ONTARIO
BY PETER DIEKMEYER
Ontario has been rocked by a range of recent events. Canada’s spat with Saudi Arabia, NAFTA renegotiation and the
installation of a new provincial government all are factors that could impact this province’s defence industry, all with national implications.
This is a province that hosts the country’s largest city, the nation’s capital and it’s the engine for the defence industry here. Of course, Canada’s leading defence industry lobby groups are also located here: CADSI (The Canadian Association of Defence and Securities Industries) and AIAC (The Aerospace Industries Association of Canada). The country’s largest military vehicles manufacturer (General Dynamics Land Systems - Canada) and a key innovation arm of the government (Defence Research and Development Canada)are based here.
GREAT EXPECTATIONS
The most visible change in Ontario can be seen in Queen’s Park where, according to one industry expert, the advent of a nationally-business-friendly Doug Ford administration could prove to be a major positive.“They haven’t produced a budget yet, so it’s still early days,” says Lee Obst, managing director of Rockwell Collins Canada. “But any bid to lower taxes, cut regulations and invest in new technologies would obviously be welcomed.” Obst, like most defence industry stakeholders is also very bullish about the federal government’s new defence policy. “Strong Secure Engaged is a great document, IF they can implement it,” cautions the industry veteran. “The government has outlined a highly ambitious program. But, getting it through the system isn’t easy. The Department of National Defence will need the right amount of staffing. Although politicians say that the programs are “fully funded,” the proof will be in the pudding.”
Rockwell Collins Canada has seen some promising signs. This year the company inked contracts with General Dynamics Mission Systems to provide software used in Canada’s combat vehicle radio networks and engineering services to help the Canadian Army analyze the performance of combat communications training. Rockwell Collins Canada also shipped 100 FasTak advanced soldier systems which use a weaponized Android computer to transmit targeting information to F-18 fighters.
THE BEST DEFENCE CONFERENCE
“There’s positive momentum in the air,” says Heather Pilot, president of Pilot Hill, which organizes the Best Defence Conference, which will take place in London, Ontario this November. Pilot’s optimism stems in part from a new partnership with FedDev Ontario, which will see this year’s edition of the event extended to a full two days. Increased interest from European companies like Qioptiq, QinetiQ, Hiab and others, who are looking to partner up in Canada as a hedge against risks caused by Brexit, together with a volatile Trump administration, are also helping to spur interest.
Pilot and her team have planned a range of sessions to keep participants up to date about the latest industry trends. These include a land vehicle innovation forum, an event to inform SMEs about how to deal with defence sector primes, as well as a presentation on procurement opportunities at NATO.
In addition, FedDev will run a section about gender equity, a hot industry topic, which will be presented in collaboration with WIDS (Women in Defence and Security).
SODA LOOKS EXPAND ITS ROLE
Pilot also continues to work hard in her role as president of SODA (Southern Ontario Defence Association), where she has been leading a strategic planning initiative. The organization’s current mission is to promote the growth of the defence and security sector’s SME community. The idea is to provide a forum to enable entrepreneurs to network, find opportunities, and share best practices. However, Pilot, Ben Cecil of CCPV, and other key board members felt that there may be new, undeveloped opportunities on the horizon.
“We’ve conducted in-depth consultations and will be recommending a range of changes,” said Cecil, former president of the Canadian Centre for Product Validation and the organization’s current treasurer. “Members clearly want the organization to continue to focus on providing SMEs access to the latest information about federal procurements and export opportunities. However, many also want to expand SODA’s scope to encompass all of Ontario.”
The recommendations, currently scheduled to be ratified at the organization’s annual general meeting in early October, would also likely lead to a name change (possibly to the “Ontario Defence Association,” or something similar).
The broader focus would encompass significant new responsibilities. According to the Ontario government the province’s 300 defence companies account for over half of the the nation’s defence industry sales. In addition to London, Ontario-based, GDLS, these include world class players such as Lockheed Martin Canada, Thales Canada, DRS Leonardo, L3 Technologies and others. And, areas of expertise range from aerospace to, “space, naval, munitions/weapons, soldier systems and C4ISR.”
HOW NAFTA NEGOTIATIONS COULD IMPACT DEFENCE
.jpg "the LAV 6.0 is produced by GDLS in London, ON")
Almost all the Ontario defence sector leaders that we spoke to for this report, voiced concerns about Canada’s ongoing efforts to renegotiate NAFTA (The North American Free Trade Agreement). The American government’s imposition of import taxes on steel and aluminum and the Canadian government’s retaliatory responses, have had a considerable effect on the industry already because it’s a big user of both commodities.
That’s particularly true of IMT Defence, which according to Remo Assini, the company’s president, last year ramped up its production of 155mm artillery shells to 2,500 units per month. “Raw materials prices have gone up throughout the industry and not just for imported steel,” says Assini.
IMT Defence’s Ingersoll and Port Colborne Ontario facilities, which supply medium and large calibre ammunition components to the Canadian, US, Australian and other defence forces directly or through OEMs, are particularly vulnerable, because shell casings are in large part made of steel.
This however has not prevented IMT, which has cash available to deploy following last year’s divestment of some non-core assets, from growing. “We think that there are good opportunities on the acquisition front,” says Assini. “The defence sector looks attractive. However, we want to continue to diversify and service other industries.”
L3 WESCAM BOASTS STRONG EXPORT SALES
Another Ontario firm that is going great guns is L3 WESCAM, which operates two facilities in Burlington and a third in Don Mills. “We have seen strong global growth in demand not only for WESCAM products and services, but for the entire aerospace and defence industry,” Cameron McKenzie, Vice-President, Global Sales & Business Development, told CDR. “This has allowed us to significantly expand our talent pool.”
Staffing levels at the designer and manufacturer of multi-spectral and multi-sensor targeting systems shot up 25% during the past 12 months from 740 to 930. “We’ve had a very exciting year,” said McKenzie. “WESCAM just announced sales of $300 million in the first half and the largest contract award in WESCAM USA’s 43-year history.” These successes included the on boarding of 30 new customers, bringing L3 WESCAM’s total customer base up to 400.
In all, WESCAM equipment is now being used on more than 200 platforms. But, McKenzie isn’t stopping there. The division is partnering with several other Canadian L3 divisions to bid on a wide range of CSC (Canadian Surface Combatant)related projects. “Although WESCAM continues to grow, we have not lost our innovative and entrepreneurial spirit,” says McKenzie. “We pride ourselves on the work we do. At the end of the day, we want to make the world a safer place.”
DRS TECHNOLOGIES
One of the defence industry’s biggest challenges in Ontario relates to communicating the value that it brings to the ordinary Canadian. That’s a task that Martin Munro, Vice-President and General Manager at DRS Technologies Canada is more than happy to take on. His company operates a 127,000 square foot communications systems, electro-optic and infrared technology production facility in the Ottawa area.
“We are one of the poster children in the industry, that has consistently leveraged small government investments in technology into key contract wins and subsequent export sales,” Munro told CDR. “That in turn, creates new jobs here in Canada. We have increased our head count by 25 in our engineering and manufacturing departments and will continue to do so next year.”
Canada’s decision to commit new resources to the CF-18 fighter platform has also provided new channels for DRS Technologies’ Deployable Flight Incident Recorder. The company recently won a contract to redesign the product to meet the needs of Boeing and the US Navy, which continues to fly significant numbers of F-18s. As if that were not enough, DRS Technologies is another company that sees opportunities on the upcoming CSC and JSS (Joint Support Ship) programs. The company will offer its proven SHINCOM Shipboard Integrated Communications System for these projects.
CCPV LOOKS TO BROADEN ITS FOCUS
According to Bruce Smith, acting CEO at the Canadian Centre for Product Validation, a division of Fanshawe College, another of Ontario’s defence sector’s key strengths remains the excellent cooperation that takes place between industry, government and academia.
“We are seeing excellent growth in the defence space,” says Smith, who took on his job as the design and product prototype testing specialist in May. “While much of our work has been related to land-based vehicles we have been talking to other key players to broaden our focus.”
CCPV counts GDLS Canada as one of its most important clients, but due to the highly secretive nature of many of the company’s mandates, he wasn’t able to go into much detail. However, projects at its 25,000 square foot centre, which houses leading-edge validation technologies and equipment, include the provision of a range of vibration, tensile and impact testing services.
CCPV has also been in strong business development mode recently through participation in industry events such as the Best Defence Conference, as well as meetings with a range of other industry companies and organizations.
A STRONGER FOCUS ON AEROSPACE
But, Rockwell’s Obst continues to have his hands full and with the recent acquisition of Rockwell Collins Canada’s US parent by United Technologies (which also owns Otis Elevator, Pratt & Whitney and UTC Aerospace Systems), there will be new challenges ahead after the merger is completed, likely by the end of September.
Obst also needs to manage the company’s involvement in “Team Cormorant,” which was selected to complete mid-life upgrades of Canada’s fleet of CH-149 Cormorant Search and Rescue helicopters. The group, which will include Leonardo, GE Canada, CAE and IMP Aerospace & Defence, is also slated to work on nine additional aircraft that will be added to the program. Rockwell Collins hasn’t yet received a specific contract, but will likely provide an advanced cockpit display system as its contribution.
Obst also continues to push for an integrated Canadian focus on aerospace. Such a move could boost Rockwell Collins Canada, which does considerable on-site auto pilot, heads-up display and other avionics embedding work on Bombardier flight decks.
“Canada has a promising innovation agenda,” says Obst. “But there appears to be a lack of focus on aviation. We used to be one of the world’s top aerospace hubs but we’ve fallen possibly to as low as 5th. We can do better than that!”
The Best Defence Conference will take place on November 5th and 6th at the London Convention Center.
Peter Diekmeyer is CDR’s Quebec Bureau Chief
