National Defence Committee on Sept. 15th, 2010

[Claude Lajeunesse]

What I am suggesting is that this public accounting would allow government, should a problem develop, to use some of the instruments that governments have to make sure that the commitments that have been made will be met.

[Jack Harris, NDP, St. John's East, NL]

Thank you.

I have only time for one more question, but I will involve both of the other witnesses.

Mr. Kalil, you have contracts now. Were there contracts associated with the early part of the program? Were they received since the announcement in July?

I have the same question for Mr. Bertrand. I'm delighted that you're active in this program and I know you do great work, but it seems to me that there have been contracts around that are not directly related to this announcement on July 15, although I will accept the fact that any certainty would open up the doors. Can you tell us about the contract history? Is it new or is it something that has been going on for some time?

[Paul Kalil]

Mr. Chairman, we've been working toward achieving this contract for the past five years, so yes, nothing happens overnight. However, the announcement in many ways was a catalyst for the decision going forward and gave everybody that last push they needed to bring this to fruition.

Would it have happened anyway? Nobody can really tell. But certainly we believe that announcement was key to engendering confidence in all the participants in the program.

[J. Richard Bertrand]

In terms of the importance of this in the context of what you're saying--to answer your question specifically--as I said, in 2004 we started the contract on that because that is a very sophisticated and high investment from our point of view. As I said, because we had the involvement of the university also, we were able to bring some of that R and D to apply.

Now that you announce a program going forward, it gives opportunities, and not only to our company, to be able to offer other services. We must remember that down the road we also do, for instance, in Canada and with some of our partners, engine maintenance. When you do an engine maintenance, then you have to do some more assembly and tests. We'd like to hope that in the future we have an opportunity to do that.

To answer your question specifically, did something happen between then and now? In the case of Pratt & Whitney Canada, no, but in the case of a number of the other contracts--there are some other industry people here who could address that, if you wanted--for them it's been very important. It has allowed them to conclude contracts since then and has opened up the field a lot more.

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Harris, you have about 35 seconds.

No? Thank you very much, Mr. Harris.

We'll now turn to Mr. Hawn for seven minutes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Chair.

Thank you, witnesses, for joining us for this important discussion.

Mr. Kalil, you talked about your work in the global supply chain on the CH-47 as well as the F-35. So what we're doing on the F-35 program is in fact not unique, but in fact is the new way that industrial participation is rolling out in other contracts, other large contracts as well, such as the CH-47 Chinook?

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Kalil.

[Paul Kalil]

Mr. Chairman, I guess it's just a contrast between the IRB approach versus what is possible by being involved early on in a development program. That is not always available. If we are buying an off-the-shelf platform, that opportunity to participate in the development and develop the technology is not there, and therefore the IRB program is entirely appropriate.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Yes, I understand, which is exactly the point, I think, with a program like the F-35, which is a development program. The opportunity to participate in the global supply chain is far superior at the end of the day, by any reasonable level of prediction, than the old IRB program.

[Paul Kalil]

We believe so, at this point. Yes, sir.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I think it was you, Mr. Lajeunesse, who said that we want our share of that $385 billion--and I couldn't agree more. If there are 5,000 aircraft built, if you do the math, 65 aircraft worth of that is about $4.5 billion.

So if we're looking at $12 billion plus, we're probably going to come out pretty well. Would that be a fair statement?

[Claude Lajeunesse]

Yes, absolutely. I do believe that if we're in a position to gain $12 billion from the purchase--and I hope we would get more--if we get that, we're already doing a lot better than we would do through the IRB program.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Absolutely.

With respect to the AIAC companies, which as you've said are coast to coast, what's your judgment of their ability to adapt to the real-world changes that have come along in the last several years with respect to industrial participation? Some people seem to be stuck in this model that if it's not the old IRB process, then there must be something wrong. Well, processes evolve. Industry evolves. The world evolves.

For your AIAC member companies, what's their ability to evolve with this real-world change in how business is done and be profitable for their shareholders, and for their workers, and for Canada?

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Lajeunesse.

[Claude Lajeunesse]

Our companies have been very supportive of the announcement. They see that as an opportunity, as you've heard. There are many others in this room, such as CMC in Montreal, CAE, Héroux-Devtek, Cascade, Bristol-Magellan, Rolls-Royce, who certainly see that as a great opportunity to create jobs, to create new opportunities to export abroad, to create new opportunities to develop new products and so on.

I have not received one criticism from our companies with regard to the announcement that was made. Of course they will have to compete. Of course sometimes they will have to compete against each other. But quite clearly this is an opportunity that they are really pleased to have.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Competition is never unhealthy, I would suggest.

[Claude Lajeunesse]

That's right.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I have a couple more quick things to ask you, Mr. Lajeunesse. You said the most important thing is a firm decision so you can get on with some planning. Are you satisfied that what we have at the moment is a firm decision?

[Claude Lajeunesse]

That's a very important point. Mr. Kalil covered that in his presentation, but let's be clear. Companies have to invest up front to gain these contracts, and Canadian companies will be leery of investing up front if there seems to be some uncertainty as to where the program is going. Moreover—Mr. Kalil was quite eloquent on this—if a Lockheed Martin sees some uncertainty also, they will certainly perhaps think twice before dealing with some of our companies. So we feel it is extremely important that the government has made a decision and that the decision be implemented.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

If the consequences of any uncertainty that might be generated by somebody else were carried to their fruition--God forbid--what would be the consequences of that for your member companies and for the economy of Canada?

[Claude Lajeunesse]

It's quite clear that if they don't invest, they won't create jobs. If they don't get contracts, they won't have jobs.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you.

Through you, Mr. Chair, to Mr. Bertrand, I have just a short one. Pratt & Whitney is a high-tech company. Obviously engines are pretty high-tech stuff. Pratt & Whitney is a large company, and there are some concerns expressed that this is fine for the big guys, but how about those little guys? How do they manage in this competitive world? Pratt & Whitney deals with an awful lot of much smaller companies in terms of subcontractors. How do you see the ability of those Canadian companies to survive and profit and prosper in this kind of environment? What has been your experience with those companies that have their acts together?

[The Vice-Chair, Liberal, Bryon Wilfert]

Monsieur Bertrand, you have about one minute.

[J. Richard Bertrand]

Thank you.

Again, with us today is, for instance, Magellan Aerospace. Pratt & Whitney Canada works very closely through Magellan, Haley Industries in Renfrew. We have a long history of being able to do that, and part of our responsibility....

Just so you understand, under the former TPC agreements that we had, and the new SADI agreements, as part of the commitments we make, we make commitments to work with those SMEs and to help them get along. As a matter of fact, we work very closely because it's part of our mandate. And the other companies that come into Canada....

You mentioned IRBs before, by the way, and you know, we shouldn't say one or the other. I think we're blessed with both now. When you do an investment on an IRB—for instance, in Mirabel, and Monsieur Laframboise is going to benefit because we're going to have an announcement in October—those things are very important. They became part of the IRBs. At the same time, if I am able to sell IBRs, which I mentioned before, I'd like to do it to more than 65 planes, which I would do under an IRB kind of agreement in the future.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much.

Thank you, Mr. Hawn.

Colleagues, we're going to the second round, and since it was so popular this morning, we're going to the lightning round again. The lightning round will be two and a half minutes.

First on my list is Mr. Payne.