the committee as you go through your deliberations. It's something that we can look at.
To give you an idea, the manufacturer has to pay the wholesale, floor-plan cost, which is the cost of supporting the inventory. It's normally some sort of relationship over the prime rate. Today, obviously with a favourable prime rate, the rates are quite good. That has not always been the case. There are requirements by the manufacturers to ensure that the cars are started, that the batteries are charged, that the brakes don't seize. There are insurance costs that the dealer needs to carry.
As I've indicated, these are costs overall that for the average dealer are tens of thousands of dollars per month overall to carry your inventory. If you are carrying about $3 million to $3.5 million in inventory, it's a lot of money for a small dealer.
If you are sitting on inventory that is unsaleable, you are carrying those costs. But what it also does is that, if you have a line of credit of, let's say, $3 million and you have half a million dollars of your inventory caught up in a recall that you can't sell, the bank or your financial institution isn't going to give you another half a million dollars to cover off. I'm giving you a general example, but you get the point.
That's very difficult to quantify, obviously, from that perspective.
Senator Eggleton: That's helpful.
Mr. Nantais: I think it's fair — and I think you would agree with this, David — that it's in every interest for a manufacturer to treat their dealerships fairly and equitably, particularly under a very complex safety recall, one, because of the business relationship itself, but it's also important to satisfy and remedy that recall as soon as possible, not just from the business relationship with the dealers but also in terms of consumers and consumer retention and servicing. Every effort is made to carry out a recall as soon as possible.
Senator Eggleton: Do the others do this? There are the Big Three, but it isn't just hitting them. What about the others?
Mr. Nantais: I can't speak for the others. I think it's important to understand, though, that every effort is made, across all fronts, to get these remedies in place as quickly as possible.
More recently, we've had some very complex recalls, with high numbers, which accounts for some of the recall numbers going up, with the Takata airbag as an example. Many manufacturers share the same components across many different lines and products. The ability of a parts manufacturer to provide new parts and replacement parts been very difficult, which has prolonged that recall more than people would have hoped.
In things like that, I think there is every effort and every opportunity for dealers and manufacturers to get together to come to some sort of equitable and reasonable accommodation.
Mr. Adams: If I wasn't clear in my earlier comments, yes, as Mark has said, all our manufacturers are of the view that it's in everybody's interests that you have a long-term relationship. It's not in anybody's interest to punish the dealer for circumstances that are beyond their control with respect to a do-not-sell in a recall situation.
Senator Eggleton: Something is obviously not right or you wouldn't be asking for this.
Mr. White: I will agree with my two colleagues that it's in everyone's interest. However, I wouldn't be here making this request if this were always the case.
Yes, our relationship with the manufacturers is one of partnership, not a partnership of equals but a partnership. But really, at the end of the day, we are looking for a consistent, fair, equitable framework. Then there is no discussion, and we all follow the same path regardless of which manufacturer, regardless of who is in charge. This is something that in 20 years will depend on the three guys at the table as to how big of a negotiation it is.
[Translation]
Senator Boisvenu: I have several questions, but given the time, I might have to draw them out of a hat to determine who will answer my questions.
Mr. Nantais, this is my first question: According to our information, in 2014 the U.S. Congressional Research Service estimated that around 15 million vehicles were recalled. By way of comparison, how many vehicles were recalled in Canada during the same period?
[English]
Mr. Nantais: That's a very good question. Unfortunately, I don't have an answer for you in terms of the total number. I'm sure we could get that number as all recalls and responses are registered with Transport Canada. It's a difficult one to answer.
[Translation]
Senator Boisvenu: That brings me to my second question, and please correct me if I am wrong. According to information I have obtained, Canada operates differently from the U.S. in terms of vehicle recalls. In Canada, internal guidelines are forwarded to the dealers instead of carrying out massive recalls. Is that the case?
[English]
Mr. Nantais: I would suggest, senator, that there is actually a great deal of similarity between Canada and United States in terms of recalls. If you look at the summary of the steps in both Canada and the United States, they are very similar.
Sometimes, based on the information and the data analysis that's done in the United States, that will be looked at in Canada as to when a recall may be initiated in Canada. Because of the highly integrated nature of our business, for the products that are essentially identical on both sides of the border, if a recall is initiated in the United States, we would generally issue a recall here in Canada, save and except if there were some regional aspects of a recall. For instance, if the safety recall is due to an issue with certain environmental aspects, such as humidity, heat, the variation of those things that causes the defect, then we would look at that in terms of whether that's the case in Canada.
You may not always get the full recall in Canada because of those reasons, but the reverse is true as well. In Canada, we've been known to initiate a recall that was not initiated in United States. I can think of where you have corrosion, for instance, where we use high amounts of salt or along coastal areas where our vehicles are subject to exposure to salt, whether its corrosion or wiring or something like that. In Canada, we have initiated a recall.
Similarly, we still have some —
[Translation]
Senator Boisvenu: I will be more specific. In the United States — according to the information I have obtained — systematic recalls are much more common. So vehicle owners receive a notice from the manufacturer informing them of a defect and of having a certain time to have the vehicle repaired. In Canada, the instructions are sent to the dealer, who can then notify the vehicle owners.
Is that information accurate?
[English]
Mr. Nantais: No, not quite, senator. Again, the process is very similar to the United States. Upon becoming aware of a defect or non-compliance issue, the manufacturer must notify the minister as soon as that becomes known. They must notify the consumer no later than 60 days beyond that. Those are very similar to the United States.
[Translation]
Senator Boisvenu: In 2014, if the U.S. recalled 14 million vehicles, in theory, should Canada have recalled about 1.5 million vehicles in 2014-15, given that our population is 10 times smaller than that of the United States?
[English]
Mr. Nantais: Generally that ratio would apply, but we have to remember that the markets are not identical. Americans buy certain types of vehicles in greater numbers or variations than we do in Canada. For instance, we have a smaller fleet, and we have a tendency to purchase vehicles that have slightly different equipment combinations.
The fleet is not identical, so I would suggest that the 10 to 1 ratio necessarily doesn't apply, senator.
[Translation]
Senator Boisvenu: My last question is for Mr. White. You worked for Volkswagen until 2015, I believe.
Mr. White: I worked for Volkswagen and General Motors, yes.
Senator Boisvenu: At the time of the crisis, you were at Volkswagen.
Mr. White: I was in Australia.
Senator Boisvenu: Could you briefly describe how this crisis has shaken consumer confidence in automakers? Today, we have seen that BMW, Audi and perhaps even Mercedes have not complied with certain environmental standards. How will your industry regain consumer confidence in these and other brands?
Mr. White: Clearly, this has not helped the image of the industry. In my opinion, all manufacturers will have to work hard to ensure that the standards are being met, to carry out their work ethically and to build customer loyalty.
There will be a lot of work to do to rebuild the image of some brands. Our dealers, who are in the line of fire, will have to work with the manufacturers to regain consumer confidence. There will be a lot of work to do in the coming years.
Senator Boisvenu: Bill S-2 will probably help with that.
Mr. White: Yes.
[English]
The Deputy Chair: Gentlemen, thank you for your presentations. Our time is up. We really appreciate your being with us this morning.
We will seat our next panel and continue our study on Bill S-2. I'm pleased to introduce our next witnesses: Ian Jack, Managing Director, Communications and Government Relations, Public Affairs, Canadian Automobile Association; George Iny, Executive Director, Montreal, Automobile Protection Association, accompanied by John Raymond, Director, Toronto, who will assist Mr. Iny in answering questions.
Please begin your five-minute presentations, and afterwards the senators will have questions.
[Translation]
Ian Jack, Managing Director, Communications and Government Relations, Public Affairs, Canadian Automobile Association: Honourable senators, we are pleased to be here today to talk about this very interesting and important issue for the future of Canada's road safety.
[English]
Let me begin by thanking you for inviting the Canadian Automobile Association to be here today to comment on Bill S-2.
Founded in 1913 as a non-profit and still to this day a non-profit, the CAA is a federation of nine clubs providing more than 6.2 million members from coast to coast with emergency roadside services but also with automotive and travel services, members' savings and comprehensive insurance. We have also since the very beginning in 1913 advocated on issues of concern to our members.
Our portfolio today includes road safety, the environment, mobility, infrastructure and consumer protection. From our earliest days, pushing for stop signs to public education about the importance of seat belts and air bags, to campaigns against impaired and distracted driving that continue to this day, we have been at the forefront of road safety advocacy for nearly a century.
Across Canada, approximately one in four drivers in every province is a CAA member. We are one of Canada's largest and most trusted consumer organizations, offering travellers and decision makers the information they need about issues that matter.
Our comments today on vehicle safety recalls are aimed at ensuring that consumers are safe, fairly treated and that necessary repairs are offered by manufacturers in a timely manner.
In the United States, the National Highway Traffic Safety Administration, or NHTSA, has the authority to require manufacturers to recall vehicles that have safety-related defects or do not meet federal safety standards. Since enacted in 1966 in the United States, more than 390 million cars, trucks, buses, recreational vehicles, motorcycles and mopeds, 46 million tires, 66 million pieces of motor vehicle equipment and 42 million child safety seats have been recalled to correct safety defects.
Here in Canada, the CAA believes that for the owners of the nearly 24 million light vehicles on the road today, Bill S-2 is a positive step that strengthens the enforcement and compliance regime to further protect the safety of Canadians.
As drafted, we are also pleased to see that the Minister of Transport would be provided for the first time in this country the authority to order companies to correct a defect or non-compliance and be given the ability to penalize through administrative monetary penalties companies that do not comply with the orders.
While most manufacturers live up to the high standards we have set for Canadian vehicles, which have helped make our roads among the world's safest, the fact remains that as we sit here today Transport Canada has 17 active defect investigations under way.
There are instances where government intervention may not only be useful but could be necessary. For example, on November 10 of this year Transport Canada announced that it had made a preliminary determination that there is a safety defect involving brakes on some 2011 and 2012 F-150 trucks. The department has received over 100 complaints on this issue.
In testimony before the committee last week, as you will know, honourable senators, the minister, Marc Garneau, said the government contacted Ford and is disappointed that the automaker disagrees with its assessment. He pointed out that under current legislation the effective result is a stalemate. This is not good enough. We don't believe this is good public policy. Bill S-2 will increase the tools available to the minister to ensure the safety of Canadians.
Today the strongest measure Transport Canada can take when dealing with vehicles it believes are a hazard to Canadians is to force the issuance of a notice of defect, which requires a manufacturer to notify owners that their cars are unsafe. That's it.
The government does not have the power to force a manufacturer to order a recall. This makes the current Canadian system a veritable, if not literal, paper tiger. Bill S-2 will give the minister the authority to order a company to issue that recall to make companies repair a recalled vehicle at no cost to the consumer and to prevent new vehicles from being sold in Canada until they are repaired. This matches similar legislation that exists in the U.S., finally levelling the playing field for Canadian consumers.
Transport Canada's website hosts information today about vehicle recalls and encourages consumers to address them as soon as possible. Bill S-2 will add teeth to that information and is a necessary tool for enforcement, in our view, in cases where the minister deems that intervention is necessary.
For too long Canadian consumer protection in this area has taken a back seat to the U.S. In our view, Bill S-2, while not perfect, goes a long way towards rebalancing the situation and is a solid advance for Canadian consumers.
Honourable senators, thank you for your time this morning. I would be pleased to answer your questions.
[Translation]
George Iny, Executive Director, Montreal, Automobile Protection Association: My name is George Iny. I am the Executive Director of the Automobile Protection Association. I will give my presentation in English and answer questions in both languages.
[English]
Next to me is John Raymond, who works with the association, but before he was with the APA, he was an auto dealer. I wanted to bring someone who has actually worked on both sides of the street and a person who when he was a dealer also operated with the highest level of integrity. If there are questions or if we want more depth for some of the questions, he could give us the additional real world experience.
The APA is a public interest association. We're basically fishermen. We essentially have public information hotlines and a website where we handle consumer complaints.
For many years before the web existed, you could say we were almost scouts for Transport Canada. Approximately 10 per cent of the complaints that the government received would have gone through our offices.
We also work with a network of recommended auto dealers and are in touch with them as well on a fairly regular basis. There are probably over 40 right now. As a consequence, we have some familiarity with both sides of the street.
The current Motor Vehicle Safety Act is like an old house that has not been renovated since the 1960s — literally — in some areas. Some of the requirements, as Ian just pointed out, are a bit quaint. The carmaker just has to send you a letter that your vehicle could be dangerous or injure you. I think that's part of the reason why today we have good, broad-based support for all sides for bringing it up to date.
I would like to address some of the specific amendments that are being proposed. First, we have talked a lot about recalls today. That's a little bit, to use the house analogy, like talking about your granite kitchen top and appliances. It's what you see but it isn't where all of the work has to be done. There are a lot of other initiatives in the act as well.
Today there are approximately 600 recalls a year in Canada and the United States. Ninety-nine per cent of those are voluntary, so no change as far as that's concerned from our standpoint. There is already good practice around that, even though the legal framework is not identical between the U.S. and Canada.
You're looking at the other 1 per cent, so six — some years it would be less or some years a little more — recalls where you have the equivalent of what Ian said is a standoff, where our government has to then go to the Americans and ask them to do something or possibly where the perception is that the carmaker is turning a deaf ear.
Even in those cases it's not likely that every one of those so-called standoffs would lead to a recall. Our government doesn't have a very strong record of being muscular with the carmakers. Even though our picture of the situation is coloured by the recalls and the investigations that don't work well, the ones that are a bit of a brawl and that are in the media for a long time, it doesn't necessarily mean that you will end up with that situation.
We see that more as an update. It will give the government tools for a small number of situations where right now they have to plead. It's not only unseemly; it's not actually good policy to require that. So that's a good thing.
The next thing is real-time look-up capability. Currently on the Transport Canada website there is a list of carmakers that will allow you to know if there is a recall in existence. They have already offered that service for over 20 years. Before the Internet you could phone to find out if there was a recall on your car but not if the recall had been done to your car. That's what we need now.
Currently, the government is like a blogger. They call the carmakers and find out what's available and put it on their website. The amendment here would ideally allow the government to require a carmaker — anyone distributing vehicles here — to provide that service to the general public so you could, first, find out if your vehicle is covered and, second, find out if it has actually been corrected.
We don't have a big privacy concern with this. A car is not a person and there is a very strong public safety component to this.
It's also very important if eventually we want to get around to getting uncorrected vehicles in the hands of subsequent owners corrected. That's where this conversation is going and it may eventually require some buy-in from the provinces. It's important for them to know there is a uniform ability to access this information and maybe tell someone at the time their registration is up for renewal: "Your car has an open recall; you have to bring it in." We do it for parking tickets. We are able to collect parking tickets. So I think that's an important thing.
With regard to administrative monetary penalties, this is something supposedly new. It will be a form of traffic ticket to someone who is out of compliance. Here, Ian and I are not in 100 per cent agreement. At the APA, we believe the fines should be low, but the reality is that they should be levied if you are consistently non-compliant.
There is a problem right now at Transport Canada where they have a huge hammer that is very difficult to use, so it doesn't get used. We would prefer to have a culture of regular, consistent enforcement of the act. We're told that these penalties would actually allow that to happen.
Fines received under the new provisions become public money. At the APA, we believe that some of that money should be set aside for public interest research on road safety. There are very good examples for very small amounts of money.
You mentioned the Volkswagen issue. That was discovered by a few university researchers on a grant of under $100,000. That is something that seven or eight countries that had diesel emissions standards were not able to find.
We believe very strongly that that would be a useful amendment and that some of that money should be set aside for public interest research on road safety.
Finally, the recall completion rates. Currently under our act — and this goes back to 1970 — the carmaker has to file, every quarter, the percentage of vehicles fixed, until the eighth quarter, and then it's off the table.
With some companies, we are seeing that they don't do anything for the first year. They wait and start filing by the fifth, sixth or seventh quarter, and after the eighth quarter, it's over; it's a dead end. It's not an investigation anymore because they have announced a recall. They have not fixed everything, but there is no real consequence for it.
Our understanding is that these amendments would support more robust follow-up and activity around recall repairs. If your initial letter didn't work, you would have to re-notify the current owners, not the original owners in your records, to bring your recall correction rates up to speed. We think that's a good thing.
There was some conversation here earlier about what is called a pre-call, where the car is delivered to the dealer, has an open recall but is not sold. I will tell you that, generally, the industry practice around this is pretty good. With most carmakers, unless the recall is for something where the safety issue is remote, where a label is delivered in Spanish and English instead of French and English — that does happen — or the tire pressure is too high, which is not really safety issue, the general practice is very good around this. There is not that big a problem with pre-calls.
Our concern, though, is that the way the clause is written, would someone interpret this to mean that Transport Canada has no authority with recall completion rates after the car has been sold for the first time? Currently, although the government doesn't use its authority in a very creative way, they do have some oversight and responsibility for it, and we would be unhappy if this were understood backwards to say were it to be sold, it's not your problem anymore.
That's it.
[Translation]
Senator Boisvenu: Mr. Iny did not mention that he is a radio and television star in Quebec. Let me congratulate Mr. Iny for his excellent work in defending the interests of automotive consumers.
It is useful for our committee to hear from consumers. We have had a lot of discussions with the representatives of producers and vendors. The consumers' version is very important, because Bill S-2 seeks to protect them better.
Looking at the American model in relation to the Canadian model, in the context of Bill S-2, where does our country stand in terms of consumer protection, on either side of the border?
Mr. Iny: There are two points of view: the legislation and the regulations. In general, Canada follows U.S. regulations. We are not at a disadvantage. When there are differences, we receive the same equipment.
As for the legislation, these updates will equip Transport Canada with a measure that is more comparable to current practice in the United States. For example, it is possible to appoint an external person as an auditor in a car company. There are fines for delays and it is easy to check, in real time, whether the vehicle is being recalled. The U.S. has all those things. We see those items as an update of our legislation. We will not have the same fines or penalties as the U.S. In other respects, the legislation is not the same, but that's not essential.
Senator Boisvenu: Are automakers waiting too long to integrate some safety features into their basic configuration? I am thinking of smart speed regulators, emergency brakes and lane departure warning signals. Do automobile manufacturers wait too long to integrate those devices into their basic configuration? We know that consumers have to pay extra to have certain features in their vehicle.
Mr. Iny: That was true at one point, but it is probably the opposite today. Efforts are being made to ensure that intelligent safety devices, such as anti-collision systems, are installed in more affordable vehicles. This is an interesting issue.
For now, the bill will not affect the current trend. There is no requirement for other devices to be installed, except for the equipment that is already required. We look forward to seeing the first field studies with the vehicles.
Senator Boisvenu: In your opinion, does Bill S-2 go far enough or could it be expanded to provide better consumer protection?
Mr. Iny: Overall, I am very pleased with this piece of legislation. We might even say that this is a historic moment. We have corrected the shortcomings in our first piece of recall legislation from 1970.
About a year and a half ago, Bill S-62 died on the Order Paper because of the election. In some places, such as the recalls of vehicles that were not sold, Bill S-62 was a bit more —
Senator Boisvenu: Robust?
Mr. Iny: Yes. However, this bill is a fine step forward.
[English]
Senator Mercer: Gentlemen, I'm a little curious. You've both proposed changes and we have had others propose changes. Are the changes that others have proposed and your proposed changes compatible?
Mr. Jack: We are not proposing any amendments. Our view is that it's time to get this passed. As was just referenced, we had a bill under the last government that was substantially the same. To the extent it was different, it was a little bit stronger. We now have Bill S-2 in front of us, and what really matters in this bill is giving the minister proper power on recall and some of the other issues raised today.
There was a long discussion on the other panel about the dealer versus manufacturer and who should pay for what. We would not want to see the bill held up for that sort of thing.
I would add that significant issues are going to be dealt with through regulation. We are very interested and anxious to see what the government will propose in those regulations. Certainly I would recommend the committee keep an eye on those when they start coming.
George made the same point a moment ago. For instance, right now only about half of the manufacturers offer VIN lookups on their websites. You can't actually do that through the Transport Canada website. If you want to know if your particular vehicle is subject to a recall, you take your chance with the manufacturer. But there is regulation under way. The department was told to bring that into being.
With regard to safety reporting requirements, Transport Canada says that they're waiting on a study from the National Highway Traffic Safety Administration, NHTSA, before they proceed with regulation on that. How much data will they be asking for from the manufacturers? That is going to matter.
The AMPs will be brought forward under regulation, not in the act itself. Our view, actually, is that we should have a stepped regime. I was reading the Automotive News yesterday. They said that the average automaker spends between $100,000 and $500,000 on media junkets to launch a new model. If you keep that in mind when you look at AMPs, I think we can agree that they could afford to pay. We need a meaningful deterrent so that the cost of performing the recall is not a lot more than the potential AMP that they might face.
At the same time, we would agree with George that we don't want to see the American situation where they cap out at $105 million. That seems a little supersized to us. We don't need to go that far.
My point, senator, would simply be that there's a lot coming forward in regulation that we do need to care about.
Senator Mercer: I should point out, though, that I think one of the reasons this bill was introduced in the Senate as opposed to the House of Commons was that we could probably propose some of these amendments, and by the time it gets to the Commons it would be a much better bill. Therefore, we would not be holding things up; we would be speeding things up by providing better legislation to the House of Commons. Because if it gets over there, with all due respect for my colleagues in the other place, they don't have the time or the record of detail that we have on these things.
I think it's wise for the government to initiate some of this legislation here because we take the time to do it right. Not that they do it wrong; they just don't have time to get it right. It's a question of time.
I would suggest that any amendments we make will not be slowing things down; we would be improving the legislation before it gets to the other place.
Mr. Jack: Fair point, senator.
Senator Mercer: I've asked this question to a number of witnesses. As I indicated before, I have a vehicle that's subject to recall. I get a letter from my dealer telling me my vehicle is subject to recall, but "Don't bring it in because we don't have the parts, and we don't know when we're going to have the parts." But they also don't tell me in that letter that I should or should not drive my vehicle.
I assume that if I shouldn't drive my vehicle, they would have told me that. It's an airbag issue. I don't drive my granddaughter in the front seat of my car anyway, because she is too small. But if I had an older grandchild, I would be a little concerned about that there is no reference to the safety aspect of me using my vehicle.
Should there not be some direct reference in any letter to the consumer about the safety issue?
Mr. Iny: One of the concerns early on when these notices were going out was that in fact the carmakers were not using strong enough language. I remember an old Volkswagen recall. They advised customers not to park their vehicles near Christmas trees or combustible materials in the garage around Christmastime.
Senator Mercer: I wonder why.
Mr. Iny: Now, often the language you see is tough, formal language to say that the vehicle could hurt you or involve significant damage.
You're right; the companies pull back and don't do the next thing — in your case, I assume, if it's that airbag recall, to say that there haven't been any cases in Canada and the likelihood is remote.
I would argue that we need to give the government the power, I hope in these amendments, to get involved with the language of the notice as well. They rarely do it. There is a possibility. In fact, we are fielding complaints weekly, I would say — if not daily at one point — from people who are nervous because they, like you, read the thing and they don't feel that the vehicle might be safe, or they don't know if they can put someone in a seat or not. So it's a problem.
It's not every recall where parts are delayed, where you would be worried about driving the car.
You actually need, I guess, a regulator that has enough flexibility and tools to give that advice. Those notices have actually kept a lot of people up at night, the ones who receive them, and probably unnecessarily for that particular recall.
Senator Eggleton: Thank you for being here. I would like to ask you about the previous panel. I don't know if you heard their testimony. They made specific recommendations that this bill, which is an amendment to the Motor Vehicle Safety Act, should be further amended. The manufacturers had three suggestions. The automobile dealers — Mr. Raymond will be familiar with this — are saying they should get the same treatment as is the case in the United States in terms of reimbursement from the manufacturers for cars that are sitting in their lots and inventory that they're carrying the cost of, separate from the actual repair cost.
I have a bit of Mr. Jack's point of view which is not to amend the bill, but do you have any comments about the amendments that the vehicle manufacturers, the Big Three, and the Canadian Automobile Dealers Association are suggesting this committee consider passing?
Mr. Iny: When it comes to recalls, the relationship between the dealer and the manufacturer is not one of equals. The manufacturer is driving the bus; the dealer has to do what he's told to do and is often, in some cases, watching the value of his franchise go down while his manufacturer is stalling or bobbing and weaving and not doing the right thing. That does actually happen.
To extend the legislation to cover the commercial relationship between the manufacturer and dealer would be something new and almost breathtaking in Canada. We would welcome anything that promotes equity between the different parties involved, including consumers but also business to business.
I don't know if you want to add something, John.
John Raymond, Director, Toronto, Automobile Protection Association: I was very pleased with John White's comments that the CADA is a former auto dealer. It's our job to handle the front lines, to deal with the consumers. If they're being compensated responsibly, they will be able to handle their constituents and customers much better. I would be for that amendment, absolutely.
Senator Eggleton: What about what the Canadian Vehicle Manufacturers' Association has suggested?
Mr. Iny: We wouldn't want to see Transport Canada's wings clipped on its ability to do research. I think it's their business what they want to study. If it really were not relevant to safety and a carmaker were being asked to produce material, I think they could easily defend themselves.
There may be other issues related to the relationship between manufacture and dealer where somebody maybe wasn't considered enough. I'm not exactly sure of that.
Certainly a carmaker has plenty of tools to stop a dealer from selling a vehicle, if they wish to use them. They may not control the registration of the vehicle, but there are penalties that you could apply in such a way that, de facto, no dealer would take the chance to do that.
Right now I would say the industry practice around pre-calls is pretty good. That's a brand new car that's never been sold.
Senator Eggleton: Mr. Jack, do you have any further comments?
Mr. Jack: I'm not opposed to all amendments for all time. I was attempting to say that we've in some cases been waiting decades now to update this legislation. Anything that is for the consumer good and that can be gotten through in fairly quick fashion, we certainly wouldn't oppose at the CAA. We just don't want to see things get bogged down. Given the history of legislation in this area, one could suggest that the longer the manufacturers have to work on things, the less stringent the legislation becomes over time. That would be a concern we would have, frankly, in this area.
One thing we haven't raised so far is completion rates. I don't know if this was in the testimony from the department last week, but they are rather low. One of the things the industry doesn't talk about much — but I'm sure George could in more depth than I — is that it's actually a costly process. The industry doesn't actually have consumer records that are nearly as good as you might think. Partly that may be their responsibility. Partly, of course, you get on to a second or third owner of a vehicle, and it's very difficult to trace people. It's very costly for a manufacturer to buy lists of consumers and to track them down. Whether or not they want to spend the money to do that past a certain point comes down to corporate philosophy and corporate goodwill, frankly. Some manufacturers will do what it takes to get their completion rate up to 30, 40, 50 per cent, and then they will stop. That's not addressed, if you're looking for things that could be addressed.
Mr. Iny: We do speak to the amendments in our written submission. I believe these amendments would allow completion rates to be addressed. I'm not sure because we mention it. I didn't tie it to one of the clauses because I wasn't sure where. If, in fact, you're told by the people in Transport Canada that that's covered, we're good with it; if it's not, then at the risk of slowing things down that does need to be considered.
Senator Eggleton: I'll flag it.
Senator Runciman: Mr. Iny, was Phil Edmonston the head of your organization?
Mr. Iny: He was. I spoke to him. He's retired now in Panama.
Senator Runciman: I compliment you on the new approach. I introduced Ontario's first lemon law, and he was at the back of the room heckling me throughout the process; so this is refreshing.
There is a reference in the legislation to the use of interim orders, including the use and development of new technology. The interim orders will grant exemptions to the rules. What was the language? I have written it down here: "The exemption would not substantially diminish the overall safety of the model." That's the exact wording, which I find pretty subjective.
Do any of you have concerns about the use of interim orders, rather than putting this into regulation?
Mr. Iny: I suspect it's there for a reason.
Senator Runciman: Sure it is.
Mr. Iny: It is necessary because of the rate at which technology is moving ahead. We'd rather have things covered inside of a framework, rather than being done on an ad hoc basis.
There is enough reluctance or inertia to take a chance on something new that we're not too concerned if government has been given the authority to look at something and wants to green light it on a study basis or temporarily, that that would end up being a large loophole that couldn't be closed.
Senator Runciman: Because it's in regulation?
Mr. Iny: If I understand correctly, the capability is there to do it, and then it would be done by regulation. Am I not correct?
Senator Runciman: There are three-year interim orders. I happen to sit on the committee dealing with regulations, and interim orders are three years now, another three years and another three years. That's the challenge, especially when you're dealing with public safety.
Mr. Iny: In that case, I will humbly pass on your question because I think I'm missing a piece to answer you responsibly.
Senator Runciman: Something to reflect upon, perhaps.
Mr. Iny: Yes.
Senator Runciman: In their submission, the manufacturers also talked about the use of regulation versus legislation — this is the other side of the equation, I guess — with respect to the notification provisions. They want that section of the bill removed. Do you have any input on that, whether you think that's an appropriate amendment, or are there any implications we should be aware of?
Mr. Iny: If the manufacturers wish to provide a guarantee that they aren't going to water it down by lobbying after the fact, I guess.
I would respect the structure of the act and the regulations as they are now. The notice, under the old law, was the remedy. It wasn't the legislation; it was the key element. I think we're still in the tradition of that legislation.
Senator Runciman: So you're comfortable with legislation? You don't support the proposed amendment?
Mr. Iny: I'd have to learn more about their preoccupation with it. My concern would be that you would get some dealing and watering down later, which you couldn't get now if it were in the act.
Mr. Jack: As I was saying earlier, there still isn't a direct line from the manufacturer to the end customer, in many cases. An incredibly important link in the chain is to make sure the consumers are notified that their vehicle is under recall. You would think that would be automatic, but it's just not. We would share George's position that it's very important that that get done.
This was to John White's point in the earlier panel, where you're depending on corporate goodwill. We have 21 manufacturers selling in this country, and the overwhelming majority will be good corporate citizens on most days of the week, but I don't think we can count on that in this crucial area at all times.
Mr. Iny: One of the issues that comes up with the notice — currently it's what I would call most narrow and rigid thinking — is a letter by mail to the last address in my records, which is the first address when the car was delivered. If the car was re-sold or the person has moved, that's it. In that case, roughly 50 per cent of the notices don't reach the current address or owner of the car.
Commercial accounts are another issue. If you're a leasing company, there's better practice around that now. But if you get 50 notices, you don't want to bother 50 customers, so you just put them in the garbage. I've actually seen that happen. It's better today, but I'm not sure. So the notice is important.
Senator Runciman: It intrigued me when you talked about penalties and said there's a hammer that's not used. If you look at the General Motors ignition switch issue, we're told it caused 124 deaths, at least 2 in Canada. We've heard some conversation about Takata as well. That one jumps out at me — 124 deaths.
You're saying now that they're going to be able to use the hammer. It seems to me there's an effort within the legislation to at all costs avoid criminal charges. They have certainly been able to avoid them up to this point in time, it seems to me, when you have a significant number of deaths, that there may have been significant fines, but no criminal charges laid that I'm aware of. What has your organization done or said with respect to those issues which have caused significant harm?
Mr. Iny: You raise a few issues. I'll start with the big hammer.
Our point wasn't that this big hammer would get used more often; it's that we're giving them other tools, like a screwdriver and maybe a nail file, so there wouldn't be the same fear.
Also, if it became part of the landscape here, if you could name someone to go into the company and set up a safety culture, you might actually, instead of working from only a punitive mode, but working towards a best practice mode, we see that as a possible outcome of what's being proposed here.
Yes, we asked ourselves the same question: Why didn't anybody go to jail? Clearly in the case of Takata, we don't have incidents occurring in Canada. That's a conversation to have in the States.
As far as the GM case is concerned — these are specific cases. We can't just say it generally. The Canadian company really wasn't aware of what was going on. They were not involved in any key or material area in the cover-up, as far as I know, unless there are documents under seal that haven't come out.
Yes, it is sometimes astonishing that bad practice doesn't personally impact the individuals in that way, because that would be a very powerful deterrent.
We're in a gasoline case now where we're the civil claimant for a price cartel. Relatively speaking, it's a few cents a litre on your gas, and a lot of people got house arrest. It's really difficult for them. It's a very difficult penalty compared to the fines. Absolutely, that would have a big impact on companies.
I don't think this is going to be a very likely outcome in Canada with or without this law, because we don't do a lot of the research and development here.
At a more basic level, which is get some discipline around receiving your complaints and not burying them, when you send out your notices, make sure you bring people in, not to have a dead end around there. Make sure your notices are understandable so if you're telling a person the vehicle could make their house catch on fire that you're not making them live with that for six months.
Those would be important and help instil a certain rigour.
By the way, once these tools are out, your job has only started. Our job might be done, but Transport Canada would have to get to work, because they are like someone who hasn't gone to the gym in a while and you give him a new membership. He's not in shape until he starts going to the gym.
The Deputy Chair: Thank you, gentlemen, for your presentations this morning.
On behalf of the committee, I'd like to let everyone know that tomorrow night we'll proceed to the clause-by-clause consideration of Bill S-2.
(The committee adjourned.)