THE INDUSTRY SPEAKS

John H. Simons May 21 1984

THE INDUSTRY SPEAKS

John H. Simons May 21 1984

THE INDUSTRY SPEAKS

John H. Simons

Executive vice-president, Electronics Group Canadian Marconi Company

WHEN PEOPLE TALK ABOUT AEROSPACE, they think about airplanes, engines and space, but seldom about electronics. As the aviation industry has evolved, the electronics sector has become more and more important. It’s a major part of the industry today, and it’s growing strongly.

The Canadian avionics, or aviation electronics, industry looks almost entirely to an international market. There simply isn’t a market in Canada for our class of products. Outside of Canada, Canadians are very competitive. We have to win on price, and be the best technically.

Electronics is a very promising growth area. I think that the companies that have succeeded in avionics have grown very rapidly, and it’s solid growth—they’re all profitable companies. We must invest large sums in research and development. Last year, our company invested some 12 per-

cent of total sales in R&D.

You have to realize that other people will produce better mousetraps, and to grow you have to develop new products. You have to direct your R&D into two areas— replace your products to keep up with the competition, and add new product-types. If a company spent no money on R&D, but just produced existing product lines, they’d be the most profitable in the world, but only for about two years until the market overtakes them.

You have to look at the realities of the world aerospace industry. Every western country has decided that the aerospace industry is an industry eligible for government support, either because of national pride, or more importantly, because of a national strategy. All major advances in commercial aviation have come from government-funded military programs.

Faced with the fact that other governments are funding 100 percent of their R&D, if the Canadian government wants to support this industry, then it has to find funds for us to be competitive.

We’ve never had the luxury of a 100 percent funded project. We have had a very successful program, the Defence Industry Productivity Program (DIPP), which has traditionally operated on a 50/50 sharing basis. Studies show it to be the most effective industrial support program of any government program in terms of sales—or contribution to the Gross National Product—per dollar spent by the government on R&D.

Canadian firms are like pygmies in the world market. There is so much available, and so much that we can go after.

Larry D. Clarke Chairman & CEO Spar Aerospace Ltd.

CANADA IS A COUNTRY particularly wellplaced to take advantage of satellite technologies—because of its physical and population characteristics, communication satellites are a very necessary service.

Since we do have a domestic market, it makes sense to build our technological thrust on that domestic need. That need alone will never be enough to keep an industry viable, but it can give enough of a base in design development and manufacturing to go out and export our capabilities both south of the border and to developing nations. From the standpoint of communications alone, Canada’s involvement in space is critical.

Canada was the third nation in the world to launch its own satellite. It was the first nation in the world to have a domestic communication satellite business.

The Canadarm was the very happy coming together of skills to satisfy a unique opportunity. I don’t think there will be many such opportunities, but you can justify it in the long run if it produces technological benefits that can be used in the conventional world. In fact, we are now under contract to Ontario Hydro to develop a sophisticated robotic system based on the Can-

adarm principle to be used in re-tubing the Pickering reactors, and this of course will substantially reduce the exposure that individuals could have to the radiation from the reactor.

Canadarm has done a tremendous amount to glamorize and bring home to Canadians the potential of the space age. But the longterm benefits are surely going to be in the more down-to-earth areas where there are high risks to individuals that can be avoided through the use of Canadarm technology.

Elvie L. Smith

Chairman A CEO

Pratt A WNtney Canada Inc.

THE INDUSTRY IS COMING OUT of a very deep recession. For example, we built some 3,300 engines in 1981, and in 1983 we built about 1,100 engines. However, because we have shifted to larger engine models, and because our overhaul and spare parts business wasn’t affected as badly, our total sales didn’t go down in anything like the proportion of unit sales.

Our conviction about the recovery is best illustrated by the fact that we are driving ahead at high speed with more research and development programs than ever before. Last year we spent some $145 million on R&D, and this high level of R&D is typical of all elements of the industry. Over the years we’ve averaged about 12 percent of sales being spent on R&D. If you don’t put money in at that rate, you can’t stay in the game.

To stay competitive cost-wise, we will have a substantial part of the factory working in a computer integrated manufacturing mode—a system with computerized design and manufacturing, computerized materials management system, automated inspection and so on. We see the manufacturing process evolving into small, largely self-contained units, rather like small integrated companies. This has very interesting implications for the work force. People within a group will not just be doing a single operation. They will manage machines that move material to workstations, supervise movement of that material through the workstations, supervise the machines that inspect it, and then send the product out the door.

I think there are two roles for government. One is to create an environment where innovation is encouraged and they can do that by providing repayable R&D grants, such as the DIPP program that we have been using, or tax incentives, and preferably a combination of the two. The second role is to assist in evolving agreements, such as the GATT aircraft agreement to ensure fair and free trade to the greatest extent possible, and also to provide export financing that is competitive in the world market.

Gordon Sampson

Chairman, Aerospace Industries Association of Canada

THE 135-MEMBER Aerospace Industries Association of Canada represents more than 41,000 employees who supply products and services to more than 50 nations and 90 of the world’s airlines.

Aviation has served to bring our nation closer together, while space communications have provided voice and video links to even the remotest settlements. By meeting our domestic needs, the Canadian aerospace industry has been more market-driven than technology-mired. This practical bent has served it well in exploiting international opportunities—an essential element for a nation that exports 30 percent of its gross national product.

Research and development, rigorous quality assurance, competitive pricing and on-time delivery have built the Canadian reputation. A vast network of suppliers serves the global needs of Beech, Bell, Boeing, Embratel, General Electric, Grumman, Hughes, Lockheed, McDonnell-Douglas and Sikorsky, to name but a few of our major customers.

Essential to our continued competitiveness is the support of schools, and the training and re-training of the industry’s most important asset—its people. Their skills must be complemented by the latest in computer-assisted design and manufacturing equipment.

A Canadian commitment to the aerospace industry is vital to several of our national interests—to provide for the common defence, to afford a space communications system that is second to none, to move people quickly and comfortably across our vast land and to enhance our international reputation—particularly in the marketplace—for advanced technology.