Automakers would be forced to compensate dealers for recalled vehicles they haven't yet sold if a bill passed by the Senate gets final approval in the House of Commons.
The Canadian Automobile Dealers Association lobbied senators to amend Bill S-2, The Strengthening Motor Vehicles Safety for Canadians Act, to include what it calls "modest compensation from the manufacturer" in the event of a recall. But the amendment in the bill, which the Senate approved Feb. 2, is opposed by automaker trade groups, who have said they will lobby against it in the House of Commons.
Manufacturers would also have the option to buy back the vehicle outright.
"Dealers are often left with hundreds of thousands of dollars worth of inventory that sit on their lots unsold when there is a recall or stop-sale order," CADA chief economist Michael Hatch said. "We're obviously happy with the development."
Manufacturers would have to provide monthly compensation to cover costs associated with vehicles that cannot be sold.
"It's not going to be a profit centre for dealers. It's basically to help defray some of the costs associated with recalls, which can often stretch into months. That becomes difficult for dealerships when depreciation and carrying costs are considered," Hatch said.
The act also allows:
The Canadian Minister of Transport the authority to prohibit the sale of a vehicle that is subject to a notice of defect or non-compliance.
The minister to name an investigator who can go inside the automaker's facilities and implement a better safety procedure after a recall.
The federal government to fine automakers by using administrative penalties instead of taking them to court, which is the current process.
The federal government to initiate a recall immediately, rather than waiting for a notice of defect to be sent to vehicle owners from the manufacturer, which is the current procedure.
Hatch said the bill "harmonizes with U.S. legislation." The changes are all powers similar to those of the U.S. government and U.S. Secretary of Transportation.
"We're always in favour of bills and regulation that harmonize with the U.S. because it's a continentally integrated industry," Hatch said.
Bill S-2 must now be reviewed by the House of Commons, which must approve the amendment before it becomes law. It will be sent to the Transport Committee first for review and public consultation before it goes to the House for a vote.
Hatch said the CADA is already lobbying MPs to get the bill signed into law. The association has also spoken with Minister of Transport Marc Garneau.
"While it went through the Senate, we were very much engaged. We very much expect to speak to members of Parliament. The process is underway," Hatch said.
"Until it gets signed by the governor general, it's not the law."
Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, disagrees with the amendment and will lobby MPs to oppose it.
"The bill, which is a very important piece of safety legislation, is not an appropriate place to address commercial issues between businesses," he said. "The legislation itself and Transport Canada aren't structured to deal with commercial business issues."
He said the mandate of Transport Canada and the bill "is vehicle safety and public safety."
"All discussions we've had with Transport Canada…have all focused on vehicle recalls and trying to improve them," he said.
It's not yet known when the bill will be presented at committee or in the House.