Ontario tries to allay auto sector fears over climate change plan

Theglobeandmail.com
May 2, 2016
By Greg Keenan and Adrian Morrow

The Ontario government has moved to reassure the auto sector that it considers the industry crucial to the province’s economy amid a controversy stirred up by a draft action plan on climate change and comments critical of auto companies and executives by Environment Minister Glen Murray.

The government has taken the unusual action of issuing a joint statement to the auto industry - sent by Mr. Murray and Economic Development Minister Brad Duguid - after the Environment Minister described the companies in Canada as “lacking courageous leadership” and doomed to have BMW and Tesla Motors Inc. “start eating [their] lunch.”

Mr. Murray’s comments came in a speech the day after The Globe and Mail published details of his draft action plan on climate change, which includes a provision calling for an electric or hybrid vehicle in every multivehicle driveway in the province by 2024.

The rare joint statement, in turn, was sent to key industry officials late Friday, one day after Mr. Murray’s comments from the speech were reported.

The two ministers promised in the statement that any actions the government takes to address climate change will not place an unfair burden on the sector, which it said contributes $16-billion a year to the province’s gross domestic product.

“We value each and every company that operates here today,” the statement said.

“We have tremendous leadership throughout Ontario’s auto sector, right from the parts makers to the assembly plants - dozens of companies are stepping up and leading the charge.”

In his speech to the Economic Club last Thursday, Mr. Murray called for an entrepreneur in Canada to play a transformative role in the auto industry and “kick Elon Musk’s ass,” referring to the CEO of Tesla. He added that during the 2008-2009 recession, auto makers “were almost roadkill on the international economic highway, [but] we stepped up to get those industries back on track.”

There were few specific initiatives in the draft plan on how the industry and the province would persuade consumers to change their preferences. Those tastes, at the moment, are skewed more toward pick-up trucks and crossover vehicles and away from fuel sippers - even internal combustion-powered cars that are stingy on gas.

Putting an electric or hybrid vehicle in every multivehicle driveway in Ontario would require sales of about 1.7 million such vehicles over the next eight years or more than 200,000 a year. Auto makers sold about 760,000 passenger vehicles of all types in the province last year. Battery-powered and hybrid vehicles represent about 2 per cent of the national market annually.

“It would be unfair and place Ontario at a competitive disadvantage if we were to place the entire burden on the auto sector to convince consumers to adapt,” the ministers wrote.

The regulatory and political environment affects decision-making among auto makers looking at spending billions of dollars on existing factories in the province and those considering new investments, one industry source noted.

Statistics show that Canada is already the third choice among NAFTA countries when it comes to new automotive investment.

The controversy risks undoing the work the government has done to make Ontario more attractive to international investors, the source said.

The ministers said they will consider the impact their actions will have on the climate for business.

“While our province continues to be a leader on the climate-change front, we also remain fully engaged with our business community to ensure that whatever measures we take do not place Ontario at a competitive disadvantage,” they wrote.

Linda Hasenfratz, chief executive officer of engine and transmission parts maker, Linamar Corp., Canada’s second-largest auto-parts maker, said she applauds the government’s climate-change initiative.

Much work needs to be done on the logistics of making it work, Ms. Hasenfratz said, including building the capacity the industry needs globally to assemble the number of battery-powered vehicles that all governments want on their roads.

“The capacity for pure electric is pretty slim right now, although of course it is an area everyone is looking at,” she said in an e-mail. “It is great to demand some percentage of electric, but if the industry can’t produce them that is an issue that needs to be solved (and will be of course.)”