Local suppliers need to be nimble to land fighter jet work

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Ten years into the federal government process of deciding on a replacement for its aging fleet of CF-18 fighter jets — a $15 billion-to-$19 billion consideration — the final three proposals were filed this summer.

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Opinion

Hey there, time traveller!
This article was published 27/10/2020 (698 days ago), so information in it may no longer be current.

Ten years into the federal government process of deciding on a replacement for its aging fleet of CF-18 fighter jets — a $15 billion-to-$19 billion consideration — the final three proposals were filed this summer.

The plan is to finalize terms in 2020 and delivery of the first aircraft is expected by 2025.

As part of the process, the manufacturer of the winning bid — now between Boeing, Lockheed Martin and Saab — must provide a plan whereby they will eventually invest in the Canadian economy an amount equal to the value of the contract. That’s called the Industrial and Technological Benefits (ITBs).

Boeing's Block III Super Hornet jet fighter is one of three aircraft proposed to replace Canada's aging fleet of CF-18 fighter jets. (Dreamstime/TNS)

On Tuesday, Boeing released a little more detail about its ITB program should the Canadian Defence Department choose its Block III Super Hornet jet fighter, including five top-tier Canadian partners who will be part of the ITB and who will specifically contribute to production of the Super Hornet.

They are five established defence contractors, most of which are Canadian subsidiaries of U.S. corporations — Peraton Canada Corp., CAE Inc., L3 Technologies MAS Inc., GE Canada and Raytheon Canada Limited Services and Support Division.

But there is a lot left to go around.

Boeing’s economic development consultants, Ottawa-based Doyletech Corp., estimates that if the Super Hornet is chosen for the so-called Future Fighter Capability Project, the ITB economic benefits to Canada over 40 years of service, including direct, indirect, and induced effects, is projected to be $61.1 billion creating 248,176 person years of jobs.

The ITB would not be restricted to the Super Hornet program or even to defence spending. All of the bidders are committed to spending across the country. The proposal must check off a number of items from Ottawa’s value proposition “that seeks to motivate generational investments in Canada’s aerospace and defence industries over the coming decades, and drive innovation, skills development, and export opportunities.”

Over that 40-year span, Boeing’s proposal would include $20.7 billion worth of direct, indirect and induced spending in the three Prairie provinces, (surprisingly, more than in Quebec and not much less than in Ontario.)

When all is said and done, much of the current spending that goes on in Boeing Canada’s Winnipeg composites parts plant gets included in that. Boeing is its only customer and the output is worth about $400 million per year.

Of course, what would be beneficial to the Manitoba economy would be opportunities for Manitoba’s small- and medium-sized companies to become eligible to start taking part in the large aerospace companies’ supply chains.

Despite efforts over time to change the scenario, currently there are virtually no local Manitoba companies who are suppliers to Boeing’s Winnipeg operations.

And that plant is currently facing one of the most critical times in its almost 50 years in existence. With the airline industry in suspended animation because of the pandemic, Boeing has laid off 550 of its Winnipeg workforce that had been at an amazingly stable level of about 1,600 for many years.

The rest of the Winnipeg workforce is about to go on workshare where it will work nine of 10 days and be eligible for employment insurance benefits for the tenth day.

While the ITB process demands and the companies commit to working across the country and with every size business, the specific Canadian beneficiaries of any of the ITB programs would not be clear for some time.

On Tuesday, Boeing officials were not prepared to mention any other than the five noted above. After all, it has not won the contract yet.

Jennifer Seidman, who is part of Boeing’s International Strategic Partnerships, said Boeing does want to work with companies like Manitoba’s crop of small- and medium-sized parts companies.

But she made it clear that when the time comes, there will need to be some hard work done in order to participate, both from Boeing’s and the local players’ point of view.

“We are all about supporting SMEs (small-to-medium sized enterprises) in Manitoba,” she said. “We are going to have to work on that with boots on the ground after (if) we are selected next year… to ensure that companies get the opportunities.”

For the companies interested, she said that if there is not obvious supplier opportunities for Boeing they will have to get creative looking for innovation projects, research and development opportunities, participation in Boeing centres of excellence or supply Boeing’s partners.

The point is, when the ITB program is in place with whichever company wins the contract, local suppliers will not be able to sit back and wait to be invited. They are going to have to be aggressive and creative to ensure that Manitoba gets its share.

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

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