Ford Canada CEO urges feds to provide car-buying incentives

The best way to rescue Canada's battered auto sector is not through direct bailouts, but by giving consumers an incentive to buy new cars, Ford Motor Co.'s Canadian chief executive said Monday.

"What we need to do is provide an 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."

Mondragon was not critical of planned bailouts to General Motors Corp. and Chrysler LLC, but said the biggest boost Ottawa can give the industry is to encourage Canadians to buy its products.

He said the government could do this by making sure consumers can get loans to buy vehicles and through a short-term "stimulus" that would give a substantial incentive beyond the current $300 credit to scrap old cars and purchase new ones.

The latter recommendation was seconded by Mark Nantais of the Canadian Vehicle Manufacturers' Association, who noted Germany had boosted sales by more than 20 per cent in February through a generous scrappage program to take old cars off the road.

"Aside from the immediate economic benefit, we inherently enjoy a triple win with new vehicles that are cleaner — 12 to 18 times less polluting — more fuel efficient and, indeed, are more safe," he said.

Still, all industry representatives and union leaders meeting with the MPs were blunt about the crisis facing the Canadian auto sector.

Vehicle sales plummet

Mondragon said auto sales will likely fall 13 per cent — or 250,000 fewer vehicles — this year from 2008, 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 in the U.S.

Nantais said production was down 60 per cent so far this year, which would result in a drop of 1.6 million vehicles if current trends continue.

But while the MPs were mostly concerned about the wisdom of Ottawa's and Ontario's multi-billion-dollar rescue proposals, industry representatives said the problems were broader than those of individual companies. The problems include plunging consumer confidence and frozen auto leasing markets, they said.

One official said leasing has gone from 43 per cent of all cars sold last year to 19 per cent this year, representing 390,000 fewer units.

The government has created a new $12-billion credit facility to boost lease activity, but Mondragon said that was too small given that the size of the market is $60 billion.

He was especially critical of Ottawa's $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- to 18-times as much pollution as newer vehicles.

Ford is the only automaker of the so-called Detroit Three to have so far eschewed government bailout money. General Motors and Chrysler have asked for about $10 billion from Ottawa and the Ontario government.

The bailouts 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.

Ford strikes deal with union in U.S. 

Earlier on Monday, the United Auto Workers union in the U.S. said its members working for Ford approved contract changes that include freezing wages and cutting other benefits in a move aimed at helping the automaker remain competitive.

The approved agreement also ends the jobs bank program and lets Ford make payments in stock to a union-run trust for retiree health care.

The union said 59 per cent of production workers and 58 per cent of skilled-trades workers voted for the agreement.

Ford is the first U.S. automaker to come to an agreement with the union.

Over the weekend, GM Canada and members of the Canadian Auto Workers union reached a tentative deal that will be voted on by 10,000 workers in Ontario on Tuesday and Wednesday.