$3.8 billion Chrysler investment 'not ideal,' Harper says

Stephen Harper must be hoping we all have short memories, because this was HIS IDEA for the auto industry a short two years ago, This doesn’t sound too “ideal” either:

Harper’s 'Green levy' hurts Big Three

STEVEN CHASE AND GREG KEENAN
Globe and Mail
May 30, 2007

OTTAWA, TORONTO — The Harper government's "green levy" tax on less fuel-efficient vehicles threatens investment in Canada's auto sector, a major lobby group warned federal lawmakers yesterday.

The Canadian Vehicle Manufacturers Association also cautioned that Ottawa's scheme to subsidize more fuel-efficient cars is distorting the market, sending more than two-thirds of the cash to Toyota Canada Inc. buyers, half of which will reach purchasers of a single model, the Yaris.

Ottawa expects to extract $110-million annually by a levy slapped on purchases of so-called gas guzzlers - about $55-million of which will come from autos sold by the Big Three U.S.-based auto makers.

"At a time when facilities are being closed in many regions of the world because of global overcapacity - including some in Canada - capital is no longer fixed and can be moved globally and every dollar on the bottom line is being counted," Mark Nantais, CVMA president, told the House of Commons finance committee.

"A $55-million tax is one more obstacle to explain as one develops its business case for new investment in Canadian operations," he told MPs sitting on the committee.

He warned that Ottawa's surprise 2007 budget move to dole out subsidies and penalties for purchases of various cars based on fuel efficiency is a historic intervention in the auto market.

"This measure constitutes, in my mind, the single most significant intrusion into - and disruption of the functioning of - the competitive automotive marketplace," Mr. Nantais said.

His group represents the Canadian arms of the Big Three U.S.-based auto makers: DaimlerChrysler Canada Inc., Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd., all of which have also spoken out publicly against Ottawa's auto "feebate" scheme.

In addition to lobbying Ottawa directly, Mr. Nantais made a presentation earlier this week in Oshawa, Ont., home of General Motors, where he urged Oshawa City Council to push the federal government to eliminate the feebate program immediately.

Conservative Finance Minister Jim Flaherty shrugged off concerns about his budget's subsidy scheme, saying it's inevitable some car makers will be upset if fewer of their models qualify for rebates than they would prefer.

"There's some line-drawing inevitably that happens there, and some companies are more happy than other companies about the line-drawing and they're talking about that with Transport Canada which is responsible for the line-drawing."

Mr. Flaherty suggested, however, that the fuel-efficiency cut-off point for the subsidy could be revised in the future.

"That can change over time," Mr. Flaherty said.

Feebates also penalize some technologies being developed in Canada and used in Canadian-made vehicles, Mr. Nantais said, pointing to so-called cylinder deactivation, which involves some cylinders of an eight-cylinder or six-cylinder engine shutting off when a vehicle is cruising, which reduces fuel consumption.

The levies from the scheme will cost Chrysler, Ford and GM $67-million while providing $47-million to Toyota Canada Inc., he added.

The Toyota Yaris consumes 6.4 litres of gas for every 100 kilometres it travels, which means it qualifies for a $1,000 rebate by falling below the line of 6.5 litres per 100 kilometres.

Honda Canada Inc. has already acted on its own by offering $1,000 rebates to buyers of its Fit subcompact, which competes against the Yaris, but uses 6.6 litres of gasoline to travel 100 kilometres. It misses the cut-off for the rebate by one-tenth of a litre