Natural Resources Committee on Feb. 28th, 2013

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

So you would support the idea of a smart grid and all the employment associated with that.

[Christopher Smillie]

Absolutely.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Okay.

That dovetails with what Roger Martin, the dean of the University of Toronto Rotman School of Management, has said. He said that more effective collaboration between businesses and universities could bring more commercially viable new products and services to market.

I don't think I would disagree with what you say in terms of the skilled trades being part and parcel of innovation, and I think the quotes that I've read here and that we've put on the record show that there needs to be a greater level of coordination among governments, industry, and universities to push forward that innovation agenda. Would you agree?

[Christopher Smillie]

I'd agree. In fact, there was an event that we put on today wherein we had Minister Finley and Minister Raitt talk about the same issues.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

How much time do I have, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

You have a minute.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Oh, wow. I'm being efficient today.

[The Chair, Conservative, Leon Benoit]

Yes, you are.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Petsinis, I noticed your comment that the government shouldn't pick and choose certain technologies to put forward. However, your company received quite a lot in funding to get through a rather difficult period. Do you not see that as the government perhaps picking one company over another company?

[Philip Petsinis]

First of all, we were very grateful for the government's action in that stage. It averted some very significant economic devastation that would have happened in a number of communities. In fact, the other OEMs that did not require support also advocated for support because we have a shared supplier network.

Had that step not been taken, not only would it have affected our company and Chrysler, but it would have most noticeably affected every vehicle manufacturer in the country. From that perspective, we continue to think it was a wise investment. We've made significant commitments to the Government of Canada and the Government of Ontario with regard to production mandates and employment—

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I don't want you to get me wrong. I like what you've testified to today and the direction you're taking. I just sometimes like to have it recognized that sometimes government does have to step in to help companies move in a more innovative direction. Particularly when they haven't been on that track in the past and they want to get on that track, sometimes they need the aid of the federal government.

[Philip Petsinis]

The only comment I have is right back to the U.S. policy, where they don't.... It's better to have broad-based initiatives in the area of certain automotive technologies or refuelling, because the dynamics change so often that you need to provide a level of support and let the market dynamics ebb and flow to make the right economic decisions so you have investments that have longer viability.

Some government-selected initiatives or funding at times can result in decisions that don't have longer-term economic viability. On the refuelling side, it is very unclear how that will play out over the near and mid-term future. It will be dynamic.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Nicholls.

Continuing the five-minute round, we'll go to Mr. Leef, then Ms. Liu, and then Ms. Crockatt.

Mr. Leef, you have up to five minutes. Go ahead, please, sir.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

My first questions will be for Mr. Pyun from Bombardier. We haven't heard a lot from you after your opening testimony today. I've looked through a lot of the information that you've provided. A lot of it is rail and air stuff, of course, but I know that Bombardier is highly invested in technologies for smaller-scale stuff.

I was wondering if you could expand briefly on some of the technologies that are deployed on some of your smaller items. I noticed that at the beginning of one of your packages you have a picture of one of your older snowmobiles, but maybe you could talk about this a little for us. If there are any recommendations that you didn't list as to where the government, from your perspective, could improve the advancement of innovation, I'd appreciate hearing them.

[Pierre Seïn Pyun]

Sure.

Thank you very much for your question. I was starting to feel a bit neglected with all the questions going to other companies.

But joking aside, the recreational product division of Bombardier was spun off from the company a few years ago. Now it's a separate company. I'm not really in a position to comment on that, but it is part and parcel of the history of Bombardier. The company was built upon this great invention in the thirties and forties, but the company has evolved through acquisitions into other sectors, such as rail and aerospace, and a few years ago that division was spun off.

But on your other question about policies and maybe the ecosystem to support greater innovation in Canada, and more broadly speaking from our experience in other countries, what we would recommend here in Canada is that, I think maybe simply put, we can put measures in two different baskets. On the one side, it would be more the technology-push kind of policies to support the commercialization of technologies. I think there are some great programs afoot here in Canada that have been in existence for some time in the aerospace sector, in the rail sector or, more broadly speaking, in the clean technology sector. We have been able to benefit from some of these programs. We have partnered with others to tap into those programs and move forward some projects in the area of clean technology. Some other programs we haven't really yet benefited from. Examples would include the GARDN program that I referred to. This was an NSERC program. Unfortunately, there was a decision made last year not to pursue this program anymore. It was a question of priorities, we understand, but the biofuel project that I mentioned was partially funded by this program.

Another program I would flag is sustainable development Technology Partnerships Canada. We're in discussions with them over possible potential projects we may work with them on. We have MOUs in place with this organization as an early adopter of some of the technologies that they're developing or funding with the participation of other companies. So that would be on the technology-push side.

For the PRIMOVE technology that we referred to, there's a pilot project that we're currently discussing with the Société de transport de Montréal. Policies to support the deployment of technologies for demonstration projects would also be a policy that we see elsewhere such as Germany. PRIMOVE is being deployed in Germany as well on a pilot-project basis, and it could be a policy that the government may wish to consider further to push forward the innovation agenda.

The other basket of policies would be more on the demand-pull side. I'm talking about strategic procurement, so leveraging procurement or public investment in either infrastructure projects or procurement of products and services to drive innovation and domestic manufacturing capabilities here in Canada. I think one great example is Public Works' Canadian innovation commercialization program that targets specific sectors, including clean technologies.

I think there's scope for the government to maybe expand that kind of program going forward and really use investment in public infrastructure projects as a tool, as a policy lever, to drive innovation. Of course, you have to do it in a way that provides value for money for taxpayers, but maybe in the way projects are spec'd you could leave more scope and latitude to the potential suppliers to provide innovation solutions for more sustainable and smart infrastructure here in Canada.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Leef.

We go now to Ms. Liu for up to five minutes.

Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

Thank you, Mr. Pyun and Mr. Laforge. I prepared some questions for you. I hope you'll feel less neglected.

I am glad that you're here this afternoon. I represent a riding with hundreds of employees in your sector, Rivière-des-Mille-Îles. It's north of Montreal, right beside Mirabel. I would think you're quite familiar with the area.

As you pointed out in your presentation, effective support for the sector requires political will. Your industry has been calling for that for months, if not years.

As you may know, we also have an aerospace caucus, and I'm delighted to be on it. In the House of Commons, I've repeatedly asked the government to introduce a development plan for the industry. In November, the report of the review led by Mr. Emerson was released. You are, no doubt, very familiar with the report. It criticized the federal government for its lack of support for the space and aerospace industries.

What do you have to say about the report? We hope the government will adopt measures in its next budget. Do you have any comments on the report's findings?

[Pierre Seïn Pyun]

I can answer your question.

Bombardier actively contributed to Mr. Emerson's aerospace review. We had the opportunity to give the company's perspective, obviously, along with other players in the industry. We are quite pleased with the review's findings and the 17 recommendations it proposes for the aerospace sector.

The recommendations span different parts of the ecosystem to support, maintain or increase the industry's ability to compete on a global level. It covers technologies and employment. In terms of global competition, bilateral and multilateral agreements with other countries need to be put in place or strengthened to create a fair playing field. We also think the report does an excellent job of describing the challenges facing the sector.

In our view, aerospace is a sector that does not enjoy natural forces here, in Canada. For several decades, however, it has had the benefit of investments, which have allowed the sector to develop expertise that is highly prized by other countries. The report does an excellent job of that. It describes the state of global competition, which includes not just traditional aerospace countries. The sector is indeed seeing other countries emerge. A number of countries, such as China and Russia, are looking to build a strong aerospace sector.

So we support the recommendations. We are satisfied thus far with the government's response to the potential implementation of the report's recommendations.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

We also know that during the prebudget consultations, the Aerospace Industries Association of Canada made two recommendations.

The first was to make labour and capital expenditures under the SR&ED tax credit refundable and tax-exempt at a rate of 15%.

The second called for better funding for the technological demonstration of new products to allow the industry to remain competitive.

Do you support that recommendation? Is your sector also affected by the tightening up of the SR&ED tax credit?

[Pierre Seïn Pyun]

With respect to the SR and ED program, our view is that it's been a good program to support innovation. But in times of economic downturn, especially for a company like Bombardier, which is extremely export-oriented, with 93% of its revenue deriving from export markets, and which, for all intents and purposes, is not really generating profits here in Canada, we're not able to benefit from the program in years when we're not making profits, as you know.... In the past, we have made it known that our view is that if you want to make this program really beneficial, you have to man the program in a way that companies can monetize and use the money to really support innovation, by making it partially refundable, for instance, like it is in certain jurisdictions such as the province of Quebec.

But we also understand the fiscal constraints, and there have been signals given in the past of the savings you can achieve from the changes announced recently to the SR and ED program. There might be a willingness to do more direct forms of support. The Emerson report contains a recommendation for a new technology demonstrator program. One of the challenges of the review process was to come up with recommendations that are fiscally neutral, and we think this recommendation is very affordable and would not in principle entail new funds from the government but the reallocation of existing funds, for instance from the SADI program, to this new program and also from the SR and ED savings.

We look forward to working closely with the government as the government considers implementing this recommendation.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Ms.Liu.

Ms. Crockatt, go ahead for up to five minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

I'll say at the outset that I was really glad to hear that the NDP is now supporting the pipelines to the west coast, the Kinder Morgan one. I look forward to that continuing. Thank you.

And I'll say to Chris that we haven't properly thanked you. Could you thank your organizations on our behalf for Helmets to Hardhats. It's a fabulous program and it's allowing the veterans, the best of the best, to go to work for you. We're just really happy that you're participating in that, so thank you.

Mr. Petsinis, do you agree with Mr. Truckenbrodt when he says that innovative technologies don't only need money, but also moral support from governments? If you do agree, could you tell us what that might look like?

[Philip Petsinis]

I guess in general that's an accurate statement. In the end—in our industry anyway, being a global industry—in many cases the innovative work will be done, but the financial decisions will in many cases drive where it will be done as well. So it's a balance of those two factors.

From an innovation standpoint, GM does have extensive R and D activities in Canada in universities from coast to coast, where we're doing significant research and development on many aspects of our business. So having a very high-quality education system and university-based researchers is a very significant aspect of where you do research as well.

So there are many factors that go into how, when, and where you do that type of innovative activity. We have a very strong research and development centre in Oshawa, as well as at Kapuskasing. In Kapuskasing, we do all the cold-weather testing corporately for GM globally. In Oshawa Ontario we have a regional engineering centre that has almost 300 engineers, with Ph.D.s and masters' degrees, who are working on a variety of advanced technology developments. Canada is a very good place to do that innovative work and we look forward to doing more of it, as we've committed to the government.

[Joan Crockatt, Conservative, Calgary Centre, AB]

So is the government letting the public know that, so that we can basically give you an edge up with the public understanding what kind of innovation is going on inside your companies? Is that what you were thinking of there?

[Philip Petsinis]

No, it's more along the lines of its being a multifaceted issue as to the decision process, and it's not one thing, but many things. So it goes from education, fiscal policies, infrastructure policies, etc., that facilitate making some of these decisions in selecting Canada as a site to do that innovative work. It's about many things, and not usually one thing.