Government Operations Committee on May 3rd, 2022

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

I appreciate your comments once again. I feel it's important to emphasize, again, the benefits that are accruing for the Canadian economy and businesses like yours through the NSS.

I want to switch gears just a little bit, really quickly. I think last week Davie announced that it's becoming a member of the Centre for Innovation, Industrialisation and Inclusion of Alternative Energies and Green Metallurgy. The purpose of this is basically to increase investments in sustainable marine technologies and work towards long-term decarbonization.

In your opinion, is there a need to examine the NSS through the lens of climate change? Also, do you believe there are examples of initiatives in this industry that can help improve the negative impact shipbuilding might have on climate change?

[Shaun Padulo]

Mr. Chair, I want to say, first and foremost, that I think it's a very bold and welcome strategy Davie has adopted. They're leading the industry right now in terms of adopting those policies, and it is important. Whether it's shipbuilding, aviation or car manufacturing, considering the environment and construction in the context of environmental sustainability is very important.

If we look at the traditional methods of ship production, and the activities that occur in a shipyard, there are certainly many things we can do to improve. If we look at shipyards across Canada right now, I believe we're all trying to figure out how we can adopt the most environmentally sustainable methods, whether in the activities our people are engaging in on the shop floor or the ships themselves, or in the equipment we're purchasing.

I do think it's important, and I commend Davie for being leaders on that front.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Padulo. I apologize for interrupting you. If you have further information you would like to provide to the committee, please submit it to the clerk and we will distribute it. I appreciate that.

We'll now go to Ms. Vignola again for two and a half minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

Mr. Fulfaro, the design costs of the Type 26 frigates, which Irving Shipbuilding will build, are currently around $490 million. Lockheed Martin is designing it. Do you think that this design cost is reasonable for fifteen Type 26 frigates?

[Achille Fulfaro]

Can you translate that into English? I didn't receive a translation.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Currently, Irving Shipbuilding has contracted Lockheed Martin to design the Type 26 frigates. This will cost about $490 million. Do these design costs for 15 frigates seem elevated or appropriate to you?

[Achille Fulfaro]

Generally, I don't talk about the proposals that come from others. I'll repeat that Fincantieri's proposal is very clear. Our proposal covers all the issues. We are acting as a global player, including in the transfer of technology—

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I see.

[Achille Fulfaro]

We are confident in our cost. I cannot give you information about other—

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Very well, I will rephrase my question.

In this case, out of the $30 billion in your proposal, what percentage is the cost of design?

[Achille Fulfaro]

The percentage is very low for the reason I explained before. We are talking about a well-proven and sea-proven ship. We have to tailor the ship to the [Inaudible—Editor] and to the user requirements, but we don't feel we have to completely change the design.

The difference between a well-proven, sea-proven design like the FREMM and the paper design is exactly the difference in the cost. We expect to reduce the cost of the design, but also, I have to say, reduce the risk. The important point we underline in our letter is that we have not only reduced the cost of design—

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you. Unfortunately, my time is up, Mr. Fulfaro. I wish you an excellent afternoon.

[Achille Fulfaro]

We'll spend two hours discussing this in the future.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Fulfaro.

We'll now go to Mr. Johns for two and a half minutes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you all again for being here.

Mr. Padulo, you talked about your shipyard, which, not long ago, had no workers at all when it was once one of the most thriving shipyards in the country.

Hearing that, can you talk about the importance of the national shipbuilding strategy as an anchor, not just for today, but so that, 20 or 30 years down the road, we won't have an empty shipyard but a thriving shipyard? How important is it that we do it right with the investments we're making now? Can you speak about the critical need for us to ensure that we're making key investments strategically so we have a long-term, thriving shipbuilding sector in Canada?

[Shaun Padulo]

I think the situation we find ourselves in right now is one that is a historical challenge. We're looking at a fleet for the Canadian Coast Guard as well as a fleet for the Royal Canadian Navy that are past their service lives.

My background is in commercial shipping. I spent many years in the Netherlands and Houston, Texas. Ships are supposed to last 25 or maybe 30 years. A lot of our vessels are quite older than that.

From a government perspective, I believe we need to ensure that we have a constant build program ongoing, so that as ships start to reach their end of life, there's a continuous renewal.

At the same time, as I mentioned in my opening remarks, we can't forget the fact that Canada is a maritime nation, whether we like it or not. Commercial ships are operating on the Great Lakes, east coast, west coast and internationally. I think that marrying government work and commercial work is extremely important.

The shipyards that were shut down need a boost. We need to be resuscitated, and we have been, through the national shipbuilding strategy. We need to be here to support our commercial sector. For many years, the ships that we're currently repairing in our shipyards in Ontario were going down to the United States. We completely lost capabilities within those yards. We're rebuilding that now.

The government work is critical to allow us to rebuild that capacity, so that in the future we can not only build ships for the government, but we can build ships for the commercial sector and repair ships for the commercial sector and government.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Do you believe that the end of life of those vessels is built-in, like the ship-breaking piece? Right now, we're sending a lot of our ships to Bangladesh and other countries.

What can we do to ensure that can also help build on the capacity piece?

[Shaun Padulo]

I think it's incredibly important that the ship recycling piece does become part of the larger picture. When we look at a vessel, there's an entire life cycle. There's design, construction, repair maintenance and then recycling.

In Canada, we have very strict environmental regulations. We have very strict regulations when it comes to health and safety. I think when ships are sent to other jurisdictions, those jurisdictions may not be held to the same standards that we hold our companies and employees to here.

I think it's very important that we consider recycling as part of the entire life cycle and include it in a national shipbuilding strategy.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Now we'll go to Mr. McCauley for five minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks gentlemen for being with us today.

Mr. Padulo, you mentioned that at one point you were up to 4,200 employees at the shipyards. What were you working on at that time that you had such a large number compared to now? What period was that, please?

[Shaun Padulo]

That would have been during the 1980s when the St. Catharines dry dock had about 2,000 employees, and roughly during the 1970s when the Thunder Bay shipyard had about 2,000 employees as well. Throughout various courses of my period at Heddle, we've had up to 200 in Hamilton. It was at peak periods in each one of those yards.

The reason I drew attention to that was that those shipyards are large and they're capable of handling that many employees. Some of the largest icebreakers that are currently operating within the Coast Guard's fleet, like the Des Groseilliers, were built at Port Weller, for example.

[Kelly McCauley, Conservative, Edmonton West, AB]

What projects do you see your company focusing on? You mentioned you can't join the NSS because then you're excluded from 1,000 tonnes and above.

Do you see that as a niche? Do you see that as a partner of Seaspan and Davie for the polar icebreaker? Are you looking for a change with the NSS to encourage the main players to subcontract?

There was a story a couple of years ago about Irving outsourcing a lot of the value-add business to European companies for the AOPS.

Where do you see a role for your company?

[Shaun Padulo]

Ultimately, I see a role for our company in partnering with Canada in the NSS. I understand the rules within the NSS. Partners are not allowed to build vessels under 1,000 tonnes. I see us playing in that space, building vessels under 1,000 gross registered tonnes for Canada. As well as—

[Kelly McCauley, Conservative, Edmonton West, AB]

May I interrupt you quickly? Has anything been announced for 1,000 and below?

A lot of ships have been announced for Seaspan and Davie for the Coast Guard. Are any of them about 1,000? Traditionally, what would be below 1,000 tonnes that you work on?

[Shaun Padulo]

Multiple programs have been announced. The near-shore fisheries vessel is one of them. It's a one-off. There are two aid to navigation vessels and then there are six mid-shore multi-mission vessels. These are all of the programs that we're looking at when we talk about the vessels under 1,000 tonnes.

I think that within the last few years, the rules of the national shipbuilding strategy have shifted. Namely, if Davie becomes a third shipyard, that would be a large departure from the original rules of the program.

I think there is an opportunity for us to become a partner of Canada, but to focus on vessels under 1,000 tonnes and also on the complex VLE programs.