Proceedings of the Standing Senate Committee on
Energy, the
Environment and Natural Resources
Issue 7 - Evidence
OTTAWA, Wednesday, February 5, 1997
The Standing Senate Committee on Energy, The Environment and Natural Resources met this day at 12:30 p.m. to continue its consideration of Bill C-29, to regulate interprovincial trade in and the importation for commercial purposes of certain manganese-based substances.
Senator Ron Ghitter (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, with us today are representatives of the Canadian Automobile Dealers Association. Welcome.
Senator Kenny: Mr. Chairman, I would like to table with the Clerk of the Committee the studies which had been requested earlier. They include the departmental literature review and the Library of Parliament literature review, together with summaries. They are available in English and French. They are here to be distributed to the committee.
The Chairman: We will arrange to have them delivered to the offices of the senators. Thank you for providing that information at the request of the Senate.
Mr. Knight, please proceed.
Mr. Ted Knight, Chairman, Canadian Automobile Dealers Association: Let me express my pleasure at being here today on behalf of the Canadian Automobile Dealers Association, which comprises all of the retail automobile dealers in Canada, including domestic, Asian and imports.
There are about 3,800 new-car franchise dealers across this country. We employ in excess of 100,000 people. We are franchise new car guys and we are small business guys.
I am a dealer in downtown Regina where I have a Chrysler-Dodge-Jeep franchise. I have a Pontiac-Buick franchise in Fort-Qu'Appelle, Saskatchewan. I also have a Hertz franchise. I have been in the business for about 20 years. Before that, I was a finance man; I used to lend money.
I am here to speak about auto emissions and our concerns with MMT. The manufacturers have been responsible over the last 10, 15 years and have done a great job in voluntarily reducing smog through the emissions systems. It is my understanding that, statistically, we have seen somewhere between a 90- and 98-per-cent reduction in emissions over the last 10 years.
The last remaining barrier, as I understand it, is the concern over MMT. What is the impact of MMT on an automobile dealer? First of all, our emission systems will malfunction; we know that. We know that MMT causes problems with oxygen sensors, spark plugs and catalytic converters.
What that really means in layman's terms is that when you buy an automobile from a guy like me, one year or two years down the road, you will do more tune-ups in my shop as a result of the MMT in the gasoline. This is proven.
The manufacturers' researchers have conclusive evidence that this happens. I need to tell you, as a businessman, that I have no problem with MMT in gasoline.
If we sell 1.5 million new vehicles every year, and if two-thirds of those have to be tuned up every year at a cost of $100, that is $100 million per year and, in ten years, $1 billion going to members of the Canadian Automobile Dealers Association. I cannot think of a better place for it to go. I say that tongue in cheek, obviously.
I am one of three Canadians in a group with 17 American Dodge dealers. I am one of those guys who just talks the way it is. I am not a highly educated person. I have been in the trenches; I am a street guy. I tell you I can prove that, of the three members in Canada -- one guy in Ottawa, and one guy in Toronto and myself -- our service departments, as they compare profit-wise in the amount of work and the number of items, are the most profitable dealers in the group. We are not the most profitable when it comes to sales or parts or body shop work, but in the service department, we head the list. That is because we do more maintenance work.
We have it broken down to the cost per repair order, the number of hours per repair order, all of those things. I tell you that I personally can show you statistics on that. There is an increased cost to the consumer. There is no question about that. Consumers have been paying for environmental protection. I am not really sure they are getting it.
One of the other problems that we have is in the province of British Columbia. There we have about 600 dealers with huge investments because the cost of land is a little more than in Regina. The law there states that they cannot sell a car if it does not have the proper emission controls on it. They would be subject to a fine of $5,000. I am sure you are aware of all this.
We have an article from the Automotive News, a U.S. publication which goes all over the world. They interviewed a fellow from British Columbia, Ron Jones, who is a Ford dealer in Vancouver. I will leave the article for you to read. We can be fined $5,000 per occasion.
We are being caught in the middle of this situation. We have manufacturers saying that they will not produce the vehicle with the equipment on it if MMT is in the gasoline. We have the province of B.C. saying that, unless there are controls on the vehicle and unless it meets their emissions standards, that the dealers will be fined. The guys are being hung out to dry.
If anything is to come of this hearing, I would implore that you protect the small business guys in British Columbia because they are really the meat in the sandwich between the manufacturer and the government. We have no control over that.
Bill C-29 should serve the consumer better. We need the protection. We need to have gasoline. We need to have what I would call hassle-free driving. I can tell you -- and this is something which our associates did know until I brought to their attention because I am in the business -- I have no doubt in my mind that we do far more engine maintenance work in Canada than my peers do in the United States. That is not because of climatic conditions; it is because of the additive in the gasoline which we knows corrodes the spark plugs and the emission systems. I present this to you as an automobile dealer.
I am not paid to come here. My high school principal would probably roll over in his grave to know I was here. I am a car guy. I would rather be home in Regina selling cars in the snow. I am not paid by anyone to be here. Manufacturers have no influence over me, believe me. I buy from them. I tell them that I am one of their biggest customers and they need to be nice to me. I also tell them that people do not have to buy a car from me. If they do not like the car one manufacturer makes, they can buy from one of the other dealers. I am an independent guy, like the 3,800 other dealers. I receive no remuneration from the association. I have no remuneration or assistance from the manufacturer. This is our own association speaking. These are our concerns over MMT. They are genuine. They are sincere. I am presenting our side of the picture to you. I leave it at that.
The Chairman: Thank you. We appreciate having someone from the trenches come and explain your situation, as you have. I would like something clarified about this article. If you sell a car with all the required equipment on it, then you are meeting the standards in B.C.; but you are saying that, if the equipment then gets fouled up, you can be fined? Once you have sold it with the equipment and you meet the standards of the province of British Columbia, if, say, six months later, the diagnostic material gets gummed up and is not working, the suggestion in this article is that you can be fined.
Perhaps I am misreading it. It says:
Under local law, should Jones sell a car with a catalytic converter that was damaged by the additive, Jones could be fined as much as $5,000 (Canadian.)
Is that true?
Mr. Huw Williams, Director of Public Relations, Canadian Automobile Dealers Association: The senators around this room have more legal and political experience than we will ever hope to have, so you know that everything that you see in print is not necessarily true.
This came out of the fact that the dealers in British Columbia are subject to the highest environmental standards across Canada. They have taken the lead and followed the California emissions standards. Our local association there became very concerned that with the 1998 model year cars, they would not be able to meet the standards if converters were disconnected or if they were left on and then malfunctioned.
We received a legal opinion from a local law firm, which we have since run past a number of other lawyers, that makes it clear that the liability for the warranty in the province of British Columbia rests with the seller of the vehicle or the retailer.
Yesterday senators asked the presidents of the big three: Will you honour that warranty in the 1998 model year? I am here to tell you that, if they do not honour that warranty, the liability for that comes on to the dealer. Dealers in the province of British Columbia will be faced with one of two things. They can either sell vehicles with disconnected OBD-II systems, which do not meet the warranty standards and they will therefore be subject to fines, or they will not be able to sell cars at all because they do not want to be subject to fines. Something has to budge, either the provincial legislation or the federal legislation.
The Chairman: I am confused between liability and fines. I understand the liability side. I have difficulty understanding how you could be subject to a fine if you sell something that meets B.C. standards and it is then gummed up by an additive. Do you have a legal opinion that says that?
Mr. Williams: Yes, we do. I would be happy to provide it. For the record, the concern is that if you as a dealer are selling a vehicle that is not warrantied and does not come with a bona fide warranty booklet -- that is, if the manufacturers have pulled their warranty -- then you are subject to a fine of up to $5,000. If the manufacturers pull out of the warranty business and leave it up to the seller, we are in trouble.
Senator Buchanan: At the present time, when I buy a new car, the warranty for that new car rests with the manufacturer, not with the dealer.
Mr. Knight: The dealer performs the work and submits the claim to the manufacturer. If it is not a valid claim, the manufacturers will just say they will not pay. The dealer cannot then go back to the customer and say he has to pay.
Senator Buchanan: Why not?
Mr. Knight: Because the customer would not pay.
Senator Buchanan: So you sue the customer.
Mr. Knight: I am not a lawyer by profession. I am a dealer of Chrysler-Dodge, probably the finest cars in the world. This is a 1997 owner's manual from Chrysler Canada. If you bought a car from me, I, or one of my salesmen, would sit down with you and go through it. The booklet says that, in Canada, MMT can be used at levels higher than those allowed in the United States. For this reason it is even more important to look for gasolines without MMT in Canada.
The booklet describes how gasolines blended with MMT have been shown to reduce spark plug life, reduce emission system performance. To ensure maximum spark plug durability and optimum emission system performance, the company recommends using gasoline without MMT.
I am right in the middle. Once a customer reads this, I will hear things like, "Mr. Knight, my son works for Esso, and all their gas has MMT in it, so maybe you can sell me a different car."
That is why I am here. We are the meat in the sandwich. We are the guys with over 100,000 people working for us and we have no clout.
Senator Buchanan: If I were to go to your dealership with this problem, having bought a new car from you, you would say, "Look, I doubt if Chrysler will honour the warranty for your problem." You will not do the work. Then my only recourse is against Chrysler Canada.
Mr. Knight: You must go through the dealer, sir. You have to sue me first. In the province of Saskatchewan, I can add on the manufacturer. Just imagine the relationship I will develop with my manufacturer if I start suing them because my customer is suing me for $100,000. That is what I mean when I say we are the meat in the sandwich.
Senator Buchanan: The final decision on warranty is made by Chrysler or GM.
Mr. Knight: That is correct.
Senator Kenny: It is their car.
Mr. Knight: They provide the warranty. I am the seller. I buy the car from them and sell it to you. I do the warranty work, subject to their approval. Every day I submit on my computer a list of warranty claims, and they send a guy around -- an auditor, for lack of a better term -- who says whether they will pay or not.
Senator Buchanan: They have to notify you in advance if they will reject it because of MMT?
Mr. Knight: Correct. What they will say is, "Since MMT is still in the gasoline, the cars being sold in British Columbia cannot have that label on them," and then the dealers in British Columbia will be subject to the fine.
The Chairman: I question your interpretation of this legal opinion, frankly. I do not think we should talk about legal opinions here, but on first reading, I think a different interpretation can be put on this. I do not think it goes as far as you might be suggesting. I think we can discuss it further.
Mr. Knight: There are really only two issues on my mind. One is the legal issue, and obviously there can be a different opinion. That is the opinion we were given. The other issue is cost. I can assure you that the Canadian consumer is paying more for maintenance on their vehicles than consumers in the United States. I have pictures that show that. I am sure you have seen them.
Senator Spivak: Yes, we have seen them.
Mr. Knight: I can tell you I do a lot more service work than some dealers in the U.S.
Mr. Williams: You get into the question of who sues whom. Our association had a lot of discussion on this. There are dealers who like the fact that we in Canada are more profitable in the service area than our counterparts in the United States. Does it make sense for us as a national association to be here arguing to hurt our revenues?
There was some legitimate debate about that. At the end of the day, the winning argument was that nothing is more important than your relationship with your customer. If you are selling new cars and hassle-free driving, with all the new warranty packages, and if you cannot make good on that commitment, you will not be in business very long.
Senator Buchanan: It may be more of a business problem than a legal problem.
The Chairman: I am sure we understand that argument. That is quite true in any business. I think that is an important statement to make.
Senator Cochrane: Are there any differences in the warranty provisions between vehicles sold in Canada and those sold in the U.S.?
Mr. Knight: Not to my knowledge, senator. The U.S. warranty coverage is stated, obviously, in miles. I believe it is three years and 36,000 miles, and ours is three years and 60,000 kilometres. We cover some things that are standard on our product lines, such as lights that go on automatically. I believe the bumper has a safety feature in Canada that they do not have in the United States. If you are asking about costs and repair features, I believe they are the same.
Senator Cochrane: MMT is now legal in the United States.
Mr. Knight: It is not in use in many states, though.
Senator Cochrane: Do you foresee many changes with respect to warranties and vehicles sold in Canada?
Mr. Knight: I am not privy to that information. I cannot answer the question honestly.
Mr. Williams: One of the things the factories did with us independently is to provide us with their warranty information. As was explained to the Senate committee, they guard that information confidentially. We had to agree to guard that information as confidential. If you look at warranty data between Canada and United States for dealers, as well as our performance data, there is only one conclusion: More warranty work is done on spark plugs, emission systems and catalytic converters in Canada than in the United States. As a result, the service stations and dealerships are more profitable. The question you must ask is: Who pays for that?
Mr. Knight: I just completed a business deal with Canadian Tire. In Canada, they are the only company expanding their service department. They sell tires, batteries, plugs and fan belts. They are after what we call the front end of the business. When you buy a new automobile, while you should go back to your dealer, many people go to the quick lube places. Sometimes when you need a battery, tires or a tune-up on the older cars, you go to the Canadian Tires of the world. They are expanding their service; they are not reducing it. Yet cars are getting better. They are lasting longer. The warranties are longer and better, yet they are expanding because, in my view, there is a tonne of maintenance work out there.
Senator Cochrane: There are a number of other reasons.
Mr. Knight: I was about to say that it is not all related to MMT.
Senator Cochrane: All you need to do is read the magazines and consumer reports, and then you will know why Canadian Tire is expanding. I do not know if you can use that argument.
Senator Kenny: In the dealerships you operate, have you personally seen problems where the OBD-II equipment is plugged?
Mr. Knight: Yes, I have, particularly in the Chrysler facility where I spend 90 per cent of my time. In particular, sport utility vehicles are getting complicated with the on-board diagnostic systems, and we have computers in the service department to service them. In some situations, we had to replace the oxygen sensors on the computer boards. If you ask me, "Is that a result of the MMT?" I cannot honestly answer that question. However, we do more of that work in Canada than is done in the United States. I can only assume there is some reason for it. It is not climatic. I have seen these systems fail, yes.
Senator Kenny: We have had evidence from refiners telling us that MMT is the greatest thing since sliced bread. What is your reaction?
Mr. Knight: I live in a city where there is a small refinery. The co-op guys are there, and they do the heavy oil. I have no doubt that this product may be useful in a lot of cases. I am not questioning that. I would say to you very respectfully that I have been in the business 20 years. I have been associated with manufacturers. I have enough belief and credibility in their research, in what they do and in what they have done with automobiles in the past 10 years, to believe their statistics and research.
I am not here on their behalf and I am not here on behalf of the oil guys. The oil guys probably have a reason for telling you what they want to tell you. I am just telling you that our cars do not run as well, and I can show you that.
Senator Kenny: You have told us this tongue in cheek, but you really meant it: You are making a hell of a lot more money in your service end than your counterparts in areas that do not have MMT in the gasoline. Do your customers understand that? When they come in with a problem, do you communicate to them or does anyone communicate to them that they are paying more dough than comparable users elsewhere?
Mr. Knight: No, sir. I am a businessman. Chrysler and GM will pay the warranty, and the customer will pay the tune-up. If your car in Canada requires more work than the American's car, that is the cost of doing business and the cost of maintenance. If I said to every customer, "Do you know that your counterpart in the United States probably does not have to do this work because of this problem," I think there would be a lot of reaction out there. However, the consumer does not know.
Senator Kenny: You were not here yesterday, I do not believe, but we talked about whether this is a political issue. We have not seen people walking up and down the streets holding signs saying, "Ban MMT." We concluded that, in the broad sense, it is not a hot political issue. Maybe we are getting some of the explanation here.
If your customers do not understand why they are paying the dough, how would you advise us to communicate the problem to them?
Mr. Knight: That is an interesting comment. I described to Senator Buchanan that I must go through the warranty booklet with you and talk about it. When anyone purchases a new car, the first thing the salesman wants to do is hand you the keys, give you a little kiss and say happy motoring. He does not want to spend a lot of time going through the book, in case you change your mind before you get out the door.
There is a buzz in the industry. Selling is such an interesting profession. If everyone sat down and talked to the consumer about MMT, you would find over a period of time that people would say, "What is this all about?" People do not know. Very honestly, as a car dealer, until the issue arose, I did not know because I have other things to worry about.
Senator Kenny: You are also telling us that it is not in your interests to tell people about it.
Mr. Knight: I am not sure if that would be a fair comment on my part.
Senator Spivak: Having listened to people, it seems that this problem will get worse in the future. The reason behind it is that we need to reduce emissions because of smog.
Some people here want to be shown the evidence. They are sceptical about the fact that MMT causes all these problems with cars. One of the reasons is that these new diagnostic systems have just been put in.
Mr. Knight: That is right.
Senator Spivak: We are faced with a decision on what to do with this bill. We are being told that there has not been enough research and that we need to look at more independent study.
You are a hands-on guy. What is your opinion on all the research? Do we need a lot more study to ensure that these systems cannot function properly with MMT in the gasoline? In your mind -- and I know you cannot tell us definitively -- is there a good case?
Mr. Knight: All you are saying is true. The cars have improved. All the manufacturers have improved their product line and the diagnostic systems on the engines.
I was a director of the Provincial Apprenticeship Board for a number of years. I focused on student training for kids coming out of school. There was a day when you could take a fellow from grade 8 or 10 and teach him to be a mechanic. Those days are gone. My technicians have a computer in the service department. They need to know how to run that computer. If we cannot find the problem with your car, we have a system that we can install on your car. You drive the car home and it diagnoses the problem. We call it a co-pilot. They have can even link it up to Detroit.
The advancement has been on the manufacturer's side, not on the refining of fuel additives or products. You now have a situation where one side is lagging behind the other. In which side do you put your faith -- the manufacturer of the product, with all their research and development; or the manufacturer of the fuel additive?
Senator Spivak: That is not question I am asking you. You are seeing these cars. Whether or not they should be equipped with computers is a matter of debate. I think they should because we will get a better environment. Now you have them, and you have this particular product, which most of the world does not use. Forget all that. You are dealing with these cars. If you had the decision to make, what would you do? Would you fix the cars or would you get rid of the element in the gasoline? I understand that the refineries in the lower mainland do have gasoline without the additive.
Mr. Knight: That is right. I would get rid of it. We need to get rid of it and move on.
One of the reasons that we started the association and hired guys like this is because we realized that we need to get into the real world. We are so busy chopping wood, sometimes we do not sharpen our axe. We need to get this out of the field. We need to move on.
Senator Spivak: What do you think of the timing? Some people say that we should take another three months or another 12 months. You have told me that you would like to get rid of the fuel. How fast should we do this?
Mr. Knight: We have the 1998 products coming in September and the manufacturers want to meet the emission standards.
Senator Spivak: Do you think we should move fast?
Mr. Knight: Yes.
Senator Spivak: You employ 100,000 people. Why do you not have any clout with the government? Why is it that the oil companies have the clout?
Mr. Knight: We hired Mr. Williams three years ago. We are not professional people. We are busy making a living.
Senator Spivak: I understand that. I am from Winnipeg. I am from a have-not city.
Mr. Knight: As individuals, we are so busy competing against one another in our everyday life that it is difficult to get together and sit down. We have started to do that.
I just came back from a meeting of the National Auto Dealers Association in Atlanta. The association has over 20,000 members. It deals with the government on regulations, and the environment and the transport secretary in the United States. We are trying to do that now through our offices. I am not a paid gun for anyone. If you want to leave it the way it is, I will make more money. My standard of living will not change if you leave it in or take it out, but the right thing to do is to take it out.
Mr. Williams: I will take you through the process the association went to through to look at this data. We looked at the data at the staff level. We then had a committee of dealers look at the data and talk to their manufacturers on MMT. We then looked at performance data and warranty data on an individual basis with each of the manufacturers and used good old common sense to combine all those things.
We came to the decision that MMT should not be added to gasoline. What is the motive of the dealers association if we did not believe it screwed up the systems?
Senator Taylor: Senator Cochrane might want to read this recent legal decision regarding the B.C. Automobile Association and Jones, McCloy and Peterson. For those of you who are worried about warranties, in the three last lines, they say that the dealer is responsible. If they sell a car, it has to be clean. However, you do not have to do that in Saskatchewan or Manitoba.
I have a technical question. I have a lot of experience with warranties. I have a Chrysler product and my dealer and myself share driving it between warranties. They have always paid up. It is running fine. They have replaced almost everything. It is almost like new now.
Propane does not contain manganese and the plugs and systems will look different in a propane-powered car. I am sure you sell propane vehicles in Saskatchewan. Have you compared your plug and on-board emission systems with a propane vehicle vis-à-vis a gasoline vehicle?
Mr. Knight: No, I have not. With natural-gas-powered vehicles, engine changes are done at the factory. For example, for Alberta Gas or Sask Power, that work is done at Windsor.
Senator Taylor: I have a gasoline truck which was converted. You can do that with cars, too. A lot of taxies have converted also. In Saskatchewan, propane is fairly cheap. I thought you may be doing service on a lot of those. That is a good way to compare what gasoline does to your electrical system vis-à-vis a propane system.
Mr. Knight: I have no experience with that. I could not speak to that.
Senator Buchanan: I certainly do not want to get into a detailed discussion on this. I am not disputing what is contained in this legal opinion. I am a practising member of the Nova Scotia bar, but I do not practice that much, so I had better be careful what I say about this.
According to the B.C. regulations, if the proper warranty booklets are not in the car when it is purchased, then you would be liable for that maximum penalty of $5,000.
Mr. Williams: You are absolutely right about that. Our counsel explained to us that if the car is not warranted by the manufacturers and we provide a warranty booklet, that booklet is not valid if the car is not warranted. Do you understand? If we give them a warranty booklet for a warranty that is not valid, we are in violation.
Senator Buchanan: You give them a warranty booklet that complies at the time of the sale. If that booklet is for a warranty put out by Chrysler or GM and it is valid at the time you sell the car, the only requirement is to ensure that the warranty booklet is included with the vehicle.
Mr. Williams: The problem, as explained to me by our legal counsel, is that if the warranty is void, the warranty booklet is void. That is to say, the whole package is void. When we are selling the vehicle, we anticipate that either Chrysler or the manufacturer will tell us, "We are not honouring those warranties;" or, "We are disconnecting the system." It is one or the other.
Senator Buchanan: Are you saying that if Chrysler had issued their warranty booklet with that car, then they could cancel that warranty right at the time of sale?
Mr. Williams: No. If the warranty is valid and the factories back up the warranty, then there is no problem.
Senator Buchanan: Yes, that is at the time of sale.
Mr. Knight: But one of the items says that, in British Columbia, a person must not sell a passenger car or light-duty truck manufactured in the model year 1998, 1999 or 2000 which does not have a valid emission control label affixed to its engine compartment.
Senator Buchanan: I am getting to that. Essentially, your lawyer has told you about the last three lines. This means that, from the 1998 model year onwards, dealers must ensure that these vehicles have the correct valid emission control labels affixed to the engine at the time of sale.
If that emission control label is attached and if it complies to the laws of B.C., then why would a dealer be liable if, one month later -- and I do not agree with this -- MMT did something to gum up the emission systems in the car? You are out of it because you have complied with the law at the time of sale.
Mr. Knight: But the manufacturer will not pay for the tune-up.
Senator Buchanan: That is between the manufacturer, you, and the customer.
Mr. Knight: That is not fair, senator. You are putting me in the middle.
Senator Buchanan: I am getting at the offence. You said that there is an offence under the laws of B.C. if the system fails and that the dealer is liable. How could the dealer be liable if, at the time of sale, he complied with the law and the correct and valid emission control label was affixed to the engine compartment?
Mr. Williams: I do not want to argue a legal point with you, because you are more skilled at that than I. If the warranty and the warranty booklet are not valid at the time of sale, we are subject to the fine. That is what our counsel tells us.
Senator Buchanan: That is not the question I posed, though. If there is a valid warranty booklet in the car at the time of sale, then that section has been observed. If the proper emission control label is attached to the engine compartment at the time of sale, the law of B.C. has been obeyed.
If, one month later or 10 years later, something gums up the system -- although I am not convinced at this point that it will -- why do you say that the dealer could be liable to a $15,000 fine?
Mr. Williams: I do not believe we said anything about a $15,000 fine.
The Chairman: We are getting into legal matters.
Senator Buchanan: I want to get this clear. I understood you to say that even if the law was obeyed at the time of sale, if the emission system failed in the future, the dealer could be fined by the government of British Columbia.
Mr. Williams: It is one or the other, senator. I take your point. You are not fined later; you are just liable for the work.
Senator Buchanan: That is not an offence under the law?
Mr. Williams: It is not an offence. It is one or the other.
Senator Buchanan: That is what Mr. Knight was saying, and I understand that. I know a lot of dealers. They are like politicians; they have to satisfy their customers to get them coming back.
Mr. Knight: That is right.
Senator Adams: Do you have any idea how much the dealers are losing on these warranties every year?
Mr. Knight: That is a good question. In my own operations, I have a little goodwill fund, because it is a lot less arduous paying than arguing with a customer because the manufacturer will not pay me. I do that internally and I know a lot of other people who do the same.
I could not give you a specific answer. When you buy a new car, the manufacturer sends you a form on which you indicate how you were treated. From that they derive the Customer Satisfaction Index and the Sales Satisfaction Index.
I am in the process of spending $1 million to make my building look nice for the manufacturer. GM has told some dealers in Manitoba that they can no longer continue in their business. That is all part of the new Project 2000. The number of auto dealers is shrinking. In the U.S., there are entirely different things happening.
Part of the reason is that you cannot buy the necessary equipment, such as the computers.
A lot of the things which happen in my dealership, a dealer trip for example, are tied not only to how many cars I sell in a given period but to my Customer Satisfaction Index rating.
My twin sons, who are 22, want to be car dealers and my ability to get another franchise is tied to my Customer Satisfaction Index. That all relates to whether the customer is satisfied with my service.
If you spend $30,000 on a car and it does not run right, you are not likely to put a happy face on that customer satisfaction survey form.
Senator Adams: I have been driving since 1955. Most of the time, my repairs are covered under warranty, but sometimes they say it is not covered and I must pay for it, even when I am sure it should be covered. I do not want the dealer to lose every penny on warranty matters, but I have to wonder about that sometimes.
Mr. Knight: The records show that manufacturers' warranty costs per car in North America have been driven down in the last ten years. There are two reasons for that. The first is that the technology has improved and therefore the cars are better. The second reason is that they have done it a bit on the backs of the dealers.
I sell about 2,000 cars per year. I know that 70 per cent of my business is repeat and referral. If I look after you and treat you well, you will come back to me. If I do not look after you, you will go elsewhere.
Senator Adams: I am wondering about spark plugs. Are some spark plug manufacturers good and others bad? That may not have anything to do with MMT.
Mr. Knight: I know that if you use Chrysler or Ford parts, they will warranty them for the life of the part.
Senator Anderson: Is MMT used in gasoline in the United States?
Mr. Knight: To my knowledge and information, it is not against the law but it is not used.
Senator Anderson: It is not used at all?
Mr. Knight: My understanding is that it is available in some of the states, but not in any of those with substantial populations such as Florida and California.
Mr. Williams: The most telling thing from the environmental perspective is that the gasoline in the major population centres, such as California and New Jersey, has to be reformulated, which results in a cleaner fuel. They do not allow MMT in those regions because it causes increased emissions. California has banned MMT by name since 1979.
Senator Buchanan: It is not banned. They just do not use it because of the EPA non-waiver. The Supreme Court of the United States has said very clearly that MMT can be used in the United States. There is no right of appeal with respect to that decision.
Senator Kenny: It is banned in California.
Senator Buchanan: We asked them that; they said it is not banned but that they do not use it.
Mr. Knight: I do not know what politics means in this thing. I am here as a business guy. I tell you very honestly and sincerely: Get rid of it.
Senator Whelan: Mr. Knight, I could not agree with you more. The others here heard me say this several times yesterday. I have a son-in law who is a grand master technician with a General Motors dealership. He says the same thing as you do about service. They do not get paid as much as an assembly worker in the plant; however, they must repair all the bad things that come from the manufacturer.
He also says the same thing as you do about MMT. I say the same thing as Mr. Knight, Mr. Chairman. After hearing the evidence, I cannot believe that the oil refineries and the gasoline companies have the authority that they have.
Why do you say MMT should be banned?
Mr. Knight: It is not good for a number of reasons. It is not good for the environment. It is not good for automobiles. It is not good for consumers. If we went on a campaign and told every consumer in this country that this stuff will cost them $100 per new car per year for the next 10 years, there would be an uprising. We are already viewed as being right below lawyers and politicians on the credibility scale.
The Chairman: Thank you very much for coming, gentlemen.
The committee adjourned.