CANADA

Fighting for survival

CHRIS WOOD August 4 1986
CANADA

Fighting for survival

CHRIS WOOD August 4 1986

Fighting for survival

The decision was announced with a minimum of fanfare. In a press release from its head office in Etobicoke, Ont., Litton Systems Canada Ltd. ended weeks of speculation by announcing that it had selected Nova Scotia as the province where it will build an $18-million radar plant under federal contract. Litton’s choice of a site at an industrial park outside of Halifax ended a fierce bidding war among Nova Scotia,

Prince Edward Island and New Brunswick. But the conduct of the competition, in which three of the country’s poorest provinces scrambled to lure the multinational defence contractor with generous investment incentives, left a residue of bitterness. Said Prince Edward Island’s Premier Joe Ghiz, who saw his province’s chances for the plant collapse in June after he demanded better terms from Litton: “The government wants jobs for Islanders but not jobs at any price.

P.E.I. is not a banana republic.”

Indeed, well before Litton’s announcement, the Maritimes competition for industry and jobs had aroused political leaders in all three provinces — and raised serious questions about how such projects are awarded. The competition became so intense that in its unsuccessful bid, a coalition of groups in Nova Scotia’s hard-pressed Cape Breton Island, led by the federal development agency Enterprise Cape Breton, told Litton it would be eligible for direct federal grants and tax credits worth $15 million—five-sixths of the plant’s cost. Ian Stott, president of Cape Breton’s Board of Trade, made no apology for offering Litton such generous incentives to locate on the island, where the unemployment rate in several communities has risen above 50 per cent. Said Stott: “We have no God damned choice. We’re fighting for our survival.”

The Litton controversy had its

roots in the company’s decision late last month to reopen competition for the plant. On June 17 Ottawa officially awarded Litton and Swiss partner Oerlikon-Biihrle Ltd. a $650-million contract to supply a new low-level air-defence system to Canada’s forces in Europe. The deal bound Litton to build a radar component plant somewhere in the Maritimes. Anticipating that it would receive the contract, the

company had begun negotiating with all three Maritime provinces as early as the spring of 1985. Last December the company reached a tentative agreement with Prince Edward Island’s Conservative government to build the factory in an industrial park on the outskirts of Charlottetown. Then-premier James Lee made the Litton deal a major plank in his platform when he campaigned—unsuccessfully—for reelection in April. And when federal Supply and Services Minister Stewart Mclnnes tipped Ottawa’s hand and told a Charlottetown audience during the election campaign that the government had chosen Litton to build the plant in Prince Edward Island, critics accused the federal Conser-

vatives of trying to give a boost to the provincial Tories.

However, the plan collapsed when Ghiz strongly questioned the terms of the deal in the wake of his April 21 election victory over the Tories. Ghiz said that although Lee had pledged to give Litton what amounted to a $9million grant, the plant would initially create only some 200 jobs for Islanders. At a June 18 meeting with Litton Canada president Ronald Keating, Ghiz asked for concessions from the company. After that Keating declared the company open to new offers from the other provinces.

Ghiz told a Charlottetown news conference last week that in return for its $9 million his government had

asked Litton for guarantees that it would keep the plant open for 10 to 15 years—or be prepared to forfeit some of the money. It also asked for severance or retraining guarantees for workers should the plant close when the five-year federal contract came to an end. Litton rejected all the conditions, said Ghiz. Added the premier: “We discovered that Litton Industries wanted our money with no strings attached, without any obligation to taxpayers or the workers at the plant.” Asked to explain the decision, Litton spokesman Charles

Pittman said the company was looking for a government which was “prepared to work with us over the hills and valleys.” Said Pittman: “That positive environment, we felt, would not be in P.E.I.”

Nova Scotia Premier John Buchanan would not reveal the details of his province’s successful bid. But provincial government programs offer investors below-market loan rates as an incentive. Litton said the plant will be built at the Halifax County Aerotech Business Park —a site where the company also plans to con-

struct a $9-million plant to service Canadian Forces Aurora patrol aircraft. Litton said it intends to start building the radar plant in the fall and begin operations a year later.

But Nova Scotia peace activist Muriel Duckworth, a leader of the Voice of Women in Halifax, said peace groups would oppose the construction of the plant, and she called for full disclosure of the government’s bid. The Litton announcement came in the same week that one of the defence giant’s subsidiaries pleaded guilty in a Philadelphia court to defrauding the U.S. government of $6.3 million (U.S.) —some $9 million Canadian—by inflating the costs of military equipment. The company has also had frequent troubles at its plant in Toronto—including a bombing in 1982 by a group protesting the company’s role in manufacturing guidance systems for the U.S. cruise missile. Charlottetown history professor David Weale, a member of a group that opposed Litton’s presence, deplored the “desperation” with which the Maritime provinces sought to subsidize the company, whose U.S. parent, Litton Industries of Beverly Hills, Calif., had worldwide profits of about $400 million in 1985. Said Wheale: “May God help Prince Edward Islanders and all Atlantic Canadians if they have to depend on Litton for sustenance.”

In defence of Litton’s selection process, Pittman said the company “did not ask the provinces for any money. They came to us. The provinces are competing just as we go out and compete for business.” Federal Environment Minister and Prince Edward Island MP Thomas McMillan criticized the provincial government for throwing away badly needed jobs and sending “a bad signal” to other companies that might want to locate on the island. Still, McMillan earlier conceded: “This auctioneering is not good for the region. The system is badly flawed.”

With high unemployment throughout the region, Maritime governments cannot afford to stay out of the contest to attract investment and jobs. But after the Litton affair, politicians in all three provinces agreed that one outcome may be new controls on incentive contests. Said Ghiz: “It’s unconscionable to create a bidding war between have-not provinces.” In response to the uproar, McMillan pledged to explore federal guidelines to prevent a fresh outbreak of competitive cheque-writing the next time Ottawa directs a project to the region.

CHRIS WOOD

DEBORAH JONES

BARBARA MACANDREW