National Defence Committee on Feb. 2nd, 2017

[Rachel Blaney, NDP, North Island—Powell River, BC]

That's amazing.

[The Chair, Liberal, Stephen Fuhr]

It's time to circle back, so that ends the formal questions, but we've got some time left, so we'll start with five-minute questions for all three parties.

We'll start with Mr. Spengemann, and then Mr. Bezan, and then we'll come back to you, Ms. Blaney.

Mr. Spengemann, you have the floor.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

Thank you very much, Mr. Chair, for an opportunity to follow up.

I have two questions, two separate areas. First, where is the level of automation in the yard at the moment? Have we plateaued? Are there any paradigm shifts further down the pipe in automation? What will that do to the workforce? If you look back 20 years, what did it look like then compared to now?

[James D. Irving]

Do you want me to give you the technical answer? My answer is that I don't think we could spend any more money to get any better. We spent a bundle to get it right, so, Kevin...

[Kevin McCoy]

Thank you. The boss answered the question, but let me follow up.

[James D. Irving]

You've got a tough job dealing with me.

[Kevin McCoy]

Let's just start with the ship design.

The ship design is in the most modern, three-dimensional tool, the same one the Koreans use. In all the dimensions for steel cutting, for example, we don't fat-finger anything. It comes through the model, through some middleware, through our machines, and cuts the steel plate to within a millimetre of accuracy. It's the same for pipe bending, and the same for trimming and cutting holes for pipes and cables and things like that. There's a very high level of automation.

As a matter of fact, when we were having some issues with it and we asked the software vendor about the rest of the world, they told us that here at Irving Shipbuilding their software was being used to the greatest degree of automation in the world, which was an eye-opener for us.

We've invested heavily not only in the base software, but even in logistics. We've got thousands of little pieces that have to get cut out of steel, and to move those efficiently around the shipyard and know where they are and when they're done, we just implemented bar-coding throughout the shipyard. We understand where everything is at the right time and we can track everything from the supply chain, and we're even looking right now at RFID tracking of valves and pieces of pipe and things like that throughout the shipyard.

I think we're heavily investing in that where it makes sense and will reduce the costs, and we're looking toward the Canadian surface combatant, which has a degree of complexity beyond what we're dealing with here, so we're looking to the future with technology.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

Is it fair to say, then, if you're saying you have 2,500 people doing physical labour on a ship, that that's going to stay at that level for the foreseeable future and there isn't going to be a breakthrough where you're going to drop that workforce by 50%?

[Kevin McCoy]

Right now, all of our labour projections say around 2,000 to 2,500. We're at about 2,500 and steady.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

Okay.

[James D. Irving]

Excuse me, and just to finish what Kevin was saying, not only do we have RFID tags on our equipment, but all of our employees in the yard have an RFID tag. We know where all of the employees are in the yard, for a couple of reasons. Safety is number one. These are complex areas. They're tight. They're difficult spaces to work in, so we track everybody. There's an emergency button that they can press if they have a medical problem.

Also, from a productivity point of view, we know that the payroll costs a lot every hour, so we want to know where everybody is. Are they on the job, or are they not on the job? Is the supervisor managing the job properly? We're learning that, and we've had good co-operation with the union on that. They've been good partners, which is a big step change in the labour movement, as you can imagine. We're determined to be productive.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

Thanks for that.

I have a quick second question, Mr. Chair.

You talked about reducing the overhead federal-commercial mix. Another way to look at it is the domestic versus international mix. What does the international market look like—I'm looking at the Halifax-class upgrade on the service side, but potentially other work—and where do you draw the balance between potentially overfilling your books and having excess capacity?

[Jonathan Whitworth]

We actually have a great example of that working right now. We, as the west coast partners with Irving on the east coast and our other partner, Lockheed Martin, were very successful in doing the Halifax-class modification, the FELEX program. On the east coast, it was seven ships, and on the west coast, it was five ships. They were on time and under budget. It was a great program.

Thanks to that project, we were able, with our Lockheed partners, to go to New Zealand and successfully win a New Zealand combatant package, which we are going to be starting in Victoria this year. It is extremely rare for a country to export their defence contracts. Why did they do it? They were able to visit our shipyard in Victoria to see the HMCS Calgary, which had already been finished. They said, “Wow, that looks great.” Then they went into the yard and saw the Vancouver, which was being ripped apart, and they were like, “Okay, this is how it works.” Then they went on the Regina, which hadn't gone in yet, and they knew it was going to end up looking like the Calgary. It was a fantastic story, based on success and an ability to bring non-Canadian international work to our country. It's very rare, and an incredible success story.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

It's a new pathway to future work.

[Jonathan Whitworth]

You got it.

[The Chair, Liberal, Stephen Fuhr]

That's awesome to hear.

Mr. Bezan is next.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I have one quick question, and then I want to give the rest of my time to Mr. Clarke.

You're saying there's that gap of 18 months from the time that we wrap up AOPS and hopefully are into the new surface combatants. That time lag wasn't there originally. What's the reasoning? Is it because of the change in the way we're tendering for the design for the surface combatants?

[Kevin McCoy]

It's due to delays in the program on the government side in understanding the requirements, getting the procurement strategy defined, getting the RFP out. It's just moved to the right.

Scott, do you want to chime in?

[Scott Jamieson]

I think that's absolutely right.

In a perfect world, the procurement strategy would have been announced several years before it was, and we would be moving forward. However, we are where we are, and that's what we're working towards.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I'll give the rest of my time to Mr. Clarke.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Thank you, Mr. Bezan.

Welcome, gentlemen.

During your presentations and your responses, you raised concerns about the shipyard industry, that is, how to keep them active and solvent in the long term. You also raised concerns about national defence and public safety. You said that you are proud and happy to be part of the defence of Canada and the security of our country and of Canadians.

What I'm interested in is icebreakers. I know they aren't included in the national shipbuilding strategy. But looking at the situation from a global perspective, icebreakers provide commercial security, if only for the St. Lawrence Seaway, which has traffic equalling $2.4 billion annually. With direct and indirect spinoffs, this represents almost 5% of Canada's GDP.

Icebreakers also provide public safety, whether it involves ice backup in Quebec City or ice overflow in various major rivers, like the Saint John River in New Brunswick, or in Saint-Jean-sur-Richelieu in Quebec.

The St. Lawrence Economic Development Council, or SODES, in Quebec City, which is the chamber of commerce for all large shippers in the world that operate in Canada, the Government of Quebec, and a number of people I met over the holidays told me they feared that a crisis was imminent.

We have 14 icebreakers: six large and eight medium. The six large icebreakers used for transportation on the St. Lawrence Seaway are in a state of almost inactivity. The two largest are currently in dry dock for repairs, and the remaining four will likely be soon. There is a risk of a dramatic crisis in the Atlantic provinces, in Ontario and in Quebec.

Does that concern you? Are you concerned about that? What do you have to say to us about the potential crisis concerning icebreakers, which I think could create a long-term crisis in your industry?

[Jonathan Whitworth]

We are keenly aware of what is going on. Seaspan is not only a shipbuilder but also a vessel operator. I dare say I probably had lunch with some of the same people that shared their concerns with you about icebreakers on the St. Lawrence and in the Great Lakes.

As the non-combat shipbuilder for Canada, we were blessed with the delivery of any vessel that's over 1,000 gross tonnes. All icebreakers would fall under that category.

The timeline of vessels that need to be built and the operational requirement, which your constituents probably talked to you about, don't necessarily match up. What we do know is that the Canadian Coast Guard is currently, as we speak, looking at what it is going to take to operationally keep some of the older vessels alive, have vessels built with Seaspan, and possibly look at interim solutions, as they're doing with the interim AOR.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

This brings me to my second question, Mr. Whitworth.

The polar icebreaker that you're about to begin building soon will be used to ensure our sovereignty in the Arctic, which is fantastic. In fact, that's why I became a Conservative 10 years ago. However, it won't be used to protect the commercial seaway in the south.

Your company and Irving will start building ships in 2017 or 2018—please forgive me if my dates aren't accurate. Irving will be done by 2040, and you will be done by 2030.

In this period of about 25 years, would you be able to enter into a contract to build six new icebreakers, based on your current capacity?

[Jonathan Whitworth]

Very much so, and this goes back again to what the Coast Guard is talking about with us, literally as we speak, and have been for the last six months, because the icebreaker issue didn't sneak up on us.

These vessels that are operating today are good vessels, but they're 30 and up to 40 years old. They need to be replaced. It goes back to the comment we unfortunately both said earlier: if you go three decades without building new ships, this is what we own. This is what we have to do.

Seaspan looks forward to building the ships we've been asked to build. If the Coast Guard deems that there are going to be interim solutions, we look forward to hearing what they are, hopefully helping or bidding on that. How the Coast Guard is going to fill that gap really is in the Coast Guard's hands right now, as well as how many vessels there will be for the St. Lawrence.

[The Chair, Liberal, Stephen Fuhr]

That's your time.

Ms. Blaney, you have the floor.