Canadian Defence Review

 

March 2012

 

Title: #2 General Dynamics Canada (2001 rank #4)

 

Like many defence players General Dynamics Canada has been feeling the pinch from sluggish global demand. However this long-time sector player stood out by how quickly and broadly it reacted. “We internalized the challenge and asked employees to look for ways to make our business more efficient,” says David Ibbetson, the company’s general manager and vice-president (C4 systems). “That includes fresh ways to incorporate COTS technology into our products and systems, developing technology upgrades that will help extend the life of our customers’ assets, and expanding our reach to partners and experts, within industry, academia and the end user community.”

 

General Dynamics provides a wide range of products and services, from systems integration and electronic systems, to complete command, control, communications, intelligence, surveillance and reconnaissance solutions. Major company mandates range from the supply of mission systems for Canada’s new navy CH-148 Cyclone helicopters to armed forces land command support systems and the CP-140 Aurora Incremental Modernization Program. In short the company’s increased efficiencies will benefit a lot of defence stakeholders.

 

General Dynamics Canada’s positioning as part of the broader General Dynamics global group of companies, which employ close to 95,000 people that supply land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems, also provides local centers of excellence with unique export opportunities.

 

For example during the past year, the company won a contract to provide its new tactical mobile routers to a Middle East customer. In addition its smart display is used in a variety of US Army and Marine Corps combat vehicles. “We also see significant opportunity to expand our footprint in the maritime aircraft market within the Pacific Rim for our UYS Sonobuoy Processor,” says Ibbetson.

 

That said Ibbetson expects that folks will be hearing even more about the company in the future due to upcoming bids on the Integrated Soldier Systems Program and the LAV Reconnaissance and Surveillance System. General Dynamics is also seeking to supply multi-level/multi caveat security systems solutions for federal government information networks and on the Underwater Warfare Suite Upgrade.

 

 

Title: #3 Thales Canada (2011 rank: #9)

 

Two thousand and eleven was a big year for Thales Canada’s defence unit. The period was characterized by a massive build up in orders and sales, new hiring and a management change at the top. Dave Spagnolo, a long-time industry veteran, who was formerly the unit’s vice-president (defence and security) has moved over to the civilian side, to be replaced by Mark Halinaty. In a conference call, both expressed enthusiasm for their new roles.

 

“It’s going to be a busy time for us,” said Halinaty. “We booked close to $500 million in new orders last year, and are particularly excited about DND’s selection of Seaspan as the main contractor in the non-combat vessels in the National Shipbuilding Procurement Strategy. We are their electrical systems integrator and expect the partnership to generate significant activity during coming years.”

 

Halinaty will have his work cut out for him because Thales, which has close to 1,400 employees spread throughout the country, has been active on a variety of fronts. The company’s defence sector revenues spiked 40% during 2011, due to its work on the Land Command Support System (LCSS), Tactical Control Radar (TCR) and other initiatives. Thales Canada’s Montreal–based defence optronics business did particularly well due to DND’s order of thermal imaging modules and driver vision enhancement equipment, which helps boost visibility of soldiers in the field at night and in adverse weather conditions. Thales Canada also built up a variety of capabilities in software defined radio and in advancing export opportunities for its counter IED technology.

 

That said Thales Canada has no intention of merely letting its current momentum ride out. The company is actively pursuing a variety of new mandates. These range from a simulation and trainer system bid related to the Leopard tank, to partnering with other key players on close combat and tactical armoured patrol vehicle (CCV and TAPV) bids. The company also hopes to be involved in the Land Vehicle Collective Training System (LVCTS) and Canadian Surface Combatant (CSC) bids.

 

Title: #4 Meggitt Training Systems (#3, 2011)

 

Meggitt, which provides live-fire and visual training systems to military and law enforcement agencies, is coming off a great year says Spencer Fraser, its president and general manager. “We boosted sales, developed new products, entered new markets and reached a number of key milestones,” says the industry veteran. “And we have a lot of opportunities in the pipe that we will try to capitalize on in 2012.”

 

Through its operations in Medicine Hat, Alberta and Montreal, Meggitt continues to be the beneficiary of several secular industry trends, notably increased demand for highly sophisticated land, sea and air targeting solutions, which the company markets in Canada, the US, Europe, Asia and the Middle East. “Exports are a big part of our business,” admits Fraser. “Its hard for defence companies here to thrive based only on local demand.”

 

Meggitt’s most visible product is the Hammerhead, a radio-operated training boat, which is designed to help simulate a multi-vehicle swarm attack of up to 16 navel units simultaneously. These threats have received considerable attention recently because they are one of Iran’s few defences against the flotilla of NATO naval craft that are patrolling its sea borders near the Straights of Hormuz. “We produced our 100th Hammerhead target drone and showcased it in the “Trident Fury” exercise, again last year, as well as our 500th Vindicator fixed wing air vehicle,” notes Fraser. “I guess it was a year for round numbers.”

 

Meggitt has also developed or enhanced a series of additional capabilities. These include work on what Fraser bills as the world’s longest isometric firing range for snipers, as well as the world’s first ground control station with vector charts capability and 3D situational awareness software. Fraser also noted the sale of Meggitt’s first Mosquito unmanned helicopter vehicle target (it has since sold more than a dozen), which the company bills as a “cost-effective, subscale helicopter threat simulation.”

 

#5, L-3 Communications (#2011 rank #1)

 

Canadian defence sector stakeholders are all currently reviewing experiences in the Libyan engagement to apply lessons learned to future deployment. According to Peter Gartenburg, vice-president (Ottawa operations) at L-3 Communications Canada, one tip that was picked up relates to NATO’s ISR efforts in the conflict and the applications they could have in Arctic patrol, an increasing priority for the Harper Government.

 

“DND was very impressed with the CP-140 Aurora’s new ISR capabilities stemming from its latest upgrades,” said Gartenburg. “These include the L-3 WESCAM electro-optic/infra-red cameras, an L-3 data link to send full motion video to the ground and an L-3 overland equipment mission suite.” According to Gartenburg, L-3 Communication Canada’s ISR capabilities are just one of many areas in which the company will be able to add value during coming years.

 

L-3 Communications Canada’s size alone (it has more than 2,000 employees) and infrastructure give it the clout to effectively bid on a slew of large DND projects ranging from JSF, MCDV, ISSP and many more, which typically require considerable supplier bases and contacts to help meet industrial and regional benefits requirements.

 

The company’s operations are conveniently spread across six production facilities and a slew of other locales throughout Canada. Major units include L-3 WESCAM, L-3 MAS, L-3 MAPPS, L-3 CMRO, L-3 Targa Systems, and L-3 Electronic Systems. However L-3 Communications Canada also leverages its position as part of a large global provider, to generate export work, through its numerous centers of excellence located here. L-3 Communications’s global footprint encompasses more than 80 companies and 61,000 employees that generated $15.2 billion in revenues during 2011.

 

Of course L-3 Communications Canada’s crown capability is the F-18 maintenance, repair and overhaul operations at its Mirabel facility just north of Montreal, which the federal government spent close to $100 million to build. The company recently won an Optimized Weapons System Management (OWSM) contract that will see it support the F-18s to the end of their useful life. However long before that occurs, L-3 Communications Canada officials will be angling to get MRO work from the new JSF program.

 

Title: #6 CAE, (2011 rank: #2)

 

Montreal-based CAE, a world leader in modelling, simulation and training for civil aviation and defence, is a truly Canadian and global success story. According to Chris Stellwag, CAE’s director (marketing and communications, military and civil) the company employs more than 7,500 people at close to 100 sites in more than two dozen countries. CAE has also established a global network of 34 civil aviation, military and helicopter training centers in which it trains more than 80,000 people each year.

 

The past year has been a busy one for CAE, which won several deals including a contract from Boeing to build six P-8A Poseidon simulators. Stellwag believes this deal could have further implications because DND will be looking for updated maritime patrol solutions in coming years, for which the craft is a prime candidate. CAE also recently announced that it will be developing a multi-purpose training center in Brunei, and that it has just about completed work on two CC-130J simulators and related equipment which should all be delivered to CFB Trenton in 2012.

 

CAE also took on new challenges during 2011. The company teamed up with Force Protection to bid on DND’s TAPV program and will be taking a major step forward on the bid acting as prime, with overall responsibility for the comprehensive in-service support solution. CAE will also partner with General Atomics to bid on the joint unmanned surveillance target acquisition system (JUSTAS) UAV competition.

 

In fact CAE is so used to going against the grain that Stellwag believes that tough budgetary times afflicting global defence players will actually be a plus for it. “We see ourselves as providing a money-saving solution for armed forces,” says Stellwag. “Although simulator training can never replace real life flying, its is far more cost effective. The operating cost of flying planes can be in the tens of thousands of dollars per sortie. As a result, simulator training will almost certainly have a growing role in tight budget environments.”

 

Peter@peterdiekmeyer.com

 

Title: #7 Lockheed Martin Canada (2011 rank: #11)

 

The name Lockheed Martin has been on everyone’s lips in the defence sector in recent years, due to Canada’s involvement in the massive Joint Strike Fighter program (expected to be the country’s largest military purchase ever), DNDs acquisition of 17 Hercules transport aircraft and a slew of other initiatives.

 

However ironically, the company’s presence on the ground here is mostly tied to naval programs, the largest of which, the Halifax Class Modernization HCM)/ Frigate Life Extension (FELEX) is currently proceeding on pace, says Tom Digan, the company’s president and general manager. “The work is well underway,” said Digan. “The first three ships had entered the yards by the end of last year, and numbers four and five will do so this year. The initiative is not without its challenges, but these often occur on the first units in upgrade programs.”

 

Lockheed Martin Canada’s 550 employees are mostly spread between its Dartmouth, Ottawa, Montreal and other locales including eight people assigned to Hercules-related ISS work in Trenton. As part of a global security and aerospace player, which employs close to 120,000 people in innumerable business units and which generated $46.5 billion in sales during 2011, Lockheed Canada naturally also seeks to get involved in areas that are not directly defence related. In Canada these include numerous renewable energy initiatives ranging from geothermal turbines in the Bay of Fundy, to solar fields in Ontario to a biomass plant in Alberta.

 

That said, Lockheed Martin Canada is far from sitting on its laurels says Digan. For example the company is leveraging its HCM/FELEX experience to compete in New Zealand to upgrade two ANZAC frigates. The company is also teaming up with Force Protection (it will supply electronic systems integration, cabling and crypto technology) on its TAPV bid. It also expects to be bidding on a variety of initiatives in the near future notably on NSPS contracts related to the new Arctic patrol vessels, to the Canadian Surface Combatant and Joint Support Ship project work.

  

Title: #8 Boeing Canada (2011 Rank #10)

 

Boeing Canada has a substantial defence sector footprint. The company has supplied (or is in contract to supply) DND with a variety kit ranging from the C-17 transport aircraft, Chinook CH-147 helicopters, ScanEagle UAVs and modernization work on its F-18s. As a result of those and other sales, the company is also on the line to supply substantial industrial and regional benefits work to its local production facilities and its more than 200 Canadian suppliers.

 

The Boeing Company’s business (parent of Boeing Canada) is divided almost equally between its military and civilian sector. This has proven to be an enormous advantage during the past year, says Eddy Morin, a vice-president (defence) who works at the Ottawa office. “We have been able to compensate for tightening defence spending in western countries by devoting more effort on the civilian side, where business is growing rapidly.”

 

That said, Morin is eyeing a slew of opportunities in Canada. These range from possible demand for more C-17s to augment the existing heavily-used four aircraft which DND took delivery of several years ago; to preparation of solutions to meet Canada’s search and rescue needs (the V-22 Osprey is a possible candidate) and maritime patrol requirements (for which Boeing is proposing its P-8 Poseidon). Contract wins in either of these categories would almost certainly come with additional IRB strings attached, which could boost the more than $1 billion in annual economic activity that Boeing generates here.

 

Boeing is also a dark horse candidate should the Canadian government begin to tire of the delays and cost overruns in the Joint Strike Fighter program, to which it has committed, but not yet signed a formal purchase agreement. Boeing’s F-18 SuperHornet, a cheaper alternative, more in line with the country’s existing fleet, is thought by many to be a viable option. “We are watching with interest how the fighter program is unfolding,” says Morin. “Right now the government has made its decision and we respect that. However should it change its mind we are open to new discussions.”

 

 #9 Seaspan Shipyards (#8 in 2011)

 

The selection of Seaspan Shipyard by the Department of National Defence to build the National Shipbuilding Procurement Strategy non-combat package has pretty much guaranteed the company will be a major sector player for many years to come. The win, announced in October, capped a year of tremendous efforts by an aggressive business development team. But that was the easy part. Now the vessels need to be built, a process which has consumed much of the company’s focus since then and will do so for the coming year.

 

The NSPS non-combat package, which some say could be worth as much as $8 billion, includes the Navy’s joint support ships, the Canadian Coast Guard’s off-shore science vessels and the new polar icebreaker, are of which slated to be built at Seaspan’s yards in North Vancouver and Esquimalt British Columbia.

 

According to John Shaw, Seaspan’s vice-president (government relations), the company has already hired an engineering firm to complete detailed plans regarding new buildings that will be put up as part of the company’s NSPS commitment to invest $150 million to $200 million in new structures, equipment processes and people. Seaspan also announced that Brian Carter will take over as president and that he will oversee operations at its three shipyards; Vancouver Drydock, Vancouver Shipyards and Victoria Shipyards.

 

That said, while conclusion of an umbrella agreement was announced in early 2012, and construction of the first NSPS vessel, a coast guard science unit is slated for early next year, major contracts for the JSS or the Arctic ships have yet to be inked. “We have had initial meeting with the Coast Guard and Navy,” says Shaw. “But these things take time.” 

 

Until then, Seaspan has plenty to keep it busy. The company recently started refit work on the HMCS Protector, which is expected to see the Auxiliary Oiler Replacement (AOR) vessel through to the end of its useful life. Extended dock work also continues on the HMCS Chicoutimi submarine and refit operations on the HMCS Corner Brook are slated to start at the end of 2012.

 

#10 Raytheon Canada (2011 Rank #7)

 

Like many local defence contractors Raytheon Canada boasts a wide variety of capabilities. However one figure stands out; its more than 1,400 local employees, the majority of which are skilled engineers, a total that company officials says is the country’s second largest in the industry.

 

Raytheon bills itself as a “mission system integrator for sea, land and air applications,” which creates, designs, and builds complex systems. According to Brian Smith, Raytheon’s general manager at the Waterloo facility, three of the main activity drivers are its work in air traffic control systems, public safety technology and solutions and wireless communications networks. Raytheon also has numerous centers of excellence spread throughout the country, including Woodbridge, (which focuses on high traffic systems), Midland (electro-optics) and Calgary.

 

Like many in the industry, Raytheon has felt the pressures of the global economic downturn. “We have slowed production in certain lines and adjusted staff accordingly,” notes Smith. “However we continue to pursue new opportunities both in Canada and elsewhere.”

 

“Innovation is the key,” says Smith. “Constant improvement drives all aspects of our organization.” This innovation played itself out in several ways, notably a technology demonstration program win by the Department of National Defence and Defence Research and Development Canada (DRDC), for Raytheon’s next generation High Frequency Surface Wave Radar (HFSWR).

 

“We believe that this technology is the key to providing persistent, active surveillance of Canada’s 200 nautical mile Exclusive Economic Zone (EEZ), said Smith.  “HFSWR is one of the most important new technologies available to protect our fisheries and marine environment and to provide ice flow monitoring in the Arctic and East Coast.” Raytheon also continues to do work on the Phalanx weapon system overhaul, which will extend the system’s useful life until 2017.

 

Peter@peterdiekmeyer.com

 

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