Canadian Defence Review


October, 2012


Title: Quebec Aerospace and Defence Report 2012

Subtitle:  Home to top aerospace and defence providers, Quebec has been pushed into the back seat on recent major federal land, sea and air procurements.  Many are compensating by trying to land sub-contract and ISS work.


Former Quebec premier Maurice Duplessis had a saying “Rendez nous notre butin” (give us our cut of the loot) which succinctly expressed his views on Canadian federalism. The philosophy, adopted by many of his successors, basically meant that the province would keep quiet, as long as it got its share of the contracts. However in recent years, Quebec appears to have been increasingly short-changed in a series of land, sea and air defence procurement initiatives.


On the naval side, late last year, Public Works and Government Services Canada shovelled out $33 billion in contracts to Irving Shipbuilding and Vancouver Shipyards, leaving Quebec-based Davie Shipyard out in the cold. In aerospace, L-3 MAS’s Mirabel facility, long a lead player in servicing Canada’s CF-18 fighters, was left with little clarity about a similar role with next generation aircraft, after the federal government’s Joint Strike Fighter initiative exempted Lockheed Martin from offset requirements. On land, Ontario-based General Dynamics Land Systems has been doing good work on the LAV III program and related upgrades, leaving few similar opportunities for others.


First class contractors, second row seats

In short, it appears that Quebec defence contractors are being given second row seats, forced to make do with sub-contract work. Despite this, by all accounts, the capabilities of its major players remain solid. “Our province is very strong in aerospace,” says Suzanne Benoit, president of Aero Montreal, an industry lobby group. “Major players with Quebec operations such as Bombardier Aerospace, CAE, Heroux/ Devtek, Pratt & Whitney, and Bell Helicopter, are well-diversified between their civilian and defence sides.”


According to Aero Montreal, the sector’s 215 Quebec companies employ 42,000 workers, who generate some $12 billion in annual sales, 80 percent of which are exports. And they aren’t just banging metal. The province also accounts for 70 percent of the industry’s research and development spending. Sadly though, despite all it has to offer; Quebec is being left behind on the defence front. Although military sales account for 23 percent of the Canadian aerospace industry’s revenues, in Quebec that total remains a meager 11 percent. “Knowing that the federal government will be sourcing $16 billion (worth of product) in the next 20 or so years, we want our share,” says Benoit.


L-3 MAS: looking to new horizons

Canada’s CF-18 fighters are arguably the country’s most important defence asset, which makes L-3 MAS, - the company that has been responsible for keeping those ageing aircraft in the sky for the past quarter century, - its most important contractor. Jacques Comtois, its new vice-president and general manager has been trying to build on that success, by positioning L-3 MAS for new horizons such as aero-structure construction opportunities.


L-3 MAS, which employs 900 people, recently renegotiated collective agreements with union personnel that Comtois says will provide it increased flexibility to manage workflows through the creation of new job classifications and other tools. Key will be lower pay scales and the abolition of traditional defined benefit pension plans for entry level employees (though existing personnel will keep what they have). The company, which also supports the CC-147, CC-148 helicopters, has also kept busy developing opportunities in Australia, working on the CC-150 Airbus in-service support initiative, and looking to partner with a provider to do ISS work on the Fixed Wing Search and Rescue project.


That said, although L-3 MAS has landed the Optimized Weapons Systems Management (OWSM) designation for its role on the F-18 fleet (which it expects to maintain until the end of its expected useful life in 2023), the Joint Strike Fighter in-service support mandate remains the big prize. And until clarity emerges in that dossier, the company will have to seek out opportunities elsewhere.


Discovery Air: Top Aces continues to advance

The big news at Discovery Air’s Top Aces division was the extension of the standing offer on its Interim Contracted Airborne Training Services (ICATS) initiative for another three years (until September 2016). Top Aces provides the Canadian Armed Forces with a range of services, including the operation of an aggressor fleet that challenges Royal Canadian Air Force pilots in training missions, as well as providing support to forward air controller training and live fire target practice.


According to Didier Toussaint, the division’s president and CEO, the company also recently added a new capability, the ability - to drop practice munitions - and is working on finalizing TC certification, for which the army is anxiously awaiting. Top Aces has even bigger opportunities in mind though. Its parent company Discovery Air is expected to bid on both the upcoming FWSAR initiative and on a new Public Works and Government Services Canada competition for a long-term airborne training contract.


CMC Electronics: helping governments maximize existing assets

According to Jean-Michel Comtois, Ultra Electronics’ vice-president (marketing and sales, government and public affairs), one of the major industry trends affecting Quebec defence contractors continues to be tightening government budgets. These are forcing military personnel to do more with less, a trend that Ultra Electronics, which provides cockpit systems integration and avionics solutions, has been taking advantage of.


“When money is tight, it pays governments flying older Hercules C-130s, a market we specialize in, to upgrade their cockpits rather than buying new aircraft,” says Comtois. “And since there are more than 1,000 of these planes in existence right now, many in countries that have just three or four aircraft (one of our niches), this presents us with tremendous opportunities.”


Not surprisingly, Comtois sees a bright future for the company’s 1,100 employees, 800 of which are located in Montreal. For example the recently-approved Communications, Navigation, Surveillance/Air Traffic Management CNS/ATM protocol, which will enable air traffic controllers to manage increasingly-crowded skies, will create significant upgrade demand, as operators strive to make their hardware industry compliant. Ultra Electronics also believes that the Large Area Displays (LADs) in the trainer cockpits it produces could present an opportunity, if the JSF initiative moves ahead.


CAE: a true world leader

One of Quebec’s strongest aerospace players, in fact one of the country’s most important defence contractors, is modeling, training and simulation systems producer CAE. Canada’s defence sector for the most part consists of a series of supply chain niche players, and Montreal-based CAE is one of the few providers that designs, develops, produces and supports end-to-end defence solutions.


Unlike many businesses which find nuanced ways of referring to themselves as “leaders,” or “best on our (narrow), field,” CAE, which employs 8,000 people at more than 100 sites around the world, the latest of which is a training center in Lima Peru, really is a real stand-out. Close to 90 percent of its sales, which are high-value technology contracts, are exports, meaning the firm generates huge value for Quebec’s economy. 


The big news of the defence front at CAE, was the nomination earlier this year of Gene Colabatistto, as its new Group President (Military Simulation Products, Training and Services) replacing Martin Gagné, who has agreed to stay on as an advisor. A Tier one supplier, CAE continues to make regular contract announcements, on the military side, such as one last month to provide $200 million worth of long-term recurring training services to the Kuwait Air Force.


Rheinmetall Canada: assembling the TAPV

While Quebec’s capabilities on the land front are smaller than those in Ontario, Canada’s vehicle production hub, Rheinmetall Canada, has consistently shown itself to be leader. In June, the company, which employs 250 professionals at its 32,000 square-meter St-Jean-sur- Richelieu facilty, a short drive south of Montreal, got good news when the Textron team, won the Tactical Armored Patrol Vehicle contract.  Rheinmetall will act as the primary in-service support hub for the vehicle fleet during its service life, in addition to performing final assembly, testing and some systems integration.


According to Duncan Hills, its director of government relations and industrial benefits, this will include installing essential sub-systems such as a Remotely Controlled Weapons Station, a Vehicle Navigation System and a Driver Vision Enhancement System. That said, the company, which also provides a full range of project management, battle management, and communications systems capabilities is far from satisfied and will be bidding for new work, on programs such as the Integrated Soldier Systems Project (ISSP), for which it recently submitted a proposal.


Meggitt gearing for LVCTS

Meggitt Training Systems (Quebec) division, which employs 24 professionals in Montreal devoted to supplying small arms training solutions, is another defence player that is well positioned to grab new work during coming years. The company, which is an offshoot of the old FATS (Firearms Training Systems) Canada Inc. has build a strong rapport over the years with the CF, supplying 36 LAV turret trainers, as well as 160 small arms training systems, which it continues to support.


According to Peter Longstaff, its president (military sales), the company’s major target will be the Land Vehicle Combat Training Systems (LVCTS) initiative, which it will be bidding on in coming years. Meggitt will do the systems engineering in a partnership with Calia (which will provide in-service support), Mechtronics (manufacturing) and Ruag.


“DND is getting a lot smarter with their money in our area,” says Longstaff. “They appear to be thinking more about how to get long-term value, at the systems level. If that continues, it will be good for all stakeholders, including the Canadian Forces, industry and the taxpayer.”


Rousseau Metal: turning a niche into a competitive asset

While Quebec companies losing out on top tier work is clearly a problem, the fact is that many have compensated, doing quite well by hammering out solid niches in specialized areas. According to Marie-José Arcan, a spokesperson for Rousseau Metal, the company, which employs 300 at its Saint-Jean-Port-Joli, facility, uses the latest metal cutting and bending technology to build high density and durable storage solutions for spares containers, for a slew of Department of National Defence programs ranging from MSVS Milcots, LSVS, frigates and other projects. Business is so good, the company has just invested in a 10,000 square foot plant expansion, to install a new paint line.


Who speaks for Quebec?

There is an old saying in business: “if you have only one customer, you are no longer independent; he is your boss,” which may explain why few Quebec defence sector stakeholders are ready to speak out about the apparent second class treatment the province is getting. However you don’t have to look far for reasons. The Harper Government, unlike predecessor Liberal administrations, has few Quebec Members of Parliament from which to draw ministerial talent, which no doubt accounts at least in part for why Quebec’s voice is not being heard when decisions were being made.


For example Denis Lebel, the minister responsible for defence and aerospace issues in Quebec has a low profile even in his home province, and, judging from his results, has little clout at the cabinet table. Lebel’s office issued a statement saying that the minister’s staff participate in trade missions, supplier tours and industry days, but could provide no example of successes achieved during his mandate, other than a $500,000 contribution to Aero Montreal, and a link to a small joint venture partnership, which the ministry claims to have fostered, which had no dollar amounts attached to it.

Provincially things aren’t going much better. The recent election of the Parti Québecois has left the province’s aerospace and defence sector in a vulnerable position. If the past is any indication, the party, led by Premier Pauline Marois, will likely be seeking excuses to create conflicts with the rest of Canada, in order to promote its separatist agenda, rather than seeking to build bridges.

When contacted Quebec’s Service des Affaires Publiques, Ministère des Finances et de l'Économie could point to no new initiatives that the government is taking to maximize Quebec’s participation in coming defence initiatives such as JSF, transport aircraft and helicopter programs. According to one spokesperson, new ministry personnel are still not up to speed on the project and were unable to provide comment. However the office of Elaine Zakaib, Minister for Industrial Policy, issued a statement saying that the government has attended an industry held by Irving Shipbuilding in September, to angle for work for Davie Shipyard.

With government efforts to bring some defence bacon home to Quebec apparently not going anywhere, Aero Montreal has been forced to pick up the slack, which is somewhat ironic, since as Benoit notes, the group’s primary focus is aerospace, not defence itself.


Nonetheless the lobby group’s defence sector working group, which is chaired by former CAE executive Martin Gagné, and which includes players from many of the major firms noted above, as well as other such as Thales Canada, Sagem Canada and Bell Helicopter, has taken the lead. Aero Montreal’s defence strategy identified four air force requirements that the industry would seek opportunities in: two noted above (JSF, FWSAR) and the Joint Unmanned Surveillance Target Acquisition System (JUSTAS) and the Canadian Multi-mission Aircraft (CMA).


The group then identified what it calls “capability gaps,” that could realistically be filled by industry players. These range from C4ISR, data fusion and UAV sensing solutions, as well as command and control and remote sensing and sensor integration capabilities.  The jury is of course still out on how much work can be generated in these areas.


One thing is certain: with the big contracts being doled out elsewhere, Quebec companies will have to run twice as fast to get their share of the smaller mandates.


Otherwise poor Maurice Duplessis will be left rolling in his grave.



Highlight this quote:


“Knowing that the federal government will be sourcing $16 billion (worth of defence-related aerospace) products in the next 20 or so years, we want our share.”

Suzanne Benoit, president of Aero Montreal

(Please post with attached photo).





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