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

3:30 p.m.

Conservative

The Chair Maxime Bernier

Good afternoon everyone. Welcome to the 26th meeting of the Standing Committee on National Defence.

Before we begin, I would like to congratulate Mr. Bachand on his election as second vice-chair of our committee, as well as Mr. Wilfert on his election as first vice-chair, even if he is not here today.

I also want to thank my colleagues for having put forth my name and for having supported the motion for my nomination as chair of the committee.

Thank you very much, everybody.

Mr. Hawn.

October 5th, 2010 / 3:30 p.m.

Conservative

Laurie Hawn Edmonton Centre, AB

With respect to business for Thursday, I believe an error was made. The direction from the committee was to invite Mr. Williams and Mr. Ross. In error it went out as Mr. Williams and Mr. Watt. I would like to change that back to what the intention was in the first place, which was Williams and Ross.

3:30 p.m.

Conservative

The Chair Maxime Bernier

Thank you for raising that point. It's very important. You're right.

So for our next meeting on Thursday afternoon we'll have Mr. Williams first and then Mr. Ross. Mr. Watt will be with us the week after. So that will be the agenda of our meeting on Thursday afternoon, with one hour for each witness. That will be great.

Let's start our meeting with our witnesses. We have with us from the Magellan Aerospace Corporation, Mr. Matthews.

Bienvenue. Merci.

From CAE, we have Ms. Bourque. Welcome to our committee.

From L-3 Communications MAS Inc., we have Mr. Bastien; thank you for joining us today.

You have time for your presentations. Following that, committee members will have questions for you.

You have the floor, Mr. Matthews.

3:30 p.m.

Bill Matthews Vice-President Marketing, Magellan Aerospace Corporation

Thank you, Mr. Chairman.

My name is Bill Matthews. I am representing Magellan Aerospace at today's committee meeting.

My responsibilities as the vice-president of marketing at Magellan include customer interface, business development and capture, and customer strategic liaison for future opportunity. My participation in JSF started in early 1999 and continues today as one of the ever increasing team in Magellan Aerospace for this outstanding program.

Mr. Chairman, I would like to start with a few words about why we at Magellan consider this to be a great program for Magellan, for the Canadian air force, and for Canada.

The Joint Strike Fighter program, including the F-35 aircraft and the engines that will power it, is a perfect example of the kind of program that companies such as Magellan seek. It fits within Magellan's core capabilities; it is exceptionally high technology in its design, materials, and systems, allowing manufacturing advancement; and it is expected to be in production for 20 to 30 years, allowing efficiencies and return on investment for industry manufacturers.

Additionally, our air force will be equipped with affordable aircraft that meet the defined requirements for the threats faced today and for those foreseen for the future, that can be operated seamlessly with our allies, and that are at the beginning of their life cycle, not at the end.

And finally, this program is ideal for Canada through the widespread engagement of over 80 Canadian companies who are proving capable of contributing technology and providing costing that is competitive on a world level. The current estimate of the value of the participation of Canadian industry is $12 billion. This is exclusive of the value of support opportunities estimated at several billion more: high-technology jobs lasting decades and starting immediately across Canada.

If I may, Mr. Chairman, more specifically for Magellan, our company has supported fighter aircraft programs in Canada and the United States for decades, in the areas of both new build and repair and overhaul activities. The list includes the F-86 Sabre, the CF-100 Canuck, the Avro Arrow, the CF-104 Starfighter, the CF-101 Voodoo, the CF-5 Freedom Fighter, and currently the CF-18 Hornet.

We have also supported the repair and overhaul of engines on these aircraft and others for both DND and the U.S. DOD. This is a business we know well and one that has prepared us for Joint Strike Fighter. Many other Canadian companies have similar experience levels and are similarly prepared.

Magellan has been engaged on the Joint Strike Fighter program for more than a decade. It has produced development parts in 2003 that were the first produced outside the United States. It has delivered critical components to each of the three F-35 variants and is working to position its divisions for engine work as the ISS aftermarket program is rolled out.

Magellan's initial estimate of participation value on Joint Strike Fighter in early program days was $1 billion to $1.5 billion. In 2008 Magellan released an estimate of $3.0 billion based on work won and its extension, on conservative estimates. Today that target remains valid, with upsides seen on engines and aftermarket. To achieve this level of business, we have or will have over the next four years invested up to $120 million in infrastructure, equipment, and technology, and in the education of our people to meet the rate reduction requirements at our operating sites.

Mr. Chairman, Magellan has worked hard on this program, starting early and contributing investment, energy, and know-how. The successive Canadian governments' support of this program has been instrumental in our industry's success throughout the past decade, and the current government's announcement on July 16 past was especially timely. This removed doubt and uncertainty within our ranks, and more importantly in our customers' minds.

Mr. Chairman, Magellan's purpose in accepting this opportunity to speak today is to provide assurance to those members less aware that this is the right program in all its aspects for our country. It is also to leave no doubt that reintroduction of that uncertainty will cost Canadian industry its opportunity and Canadians their jobs.

Thank you.

3:35 p.m.

Conservative

The Chair Maxime Bernier

Thank you very much.

I will give the floor to Madame Bourque.

3:35 p.m.

Nathalie Bourque Vice-President, Public Affairs and Global Communications, CAE

Thank you, Mr. Chairman.

Good afternoon and thank you for having invited me to discuss Canada's new generation of fighter jets, the F-35. CAE would like to reiterate its support for this program, which represents a very significant military procurement opportunity for the Canadian aerospace industry.

Before indicating what this program could represent for CAE, here is some information on our corporation.

CAE is a world leader in the area of simulation technology, modelling, and integrated training solutions for civil aviation and defence forces throughout the world. We provide pilots with training solutions, and we make sure that they are always prepared to deal with the unexpected. We build simulators, and we provide a full range of training services like in-class instruction and simulator training. We also provide our clients throughout the world with training solutions, and maintenance technicians.

CAE is a world leader with 7,500 employees in more than 20 countries and with revenues of C$1.5 billion. Our head office is located in Montreal, and we have 3,500 employees in Canada. In fact, we are the largest Canadian corporation working in the defence sector in Canada.

At present, we are under contract to provide air crew training for the CC-130J and the CH-147.

The fact that we were awarded these contracts has helped CAE bid and win contracts for six additional C-130 simulators around the world, including one for the U.S. Air Force Special Operations Command. Overall, it has also enabled us to award contracts to many other Canadian companies, out west, in Ontario, in Quebec, and in the Atlantic provinces.

With the purchase of the F-35, Canadian companies should be in a position to bid for work, not only on the production of the 65 aircraft bought by Canada but also for the full global production, estimated at over 3,000 planes and up to 5,000 planes. As a world leader in training solutions, CAE would like the opportunity to offer pilot and maintenance technician training solutions for the JSF. We believe it is important that our Canadian pilots and maintenance technicians be trained according to the best practices and ethos of the Canadian Forces. This will also be more cost effective for Canada as we take advantage of numerous synergies by leveraging common technologies and solutions across the C-130J and the CH-147.

We have full confidence in our company's ability to compete with anyone else in the world. We look forward to the opportunity to bid on the pilot and maintenance training, not just for Canada but for other countries as well. If our bid is successful, it will mean thousands of person years of work for our employees and our Canadian partners.

We are excited by this opportunity and hope it moves forward in a timely manner. As participating countries confirm their orders, they will then look to secure their training support.

While CAE is already in a position to do so in Canada, our efforts to win similar international contracts will be greatly enhanced.

Thank you for listening, and I will be pleased to answer any questions you may have.

3:40 p.m.

Conservative

The Chair Maxime Bernier

Thank you very much, Ms. Bourque.

Now, I give the floor to Mr. Bastien.

3:40 p.m.

Major-General Retired) Richard Bastien (Vice-President, Business Development, L-3 Communications MAS Inc.

Mr. Chairman, committee members, my name is Richard Bastien, and I am vice-president of business development at L-3 MAS. On behalf of my president, Sylvain Bédard, who is unfortunately out of the country today, I am very pleased to have this opportunity to express our views on the upcoming procurement of fighter jets by the Canadian government. I thank you for this opportunity.

To establish my credentials and that of L-3 MAS, let me just indicate to you that I have completed a military career of more than 35 years as a fighter pilot and commanding officer of a fighter squadron and of a fighter wing, concluding my career in 2004 as assistant chief of the air staff. I am now with L-3 MAS, a Canadian company, wholly owned by L-3 Communications. MAS, established in Mirabel, Quebec, was previously owned by Bombardier Aerospace. It has been in the aerospace industry for well over 60 years, but is more known over the past 25 years to be the CF-18 sustainment authority in Canada. Sustainment refers to the engineering, maintenance, and upgrade support to the CF-18 fleet. As a matter of fact, we can say that MAS is the fighter sustainment centre of excellence in Canada, having created and sustained nearly 1,000 jobs in the Canadian economy over that same period.

As regards the government's recent announcement to proceed with acquiring the Joint Strike Fighter (JSF) as its next fighter jet, MAS is clear. As my president indicated when Prime Minister Harper visited our facilities on September 1, we fully support the government's decision and are happy to see that it is striving to equip the Canadian Forces and its air force with leading-edge equipment capable of carrying out all missions that may be required in the future. The JSF, or the F-35, is clearly that aircraft.

As I mentioned, MAS fully supports the government's decision to go ahead and acquire the F-35 Joint Strike Fighter. We believe that being part of a group of like-minded nations flying this interoperable fighter aircraft will make Canada a stronger international partner and provide a more effective response, if and when required. However, to effectively and efficiently provide this operational capability with a relatively small fleet must mean that Canada will put a lot of effort into ensuring availability of all operational assets over the full life of the fleet, which we understand to be planned to last until 2050. This surely means that a solid sustainment plan will be established as early as possible.

Let me make a point that seems to be lost so far with this project. There are two key phases to such projects: the acquisition of this system and its sustainment over time. So far, a lot of discussion has pertained to the acquisition. Numerous Canadian companies are already proud participants in that phase, and we are most happy for them. But the sustainment--something that really starts once the aircraft is delivered--is as important as the acquisition and must be addressed now, because the sustainment cost of a fleet over 20 years of use normally equals or exceeds the acquisition cost. In this case we are talking about a fleet that is meant to last at least 35 years, thus the sustainment question should be even more important than the acquisition question, since Canada will want a viable operational capability until the end of the F-35 operational life.

Of course, an aircraft such as the F-35 is quite an improvement over the previous generation of fighters. It will provide undreamed-of operational capabilities, and even incorporate leading-edge stealth material to increase its survivability. However, its basic construction, its airframe, will still age and fatigue over time, caused by normal training and combat use, and it will need to be maintained, repaired, and modified to meet its expected longevity. This was the case with older generations of fighters, such as the CF-18, and believe me, it will be the case with any fighter aircraft that will fly for more than 35 years. It is a core concern that must be addressed.

I say that with some confidence, since L-3 MAS truly understands these issues. We have lengthened the life of the CF-18 by more than 15 years to make it last 40 years. We are proud to be the centre of excellence for fighter sustainment in Canada. This is the state of industrial support for military fighter aircraft in Canada. Today, no other Canadian company has the skill and experience we have acquired, with DND support, over the past 25 years in delivering fighter sustainment and improvements. We are proud of that heritage and the quality of service for which we are known, and we wish to pursue that superb relationship with DND on the F-35.

We all know that there is no offset attached to the JSF. We understand that to mean that most industrial gains in Canada will be through competition in the global market. To achieve these gains, surely the Government of Canada will want to assist Canadian companies in their quest to capture part of this global supply chain. While this can more easily be accomplished for systems and parts of the aircraft, it cannot be so for this fighter sustainment, as a country will not likely ferry its aircraft thousands of kilometres away to get them fixed, especially if they are not in flying condition.

3:45 p.m.

Conservative

The Chair Maxime Bernier

Mr. Bastien, you have one minute left.

3:45 p.m.

MGen Richard Bastien

All right. I am almost done.

Sustainment is very hard to export; therefore, establishing a Canadian sustainment plan early and ahead of signing the acquisition contract is all the more important, since this is the time many countries have negotiating leverage. I underline again that access to facilities is but one aspect of the sustainment issue. What about Canadian sovereignty and control over these key assets in times of tension or conflict? What would Canada's priority be, when other allies have pressures to have assets available, if the sustainment facility is not in Canada?

At this stage of the project, the government must do its utmost to ensure that the F-35 is not only a military success, but also a success for industry in Canada. Our Canadian companies do well in terms of procurement and participation in the global supply chain linked to the JSF. The government also has an opportunity to give a Canadian company, specialized in fighter jet in-service support, the opportunity to help DND define the Canadian in-service support for the F-35, to provide this service, and, who knows, to enable us to become a North American depot and to compete in a larger market. We see that as one of the best opportunities for the government, which will be two significant benefits for Canada for the entire life cycle of the F-35.

Members of the defence committee, thank you once again for your kind invitation to present L-3 MAS's view on the F-35 project. MAS fully supports the selection of the F-35, is proud to be the fighter sustainment company in Canada, and is looking forward to our involvement in the F-35 sustainment.

Thank you.

3:50 p.m.

Conservative

The Chair Maxime Bernier

Thank you, Mr. Bastien.

I will now give the floor to Mr. LeBlanc, for seven minutes.

3:50 p.m.

Liberal

Dominic LeBlanc Beauséjour, NB

Thank you, Mr. Chairman.

I want to thank the witnesses for their presentations.

I have two questions. If there is any time left, my colleague Mr. Wilfert will continue. I have a question for Ms. Bourque and another for Mr. Bastien.

Ms. Bourque, I will start with you. You have an Acadian last name. I am happy to see the name “Bourque”. It is a pleasure to have you with us.

I agree with you. CAE is an unquestioned Canadian leader in training, in the manufacturing of simulators, and so on. You're right to celebrate CAE's success.

You said you were confident that in the bidding process you could compete with anyone else, and “if you are successful”, I think was the phrase you used, there would be untold job and economic benefits to Canada. I agree.

I'm worried about what happens if you're not successful. I'm worried about what happens in the global supply chain. Unlike previous procurements with guaranteed industrial and regional benefits.... Canada is allegedly buying 65 of these planes; other countries are buying thousands of them. What happens if we're not successful, if we don't put contractual obligations on the supplier to ensure that companies like yours, that have such a proud history, would benefit? I'm wondering why you wouldn't prefer a guaranteed benefit instead of a chance to compete and hopefully be successful on perhaps a larger pie.

Mr. Bastien, at the end of your comments you said something very interesting. Again, I think your company, in terms of fighter sustainment, has certainly been a centre of excellence, and we all celebrate the success and the terrific work done at L-3. I share your pride entirely. But you reminded us that fighter sustainment, the maintenance work you've done so well on the CF-18s, perhaps isn't the same as manufacturing a landing gear or some armament to go on the plane or a component of the plane. So why not then ask the government to oblige?

You said that before the contract is signed is when we have the most room to negotiate. Why not put a Canadian in-service maintenance fighter sustainment program as a binding, contractual arrangement with Lockheed Martin to ensure that your company or another Canadian competitor, if that's the case, is guaranteed that work? Why take the chance that some American company, right on our border, is in fact able to cut the grass from L-3 and you lose a large portion of that work? Perhaps your case screams out for binding IRBs with respect, if only in your case, to the sustainment program.

Thank you, Mr. Chair.

3:50 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

Thank you, Mr. LeBlanc. Yes, my ancestors were part of the Great Deportation. That is how we ended up in Quebec.

As regards your first point on it being external, I agree with you. That would be a good thing. Unfortunately or fortunately, Canada signed an agreement in 1997 which established that among participating nations, the agreement would be global and not based on regional benefits as we have seen in other programs.

That is a fact. We have to live with that; we are not rewriting history.

3:50 p.m.

Liberal

Dominic LeBlanc Beauséjour, NB

Excuse me, I don't want to interrupt you.

You would have preferred a guarantee of contractual benefits for Canada?

3:50 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

Clearly, everyone would prefer to have guaranteed contracts. I think that is normal.

Having said that, as regards the CH-47 and the C-130J,

CAE competed. The Government of Canada put out an SOIQ, a solicitation of interest and qualification. We qualified with our Canadian partners across the country. We won that competition. Then we negotiated a contract with the Canadian government that was a fair contract. We won the contract for the CH-47. We won the contract for the C-130J, and Lockheed Martin, after, again, hard negotiations and looking at different things...we won the contract for maintenance technicians on the C-130J.

This is the name of the game. This is a democratic country, we live in a relatively democratic world, and we are okay with competition because we believe, as a world leader, that we can get the best.

I will add one thing. We do a lot of work for the U.S. Special Forces in the States. The U.S. Special Forces, for those who will remember, are...that movie Black Hawk Down. They only buy the best, and we're their biggest supplier. I guess that means something for the quality of the work that is done by the employees of CAE.

So we're open to competition.