Subcommittee on Canadian Industrial Sectors Committee on April 28th, 2009

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Lake.

[George Haynal]

I didn't mean to make that suggestion lightly. I fully echo your view. I think it is extraordinarily important for all Canadians to understand what this industry is about. It's unique. And it's not necessarily evident what this thing is, unless you're exposed to it on a reasonably intensive basis. It is unique.

So thank you for the opportunity to make that point.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Haynal.

Mr. Thibeault.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

I thanked all of you earlier for coming, but I want to thank you again, because this has been very informative for me. Your last comment, specifically about Bombardier.... It's good for all of us to hear and especially to be able to bring that back to our constituents. So thank you for that.

You brought up the comment that innovation is contagious. I'd like to go into that area, but first I'd like to talk a little bit about the green economy and green innovation. I've heard it mentioned a couple of times, but where is the sector going in this area? I'll start with you, Mr. Bertrand, and then open it up to everyone. Do you feel this is an area where innovation into the green technology for your sector can provide new jobs, new contracts, things along those lines? Do you see that as an opportunity for innovation?

[J. Richard Bertrand]

We are at the driving point, if you will, of aircraft and other manufacturers when they talk about the environment. A plane doesn't fly without an engine, and it's important that it be a very sophisticated engine. If the engine in the car doesn't work, you pull over to the right. If the engine in the boat doesn't work, you just float. But the engine in the plane is critical. That's why we invest so much in R and D. That's why, coming back to your question as to the benefits for all Canadians, we are ahead of the curve in so many of those areas, which helps us.

But coming back to innovation, when it came time to innovate.... And I'll just mention, for instance, where we are unique in the world. Our 600 engine manufacturing is a continuous line of manufacturing, in which we've reduced 1,000 working parts, made the engine much lighter and much more efficient.

The new PurePower engine was actually developed by our American office as well as our own. The PurePower engine that is coming out is going to be to the tune of about 25% to 30% more energy-efficient, and that is one of the reasons the CSeries is becoming so popular, if you will.

Coming back to innovation—the innovation we work on and continue to work on—again, there was mention of the Q400, which is a turboprop. The whole turboprop market has suddenly exploded again because of the cost of fuel, because of the cost of transportation, but also because going.... A good example is what Porter airlines is doing between Ottawa and Toronto or Montreal and Toronto. They're saving significant.... So we continue to work on those engines that we had from before to make them lighter and so on. We work with universities on that innovation—can we take metals, and work with better metals, or make them lighter, and so on.

I don't know if that completely answers your question on innovation, but I can tell you that the heart of it is that the innovation we create today is going to assure our competitiveness tomorrow. And coming out of the gate, if we're not ahead of the curve on that....

Last year Boeing was quoted as saying it wanted engine manufacturers around the world to work more aggressively on environmental solutions. I think aircraft manufacturers are actually pushing the engine manufacturers a lot in that direction, saying, “Look, we have to be leaner, we have to be greener, we have to be more efficient if we want people to buy our planes”. And it's not sufficient to do that.

Finally, we're being innovative in our aftermarket. You must remember that a very good portion of our income comes after the market—in other words, repairing engines and so on. We're being very innovative there, in that we're finding solutions for airplanes that are older, in which we could re-engine the airplane. And that's not an easy task, because the nacelle, or the container if you will, for the airplane has to be the same and it has to have the same aerodynamic impact on the plane. So we're innovative in that area, too. And here we work, again, with manufacturers in the field and service people.

[Nathalie Bourque]

I think CAE stands for “agreeing”, when you think about it. It wasn't meant to be at the beginning, but it turned out to be. CAE was born in 1947, and as I said, it was a former Royal Air Force pilot who wanted to do something innovative and technology-challenging. So we started this, and with the first contract we had from the Canadian government, to do a simulator for a CF-100, well, that took us to where we are today.

When you think about it, we don't spend fuel. It's very safe, because you can crash 15 times if you want to, and it has no consequence. And it's about 10% of the cost. Sixty minutes in a simulator represents six minutes up in the air.

Our simulators are so good because of our innovation that now—and please don't panic over this—the first time a co-pilot flies an actual aircraft, it's with passengers in the back. That was given to us by the FAA in the early seventies because of the motion and the quality of visionics we had; it was so real that they decided to give us that right. And we have that right around the world now.

Just to come back to the expression, which I will note and use many times later, when you talk of innovation being “contagious”, if we were to add companies that were spun off from our employees making start-ups in Montreal, between me, Pratt & Whitney, and Bombardier, we could probably come up with hundreds of companies that were born out of engineers who left us, including eNGENUITY. I could name I don't know how many in Montreal that were started, because innovation is contagious.

Just to finish, to come back to what Mr. Lake was saying about the projects that we have done, even though we are very, very green, we've even improved on this. Through the first R and D program, we had the Phoenix program. We developed a new simulator, which is about half the weight that it was before. So since we ship these big simulators around the world, we're saving on that, too. It's made with companies that developed a new manufacturer in Drummondville, Quebec, to be able to do that.

So that's all. We feel very good about being green.

[Claude Lajeunesse]

Mr. Chair, perhaps I could just add a word.

Actually, the government, about a year and a half to two years ago, announced the creation of a new program called the business network centres of excellence, based on the networks of excellence that existed for universities before. The IAC and its members responded to that and actually put together a proposal that was one of the very few--there were four out of about a hundred applications--that were successful. That proposal represented an investment by the Canadian government of $11.8 million, a total investment of $25 million for a green aviation R and D network, looking at how you can develop a greener airplane from birth; that is, the construction, operation, and disposal. The network has already begun operating. We received the first instalment in March. It's operating, and I can assure you that there will be some innovations coming out of that, because we work with universities. It's a very significant program that the Government of Canada has put together, and the industry has responded very, very well, and responded in one way: to looking at the green airplane.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Monsieur Lajeunesse.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I touched earlier on the different industries that are identified as regional, so to speak, but as we've heard from industry after industry, there's more of a national component than we might think. And we've heard today that this case exists for your industry as well.

One of the things that came out of the first ministers conference in January was this notion of internal trade, as opposed to just external trade, which is obviously so important to your organizations. I am just wondering about barriers to internal trade that might significantly impact your industry. I'm thinking about credentials, for example, from one province to another province. Are there barriers that affect your industry? To what extent would it affect your industry? And how would it be addressed, if so?

Does anyone want to speak to that?

[J. Richard Bertrand]

I don't know of any. National defence?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay—so on the internal trade side of things it's not so much of an issue.

This is may be more the case for CAE and for Bombardier. You talked about operations outside of Canada. What percentage were you talking about, Mr. Haynal, outside of Canada?

[George Haynal]

Operations outside of Canada?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Yes, your workforce. What percentage of your workforce?

[George Haynal]

About 66% of the workforce is outside the country.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

And Ms. Bourque?

[Nathalie Bourque]

For what we could do.... Well, we couldn't do it. It's about a third. We have 3,500 people in Montreal and we have 1,000 working in Tampa, Germany, or Australia, where they add the military component that we aren't able to do.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

That partly answers the question I was going to ask. You kind of brought up earlier the notion of the Canadian government and that when we're procuring we should give preference to Canadian companies, in a sense, and yet both companies have operations outside of Canada. What would cause you to choose to put those operations outside of Canada versus having them inside Canada?

[Nathalie Bourque]

If I gave you that impression, I'm very happy to have the chance to correct it. We don't want to be given preference because we're a Canadian company. We want Canada to choose the best in the world, and if we're considered the best in the world for all of the U.S. forces—the Marines, Navy, whatever it is—we might be considered the best for Canadians as well, as we are for Germany and Australia and for the NATO countries. We do the NH90, the famous helicopter. We were chosen to do this for all NATO countries because we're the best. Again, I'm on the training side.

So we're not asking for a preferred situation. We're just asking our government to do a fair, competitive process, which they did with the OTSB, for the training of the C-130J, where they went for an SOIQ, a statement of interest and qualification. Then they qualified a group. Then we did the RFP, and then we got the contract. By the way, that took a year and a half—and we're okay with that. So preferred is not a word that—

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Maybe it was a bad choice of words on my part. That's fair.

[Nathalie Bourque]

We're just asking to be fair. The way we're organized right now, the only place where I would say we have employees who could do a job in Montreal would be our 200 engineers who we have based in India, because when you have a training centre in Dubai you need simulators to train pilots in Dubai. You cannot train every single pilot. You can't fly 20 hours to come and take a course in Montreal. It would be like saying there's one engineering school and it's in Montreal. It's impossible. So we are regionalized for this, and we have training centres in 25 countries around the world.

So really our biggest base of employees is in Montreal, with half our staff. The other half is mostly in our training centres. They are instructors and people maintaining a simulator, and the others are doing military work. So we are very Canadian-based. I come back to this. We have 200 in India, and these people—we looked at this and we were trying to keep our costs down and it's one of the ways that we've managed to keep our costs down. But thank God we have the SADI program. We will be doing the $714 million of R and D in Canada with the help of the Canadian government. Otherwise these numbers would potentially change dramatically.

[Claude Lajeunesse]

Mr. Chair, if I could, I'll add on this, because there was a question that I answered with regard to military procurement. Quite clearly we do not favour protectionism. That's not the issue. The issue is that if government is going to spend large amounts of money purchasing foreign aircraft that of course are not built in Canada, we want to make sure that the industrial regional benefits, or the in-service support that comes out of these investments by the Canadian taxpayers, maximize the benefits to the Canadian taxpayers. It's not a plea for protectionism. It's a plea to make sure that we work smarter in terms of the investments that are made in this country.

[The Chair, Conservative, Dave Van Kesteren]

Okay.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I think Mr. Haynal wanted to comment.

[George Haynal]

First, a correction on the number I gave you. I was talking two-thirds of our employees globally--that is to say between BT and BA--are outside Canada, but in the case of Bombardier Aerospace, two-thirds of our employees are in Canada. So only one-third of our labour force is elsewhere.

We have a plant in Belfast that is a factory we bought from Short Brothers, or it is Short Brothers, and the reason we're there is partly because of its history. The Short Brothers built aircraft for the Wright Brothers. They've been in this business a long time, and they have unparalleled global expertise in the manufacture of wing technology, for instance. That's one reason and one example.

We're in Wichita, where we make Learjet aircraft, business aircraft. We're in Wichita because that's where Learjet was when we acquired them and that's where our global expertise for this size of aircraft resides.

We've established a small plant, now growing, in Queretaro, in Mexico, and we'll see where that goes. We went there for a number of reasons. When I think of my checklist, to answer your question, let me give you the checklist in answer.

Why would we establish anywhere, Canada or elsewhere? One is markets. Are they fair, are they clear, can we compete in them? Is there some comparative advantage in being there? Human resources. Are they there? Are they stable? Are they trained? Are they reliable?

Partnerships--can we have a sense of partnership with communities, governments, suppliers, institutions, universities, and others? Clusters--are there clusters available on which we can draw in terms of suppliers, in terms of technology suppliers, in terms of economies of scale?

Lastly are societal issues. And this is a hard one to calibrate, but it's a huge part, I think, of decisions that favour Canada. Is there a rule of law? Is there a climate of trust and constancy? Is there protection for intellectual property? Can people feel safe here?

These are all real questions. They may not have a dollar figure attached to them, but they are all very real.

[The Chair, Conservative, Dave Van Kesteren]

Very important. Thank you, sir.

Mr. Garneau.