National Defence Committee on Feb. 2nd, 2017

[Kevin McCoy]

Let me first say that it's not the shipyard's job to determine the laydown of naval forces. We have done analysis of a 15-ship Canadian surface combatant fleet with maintenance cycles and a traditional and historic deployment profile for the taskings that Canada's navy is asked to do. It clearly shows that 15 ships is not an excess number of ships for the navy but that 15 ships is really a floor for the navy. We're very satisfied that the number is not a flush number for the navy.

In terms of sustaining the workforce, as my colleague Mr. Jamieson said, we built our shipyard and sized our shipyard for the Arctic and offshore patrol ship program and the 15 Canadian surface combatants. We built that. That's what I would call the takt time of units going through our big facility. Now the paint time, the amount of time for structural assembly, and those kinds of things are all optimized over the 30 years of building the six Arctic patrol ships and the 15 Canadian surface combatants.

We're hiring to that and we're training to that. We're looking at our demographics. For example, right now 30% of our workforce is under 30 years of age. We're looking at the long term. Our workforce is 11% females. We are trying to get more under-represented groups in. We think, because we have the capacity sized to Canada's needs, that we'll be able to sustain that workforce for the long haul.

[Yves Robillard, Liberal, Marc-Aurèle-Fortin, QC]

My second question is for Mr. Irving.

With regard to your staff, I would like to know how the recruiting and training of skilled and specialized workers have progressed in your shipyards since 2010. Do you apply policies to ensure that your workforce includes women and members of the indigenous community, for example?

[James D. Irving]

Yes, we have made a major effort in this area. We have a training program for the entire workforce. We started with a group of employees used to building ships in a traditional way. We changed our entire method and adopted much more sophisticated technology. We have a program where we work with the community college to train people.

We put 500 people through community college.

About 500 people have gone through the community college, which helped them learn their trade. And as Mr. McCoy said earlier, we have a program for women. We also have one for people who are having difficulty in finding work. That's part of our program.

[Yves Robillard, Liberal, Marc-Aurèle-Fortin, QC]

And that includes indigenous people?

[James D. Irving]

Exactly.

[Yves Robillard, Liberal, Marc-Aurèle-Fortin, QC]

May I continue, Mr. Chair?

[The Chair, Liberal, Stephen Fuhr]

You have about 45 seconds for a question and an answer.

[Yves Robillard, Liberal, Marc-Aurèle-Fortin, QC]

That's very fast.

In terms of infrastructure and human resources, could you explain how Irving has expanded and modernized its shipbuilding capacity since the national shipbuilding strategy was launched in 2010?

[Kevin McCoy]

Thanks for the question.

We've built the most modern shipyard in North America. We have the single biggest building for shipbuilding in all of North America. We went around the world. We looked in the U.S. We looked in Europe. We even had the Koreans come and benchmark against how they would build ships with their build strategy and the layout of the equipment. We've bought the best machines and equipment in the world. We're very confident. Not only that: our target state is audited, as part of our contract, by a group that holds the standard for shipyard performance around the world. It's called First Marine International. It has standards for how you order material and trigger material, how you paint, how much automated welding you do, and all of that. We get audited and inspected by them as part of the contract to ensure that we are using world-class practices.

Between our investment, the benchmarking that we did, the equipment and machines, the training we've done, and the outside independent third party that makes us beholden to Canada to satisfy, we're very confident that Canada is getting the best in terms of practices and output for the navy.

[The Chair, Liberal, Stephen Fuhr]

Thanks for that.

Mr. Paul-Hus, you have the floor.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, gentlemen.

My question is related to the comments of Mr. Rioux, the new parliamentary secretary to the Minister of National Defence.

On January 30, 2009, the Shipbuilding Association of Canada sent a letter to Stephen Harper, who was the Prime Minister of Canada at the time, to ask him to establish a naval strategy. Mr. Irving was one of the co-signers of the letter. The letter listed various needs and four shipyards involved, including Davie, in Lévis, Irving, Washing Marine Group and Upper Lakes Group Inc. in Ontario. The builders of these four groups got together to ask that a maritime strategy be established, and it was. Fortunately, Irving and Seaspan ended up getting the contracts.

Today, you think that the other shipyards can disappear, that you will get the contracts, and you will build Canadian ships for the next 100 years. I would like to understand why you are so intent on doing this. You have already nearly shut down the other companies in the industry. Now you are doing business and consider that the others can disappear.

What is your intention? You know you have contracts for 30 years.

[James D. Irving]

You know, there was no shipbuilding in Canada for many years. You had shipyards in Montreal and you had shipyards up in the Great Lakes. You had a number of them. They all went broke. Davie's has been broke I don't know how many times. It went bankrupt different times. You heard from Jonathan here that they were about ready to close down. We closed down one big modern shipyard, and we were about to close the one in Halifax because the government had no foresight in this business. It was going to let it go. It was letting it disappear.

We worked as an industry group, and we had no idea where it was going to end up. All we were saying to Ottawa was: “Listen, if you want ships and if we're going to protect our country and have an industry that supports the country and defends the country and so on, somebody better wake up.” We worked as a group, and in that period of time some people dropped out, some people were sold, and some people went bankrupt, because it took many years. I wrote many letters and made many trips to Ottawa to try to convince politicians to move, and we got no response, so the thing went into disarray.

In that time, we all bid. Davie's bid. Jonathan's company bid. Anybody could bid. I can tell you that when it came to the deadline, there were very tough requirements about bidding. At the last minute we were told, “There will be a two-week delay because Davie wants another two weeks to bid.” We said, “That's not fair. Those aren't the requirements.” We were told, “Forget about the requirements. That's what we're going to do.” I said, “Okay, let it go.”

I understand the problem for Davie. I'm sympathetic to it, but I'm also going to fight for our company. We've spent hundreds of millions of dollars. We've trained people. We've worked like hell to make something go. The problem in Canada is that we get political about everything, and then we end up with nothing, because we can't sustain a competitive business. We're going to have to do what we have to do to build ships in this country. We're going to have to look after industries in Quebec, and I'm all for that, but we can't be so political about everything that we get nothing that is efficient.

There will be lots of good things happening in Quebec because there always is, but don't feel that we're out there trying to say, “Kill the competition.” We've been beaten up like everybody else has been in this business, so we want to be reasonable. We're trying to support lots of local industries, and we're going to support local industries, but we have to be strategic about how we spend federal money.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you for your answer.

I fully understand. You managed to get the contract.

I visited your facilities last November. Just like Seaspan, you have a great company. I have nothing to say about your companies, and I find it normal that you want to get contracts to ensure your survival and continuity.

Having said that, now that you have managed to get your contracts and you can plan in the long term, can you give other companies the opportunity to get contracts without blocking them?

The Davie yard was bought back in 2012. It now has the Asterix contract. These people also want to develop their activities, pursue them and go further. It is the biggest building site in terms of area. Like you at the time, it needs contracts to progress.

Can we include Davie in the process and not block the strategy by keeping only two shipyards in Canada?

[Jonathan Whitworth]

I'll take that one.

In 2009, that letter you spoke about predated the national shipbuilding procurement strategy at that time. All of us, quite frankly, were trying to figure out how to survive the next day.

Once NSPS came out and the government, not us.... To be honest with you, if you had asked us, I would probably have said, as the shipbuilders would say, “We'll just do it all.” We didn't say that it would be two shipyards. The federal government did, based on the number of vessels they knew they had to build.

The reason that makes sense, and the reason we're not looking to hold anybody out, is really about the cost to Canada. It's back to that story I talked about before. We're not talking about hundreds and hundreds of ships, as in the United States, which builds 15 combatant ships a year, and probably an equal number of non-combatants. Unless Canada is going to spend that kind of money, which I don't think it is, then not everybody can feast. It physically doesn't work.

The other part that was recently brought up was that maybe we could build the ships in different shipyards and cut them up, unblemished by success. It never happens.

There was the case of a shipyard in the United States last year. The shipowner decided to cut the ship up into three shipyards. Two of the three shipyards went bankrupt, and so did the shipowner. It's very inefficient, and it costs a lot of money.

[James D. Irving]

I could just finish that, if you don't mind.

[The Chair, Liberal, Stephen Fuhr]

Go very quickly, please.

[James D. Irving]

I mentioned this earlier. In December, Davie took a ship.... They were building it for 10 years. They had federal government money. It was maybe not the same owner, but the previous owner had $200 million-plus from EDC. They built one. It took 10 years. The contract 10 years ago was to build three ships. One of those ships finally got completed and sailed away a couple of years ago, I think. The second one sailed away half-finished, on a ship. It was taken to Europe to be finished in another yard. The third ship is still in pieces in Quebec. The top side for this navy ship they are currently building is being built in Finland.

I understand they want work, but the work we're doing is being done in our yard, and we're finishing the ship, sir. I don't want to be rude about it, but it's troubling to me, so I'll just tell you that.

Thank you.

[The Chair, Liberal, Stephen Fuhr]

Mr. Fisher, go ahead.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chair.

Thanks, folks, for being here. We appreciate your input and your level of expertise.

For full disclosure, Irving is a big employer in my riding. I was happy to tour the assembly hall a couple of times, and I was thrilled to see steel being cut in Dartmouth and Burnside industrial park.

Mr. Whitworth, you spoke a bit about your capacity, so I'm going to ask Irving about room for growth. Let's go out on a limb and say that you got some of the in-service support contracts. Would that mean more jobs in Nova Scotia, or is the repair and the support a different process from the actual shipbuilding? Is it a massive change, or do you have the same skill sets in your yard?

[Kevin McCoy]

Thank you for that question.

Today we are doing both, and doing them quite well. We have two ships under construction, the first Arctic patrol ships in our new, modernized facility, and right in the same.... You can throw a baseball to the dry dock, where we have a Halifax-class frigate. We ramped up and started the construction on a Harry DeWolf-class ship at the same time. We typically had two of the frigates in the shipyard.

What is very important for us is that new construction has trade peaks and valleys and repair has trade peaks and valleys. Typically, when you put them together, you can manage if you have a critical mass of work to do that.

Right now, we have about 300 people—mechanics, engineers, and logisticians—who work in Halifax-class maintenance and in-service support. If we didn't continue to get that, that would be 300 people fewer. Those skills, knowledge, and abilities would have to transfer to some other part of the country. Along with it would come the loss of supporting overhead. It would also degrade that critical mass of workers so that when we have those trade imbalances, we would be forced to take more drastic action than we typically do now, which would be that we would have to move workers back and forth all the time between repair and new construction in order to smooth out those balances.

Today we're doing it. We're doing it quite well. We just finished seven of seven Halifax-class mid-life upgrades, on time and under budget. It's an integral part of our business that we manage.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Then skill sets aren't so specific that you can't move people around for different jobs within the yard.

[Kevin McCoy]

We move them routinely. Yes, sir.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

It makes me think about all your training, all the courses at NSCC. Could you tell me a little bit about the ramp-up you needed to get some of these trained people? I understand you're working closely with NSCC.

[Kevin McCoy]

We work very closely with NSCC. We built a training program that's available to the entire industry. I call it shipbuilding 101. It was a five- to six-week course that was run by the NSCC. We paid them the tuition to do that. We put 500 of our workers through it to make sure they were up to speed on all the modern shipbuilding techniques and processes, including modern unit construction and blueprint reading.

Then there was a three- to four-week practical factor that everybody had to pass. If you were an ironworker, you had to assemble a tank. If you were a welder, we gave you a certain amount of welding to do in different configurations and with different processes in a certain period of time. An electrician had to do wiring, and for pipefitters there was something similar. We worked with the Nova Scotia Community College and got about 500 of our people those modern skills to make sure they were ready to construct a ship.

On top of that, on the first floor of our massive facility, we have a 17-booth welding school. We have the Canadian Welding Bureau right in there, and we bring in Canadians who don't have full journeyman certification and give them the training and the certifications right there. We knew we would have to work with Canadians to get them these jobs, because a lot of them didn't have all those skills. We also have a full training centre in that facility for electricians and tank-testers and pipefitters and ironworkers. We think we're set up for the long haul.

The certainty of the 30-year shipbuilding contract that was run with this national shipbuilding strategy gives us the ability to invest this kind of money and talent into training, which we were never able to do before.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Do I have time?