Industry Committee on May 27th, 2008

[Bruce Stanton, Conservative, Simcoe North, ON]

Mr. Boitson.

[Don Boitson]

I was going to add to that. Remember, we're talking about military procurements here. We, Canadian industry, compete in all commercial aerospace and other activities that we are in on a global playing field, so I concur that there needs to be healthy competition in order to drive that excellence out of industry as well. And if there needs to be some policy to make it a smaller amount that needs to be regionalized, if you will, and have a higher percentage that's available or up for grabs to the most competitive out there, whatever the region may be, that will, in the long term, drive more global competitiveness for Canadian industry for sure.

[Bruce Stanton, Conservative, Simcoe North, ON]

Do I have more time, Mr. Chair?

[The Chair, Conservative, James Rajotte]

Five seconds.

[Bruce Stanton, Conservative, Simcoe North, ON]

Okay, I'll let that go then.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chair.

My question goes to you, Mr. McKay. You mentioned industry partnerships and you had some recommendations on funding commercialization, on intellectual property and on the way to fund projects.

I would like to hear some more details about your recommendations, especially on funding commercialization. What did you mean? What kind of government funding assistance are you looking for?

[Sean McKay]

One of the specific points was funding for pre-competitive collaborative activities, and those would be where several companies, such as the Boeings and the Bristols and potentially the Standard Aeros, would get together and look at pre-competitive technologies.

In the past in Canada, together with our comrades at the National Research Council, both in Montreal and in Ottawa, we have spent a considerable amount of time trying to understand what technologies industry would like to look at from the aerospace perspective. I'm specifically talking about composites and what we need to do to get industry to leapfrog ahead so they can actually understand and utilize the latest technologies. We spent a considerable amount of time putting these specific projects together. An example would be a fairing on a Boeing aircraft, utilizing a different material and process that would save weight and save cost.

Unfortunately, when we put the project together, we really didn't have the mechanism to take it forward. What I mean is that because it's pre-competitive, there wasn't an end company that would have direct benefit from it. There would be several end companies that would end up directly benefiting from it, and we couldn't find a funding mechanism to be able to basically put a grant together to fund some of the technologies. We looked at Industry Canada, and they had at that time the TPC, and now they have the SADI program. Either/or, we're looking at basically taking off and acting as a loan project, based on future sales to pay off that loan.

With these types of pre-competitive, collaborative activities, it's very difficult to tie in to future sales right back to this level of technology. So I think there was a gap, especially in the aerospace sector, to be able to fund or support these types of programs.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Vincent.

Mr. Hoffman.

[Peter Hoffman]

Thank you.

I'd like to follow up on Mr. McKay's comments.

You hit on a point that I think is very important here. In the countries where we've successfully utilized technology-based IRB programs, we have been able to come to terms with how we value technology. We go about it in a relatively methodical way in terms of looking at the impact it could have on the end recipients.

When we get into a pre-competitive environment, as we discussed earlier, that becomes a much less defined equation. But the key aspect is that a level of understanding and trust has to take place between the IRB officials and the company proposing the projects. There has to be a common understanding of how we should value things. Where we've had success in closing agreements around technology, we've had a clear understanding along those lines.

[Robert Vincent, Bloc, Shefford, QC]

Earlier, you mentioned China, India and Japan. What impact can that competition have on each of your industries? A number of those countries are copying aircraft parts. Does that have an effect on your industry too?

[The Chair, Conservative, James Rajotte]

Mr. Hoffman.

[Peter Hoffman]

The protection of intellectual property is always a concern. We have long-standing relationships in China and Japan for manufacturing and a growing relationship in Japan for design and manufacturing. From a technology, research, and development perspective, we have to be very careful in those areas.

One mechanism we use a lot--as was mentioned before by Mr. McKay--is working in a pre-competitive environment where we're not too close to our products. We're developing underlying technologies so that the winner, at the end of the day, is the one that can most quickly transition those pre-competitive technologies to their product. That way it becomes a foot race to implement, versus putting a lot of the most important technologies for the competitiveness of your company on the line.

The other technique that can be used, if you're in an area like China where the intellectual property laws may not be as mature as in other parts of the world, is to be careful about what technologies you develop there. Perhaps as a starting point understand the skills they have and let them create the intellectual property locally. It's really on a case-by-case basis, depending upon which country you're in, but it is always very much on our mind.

[Robert Vincent, Bloc, Shefford, QC]

Mr. McKay, you got my attention when you talked about "pre-competitive activities". What did you mean by "pre-competitive"? I did not understand. I would like to know a little more about that.

[Sean McKay]

Perhaps I'll use the example of putting a certain material on a part of an aircraft--a thermoplastic resin system. Some initial research work has been done at the universities in terms of developing some initial processes and properties, but how do you build a structure on an aircraft, which is a panel with ribs to support it, and develop that technology? Once you develop that technology it could be used in the under body, the wing skin, and as part of the fuselage. So the same technology could be used in different areas of the aircraft.

Once you've developed the initial phase, where you're looking at the joining and forming methods of those materials, that would be considered pre-competitive. It's not specifically aimed at an end product, but it is generic technology that could then be tailored to a specific product area by a company that is very interested in producing that type of product.

[Robert Vincent, Bloc, Shefford, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Vincent.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Mr. Olson, you talked about original equipment suppliers. Do you have a problem with that in the aero industry? Are there problems? I know you wouldn't have a problem with the nuts and the bolts. In the previous study we.... Do you still have a problem with that?

[Kim Olson]

I wouldn't say we have a problem with it. As an organization, we make sure we always align with the original manufacturers and work in an authorized manner.

The key point I really am trying to raise is for us to recognize that across the country it really does restrict how you can operate and what you can do. So from a Standard Aero perspective, it's not so much of a direct issue.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I was talking more in terms of other companies out there that are pirating.

[Kim Olson]

The perspective on this, from a turbine engine perspective or...there's another component. PMA, parts manufacturing approval, is a term in the United States. It's a process whereby you can create knock-off parts, if you will. They're authorized for installation. But we've seen it can be a problem for some of the manufacturers, although the manufacturers have now taken to PMAing the other manufacturers' products. So it's becoming a level playing field, in a sense. Perhaps in the end it's going to be a good thing for the airlines and all concerned.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The reason I brought that up is that in a previous study we learned there were indeed companies that were presenting parts that didn't really meet the standards. Is that a problem in the aero industry?

[Kim Olson]

From our direct experience, no, that is not what I would call a problem in the engines and the products we've seen.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The other thing you brought up—and I think it's pretty much evident right across the panel—is that you're experiencing, and you figure you will be experiencing, a shortage of workers. Is that with engineers or is that right across the board?

[Kim Olson]

I would say it's somewhat across the board.

To combat that, we have to invest a lot, as an organization, to develop that skill level, whether it's at the technical level or at the engineering level. We've worked with our local universities and with partners of the panel here in terms of developing programs at those universities. Any ongoing support government is able to afford for the universities to develop programs that would develop and maintain that kind of academic level is really important to us. And at a technical level, having access through Red River College to its gas maintenance turbine technician program—it's a program we've been involved in—is very important. To us, as a local business here, it's critical that we have those kinds of programs to prepare the technicians for our market.