The head of Ford Canada is calling for a hefty government subsidy to encourage Canadians to buy new cars, arguing that is a better means of helping the auto sector than massive cash injections for automakers.
Ford CEO David Mondragon told a parliamentary committee on Monday night that Ottawa should provide a $3,500 "stimulus" for Canadians who scrap their older car for a new one.
That would get vehicles that are least 11 years old off the road, replaced by cleaner, safer, more fuel efficient vehicles, Mondragon said.
"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," Mondragon said.
"There are great opportunities for governments to help the industry and the economy find the bottom."
Ford has not asked for a bailout and says it can manage on its own this year. GM and Chrysler, however, have both asked for about $10 billion from Ottawa and the Ontario government.
But Canada's finance minister, Jim Flaherty, says that this incentive plan won't work.
"People who are driving old cars don't tend to buy new cars when they replace them, and I think that's what Ford's probably interested in, people buying new cars," he said.
But Ford says that a similar incentive program in Germany boosted sales 22 per cent.
A grim prediction
Mondragon was critical of Ottawa's bailout plans for Ford's competitors, and said it would be better to put the cash in the hands of buyers to encourage them to start shopping again.
Currently, the federal government is offering a $300 rebate for Canadians who trade in their clunker for a new car. That's so small, Mondragon said, that no one is actually using it at the moment.
He said a much larger rebate, along with money to help ensure Canadians can get loans to buy new cars, is the best approach to helping the auto sector.
Ontario Premier Dalton McGuinty said he would consider boosting the so-called scrappage program. He said Mondragon pitched the idea to him last week and that he found it compelling.
He said the idea is one of many that the province's finance minister is considering for the upcoming budget to be presented on March 26.
Mondragon's grim prediction to the committee was that auto sales will fall 13 per cent in 2009, compared to 2008 statistics -- a drop of 250,000 vehicles.
That could mean $20 billion in lost sales and $3 billion less in tax revenue for governments.
Mark Nantais, of the Canadian Vehicle Manufacturers' Association, went along with Mondragon on the rebate suggestion. He said Germany introduced a similar plan and boosted sales by more than 20 per cent in February.
"Aside from the immediate economic benefit, we inherently enjoy a triple win with new vehicles that are cleaner -- 12-18 times less polluting -- more fuel efficient and indeed are...safer," he said.
Nantais said auto production in Canada is down 60 per cent so far in 2009. If that remains consistent throughout the year, it will result in 1.6 million fewer vehicles rolling off assembly lines in this country.
The statement came as the Canadian Auto Workers and General Motors reached a tentative deal that will see wages and pensions frozen in a bid to reduce labour costs.
On Sunday, the CAW and GM negotiated the agreement that would freeze base wages and pension levels, extend the union's existing contract to 2012 instead of 2011 and require autoworkers to pay a health premium, among other concessions.
The deal is expected to be ratified in a vote later this week and is contingent on GM securing the more than $30 billion in loans it is seeking from the U.S., Canadian and Ontario governments.
Auto industry expert and Trent University professor Dimitry Anastakis said that the automaker needs billions in aid to stay afloat, and the union concessions will only save the company millions.
Last week, GM admitted that auditors expressed "substantial doubt" about the company's ability to keep operating and it fell to third place in the Canadian market in February sales.
With a report by CTV's Roger Smith and files from The Canadian Press
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