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Want a Cheaper Car? Sorry, You're Canadian

By Neil MacDonald, CBC News

Everybody seems to agree that the shiny new 2008 Hondas sitting in the automaker's showrooms all over the United States are superb vehicles. They are redesigned, extremely well-reviewed and a tremendous bargain, at least when compared to the virtually identical versions Honda's Canadian dealers are offering.

But the cars here are off limits to Canadian consumers. Honda and the Canadian government have been seeing to that.

Right now, the big car manufacturers are gouging Canadians. And pandering to Americans. That should be apparent to anyone with a computer and an internet connection.

When it comes to cars, Canadians constitute a captive market, fenced in behind the world's longest economic barrier - the U.S.-Canada border. And Honda, along with most of the other big automakers, is determined to keep them there.

By now, the tactics are pretty well known. Most manufacturers have told their U.S. dealers near the Canadian border to simply refuse Canadian customers. They've also warned that they'll refuse warranty service to Canadians who buy their cars in the States.

Such behaviour should be no surprise. Companies exist to make money and the Canadian consumer has been a fattened cash cow for the automakers since the loonie rose to the same level as the American greenback.

A Honda Accord EX, for example, starts down here at $23,060 in American dollars. The same car in Toronto costs $27,490 Canadian.

Honda's Odyssey EX minivan costs $28,960 US here, as opposed to $36,990 in Canada. At this writing, the currencies are virtually at par.

Where are the breaks?

At the more exotic end of the new car scale, the differences are staggering. GM's Corvette coupe, for example, starts down here at $46,225 US In Canada, it's $70,920.

A Cadillac sedan in the States starts at $50,350 US In Canada, $67,220 Canadian.

And so on.

It wasn't supposed to be this way. Back in 1988, when Brian Mulroney's government was trying to persuade the electorate that free trade was in Canada's best interest, Conservative politicians dangled the prospect of lower consumer prices to nervous, uncertain voters.

Each side would get access to the other's market. The so-called playing field would be leveled. Everything would be cheaper. That voice at the end of the TV commercial that muttered: "Void where prohibited, not available in Canada" would disappear.

And publicly, at least, the private sector made brave noises of support. Rugged free-enterprisers all, they'd compete in an unshackled market to the good of everyone.

The fact is, though, business loves being regulated, at least when it's in their interest. So when the Canadian government promulgated a new regulation in September, stipulating a standard for anti-theft immobilizers in new cars sold in Canada, the car manufacturers, anxious to keep the two markets separate, stampeded to comply.

But it's the same device!

In short order, companies like Honda and GM stated that none of their new, 2008 American models complied with Canadian standards and therefore, regrettably, had to be declared inadmissible to Canada.

In fact, in Honda's case at least, the immobilizers buried in the guts of its American-sold vehicles are identical to the immobilizers in the cars it sells in Canada. Precisely the same, right down to the last wire.

But Canadian government was asking the manufacturers to make the casing housing the immobilizer a little more resistant to cracking. That provided the excuse to declare it inadmissible.

As a result, Transport Canada banned import of the much cheaper American cars. The ones that cost thousands less. What's more, it did it, the department says, for Canadians' own good.

"Where we are coming from is a safety perspective," says Patrick Charette of Transport Canada. How the immobilizer specification would make Canadians safer, Charette wasn't able to say.

The bottom line, says Bruce Cran of the Consumers' Association of Canada, is that "Canadians are being victimized by the car industry, and the government is supporting it."

What consumers want

Who asked for this new immobilizer regulation, asks Cran? "What benefit is this to consumers? It's absolutely none.

"No consumer group ever asked for it, that's for certain. We certainly weren't included in the discussions."

As a result of these rules, about a thousand enterprising Canadians have been stuck with cars they've imported from the U.S. but that can't be driven in Canada. And untold thousands of prospective Canadian buyers are being told by the Transport Canada website that most new cars sold in the U.S. are barred from Canada.

Cran calls it all "pretty disgusting," and he's called on consumers to write their MPs. Which, evidently, they have.

Abruptly, last week, Transport Canada rewrote the immobilizer regulation. It is now open for public comment. If the new regulation makes it into law (and there's no guarantee it will), any American car with any immobilizer, or any American car that can be fitted with one, should be admissible to Canada.

At least on paper.

The fact is, however, the Canadian system leaves it to the car companies to certify new vehicles for admissibility into Canada. And they clearly don't see it as in their interest to have Canadians importing lower-priced vehicles from the States.

Indeed, they like the immobilizer regulation as it is.

Honda of Canada spokesman Jim Miller says the company's Canadian division doesn't want to have to start certifying cars meant for the American market as admissible to Canada. Honda thinks that job ought to be up to the government.

"The consumer may have gotten a political break, but administratively, it's a different matter. It's a bit of a quandary."

One big market

Still, in the end, says a consultant hired to represent automakers, the manufacturers will probably bend, if that's what the Canadian government really wants.

Speaking on condition of anonymity, he concedes that the U.S.-Canada price differential right now is ridiculous and notes that consumer anger has already forced the manufacturers to narrow the gap somewhat.

But, he says, the Harper government is "in a desperate fight to win a majority government, and so populist, so consumer-driven, that nothing else matters. They are making policy on the back of an envelope, and handing it to bureaucrats to fix."

Ottawa, he says, seems to want to moves things to the point where barriers are completely removed, creating a situation in which there is, effectively, complete free trade on cars. And that, he says, will have consequences.

Many production costs are dropping in the U.S., particularly as its dollar declines and automakers have been able to get out from under expensive health care and pension obligations.

So, he asks, why would an automaker continue to manufacture in Canada, if everything becomes one big unimpeded market?

Real free trade, in other words, might mean lower prices, but it also, eventually, means Canadian factory workers might have to accept less benefits or lose their jobs. Which was the anti-free trade argument in the first place.

In the end, it's a choice.