:
Welcome to our Standing Committee on National Defence, meeting number 36.
[Translation]
Pursuant to Standing Order 108(2), for today's agenda, we are continuing the study on the next generation of fighter aircraft.
[English]
We're continuing our study on the next generation of fighter aircraft.
We have with us as witnesses from the
[Translation]
International Association of Machinists and Aerospace Workers, District 11, Mr. David Chartrand, President, Directing Business Representative Organizer.
Welcome. We are pleased to have you with us.
We also have Mr. Pierre Grenier, President of the Factory Committee, Local Section 712.
Welcome, Mr. Grenier.
[English]
We also have with us, from the Canadian Auto Workers Union, Jerome Dias, assistant to the national president; Dawn Cartwright, national representative; and Roland Kiehne, president of Local 112. Welcome.
Each association will have 10 minutes for a presentation, and after that the members will ask you questions.
Maybe I can start with the International Association of Machinists and Aerospace Workers.
Mr. Chartrand, you have the floor for 10 minutes, and after that it will be Mr. Dias.
Thank you very much.
:
Thank you, Mr. Chairman and committee, for hearing us. On behalf of the International Association of Machinists and Aerospace Workers, I would like to take this moment to say it's a pleasure for us to be able to appear before this committee.
We represent working members all over Canada in many trades. There are many different employers, which I mentioned in the brief that I submitted to the committee. I am not going to go down the whole list, because we only have 10 minutes, but just to be short, I will say that we represent Bombardier Aerospace, which is known pretty much by everybody; L-3 MAS, which does military contracts; Héroux-Devtek, which has a chance of obtaining some of the contracts on the F-35; and many other aerospace companies. We are the largest union in the aerospace industry. We also represent members in air transportation and in maintenance for air transportation.
Many of the above-mentioned companies may obtain some work on the F-35 purchase by the Canadian government. I must emphasize the word “may”, because there are absolutely no guarantees of this whatsoever. Although some of the companies have stated they will be getting some of this work, and despite an announcement made by the government to this effect, nothing is sure. I say this because it's merely speculation at the moment when we talk about Canadian content inside of the contract.
I've spoken to two of the companies we represent. I didn't go through every one of the companies, but the two I spoke to, L-3 Communications and CPS Industries, which are among the companies mentioned in the 80-plus companies that may obtain or bid on contracts, both said they have never been approached, either by Lockheed Martin or the government or anybody else, to bid on these contracts and have never had discussions on bidding on any of these contracts.
This brings me to the question: I wonder how many of the 80-plus companies are in the same situation as these two companies. Is it a positive spin or political strategy on the part of the government to say that 80-plus companies can bid? I don't know. I submit that question to the committee.
The other question I ask is the following. Out of the companies that are called Canadian companies for the purpose of this exercise—the ones that will be able to bid on this work and that also have other manufacturing sites outside of Canada—what content of their work will be awarded in or actually be done in Canada? Also, what assurances can the Canadian government get from these companies in this regard?
Take, for example, Héroux-Devtek, which has plants in the U.S., or Rolls-Royce, which has plants all over the world, or Bombardier, which also has plants worldwide, or L-3 MAS or L-3 Communications, which has plants all over the U.S., and so on and so forth. What guarantees does our Canadian government have to the effect that those employers will keep the work that they obtain in Canada? Once they have this work, what will stop them from transferring some of this work over to their plants in other countries, in the United States or in Europe, or wherever? After all, Mexico was in Montreal earlier this year, actively seeking to lure Canadian companies to move their plants south.
How does the government intend to ensure that these corporate commitments are fulfilled? Are there any penalty clauses included in these contracts?
In clause 3.2.1.1.1 of the F-35 memorandum of understanding, I understand, from reading the minutes of the previous meetings, but not from seeing or reading the contract, that it states the following:
Actual procurement of GSF Air Vehicles by the Participants will be subject to the Participants' national laws and regulations and the outcome of the Participants' national procurement decision-making processes.
The responsibility to have a clear policy is bestowed upon us. We must have a clear Canadian procurement policy stating that any taxpayer money spent on equipment bought for the purpose of the government, the military, or even municipal and provincial governments should have at least an equal amount of return in jobs or offset contracts. By offsets, as an example, there could be contracts on the F-16, when we're talking about companies like Lockheed Martin. If they can't give you work on the F-35, they can give you some on the F-16, or on the T-50, the C-130J, and so on and so forth, on any one of those contracts.
I'll move to my next point, which concerns the expertise that we as a country have developed over the last 30 years in maintaining, repairing, testing, and inspecting military aircraft. As you heard from Mr. Dan Ross, in his opening statement on October 19, “I would ask whether you would want your son or daughter or future granddaughter in yesterday’s technology....” Those were his words. They struck me as very pertinent. I asked myself the same questions with regard to the maintenance of the F-35 aircraft, which represents $250 million to $300 million a year for our economy.
Would I want another country to do the maintenance on the F-35s my kids would fly? Would I entrust anybody but the best manpower available to maintain this fleet of 65 F-35 fighter planes? Would I take the chance of having a longer turnaround time on our fighter jets in a time of need, because the Canadian F-35s are not the priority for another country servicing us and themselves? Am I putting in jeopardy my children's lives and my country's sovereignty by outsourcing this work?
Imagine for a minute the U.S government getting their rockets in the space program maintained or repaired and overhauled by another country. All the technology and knowledge they acquired through this program has affected not only their aerospace industry, but also everybody's daily lives. Cellular technology, microwaves, LCD—a lot of technology was developed through these programs, which is why it’s important that we keep programs like that here.
Through three employers—Canadair, Bombardier, L-3 MAS—our members at L-3 MAS over the course of the last 30 years have developed an expertise unequalled in Canada and other countries, an expertise in maintaining military aircraft, repairing and overhauling them, and extending the life of these aircraft. They have capabilities in mission modifications—they've done it for Canada, the United States Air Force, and the Royal Australian Air Force—structural renewal of the Hornet for the Royal Australian Air Force and for our aircraft; replacement of centre barrels; changes in systems, like avionics and night vision; wiring harness testing; and stress and fatigue testing, and at L-3 MAS we created programs for the stress and fatigue testing. They have in-house engineering capabilities, in-house machining capabilities, and one-off capabilities.
One-off capabilities means they can do.... Once 15 years has gone by, and the plane is not being sold by a manufacturer anymore, it’s difficult to build replacement parts for those planes. They have the capabilities to do one-offs, which means not production parts, but a one-off part that they need on an aircraft that has been broken, damaged, or needs to be replaced. It’s not everybody who can do that.
This expertise has permitted the Canadian government to save a considerable amount of money and delay the purchase of new jet fighters for many years. The life expectancy of the F-18s was doubled through modernization, replacement of components, and major repair and overhaul. The ongoing maintenance of the new F-35 fighter planes represents 30 years of work. If we compare it to the F-18s, the cost of the aircraft was in the vicinity of $27 million, but the upkeep over the years represents approximately $39.5 million per F-18. We’re are talking about an incredible economic impact if the same is done for the F-35. And with the 1,000 jobs in Mirabel, at an average of $50,000 a year in wages, we are talking about $18 million in taxes over 30 years, a ballpark figure of about $540 million in taxes, and great jobs created and maintained in Canada.
I don't know about you, but I’d feel comfortable with my kids flying in an F-35 maintained by members at L-3 Com, with the experience they've developed over the years. Any repair or maintenance done by our members will be safer and less costly. It would also permit us to put our planes in the sky when we need to, without being dependent on anyone else. This ensures our sovereignty as a nation.
But don't take my opinion. Look at the facts.
Thank you.
:
My name is Jerry Dias. I am the assistant to the national president of the Canadian Auto Workers Union. Thank you for inviting the CAW here today.
I am flanked by our director of the aerospace department, Dawn Cartwright, and Roland Kiehne, who is the president of Local 112 in Downsview, which represents the workers at de Havilland Aircraft, SPAR Aerospace, MacDonald Dettwiler, and Northstar Aerospace.
We represent over 10,000 aerospace workers in every region of Canada at top companies, which include Boeing of Canada, Bombardier, Bristol Aerospace, Cascade Aerospace, I.M.P. Group, MacDonald Dettwiler, Northstar Aerospace, and Pratt & Whitney Canada.
You have heard from many of the CEOs of these companies on the proposed F-35 procurement. I am pleased to provide our perspective, which is not always the same as theirs.
I am aware of the concerns about the F-35 aircraft, its costs, its capabilities, and suitability for Canada's needs. The CAW always encourages a vigorous public policy debate.
Today I will focus on what is before me and our union's members: the F-35 stealth fighter.
Members of the committee no doubt realize that Canada's aerospace industry is slipping. In January, CAW national president, Ken Lewenza, wrote to Prime Minister Stephen Harper expressing his concern that Canada has fallen from fourth to fifth place in the world, behind the United States, Britain, Germany, and France.
We need to regain our position, and this can only be done by using federal dollars to leverage investment and jobs in Canada. In his letter, President Lewenza said that a good start would be to select the Canadian-built Q400 as the choice to meet our fixed-wing search and rescue requirement. This would create good jobs in Canada and would make Canadians safer.
President Lewenza further urged Prime Minister Harper to develop and mandate defined levels of domestic content or industrial regional benefits, IRBs, in all Canadian procurement programs.
This priority was reiterated strongly by the entire Canadian defence industry through consultations last year. The report said in recommendation number 1 that the government must:
Use Canada’s IRB program to leverage Canada’s defence and security industries into global OEM supply chains for OEM programs....
But the government has failed to listen.
Instead, it plans to spend an estimated $16 billion of our public dollars on the F-35 stealth fighter program without requiring any investment at all in Canada. There are no IRBs with this procurement. It's a giveaway to the U.S. manufacturer, Lockheed Martin.
Those dollars should require guaranteed investment and jobs in Canada of equivalent value, dollar for dollar. Canadian workers should not be asked just to sit back and hope that Lockheed Martin will send contracts to Canada out of the goodness of its heart. Wishful thinking is not how you build a world-class aerospace industry.
We are not saying that Canadian firms cannot compete. Our members produce the finest aerospace products in the world, but this is a rigged game. The so-called best value acquisition strategy leaves it up to Lockheed Martin to choose the winners and losers with our tax dollars. According to the U.S. Department of Defense, once Lockheed Martin and its top-tier partners have chosen a supplier, they will pursue sole-source contracts with these companies based on schedule, performance, and cost benchmarks. That leaves Canadian firms at the mercy of the U.S. giant, which has a far stronger allegiance to Washington and other big military buyers than it does to Ottawa.
We have already seen the signs of political interference from Lockheed Martin and the U.S. government. For instance, more attention needs to be paid to a practice called strategic sourcing, by which Lockheed Martin gives some countries direct work shares to keep them happy. Canada's military officials and others have already raised concerns about this.
Here is another example. Israel was given a 150% buyback guarantee by the U.S. government for its F-35 deal, and it could go as high as 180%. Defense News called it extraordinary and unprecedented, because according to U.S. commerce department data, offsets in recent years have averaged at about 100% for European, Australian, South Korean, and advanced western countries, including Canada.
I am aware of the debate over the 2006 MOU governing our participation in the project and the controversial section 7. Dan Ross, national defence assistant deputy minister, told you we would need to withdraw from the MOU if we went into a procurement process requiring IRBs, but Alan Williams, Dan Ross' predecessor, disagreed. He told committee members there is nothing preventing Canada from remaining in the MOU and requiring IRBs as part of an actual procurement.
If Israel can negotiate IRBs in the range of 150% without investing a nickel, and Canada cannot, after committing $551 million under the MOU to meet the F-35’s development, then something is seriously wrong. If the MOU is flawed, then the government has a responsibility to fix it.
The industry minister’s assertion that his department has identified $12 billion worth of contracts that we can bid on as part of a global supply chain just doesn't add up. As I pointed out, what percentage of that amount will we win with Lockheed Martin and its first-tier partners making the determination?
A negotiated IRB program for whatever aircraft Canada purchases would give Canadian industry guaranteed contracts up to the value of the acquisition and the in-service support, or ISS, estimated to be $9 billion and at least $7 billion respectively, for a potential total of $16 billion.
Which would you rather have, the chance to bid on $12 billion in contracts or guarantees of $16 billion in contracts?
With an IRB program, the government could also ensure that the work is distributed across Canada fairly, with the regions receiving a proportional amount of work relative to their current share of the Canadian aerospace workforce and Quebec comprising roughly 46% to 50%.
The CAW is concerned that Pratt & Whitney Canada has already sent some F-35-related work to Turkey instead of employing Canadians. Complete transparency and accountability for job creation in Canada needs to be included.
Of course, Canada does not build fighter planes, but we are one of the major commercial aerospace producers in the world, especially in regional aircraft. Civilian aerospace products comprise 83.4% of the $24 billion in annual Canadian aerospace and defence revenues.
With governments across the globe looking to reduce military spending, the civilian market likely holds the greatest promise for Canadian industry. Using both direct and indirect offsets as part of a military-related IRB program would allow Canada to encourage investment in an appropriate mix of commercial, space, and defence aerospace industries.
Finally, CAW national president, Ken Lewenza, has called for the creation of a Canadian aerospace development council involving all levels of government, the CAW, and other stakeholders to design and implement a new aerospace strategy for Canada.
We look forward to working with you to regain Canada’s standing as a global aerospace champion.
Thank you, and I welcome your questions.
:
First, our Canadian industry clearly has the capabilities to do $16 billion worth of work, let alone $12 billion worth of work or $4 billion worth of work. We have the expertise and the technical ability.
I'm concerned about guarantees. I have zero confidence, frankly, that Lockheed Martin is going to guarantee us $16 billion worth of work. I am absolutely concerned that we will not get the in-service work to maintain our sovereignty, to a large extent.
The argument is interesting. The argument is that we need to buy stealth bombers, in essence—stealth aircraft, stealth fighters—to maintain our own sovereignty, to be in control of our own destiny. But then we're going to let the United States service our planes, so we'll get them when we get them.
You can't have it both ways. If we say we legitimately need these aircraft for this purpose, then we ought to at least be in control of when we can fly them. It's an interesting argument.
I'm very much in favour of saying that if we have a history that shows we can negotiate a minimum of 100% offsets, I don't see what makes this any different. I understand the argument that we have access to the bigger pie, but the pie is going to be disbursed by Lockheed Martin. It's not broken up based on participation. If it were broken up based on participation, then I would suggest that the United States' buying of over 2,000 aircraft will certainly put them in the driver's seat, as compared with our 65.
:
The example I'm going to use is Bombardier. It used to use companies like Mitsubishi Heavy Industries to build parts of their planes--subcontract. They actually still use other companies, but that's one clear example. When Boeing ramped up its production levels, Mitsubishi Heavy Industries didn't have the manpower. It didn't have the capabilities of doing both and delivering on schedule, so they told Bombardier, which was a smaller contractor, “Hold on. You'll get your stuff later.” They made Bombardier wait for long periods of time. Bombardier had to send teams down there to finish their products, to get their products on time.
Well, picture that with our military planes. We're talking about sovereignty. We're talking about protecting our families. We're talking about patrolling the north, the Arctic. We're talking about all these things. Now we're getting our planes serviced by another country, which is also servicing their planes. There's a war. There's something going on. Don't you think they'd have an interest to put their planes in the sky before ours? I believe so. I think that's quite simple to understand. It doesn't take a great scientist for that.
If I were the Americans, I'd be looking around, or if I were somebody else in Europe or wherever, maintaining the planes, I'd say, “Hey, mine are going to go first and yours are going to go second. You hold on and wait. We'll patrol our skies before you can patrol yours.” I have a problem with that.
On the expertise we're talking about, we have a great expertise in doing it. We've done it for over 30 years. We fought to be able to get those contracts. We've bought planes from Lockheed Martin, and they told us we can't maintain our own planes in the Canadian government because there's technology we're not going to be aware of and things like that. Well, as he said, our working on them helps us to develop technologies to stretch out the life of certain aircraft. It helps us develop new technologies. We have an engineering department that works on it and all that.
But by not being able to maintain our planes, we're going to lose that expertise. Right now, the only place we can do that--the F-18s--is in Quebec. We're doing it in Bagotville and we're doing it also in Mirabel. If we do not do it, we're going to lose that expertise.
If we don't do it for so many years, the schools and the programs that teach people how to do it will close down. The people leave—they go somewhere else—and you end up not being able to put it back on track and being able to train those people.
We're talking about the aerospace industry in general. We need to continue being productive and being at the forefront of the industry with all the new technologies. It's our leverage right now. It's our edge.
We'll be honest. Countries like Mexico, and other countries, can produce cheaper. So our edge right now is technology. It's always being the first ones with a new product. It's being able to develop new technologies that are difficult to work on and that we can do by having great programs in schools. If we don't do it, we risk killing programs in our schools and making sure we don't have anybody able to do that in the future.
:
I am not an economist, but one thing that bothers me is the value of the dollar. We have received a lot of work from American companies that came here because it cost them 60¢ rather than $1. Now, it is more difficult for us to get contracts from the United States. We used to have a ton of contracts from the United States. But, more and more, the companies are going back there.
One of the reasons was that Quebec was considered to be a source of cheap labour for the United States. That's why we are going to have trouble competing with an American company when the dollar is at par. It is because of the current economic situation.
I believe we have the know-how, as you say, the skills and qualifications to do all that work. However, sometimes, it is not only about having the qualifications or skills, but it is also about political decisions.
The “military” is very important in the United States. Military contracts are given—I'm sorry, no pun intended—to taxpayers so that their politicians can be re-elected and say that they managed to provide a company with work, and so on.
Sometimes, it is not only a matter of decisions, of wondering whether we have the know-how or whether it makes sense economically. They are just “hogging the covers”. The softwood lumber industry is a great example of that.
We were able to do a lot of things here, but at some stage, the Americans decided to flex their muscles and impose a tariff. As a result, they cut a lot of Canadian companies out of the softwood lumber industry.
So these are often not logical or financial decisions. That is why we prefer to have official, signed guarantees.
We have some bargaining leverage at the moment: the planes have not been bought. It is important to look for guarantees in the memorandum of understanding.
Let me add my voice of welcome to my colleagues. Thank you for appearing before us.
I have a couple of questions for the gentlemen. Without a work order in place, we don't have any access. So we need an MOU that really leads the way, to get us in the door and make sure we have an opportunity to challenge for these contracts.
If I look at space, I'm not one of the guys who looks to the sky and sees aircraft. My claim to fame is I flew one time with the Snowbirds, but that was just a fun event. But when we look at airplanes and when we look back, Canada had the Arrow, which was the leading aircraft on the planet. I have no doubt in my mind, when I look at space and see a space arm, that we have the technology and the intellectual capacity to challenge any other country in the world, and we have the physical attributes to carry that off.
When I look at things like hockey and “Sid the Kid”, and all the rest of those things--there are hundreds of examples of expertise in this country, and aerospace is one of them, without any question.
Why would we hesitate in challenging for those contracts? We would be at the top of the ladder in getting those contracts because we have the people who can do the job. Is that a fair assessment?
:
Thank you, Mr. Chairman.
Through you to our witnesses, first of all, I'd like to say that I truly admire the passion with which you represent your members. That's something we can all feel and appreciate, because we do that ourselves.
I want to give you a little background, because it's evident that you haven't had the same information that we have been receiving ad nauseam for weeks.
There was a tendering process that went on about a decade ago. In fact, a previous government started the process, and all the nations that are currently participants put money towards deciding what the best technology would be. They put that out for bids at that time. That was the tendering process.
My colleague, Mr. Hawn, went through the aspect of the memorandum of understanding. In order to have access to the intellectual property so that our workers in Canada can do that work, they have to be a part of that memorandum of understanding. But part of that memorandum of understanding forbids the IRBs. The IRBs are being done through a different process altogether. It's the same end result that we're trying to achieve by ensuring that the participating nations are all going to have jobs equivalent or proportional to their purchases, but it's just not the same system that we're used to in Canada.
I have to agree with Mr. Chartrand about the risk in losing a capability. Thanks to your testimony today, that will certainly go into our deliberations and any further negotiations that go into the next phase of the purchasing.
During the decade of darkness, we lost capabilities, and it's taken us a decade to get these back. I'll tell you about a scenario. It was August in the summer of 2001. Some members of this committee back then were visiting Bosnia, and the parliamentary secretary of the day was talking about how they had removed all the mortar launchers from the troop carriers because they were at the point now in the world that things were going more peacefully in Bosnia. The idea was that we had the peace dividend and didn't need these anymore. One month later, 9/11 happened, and we had let things go for so long that we weren't ready for what the world is faced with now. We had mothballed our tanks. We had gotten rid of the airborne regiment. It was expedient to do so because there had been some trouble in their ranks. They were trying to cut money and just got rid of the regiment altogether.
When I got here in 2000, the first campaign, really, in this committee was to bring back the airborne. We never got the airborne, but we did get the capability back. Having a group of special operations forces was six years in the making. They call them CSOR now, the Canadian Special Operations Regiment. They can respond rapidly, they can jump from planes to deploy to where they have to be, and they're self-sustaining.
We do understand, and we thank you for what you're telling us about the risk of losing a capability. I just want to express my appreciation for what you brought to this meeting today. I don't really have any questions, because you've given us such full testimony.
:
Are there other members who would like to speak to the motion introduced by Mr. Bachand and the subamendments?
No?
I will then ask the members to vote on Mr. Harris' subamendment.
[English]
Is it a friendly amendment? It is not a friendly amendment, so first I must ask all the members about
[Translation]
and the National Research Council.
[English]
We just add “le Centre national de recherches”.
(Amendment agreed to)
The Chair: It has been approved.
[Translation]
There is the other amendment proposed by Mr. LeBlanc, which asks that the ministers be invited to appear individually for one hour each.
As amended, the amendment reads as follows:
That the motion be amended by adding the following after the word “Committee”: “, and that the ministers and the National Research Council of Canada be invited to appear before the Committee individually for one hour.”
[English]
(Amendment agreed to)
The Chair: It has been approved.
[Translation]
We are now going to vote on the full motion introduced by Mr. Bachand, as amended:
That, following the appearance of the companies regarding search and rescue aircraft, the Committee ask the Ministers of Defence, Industry and Public Works and Government Services to appear to provide an update to the Committee, and that the ministers and the National Research Council of Canada be invited to appear before the Committee individually for one hour.
[English]
(Motion as amended agreed to)
The Chair: The motion has been approved by the committee.
[Translation]
I will now turn the floor over to Mr. Wilfert.