Evidence of meeting #26 for National Defence in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was engine.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Bill Matthews  Vice-President Marketing, Magellan Aerospace Corporation
  • Nathalie Bourque  Vice-President, Public Affairs and Global Communications, CAE
  • Major-General  Retired) Richard Bastien (Vice-President, Business Development, L-3 Communications MAS Inc.
  • Daniel Verreault  Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
  • Bruce Lennie  Vice-President, Business Development and Government Affairs, Rolls-Royce

3:55 p.m.

MGen Richard Bastien

Of course, a company like L-3 MAS would prefer to see a contractual element like that included. Nevertheless, our understanding for now is that those aspects have not yet been defined in the agreement.

It is very important, during the period prior to the signing of the contract, that a specific concept for Canada be defined so that Canada can fully understand the consequences of having or not having a maintenance or support centre in the country.

We believe it's very important to have one for sovereignty reasons, and also, it's just practical. With the bigger airplanes, you may have one engine out, let's say, but you can still fly it. With a single-engine aircraft, you have to truck it; you have to break it down. Therefore, this is a key issue when you're dealing with what I would call a strategic or a very important defence asset.

We do hope this will come, that such a sustainment plan will be in place and that we will be part of it. We think that in that context we will even compete well for contracts on the North American market and therefore create even more jobs in Canada.

3:55 p.m.

Conservative

The Chair Maxime Bernier

Thank you.

We have no more time--

October 5th, 2010 / 3:55 p.m.

Liberal

Bryon Wilfert Richmond Hill, ON

Mr. Chairman, that only goes to prove why a lawyer should never ask questions first.

3:55 p.m.

Voices

Oh, oh!

3:55 p.m.

Conservative

The Chair Maxime Bernier

Mr. Wilfert, you will have some time later.

Mr. Bachand, you have the floor and you have seven minutes.

3:55 p.m.

Bloc

Claude Bachand Saint-Jean, QC

Thank you Mr. Chairman. I am proud to add that I am not a lawyer.

I would like to welcome my friends, especially the people from Quebec whom I like a great deal and whom I know very well.

My concerns are similar to those of everyone else. I defend taxpayers. I would even go so far as to say that I am defending your shareholders. If I were a shareholder in one of your companies, I would be concerned about the lack of contractual guarantees. I do not want to call into question your competency internationally, which I feel is extraordinary. You are the leaders. However, I know my American friends, and they are also very strong business people. I know that when things start going badly, they tend to scythe around themselves, and that may well affect companies that are not American. So Canada could become a victim. You said that to offset the lack of contractual guarantee, you wanted access to the global supply chain for the 3,000 to 5,000 platforms to be built. However, there is a risk. In fact, this is not about a contract for access, but about potential access. It's not a guarantee.

A contract is to be signed in 2012-2013. The Bloc Québécois believes that it would be preferable to call for certain contractual guarantees. The aircraft have not yet been purchased; I don't think the cheque has been sent out yet. Certain things were done by the Liberal Party of the day. In exchange for government participation, there were significant economic benefits guaranteed for the industry in Quebec and Canada. And that has been the case till now.

Don't you have the impression that there is a little time left to include certain provisions in a specific contract, to indicate that as the ones paying, we want a minimum of contractual guarantees? Under these conditions, if the fact that we are the best in the world exceeds our contractual guarantees, there won't be a problem. However, if we had a contractual guarantee and the situation were not to our liking, we could invoke it. In other words, under a future contract, the contractual guarantee could be a safety net if economic benefits or contracts granted to Canadian companies unfortunately don't materialize.

Don't you think that as part of the contract to be signed in 2012-2013, we could proceed knowing we are the best in the world and have a contractual guarantee as a safety net?

4 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

I will begin. First of all, I hope that my understanding is accurate. The contract that has been signed deals with the purchase of aircraft. That is of more concern to the people beside me. It does not affect CAE, but does affect companies like Magellan Aerospace Corporation, Héroux-Devtech Inc., as well as Pratt & Whitney. The presidents of those companies held a press conference last week. You were there. At the press conference, they said we had to get involved in what Lockheed Martin calls the global supply chain. You know as well as I do that once people or companies are selected to provide various components... That's why it's important to sign right away. This is not part of my area of expertise, but we are somewhat involved in the project.

As regards CAE and L-3 Communications MAS Inc., if I may add, what affects us is sustainment. That includes in-service support as well as training for pilots and technicians. That part of the contract will be dealt with in the second stage. That is what is important for us. We want to put our foot down. We believe that we have something to prove and that we can win. That contract is not even being negotiated right now. It is a two-step process. We maintain that if Canada wants everything to be done in the country, we would be very happy. However, if there must be competition, we are ready for that.

4 p.m.

MGen Richard Bastien

I think that the points raised

are the same that would have to be put forward.

The purchase of an aircraft like this is based on two criteria. The first is whether it will meet our operational requirements. That appears to be well identified and acknowledged. What we feel is important—and this is what we are advising the government given our experience—is trying to gain the best possible understanding of the long-term impact, in other words the in-service support. We are prepared, and this is the least we can do—to participate and help people working on the file to determine as precisely as possible, from a Canadian perspective, what requirements should be included in an agreement like that.

Experience has shown that negotiating these elements early on, when the procurement contract is being negotiated, is important. It seems that in some cases, once the procurement contract is signed, it is much more difficult to get all of the aspects that we would like to see included.

4 p.m.

Bloc

Claude Bachand Saint-Jean, QC

Some people say that the cost review of the aircraft by the Pentagon could reduce the number of contracts awarded to Canadian companies. I'd like to know if you have heard that theory, and if that has occurred in practice. Apparently, if the Pentagon considers it too costly, it may want to reduce costs, and that may have an impact on Canadian companies. Is that possible?

Mr. Matthews, can you answer my question?

4:05 p.m.

Vice-President Marketing, Magellan Aerospace Corporation

Bill Matthews

I admit I'm not an expert on the Pentagon, but I am a pretty seasoned person in selling to the United States DOD. So where the decisions are made vary from Congress to the Pentagon to other agencies. Nonetheless, there are constant reviews of cost on programs driven by the Pentagon, and this is not unusual. From time to time, we have a review in Canada too of costs associated with ongoing operations as well as procurements.

In the case of the Joint Strike Fighter...well, let's say in the case of the current studies being done in the Pentagon area, what is really being taken out are the thousands and thousands and thousands of ex-military people or ex-members of DOD, civilian or whatever, who are rehired to do studies, to write reports, to do whatever. The present Secretary of Defense and his deputy have focused on that as an obvious waste of money, in their opinion, and I think a lot of people agree with them. That is taking out the fluff in the U.S. defence department, as opposed to the hard core requirements, which are the aircraft, the tanks, the ships, and so on. So they're taking, I would think, measures that we would see as being beneficial to Canada and other countries that export into the United States for defence work, and Canada is a major exporter to the U.S.

So I don't see it as being a particularly negative thing. In fact, if anything, it's maybe one of the best things they've done in decades.

4:05 p.m.

Conservative

The Chair Maxime Bernier

Thank you, Mr. Matthews.

Right now I will give the floor to Monsieur Harris.

Mr. Harris.

4:05 p.m.

NDP

Jack Harris St. John's East, NL

Thank you, monsieur le président.

Madame Bourque, first of all, I want to agree with Monsieur Bachand that your company is a renowned, worldwide leader in the work that you do. In fact, as I understand it from a little bit of research, even in the last week you've announced contracts with Korean Air, with Air China, with the United Kingdom, the Royal Air Force, with the German army air school, and even with your colleague next door in L-3 Communications MAS Inc. So it's reflecting on your comment that you're open to competition, and obviously you're very successful.

First of all, do you at this point have any contracts with respect to the F-35?

4:05 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

No, we don't, because that's the second part and it's not negotiated yet.

4:05 p.m.

NDP

Jack Harris St. John's East, NL

I don't know whether you're familiar with all of this—I mean, I realize you're VP of public affairs, but are you thinking that CAE would not have the right to bid on any of this work if Canada wasn't buying 65 of the 4,000 jets they make?

4:05 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

Lockheed Martin can choose who they want and countries around the world can choose who they want in order to train their troops. As an example, in the United Kingdom, we train all the British troops and the NATO troops that go to Afghanistan. This is a contract we have. We are in a partnership with the MOD on this. For me it's kind of obvious that when your country buys, it puts you in a much better position, because this way you prove to the rest of the world that you do it for your country; you train the pilots here and you train the technicians, and then from there on you can win other contracts, which is what happened exactly on the C-130J. We were chosen by Canada under this famous SOIQ and then what is called OTSP—operational training systems provider—and after we got those major contracts, we won six other simulators around the world and one for the U.S. Special Forces.

There's a French expression that says,

“No man is a prophet in his own country.”

It's actually completely false concerning anything on the military side. If you don't win in your own country, you don't get anything outside.

We had a letter from the Swiss a few years ago, because we lost a contract here, saying “Don't bother bidding, because if your own country doesn't buy from you, we won't.”