TORONTO (Reuters) - Ottawa’s support for auto parts companies is a good step toward helping the auto sector in Canada, but a robust scrappage program would give the struggling industry an even bigger boost, the chief executive of Ford Motor Co’s Canadian unit said on Tuesday.
David Mondragon told Reuters he supported the move by the government of Canada to increase the funding it will make available to insure money owed by manufacturers to auto parts suppliers.
“Our industry is very interdependent, as we all know, and we understand the fragility of some of the suppliers in Canada and in the U.S., so any support that can be offered to them is well supported ... by Ford,” he said.
But he said what he would really like to see is a new scrappage program in Canada to replace the current model that gives consumers C$300 ($242) toward a new, more environmentally friendly vehicle when they get rid of their older ones.
“I think that less than a dozen people have taken advantage of that C$300 offer to scrap their vehicle,” said Mondragon, pointing out that the average 10 year-old car is worth between C$3,000 and C$4,000.
Mondragon said he believes a “cash for clunkers” program that offers C$3,500 toward an new vehicle would help the industry, and the economy, claw back some of the losses brought on by five straight months of auto sales declines.
Germany, for example, said on Tuesday it would increase funds for its popular car scrapping subsidy to 5 billion euros ($6.77 billion) from 1.5 billion. The plan, which will run until the end of the year, offers consumers 2,500 euros for cars nine years old or older toward new, lower-polluting vehicles.
Reid Bigland, chief executive of Chrysler’s Canadian arm, said in a statement he would also like to see a more aggressive scrappage program in Canada.
“Done right, these programs can provide a welcome economic stimulus, automotive sales stimulus, and help the environment at the same time by getting older vehicles off the road,” Bigland said.
“Remember that the average 1987 model year vehicle emits 37 times the (greenhouse gas) emissions as a current model year vehicle.”
Ford’s Mondragon recommends the C$92 million budget in place for Canada’s current scrappage program be put toward an expanded plan.
He would like to see all taxes generated from new vehicles bought under the more robust program put back into the plan to keep it running for six months, until the industry stabilizes. .
The auto industry accounts for about 20 percent of all retail sales in Canada, from the vehicles themselves, to gasoline, car stereos and windshield wipers.
Mondragon said he met last week with legislators from the Conservative government, as well as the opposition, on the idea an expanded scrappage plan. He said that the response was strong, but the concept still needs a champion on Parliament Hill.
Over 6 million vehicles, more than 30 percent of the Canadian fleet, are over 10 years old and would qualify for the program.
“My fear is that we would do it and quite frankly, it would be over-subscribed in a big way,” Mondragon said. “I think there’s that much interest from average consumers in Canada.”
Reporting by John McCrank; editing by Rob Wilson