Mr. Chairman, my name is Daniel Verreault. I represent General Electric in Ottawa. I would like to thank you for the invitation to appear before you.
GE has a long and proud history in Canada. The company has been established in the country since 1892, and its five divisions are present here. In 2009, our 8,000 employees generated nearly $6 billion in revenues, from our 12 plants and hundreds of sales and service centres.
As the major supplier of engines to the Canadian military, we power eight aircraft fleets and the navy patrol frigates.
Since the 1980s, we have generated more than $2 billion in industrial and economic benefits, thus creating thousands of jobs and transferring leading-edge technology. In addition, we continue to invest in Canada while several new industrial initiatives are being proposed in order to emphasize our presence in the manufacturing sector in Canada.
With the selection of the F-35, the government now has an opportunity to save hundreds of millions of dollars in the manner it selects its engine. In addition, it can request from engine companies industrial plans regarding how these engines would be maintained over the life of the program and decide on which one it prefers.
The JSF competitive prototype launched in 1996 was powered by an engine manufactured by Pratt & Whitney of Connecticut. For the next 10 years, the U.S. DOD also funded a competitive engine program. Congress believed it was important for the U.S. forces and its partners to have a choice of two engines and to create a competitive environment in the fighter engine market. We will be submitting shortly to the committee a more detailed description of the history of the program.
In 2002, General Electric and Rolls-Royce created the Fighter Engine Team with a view to developing and building a new engine: the F136. Designed specifically for the F-35, our engine uses leading-edge technology which enables us to get ahead of our competitor.
We are currently in the final stages of development, and our engine will be certified and available once Canada has chosen its engine, in September 2012.
The MOU that Canada and its partners signed in 2006 states that the partners can choose either the Pratt & Whitney F135 or the Fighter Engine Team F136, or both. For Canada, being able to choose from two engines has several important benefits. It will create greater possibilities for Canadian firms as opposing teams attempt to maximize the effectiveness of their proposals. Most important, it will save money.
According to the independent U.S. government accountability office, and based on the great engine war, engine choice would save the program a total of $20 billion over the life of the program. For Canada, for the same period, we estimate that over $400 million in savings will be generated. The engine represents an estimated 50% of sustainment costs of the overall aircraft.
The Fighter Engine Team is so confident that the F136 will achieve its technical and financial objectives that we recently offered a fixed price to the U.S. joint project office for engines purchased in 2012, followed by further price reductions in the subsequent two years.
Having a choice will minimize costs and maximize benefits, while being entirely consistent with Canada's procurement policies. When products of an equivalent nature are offered on the market, Canada tends to favour a competitive procurement process, in order to maximize the economic, technical and industrial benefits, and to ensure the best product at the best price. A choice of engines is therefore the best option for the men and women of the Canadian Forces, taxpayers, and the government.
For the past 15 years, the F136 engine has received consistent support from the U.S. Congress, with investment funding approvals exceeding $3 billion. This amount represents more than 75% of the total cost of the development program. Unfortunately, in response to short-term fiscal pressures, the program has now been threatened with termination by the Department of Defense.
The GE Rolls-Royce Fighter Engine Team urges the Canadian government to press the U.S. government to maintain funding for the F136 engine so as to ensure that Canada can select which engine is best. This is a contractual right that Canada received under the terms of the MOU.
Thank you for your attention. I look forward to your discussions.