Evidence of meeting #35 for National Defence in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was program.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

James D. Irving  Co-Chief Executive Officer, J.D. Irving, Limited
Kevin McCoy  President, Irving Shipbuilding Inc.
Jonathan Whitworth  Chief Executive Officer, Seaspan
Scott Jamieson  Vice-President, Programs, Irving Shipbuilding Inc.

4:45 p.m.

Liberal

The Chair Liberal Stephen Fuhr

You're out of time. Sorry.

I'm going to turn the floor over to Mr. Bezan.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

Thank you, Mr. Chair.

I want to thank our witnesses for being here.

Also, thank you for the time that you've taken with us in the past, for those of us who have been able to tour through both the Vancouver shipyard and the Halifax shipyard. It's truly impressive to get into those big facilities and see how you build those ships.

I'm trying to get a handle on the time frame here. Mr. Whitworth, you're talking about where we are with the science vessels. You're starting number three tomorrow, but you still have to get them all completely kitted out before we throw them in the water. When are you going to start building on the first joint supply ship?

4:45 p.m.

Chief Executive Officer, Seaspan

Jonathan Whitworth

We are currently in build contract for the OFSVs. That's why we have definitive dates. It will be 2017 for the first vessel, and the other two should be in 2018. We don't have a definitive build contract on the joint support ships yet, but that should be started sometime in late 2018.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

If you did get going on cutting steel in 2018, how long would it be until we would get the first one into the water?

4:45 p.m.

Chief Executive Officer, Seaspan

Jonathan Whitworth

You're looking at, I believe, 2021.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

These are very big ships.

4:45 p.m.

Chief Executive Officer, Seaspan

Jonathan Whitworth

These will actually be the largest ships ever built in western Canada.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

Then as we look at the Arctic and offshore Harry DeWolf class, Admiral McCoy, we already have the first two in the queue, rolling off the back end here pretty quickly. The first one will be in the water in 2018. Are you still on time for them?

4:45 p.m.

President, Irving Shipbuilding Inc.

Kevin McCoy

Yes. We expect to deliver the first one by the end of 2018.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

When is the last one going to come out, then, through the production cycle?

4:45 p.m.

President, Irving Shipbuilding Inc.

Kevin McCoy

It will be in the summer of 2022, sir, but we will start ramping down on the front end of the process. For example, the shipbuilders who cut steel will start running out of work at the end of 2019.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

The goal is to try to have the surface combatant design selected and coming into the chain right about then.

4:45 p.m.

President, Irving Shipbuilding Inc.

Kevin McCoy

Yes, but we know from the timeline that there's going to be a gap, and so we're in active discussions with the government on how best to mitigate that gap.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

You have no idea on the time frame, how long that gap will be, or how many people you're going to have to lay off?

4:45 p.m.

President, Irving Shipbuilding Inc.

Kevin McCoy

This goes back to the discussion we were having earlier about the speed of decision-making and getting through making those hard decisions, once we pick the ship, as to how much we are going to change and what we're going to keep the same and all of that. That's why we're very concerned about the speed of decision-making and keeping things going. We already know that in the best-case scenario, there's going to be a gap of probably about 18 months that we're going to have to mitigate. If we don't have the speed in decision-making, that gap will grow.

4:45 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

A number of witnesses we have had here have talked about the future of the Royal Canadian Navy. We've talked about that future surface combatant, whether it's a frigate or something of a hybrid between a destroyer and a frigate. Are we going to be looking at just one class of ship, or is there going to be an ability to change the modules on the basic ship so that we can adapt to new and emerging threats?

4:50 p.m.

President, Irving Shipbuilding Inc.

Kevin McCoy

Right now we're looking at a single platform. Some ships may get an upgrade in certain areas, and that's certainly doable. That's really up to the Canadian navy.

I will tell you that in just about every combatant program in the world, surface ships, submarines, or whatever are built today with what we call “open architecture”, so that as the threat emerges, you're making software changes. Very rarely are you changing major hardware, such as launchers, torpedo tubes, and things like that, or even changing out radar arrays wholesale. It's really more in the signal processing to follow the threats through life. I would expect these ships to be what I would call “spiral upgradable” as threats progress over time.

4:50 p.m.

Conservative

James Bezan Conservative Selkirk—Interlake—Eastman, MB

To go back to Mr. Irving's comments about the timeline and that shipyards are sitting in limbo and going broke, I'm glad to see that it was our previous government that made the decision, and it had all-party buy-in. I think we're getting closer to a point where we can put partisanship aside when it comes to things as important as the protection of the sovereignty of our country and ensuring that we do have the industrial complex there to support our military, whether it's on the sea, in the air, or on the land.

I just want to thank all of you for the role you're playing, for the jobs you're creating, and for stimulating economies in your neighbourhoods. At the same time, I want to encourage you to look at trying to spread that wealth as much as you can through the industrial and technical benefits as well as through partnerships that you can create.

4:50 p.m.

Liberal

The Chair Liberal Stephen Fuhr

Mr. Ellis, you have the floor.

February 2nd, 2017 / 4:50 p.m.

Liberal

Neil Ellis Liberal Bay of Quinte, ON

Thank you.

It's been great listening to you both today. I apologize that I haven't been to your shipbuilding yards, but maybe I can make it some day. I did have the pleasure of visiting the largest shipyard in the world, and I believe it still is the largest. It is the Hyundai shipyard in South Korea. I believe they employ probably around 20,000 to 24,000 people.

I look at Hyundai, a corporation, and I believe their yard is probably in the 40- to 45-year range and booming worldwide. I look at both your companies, and you've been here for 100 years and hanging on to shoestrings, I guess, until these last few years. With regard to technology and upgrades, at the Hyundai yard I saw their core business and the spread-off from the shipbuilding. We talked about other businesses and small business in general. It's about cyclical risks, and the ups and downs.

Jonathan, you mentioned other ship businesses and repairs that you're going to get into. Can you elaborate on that strategy? When you answered that question, you talked about when your capacity gap comes. Maybe I didn't hear it correctly, but wouldn't that strategy be kind of laid out right now?

To the Irvings as well, yes, this is a great thing to happen, but are there other businesses you're going to get into?

I'll throw out a second question. It's great to support small businesses, but you mentioned the idea of spreading the ships over Canada and not all the ship companies making it. These ships are to be built over the long term, and obviously will sometimes deal with bigger companies, but what are the pitfalls and risks of dealing with small businesses, with the cyclical risks they have, such that you can ensure the quality control in those small businesses and ensure that their risk is taken care of and they're not put out of business due to large corporations?

I'll just open it up to you.

4:50 p.m.

Chief Executive Officer, Seaspan

Jonathan Whitworth

I think there were three questions. I'll see if I can get to them.

On the first one, it's interesting that you talk about Hyundai. It is an amazing facility. In previous lives I've actually built ships in Hyundai as well as some of the other Korean shipyards. Also, ironically, they are absolutely getting killed. You talked about business being cyclical. Right now the Chinese, Korean, and Japanese yards are having tremendous difficulties. I believe Hyundai alone lost $2 billion U.S. last year. Cycles come and go, and right now they're in the trough of one.

What we talk about is if, God forbid, you get to those troughs, how do you fill them? As for the capacity gap that I was talking about, there are two. There's a short-term gap when we'll have maybe 10 months in between the OFSVs—the ocean fisheries—and the OOSVs. That we'll figure out. There'll be something to close that gap. The capacity beyond the first seven ships is still a point of discussion between us and the Canadian Coast Guard, because it's going to be that natural tension between operations that want all the ships now and the shipyards that want to stretch them out to have a continuous flow of work.

If the work is stretched out, the whole concept that we were hoping and looking for was about, say, 50% to 60% federal work and 40% to 50% commercial work. That's what we were going to hope for once we got through the first seven ships. The first seven ships will really keep us busy. Looking at the long term is exciting to us, because now we can leverage off the federal government contract but not be solely dependent on it.

I mentioned BC Ferries, a large fleet in our backyard. Seaspan, as part of our other operations, is one of the largest vessel operators in Canada, so we could be building vessels there. We have been contacted by other foreign countries, and we know that there's now something that could actually be traded, perhaps sugar cane from Brazil, in return for vessels that we could build for them, and things like that. It can be a trading chip that Canada gets to use that, quite frankly, didn't exist up until five or six years ago.

Regarding pitfalls and risks of small and medium-sized enterprises, that's spot-on. It is a real issue and concern and one we work with them on very closely. We understand that if they're normally producing 100 widgets a week, and now we're going to ask them to go to 2,000, we've really increased their revenue and hopefully profitability, but two things arise: one, can they handle it? Two, if they can't handle it, what does that do to our schedule? I dare say we have had some problems with that aspect.

What we're doing is we're learning, as I'm sure the Irvings are as well. You're teaching your own employees and business how to grow to this new contract, and you're also doing it with your vendors, especially the small and medium-sized enterprises. I will say the vast majority of them are coming up that curve. To some of them we've unfortunately had to say, “You know what? Maybe you just can't handle this”, and we've moved on efficiently to somebody else.

4:55 p.m.

Liberal

Neil Ellis Liberal Bay of Quinte, ON

I guess I'll just add a quick question. What about—

4:55 p.m.

Liberal

The Chair Liberal Stephen Fuhr

Actually, I'm going to have to cut you off there. A lot of times they go back, so maybe they'll ask that question later.

Ms. Blaney, you have the floor.

4:55 p.m.

NDP

Rachel Blaney NDP North Island—Powell River, BC

Thank you so much.

I would like to give you an opportunity, Mr. Whitworth, to talk a little bit about what's happening in terms of recruitment, in terms of how you're training people, and how that's going. We know the reality in Canada is that we have a large aging population and that getting people with high-level skills can be a challenge. I just want to hear a little bit more about how that's working for you.

4:55 p.m.

Chief Executive Officer, Seaspan

Jonathan Whitworth

It's one of my favourite topics, because we have both the tradesmen's and tradeswomen's side, as well as the engineers and professionals we're bringing into the office.

On the trades side, we were always quite bullish in thinking and knowing that we were going to attract all these additional employees we needed, primarily because of lot of that steel or pipe or electrical work, to be honest with you, is no different out east, and a lot of those folks and skills had gone to Alberta.

We offered something different. You could be home every night. You could coach your kid in hockey. You weren't working in -20° weather. You weren't living in a man-camp. You weren't flying in and out. You weren't gone for Christmas. It was all those kinds of things. We thought we had something different. Then the oil price dropped, and our cup runneth over.

Through our unions we get close to a thousand requests for jobs a month. We can't keep up with what is being required. Thanks to the local supply of talented trades, we've dramatically changed the makeup of our tradesmen and tradeswomen. To be honest with you, in 2009, it was tradesmen. There weren't a lot of women in the trades, first because they were not attracted to it and second because employers didn't do the right things to pull females into the trades. We've been very active in that. We just did a $300,000 scholarship that was sent to Camosun College to solely focus on females in trades. We also gave $300,000 to BCIT to focus on aboriginals in trades, because that was another segment that has been missing in this component.

As we grow, we want to change the makeup of shipyarding from what it looked like in the past. We've dramatically lowered the average age, and now you will see not quite the same makeup of what you used to see in the past.

I'd like to refer to the engineering and professional staff, as we're producing a lot of new Canadians. When you go 30 years without producing large, complex ships, the people who worked in that area have either retired or unfortunately passed away, so we have gone worldwide. I know Irving Shipbuilding has been very efficient at this as well, and we've picked some of the best shipbuilders from around the world. We brought them here with their families and established and started them.

The federal government, by the way, as well as our provincial government, has done an outstanding job of helping us with immigration and bringing the right people in at the right time. That's what's grown our force in the engineering staff.

At the same time, we just created a $2-million investment in UBC's naval architecture and marine engineering group. The current need was too desperate. We had to get these people. The future shipbuilders are going to be homegrown as well, and we're going to help them do that.