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Auto makers snipe at feebate 'inequity'

From theglobeandmail| March 26,2007

The new federal “feebate” scheme could generate $40-million in savings for Toyota Canada Inc. buyers while purchasers of new vehicles from the Detroit three would pay about $45-million in penalties on gas guzzlers.

Those numbers are based on 2006 sales of the vehicles that are eligible for a rebate and subject to a penalty in the program introduced in the federal budget on Monday that has become the subject of intense debate in the auto industry.

An analysis circulating in the industry shows that based on last year's sales figures the $1,000 rebate on the Toyota Yaris subcompact alone would have generated about $34-million in savings for Toyota buyers. People purchasing gas guzzlers from DaimlerChrysler Canada Inc., Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd. would have been out of pocket $55-million, offset by about $10-million in savings, mostly from a rebate on sales of ethanol powered vehicles.

“There's such inequity here, and the environmental benefits just aren't there,” said Mark Nantais, president of the Canadian Vehicle Manufacturers Association, which represents Chrysler, Ford and GM.

Auto makers – uneasy allies at the best of times – are divided on what to do about the federal budget, but the debate will play out next week at the winter meetings of the Association of International Automobile Manufacturers of Canada (AIAMC) in Phoenix. The group represents offshore-based companies.

Honda Canada Inc., Hyundai Auto Canada Inc. and Nissan Canada Inc. are expected to lead the charge for a strong stand against the budget, industry sources said yesterday.

“It's going to be an interesting meeting,” said Lindsay Duffield, president of BMW Canada Inc., who is also this year's AIAMC chairman.

They will run up against Toyota, which has expressed strong support for the budget and did so again yesterday.

“What the government is attempting to do here is to respond to the challenge of climate change,” Toyota managing director Stephen Beatty said.

He said he has not done an analysis that would confirm the $40-million in savings for Toyota buyers, but noted that its sales change from year to year and the auto maker would be unable to boost production immediately if there was a sudden surge in demand for the Yaris based on the $1,000 rebate.

The difference in fuel consumption between the Yaris and some other subcompacts in the segment is the equivalent of a 19-per-cent difference in CO{-2} emissions, he said.

“In the context of public policy around climate change, that's not a drop in the bucket,” he said.

He noted that some Toyota vehicles are penalized by the gas guzzler tax and some Chrysler and GM vehicles are eligible for a rebate. The rebate applies to hybrids, vehicles capable of using E85 ethanol and other fuel-efficient cars.

“If I were at General Motors right now, I think I'd be looking at how to make every Impala I sold an E85 vehicle,” Mr. Beatty said. “I think that changes the economics of it.”

Another aspect of the budget that has been applauded by auto makers – the move to provide subsidies of $36-million during the next two years to drivers who scrap their older, more heavily polluting vehicles – will likely have little impact, industry analyst Dennis DesRosiers said yesterday.

Canadians will scrap between 2.4 million and 2.6 million vehicles during that period, said Mr. DesRosiers, president of DesRosiers Automotive Consultants Inc. A $36-million incentive amounts to $15 a car, he said. Even if it's restricted to vehicles older than 15 years, that's still just 1.2 million to 1.4 million vehicles over the next two years or $30 a car.

“So, as much as I applaud the government on their scrappage initiative, I really don't think that $15 to $30 per vehicle is gong to get many older vehicles off the road,” he said.

Environmental groups have also expressed disappointment with the plan, although Ken Ogilvie, executive director of Pollution Probe, said the feebate system “sends an informational shot across the bow of consumers that it is important to think about fuel efficiency.”

He added, however, that it would have little direct impact on emissions of greenhouse gases or smog-causing pollutants, especially given that it affects only 10 per cent of new cars sold in Canada.

The opposition slammed the plan yesterday in the House of Commons. Liberal MP Judy Sgro, a member and former chairwoman of the party's auto caucus, said it was the clear the measures were “not looked at seriously...

“It was just a matter of: ‘This sounds good environmentally and we've got to be on that bandwagon, so that's what we're going to do.'”

The Conservative government has made the auto industry a “scapegoat” because it doesn't want to go after the oil industry, she said, adding that the former Liberal government looked at a system of incentives and decided that there were better ways to reduce auto-related pollution and greenhouse gas emissions.

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