National Defence Committee on Oct. 5th, 2010

[MGen Richard Bastien]

I guess you're asking me to compare. I would say that the present contracts may not be exactly the same as previous contracts. This one is different particularly because there are no IRBs, as there were previously in contracts. However, the timeframes you are mentioning seem to be the norm.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Where is most of that $7 billion estimate for the first 20 years going to be spent? Is that going to be spent in Canada for the most part?

[MGen Richard Bastien]

I would hope so. That's what we claim we would like to see.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Where has the money gone? Who has been paid the money to do in-service support of the CF-18? Has that been Bombardier? L-3?

[MGen Richard Bastien]

It has been Bombardier, or L-3 now.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

So it makes pretty perfect sense that for whoever wins that contract, that money will come to Canada. Would that be a fair...?

[MGen Richard Bastien]

I would hope this is the way it will happen.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Yes, absolutely.

[MGen Richard Bastien]

The only point I might add is that at this time in our understanding of the concept of sustainment, it's very unclear. It's very uncertain. Therefore, that's why we have this concern that we've expressed to you.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I'm glad you brought that up. Part of the MOU--and you may or may not be familiar with it--is access to information to maintain the aircraft. If we're not part of the MOU, we don't have access to information to do that in-service support for the aircraft.

Ms. Bourque, you're nodding your head. Is that your understanding from your reading of the MOU?

[Nathalie Bourque]

Yes, it is. The part that has to be a bit more clear is the part about the intellectual property and how we can use it if we're going to do in-service support. For your information, we do have 200 engineers working full time with L-3 on the maintenance of the aircraft, so we're definitely very interested in this. The intellectual property is key to this whole discussion we're going to have for the in-service support.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

That is within the MOU.

I'm going to turn it over now to Ms. Gallant for the last couple of minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

We've been told that the JSF is the only jet that met requirements to best serve our women and men in the Canadian Forces, and indeed the security of Canada, so I'm going to focus on what seems to be the concern, and that is how jobs are going to spin off from this project.

In addition to your corporate headquarters.... I'm going to direct my question to Bill Matthews. In addition to Mississauga, I understand that you have plants in Winnipeg, Kitchener, Vancouver...and Haley Industries. I was indeed speaking to Jim Lemenchick. He explained that they are going to get a piece of this business. He said that while the F-35 memorandum of understanding has been put into place in Canada, in addition to the jobs from its manufacturing, there was going to be a launch of a new generation of technology at the plant level. As a consequence, far beyond the F-35 project, there will be new opportunities available that have never been available before.

Can you elaborate on how the exposure to the new technology will expand the aerospace industry in Canada?

[Bill Matthews]

Yes, Mr. Chairman. First of all--

[The Chair, Conservative, Maxime Bernier]

Briefly, please. You have a minute to answer the question.

[Bill Matthews]

Okay. The question was about Haley Industries, which is located near Renfrew. I should tell an anecdote, but I'll stick to the subject. It is the finest sand casting facility in the western world. We're quite proud of it, and there is no one that compares to us in North America or Europe. It deals with the most technical level of sand castings. They can be simple or they can be very complex. They are very complex in Haley, and I believe that complexity has given one of our engine makers in Canada tremendous advantage in business class engines for at least 20 years. That's something to take home.

Secondly, there are technologies that are now just being developed for sand casting to make it even more capable, and we are heavily investing into those sand casting technologies to ensure that we continue to be the best of the sand casters in the world. The fact that we have won the main gearbox for the engine of the Joint Strike Fighter endorses the capabilities of Haley Industries. We have won a number of other castings but none so complex as the main gearbox.

So the suggestion that we are gaining additional benefits from doing JSF work in this particular case, beyond just the JSF part, is accurate and we expect to gain more going forward from that part of the business as well.

Thank you.

[The Chair, Conservative, Maxime Bernier]

Thank you, Mr. Matthews.

Mr. Wilfert, the floor is yours.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair, and congratulations on your re-election.

Through you, Mr. Chairman, in 2008 the then industry minister, Mr. Prentice, indicated that Canada was under no obligation to buy this particular aircraft but that the industry would benefit significantly from it. In fact, he said there were tremendous advantages, and in fact preferential conditions and advantages reserved for JSF partners. Are you aware of what those preferential conditions are? Also, in the case of Ms. Bourque's company, I understand that you have an agreement with the government to serve as an official training service provider, but in fact you have absolutely no agreement on the F-35s at the present time.

So I want to know essentially what these preferred conditions are. I thought I heard from one or two of you that the concern is if we don't buy these aircraft, we won't have any ability to participate in any of the areas that the three of you have outlined.

[Nathalie Bourque]

I'm not aware of that comment from 2008 about how the industry would benefit, so I'll put that right up front.

In our case, we want to train the pilots and we want to train the maintenance technicians. In real life, whatever the aircraft, we would still try to do it. We're not like an engine manufacturer who is with Boeing or with Lockheed Martin on something like this. So we are open to this. What we're saying today is that under the agreement that was signed in 1997, we realized that--c'est en deux temps--the contract will be signed in two sections. The first section does not do anything for CAE--you're totally right--but in the second section, where we are involved, we are definitely interested in doing the pilot training and the maintenance technician training on any platform the Canadian government would decide to buy. Right now it's the JSF, and we think it's a great platform, but again, we're no experts on an aircraft platform.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

I want to point out that my comment was based on an Industry Canada press release of September 3, 2008. My concern again goes back to the fact that we certainly believe very strongly that our industry can compete with the best in the world. There's no question. The issue becomes whether or not there's a level playing field in order to compete.

There are two issues. Obviously, one is whether this is the right aircraft that we need, and the second is what the regional economic benefits will be for industries in this country. We don't see anything that's spelled out clearly to do that, and therefore you are basically being asked to compete--and I'm sure it's going to cost you significant dollars--in this global supply chain with no guarantees whatsoever that in fact you're going to reap any benefits.

Would that be a fair statement? That's through you, Mr. Chairman, to any of the panellists.

[Bill Matthews]

First of all, my understanding of the MOU is that it contains two types of opportunity. One is strategic. The government has set some strategic guidelines for Lockheed and the two engine makers to meet in providing opportunity for Canadian companies. They've set some long-range strategic objectives that deal to some degree with materials or other advances in manufacturing or even design. Then there's another portion that is open for bidding on a competitive basis, no matter what the contract is for.

At Magellan we have been able to win on both sides. We've been competitive on a worldwide basis on machining, and we've been competitive on the strategic side as well.

Maybe that's enough said.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

If you want to finish your statement, I'm quite happy to hear it.

[Bill Matthews]

I think the concept that we ought to be ashamed of having to compete for work is misplaced. I think that only people who can't compete are ashamed to compete. We know what we're doing. We know the world market. We're working the world market in everything we do on the civil side. Why not do it on the defence side too? And we're winning. We've already delivered almost $35 million worth of product: competed for, won, and delivered. That's just the initial stages, before we're even at any kind of reasonable production.

We have colleagues across Canada, who we know are just as good, who are winning as well. In fact, I think just a week ago, Mr. Kalil, from Avcorp, announced a $500 million contract they'd won.

So we don't think that anybody, especially representatives of the country, should be ashamed that their industry has to compete for something.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

I don't know that anybody has ever said that.

[Bill Matthews]

That's the overwhelming message I'm getting. We should be proud that we're out there.