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 aircraft.
A recording is available from Parliament.
Liberal
Bryon Wilfert Liberal Richmond Hill, ON
Mr. Chairman, thank you.
The irony hasn't been lost on me that we're talking about a competition for an engine, but we're not talking about a competition for an airplane.
My question to you is if the Obama administration decides to cut the funding, which is about $1 billion, or about $1.3 billion extra, and the British are reluctant, then you would be out completely, would that be correct?
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
First of all, regarding the British situation, the Secretary of Defense has recently written to eight esteemed colleagues in the U.S. Congress advocating for engine choice, advocating that the British military be given an engine choice.
Regarding competition, Canada has selected the F-35. It is not for us to question the customer's decision. We're in the business of selling engines and systems. Therefore, now that the decision has been made, we are keen to provide you with the best engine and systems, at the best possible price, and the best overall cost of ownership.
Liberal
Bryon Wilfert Liberal Richmond Hill, ON
Can you estimate, sir, what portion of the maintenance would be done in Canada?
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
The recipe that will develop the sustainment model for the engine is still under development and under design. When we are able to compete, we will then be able to present you with an aggressive industrial plan. We will then show you what our technology can achieve, in terms of the sustainment costs. How often do you have to remove a widget? The less you remove the widget, the cheaper your sustainments costs, and therefore the better able I am to compete.
In the end, it will be the best possible price, with the best possible industrial plan for Canada. The status quo is a sole-source contract to one engine company.
Liberal
Bryon Wilfert Liberal Richmond Hill, ON
If I may, very quickly, how concerned are you with regard to the Obama administration's floating this notion that in fact if these costs continue to escalate they're prepared to veto?
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
Regarding the funding of the alternate engine in Washington, D.C., we continue receiving bipartisan support. As my colleague, Mr. Lennie, has mentioned, we keep, on a yearly basis, receiving Congress support. The situation is the same again for the 2011 budget. We are hoping that the deliberations will be the same as previous years: our engines will continue to be funded based on the advantages of having an engine choice.
Bloc
Claude Bachand Bloc Saint-Jean, QC
Thank you, Mr. Chairman.
I would like to welcome you before our committee. Mr. Verreault, I had the opportunity of visiting your factory in Bromont.
Mr. Lennie, I have visited your factory in Montreal. Those were very interesting visits.
I would now like to try to understand what is happening. One of you said this:
“contractual right under the MOU--there's an engine choice there.”
Does that refer to all countries involved in the F-35? Or are you talking about an agreement that would have been signed with Canada?
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
That is an agreement that was signed by eight industrial partners.
Bloc
Claude Bachand Bloc Saint-Jean, QC
I think that is pretty smart on your part, even though I like Pratt & Whitney a lot, to undertake a joint venture and create the Fighter Engine Team.
Who is funding the Fighter Engine Team? Is it Washington or all eight participating countries?
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
The Fighter Engine Team is a company that was created by GE Rolls-Royce with a 60% share for GE and 40% for Rolls-Royce. Of course, we invested our own industrial funds in the program.
In terms of the engine development, that is done according to the same American technology development standards. The client is the American Department of Defense. It approves some of the development stages. We received an annual subsidy of over $3 billion in order to develop the engine.
Bloc
Claude Bachand Bloc Saint-Jean, QC
I imagine Washington funds a good part of this. If it puts an end to the Fighter Engine Team by discontinuing its funding, then the contract goes directly to Pratt & Whitney.
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
The program funding is definitely funding from the American Department of Defense. That department has not included funding for that program in its budget.
In past years, each time the budgets were re-examined, the American Congress would add supplementary funding in order to finance the engine development.
Therefore, why would one use one's own money from year to year if Congress is going to be providing it in the end?
Bloc
Claude Bachand Bloc Saint-Jean, QC
Is the American Congress dealing with contractual rights?
If all countries signed the memorandum of understanding—and in this contract a choice of engines is provided—then that choice cannot simply be removed from one day to the next.
Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
Mr. Bachand, we agree with you.
Bloc
Claude Bachand Bloc Saint-Jean, QC
Mr. Lennie, Rolls-Royce is a British company whose headquarters are in England, is that not correct?
Vice-President, Business Development and Government Affairs, Rolls-Royce
The headquarters worldwide are in the U.K., our headquarters in Canada are in Montreal, and for North America they're in Washington, D.C.
Vice-President, Business Development and Government Affairs, Rolls-Royce
Well, we're a global company, I think is the best answer. We have plants scattered all over the world. We are headquartered in the U.K., but our interests are truly global now.
As I mentioned in my speech, we really have four distinct global markets that we are constantly engaged in.
Bloc
Claude Bachand Bloc Saint-Jean, QC
We have already seen in the aerospace sector that some engines are preferred to others. I remember quite clearly that initially Airbus was supposed to carry Pratt & Whitney engines until François Mitterrand decided that European engines would be used.
Do you think that the British are currently holding a card in their hands in order to have F-35s, by telling them that they want the contract provisions to remain and that there be a choice of engines? Could Great Britain play that card as we speak?
Vice-President, Business Development and Government Affairs, Rolls-Royce
As my colleague has mentioned, the U.K. is pushing hard with its counterparts in the U.S. government to try to ensure that the funding is maintained. We are hoping that Canada will do the same. That's what we hope will happen.
Bloc
Claude Bachand Bloc Saint-Jean, QC
Canada has less leverage than Great Britain does. The British could threaten to... In fact, we have heard rumours about the F-35. They want to reconsider...
When they mention reconsidering, are they referring to the issue I have raised? If Rolls-Royce and GE engines are no longer financed, then would the British go as far as saying that they will challenge the contract that they signed pursuant to the memorandum of understanding?
Vice-President, Business Development and Government Affairs, Rolls-Royce
I don't think there's misunderstanding from the U.K. side in terms of the MOU. I think the U.K., like all international partners, is simply trying to stand up and make it known that what it finds, along with all the other international partners...it would like the U.S. to abide by the terms of the international MOU.
Bloc
Claude Bachand Bloc Saint-Jean, QC
If Washington does not recover, and it decides to no longer provide funding, and Pratt & Whitney becomes the sole company to provide the engine, do you think that there is any chance that the signatory countries could take legal action because of the fact that the choice of engines was removed?
