National Defence Committee on Nov. 25th, 2010

[Claude Bachand, Bloc, Saint-Jean, QC]

I simply want to say that I quite enjoyed the presentations and that you really reached me with your dynamic and articulate presentations. I also admire you.

I would like to start with you, Mr. Chartrand. I gather that you are asking that there be minimal economic spinoff in the region. I will tell you that this is the position of the Bloc Québécois, and I'll explain why.

The minister is really taking a chance when he says that, according to the policy of the memorandum of understanding—which I have here and which is quite lengthy—we are not entitled to economic spinoff in the region; however, we will have 5,000 opportunities to get contracts.

If I understand you correctly, your position is similar to ours. You think that it is the same as throwing dice in the air and hoping for the best. Is that it?

[David Chartrand]

In my opinion, it is the same as using the taxpayers' money and heading for the casino.

[Claude Bachand, Bloc, Saint-Jean, QC]

Exactly.

[David Chartrand]

That's how I see things. It's as if I said let's take $16 billion of the taxpayers' money and go to the casino. If we win, great; if not…

I am not saying we wouldn't have work. But, like you said, it's a matter of luck. It's all speculation, "maybes". "Maybes" don't put food on the table.

[Claude Bachand, Bloc, Saint-Jean, QC]

You're right.

If I am not mistaken, we also need to make some kind of arrangement with Lockheed Martin or with the Canadian companies to ensure that the content is 100% Canadian. Because it's a concern.

These companies have actually started diversifying into the United States. It might sometimes be very tempting to say that these Canadian interests—Héroux-Devtek or Pratt & Whitney—will get the contract, but it is probably American affiliates that will profit from the spinoff of the contract.

That's something else you're afraid of, don't you think?

[David Chartrand]

It's a very big fear. I still don't have all the details; I'm waiting for them. As I understand it, in terms of the Héroux-Devtek proposals, some of the work will not be done here, but in their factories in the United States.

[Claude Bachand, Bloc, Saint-Jean, QC]

Okay.

[David Chartrand]

So, there is no guarantee that 100% of the work related to contracts with Héroux-Devtek will be done in Canada, in the Montreal area or elsewhere.

[Claude Bachand, Bloc, Saint-Jean, QC]

Exactly.

Mr. Dias, we are a little like you: we are wary of the numbers. In other words, no one is explaining how the government came to say that there will be $12 billion in economic benefits.

By the way, I have here a document from the Pentagon that I would be happy to share with you. It assesses the economic benefits. Listen to what it says in English:

JSF Canada estimates a potential for $4.4 billion to $6.3 billion of revenues for Canadian industry over the life of the JSF program; our estimate is $3.9 billion.

So, there is a really big difference. The Pentagon estimates the economic spinoffs to be up to one-third of what the Canadian government expects. Are you concerned about that? Have you seen this study?

[Jerome Dias]

No, I haven't seen the study, but we're coming up with the same numbers. When you have the opportunity to bid on $12 billion, even at a conservative estimate you get 30% to 40%. You're looking at $4 billion worth of offsets, or in that area. Once again, and I don't want to be repetitive, do you want $16 billion, or do you want $4 billion in the best-case scenario? It's very straight to our organization.

[Claude Bachand, Bloc, Saint-Jean, QC]

Are you worried now… I don't think I saw in your respective presentations the importance of spinoffs, specifically technological spinoffs.

As for the main contracts for tactical and strategic aircraft, I have already gone and seen Boeing with company representatives; I have also already gone and seen Lockheed Martin with company representatives. What these companies had to offer were small tractors for pulling the aircraft; others wanted to sell tires; others still, windshields. These aren't high-tech spinoffs.

Do you want Lockheed Martin to open up a bit and share some technological secrets so we can have true spinoffs in the aerospace industry, true technologies, and not tires and windshields?

[David Chartrand]

If Héroux-Devtek gets a contract to make parts for these aircraft, what guarantee is there that the company will be able to make parts for the entire Canadian fleet? Apparently, this company will make parts not just for the Canadian fleet, but for the American fleet too.

[Claude Bachand, Bloc, Saint-Jean, QC]

It would be the entire assembly line.

[David Chartrand]

Machining may not be high tech, but if these companies get a contract to make a specific part, what is there to guarantee that they will make all the parts for all the Lockheed Martin aircraft? They could get the contract just to make the 65 parts for the 65 Canadian aircraft.

Will it be limited to that? Will the guarantees ensure that the contract is for the entire fleet of aircraft?

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Dias, do you have something to add?

[Jerome Dias]

Yes. To go back to your question, there's no question about control of the aerospace industry. You play a major role in the aerospace industry if you dabble in technology. You don't develop the aerospace sector by having strong warehousing capabilities. The reality is, if you want to maintain technology, if you want to maintain control, if you want to have the ability to develop the next generation of aircraft, you deal with the in-service side of the business. The in-service support is straight technology. It's developing the technology to service your aircraft. If you're playing with avionics, that's high tech: wings, nacelles, ailerons, landing gear. There are key components that you force companies to invest in and this helps develop the sector. So there's no question that the type of work is more important than the volume of work. It's about labour-intensive jobs. It's about high-tech jobs.

[Claude Bachand, Bloc, Saint-Jean, QC]

I'm also afraid that the people at Lockheed Martin are saying to the people at companies like Magellan, Héroux-Devtek and Pratt & Whitney that they have this contract, but that it's only for a limited period of time. Given this American protectionism that we know so well, there is some risk that, once the contract ends, these people will simply transfer it to the United States.

Do you think there is a real danger of that happening?

[The Chair, Conservative, Maxime Bernier]

Be brief.

[David Chartrand]

Can I answer the question?

[The Chair, Conservative, Maxime Bernier]

Yes, but be quick.

[David Chartrand]

The short duration of the contract and transferring it are not the only dangers. I haven't read the contract in full. Without specifying a detailed number of parts, these people can grant the contract then, as mentioned earlier, the employer can have the parts manufactured outside Canada, even if the company is Canadian. It can decide at any time to transfer the work elsewhere, even if it got the contract for Canada. I don't think that the memorandum of understanding contains a provision that prohibits it from doing so.

I would like to say, before closing, that I would like to be invited to take part in your debate on the Rand formula, if it ever happens.

[Some hon. members]

Oh! oh!

[The Chair, Conservative, Maxime Bernier]

It's a provincial debate. You would have to get involved with provincial politics and invite yourself.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Maxime Bernier]

Mr. Harris, you have the floor for seven minutes.