National Defence Committee on Nov. 25th, 2010

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

Thank you very much, Mr. Chair.

Thank you for joining us and for your presentations. They were very forceful and complete.

Mr. Dias, some of the statements you made are rather dramatic, about looking at Israel negotiating IRBs worth in the range of 150% without even being participants, and in Canada's case we're basically given the right to participate in the contracts.

What level of confidence do you have in the Canadian industry to achieve the kinds of numbers they claim—this $12 billion, as an estimate of what Canadian industry...? And they've been very bold about their projections, but it's always phrased, I think, to be fair to the government, as “access to” $12 billion worth of contracts.

What should we do about that? The government says that under the MOU you can't buy the F-35 without participating in this program, which is essentially open access.

[Jerome Dias]

First, our Canadian industry clearly has the capabilities to do $16 billion worth of work, let alone $12 billion worth of work or $4 billion worth of work. We have the expertise and the technical ability.

I'm concerned about guarantees. I have zero confidence, frankly, that Lockheed Martin is going to guarantee us $16 billion worth of work. I am absolutely concerned that we will not get the in-service work to maintain our sovereignty, to a large extent.

The argument is interesting. The argument is that we need to buy stealth bombers, in essence—stealth aircraft, stealth fighters—to maintain our own sovereignty, to be in control of our own destiny. But then we're going to let the United States service our planes, so we'll get them when we get them.

You can't have it both ways. If we say we legitimately need these aircraft for this purpose, then we ought to at least be in control of when we can fly them. It's an interesting argument.

I'm very much in favour of saying that if we have a history that shows we can negotiate a minimum of 100% offsets, I don't see what makes this any different. I understand the argument that we have access to the bigger pie, but the pie is going to be disbursed by Lockheed Martin. It's not broken up based on participation. If it were broken up based on participation, then I would suggest that the United States' buying of over 2,000 aircraft will certainly put them in the driver's seat, as compared with our 65.

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

Obviously, as a representative of the workers, you're concerned about jobs and job protection. Of course, defence contracting is really not about industrial development per se; it's about acquiring what the military needs.

But we had a witness before us on October 5, 2010, Mr. Matthews from Magellan Aerospace, who was asked by one of the representatives of the government side about the number of jobs that would be generated by economic activity. He talked about a goal of $3 billion to be achieved in the after-market in servicing.

He said that $1 billion over 20 years would be the equivalent of about 450 jobs, because $1 billion would be the labour part or worker part of it, and if we got the full $12 billion, it would be three times that, so we'd be talking about 1,650 jobs. That doesn't seem to me to be a lot of jobs for $12 billion worth of contract work. Do you know anything about those kinds of numbers and where they might come from?

[Jerome Dias]

I can't talk about the numbers, but if it is straight jobs related to the parts, spares, and in-service, that's one thing. Repair and overhaul requires that you buy components to install. I would expect that the components you're buying would generate many times more than that in the way of jobs. Let me give you an example.

I don't know where the numbers come from, but, for example, in the auto sector, for every job in direct assembly there are 11 outside. In the aerospace sector, I think the numbers are more conservative—three or four to one. So if we're saying that there are 1,500 direct jobs tied in to that aspect of the work, you can multiply that by three or four.

[David Chartrand]

Let me say something on that.

As an example, I sat with L-3 MAS, and they clearly stated to me that in contracts they give in the area around.... They have 1,000 employees inside L-3 MAS for the maintenance, the repair, and overhaul of the F-18s. But they say they give $50 million in contracts around the province of Quebec on work that's generated from that.

Additionally, you have all the businesses around. It's not just one job fixing that airplane or building it; it's everything else around.

So I don't know where they get those numbers. As he said, I don't know that it's the person working on the plane only; it's everything else that it generates around also.

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

I have another question for you, Mr. Dias.

You mentioned the work that was done on the F-18 upgrade. It was referred to in the House of Commons by the defence minister as a “mid-life upgrade”. It was only completed in March of this year, 2010. You talked about your people doing that work, and I think you call it “doubling the life” of this aircraft. We had someone, a columnist, the other day—Peter Worthington—who talked about the F-18s potentially being useful into the future, beyond the designated date.

What can you tell us about that? “Mid-life” to me meant you were doubling the life. We've had them for nearly 30 years now.

Do you want to answer that question?

[David Chartrand]

That was me. We represent the members who did that.

Those planes were supposed to be useful for missions and things like that, and they were to have a lifespan of 15 to 20 years. We're up to 30 years, over 30 years, so they've just about doubled the lifespan of that plane. Yes, there were costs related to that, but they've missionized them; they've changed them. They've changed the whole centre barrel of the airplane because of stress and fatigue. They've changed components in the wings and so on, to extend the lifespan of those planes. They've changed the avionics inside, the electronics, and all those things.

When they're talking about the F-18s being useful for longer, I'm not sure if they're talking about the ones they have in service now--eventually you do have to change the aircraft because it isn't the latest technology--or the new ones, because there's also a new version that they're building now, a brand new one out of the plant. I don't know if they're talking about the new version of the F-18s or if they're talking about the ones we currently have for the Canadian government.

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

That finished in 2010. How much longer can they be used?

[David Chartrand]

They're going to be in service until 2018.

[The Chair, Conservative, Maxime Bernier]

Merci beaucoup, monsieur Chartrand. Le temps est terminé.

Merci, monsieur Harris. Thank you very much.

I will have to give the floor to Mr. Hawn.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

I'm sorry I'm a bit late. I was speaking in the House about Afghanistan.

Obviously, I've missed a lot of the comments, but picking up on the F-18, I'm not sure I heard you correctly, but we got the first F-18s in 1982, and the concept of operations was for phase-in plus 15 years, at which time we would be in the process of acquiring a new airplane. That put that timeframe at 2003. The airplanes will be 38 years old once we have finished with them. So I am guessing that you think it's a good idea that we replace the F-18 with something that will stand us in equally good stead for the 20 to 40 years after that.

[David Chartrand]

Maybe to relate to that, I had a Mazda GLC in 1982. I could have changed all the wiring inside and dragged it on for 25 to 30 years, but eventually I had to change it. We now have navigation systems in cars; now every car comes with air conditioning. I would have had to put it in. That's the example I have to give you.

We're talking here about a military aircraft; we're not talking about a car. You can only go so far, and I think it has pretty much been stretched. I honestly believe that. For that aircraft, for more than 30 years, it's been stretched.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Well, I'm pretty familiar with the F-18. I was the first Canadian to check out the airplane when we bought it. One of the reasons we bought the airplane was because it had tremendous growth capacity within the software of the airplane. But you're right, there is a point at which the airplane becomes non-usable. The biggest point with the F-18, though, is actually its fatigue life. They're designed for 6,000 hours of fatigue life; at 6,001 hours we stop flying it, regardless of anything else.

So you fully support the replacement of the F-18 as soon as practical, do you?

[David Chartrand]

I support the replacement of the aircraft, yes, I do.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Okay.

[David Chartrand]

I only want to emphasize that we're the ones who should do the maintenance on the new aircraft and that we should have as many contracts on it in Canada as possible.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Oh, absolutely. I think Canadian industry has made it pretty clear that it is ready and capable of competing for those contracts, contracts for a global supply chain of somewhere between 3,000 and 5,000 airplanes--nobody knows for sure--rather than only doing the work on our 65.

Would you agree there are economies of scale that are pretty evident when you're dealing with thousands of airplanes versus 65?

[David Chartrand]

Clearly. It's not only a question of how many airplanes or anything like that, but if we don't do the maintenance on those, we lose the expertise. For future aircraft that we buy, we won't have the expertise to do it, and we won't even be able to compete for the work.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Are you aware that we have the right of access and the use of all the intellectual property on the F-35 as long as we are within the memorandum of understanding, as long as we're members of the MOU?

[David Chartrand]

No, I'm not. I'm not aware. As I've stated earlier, I have not read the memorandum agreement. I've not had a copy of it. I've only read what was within the minutes of the last meetings that were held here.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I think you would probably agree that the F-35 represents a new level of technology.

[David Chartrand]

It does.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Would you agree that if we do have access to all the intellectual property under the MOU, which we do, that would bode well for development of our industry and technology for this stage, and probably whatever comes after that?

[David Chartrand]

Correct.

If you look at my opening statement...I have a hard time seeing the American government giving away their space program, or giving away that technology, or something like that; they wouldn't have developed a bunch of things around it. Well, I believe that with that new technology it'll put us on another level where we're able to develop, where we're able to see what that technology is. When we're investing that much money in the development of that aircraft, I cannot even fathom why they wouldn't give us access to that. We're paying for the development of it.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I totally agree, and that's why, under the memorandum of understanding, they are giving us access to that.