BUSINESS/ECONOMY

A golden view in a periscope

TOM FENNELL July 25 1988
BUSINESS/ECONOMY

A golden view in a periscope

TOM FENNELL July 25 1988

A golden view in a periscope

BUSINESS

ECONOMY

The Canadian defence industry is waiting at the starting blocks for Defence Minister Perrin Beatty to signal the beginning of the race. Beatty is expected to announce by the end of this year whether British or French technology will be used to build Canada’s $8-billion fleet of 10 to 12 nuclear-powered submarines. When he does, Canadian business will sprint to participate in the richest defence contract in Canadian history. To help ensure that the program goes ahead, some of Canada’s leading businessmen have formed a powerful new lobby group. Last week in Ottawa, the Committee for a Sovereign and Effective Naval Defence —including publishing magnate Conrad Black and retail baron John Craig Eaton—announced that it has launched a national campaign in support of the submarine project.

A decision on which submarine design—the French Amethyste class or the British Trafalgar class—the department of national defence will buy has been pending for more than a year and has now turned into an intense political battle that could ultimately kill the program. Not only both opposition parties but some leading cabinet ministers say that they oppose the project because they believe the cost of the submarines could escalate and the deployment of the boats could tilt Canada’s defence focus away from Europe and toward North America. But Canadian businessmen, now led by the new committee, are deeply interested in the submarine program because it goes far beyond a simple supply contract that would create thousands of jobs across Canada. In addition to Canadian parts and labor, long-term support and maintenance for the new fleet will rest with domestic firms.

In fact, Beatty says that he wants to cut the proposed nuclear-powered armada’s dependence on either Britain or France to a minimum. Most, if not all, of the submarines will be built in Canada, and most of the material and equipment used in their construction will be supplied by Canadian firms. But more than construction and manufacturing jobs will be gained, some businessmen say. The expertise gained from building the new fleet in Canada could be transferred to other high-technology companies and projects. The submarine program will also inject badly needed revenues into a broad cross section of Canadian industry—including such be-

leaguered sectors as shipbuilding and nuclear power.

The British Trafalgar-class submarine is now being built by Vickers Shipbuilding & Engineering Ltd. at Barrowin-Furness in northwest England. Vickers is represented in Canada by Ottawabased VSEL Defence Systems Canada Inc. The British craft is 280 feet long and has a crew of 97. The French Amethyste is built at the Cherbourg naval dockyard for the state-owned Direction des Construction Navales, which is represented in Canada by SNA Canada Inc. of Ottawa. Smaller than the Trafalgar, the Amethyste is 257 feet long and has a crew of 66. The defence depart-

rnent will have to purchase the technical blueprints of one of the submarine designs and assign a Canadian general contractor—likely a consortium of shipyards—to construct the fleet.

VSEL and SNA are trying to improve their chances of winning the contract by promoting their designs among Canadian companies likely to participate in the mammoth project. But each is taking a different approach. The British manufacturer has aggressively wooed domestic firms. In February, representatives of VSEL, and about 30 British companies already involved in the Trafalgar program, opened a booth at the Canadian Maritime Industries Association’s annu-

al meeting and trade show in Montreal. And in April, VSEL representatives went on a 10-province tour, speaking to 400 executives from 373 Canadian companies. Said VSEL engineering sales and marketing manager Robin Wood: “We wanted to give them a feel for what was involved. The response was extremely good.”

As a result, talks are under way between, on the one hand, several British firms that make up the VSEL consortium and, on the other, a large number of Canadian companies. One such British company is Dynamic Controls of Oldham, England. Dynamic manufactures valves that are critical to the Trafalgarclass submarine, and officials from the firm are now talking to three Canadian companies that they say could manufacture their products in Canada.

But participation in the submarine program holds other benefits for Canadian firms. When Canadian companies have gained experience building the nuclear submarines, they will be better equipped to bid for other lucrative contracts— in particular, profitable U.S. military contracts. James Clarke, president of the Canadian Maritime Industries Association, said that Canadian nuclear industries and the marine manufacturing sector will benefit from the British or French technology transfers to Canada. The transfers would give Canadians the ability to manufacture new materials from such products as steel and aluminum and could create whole new industries in Canada.

A case in point is GNB Batteries (Canada) Inc. of Fort Erie, Ont. It wants to supply the huge electric battery that each submarine uses. Company president Donald Shaw says that each battery would cost about $1 million, but he adds that he is already looking beyond the domestic contract. Said Shaw: “There are a considerable number of other countries that have submarines, and it would give us an opportunity to export.”

Meanwhile, France’s SNA is waiting until Ottawa selects a main contractor before it begins negotiating with Canadian companies. Keith Davies, vice-president of SNA Canada Inc., said that SNA ultimately wants to become closely involved in choosing the subcontractors who will build the submarine in Canada. And he added that his firm wants to

take a share or equity position in the prime contractor to ensure a high level of participation and control by SNA.

Both SNA and VSEL spokesmen say that the level of Canadian content in the submarines will ultimately be far higher than the minimum 65 per cent that Beatty has said that he wants. Said Davies: “I look forward to it very optimistically as a very high Canadian content, very high. Certainly above 72 per cent.” He added, “If you stretch it out over the whole program, you could predict that there is certainly a potential that the Canadian content in the last submarine would virtually be 100 per cent.”

Participation in the project will also be a demanding challenge for Canadian technicians. Such a sophisticated project is similar to building a spacecraft. Said Thomas Maxwell, former submarine project manager for the MIL Group, one of the companies that will likely bid on the project: “The discipline that has to be exercised in the construction of these

submarines is 10 times greater than for an ordinary ship.”

Clarke says that the demand for highquality products permeates all aspects of the submarines’ construction. As a result, those standards will be extended to the manufacturing industry that develops to support the shipyards. As well, said Clarke, the nuclear-powered submarine program will revitalize Canada’s shipbuilding industry, transforming an-

tiquated shipyards into highly advanced facilities. Added Clarke: “There are a bunch of new skills implicit in building these ships that our yards don’t yet have—such as very modern, sophisticated welding procedures. It’s not the sort of thing Canadian shipyards have ever had to cope with before.”

Canadian expertise should also benefit the country that wins the submarine contract. Rear Admiral John Anderson, the defence department’s chief of submarine acquisition, said that either Britain or France will likely buy technology for the submarines from Canada. Said Anderson: “There is often a view that all the technology transfer that is going to take place is to Canada, but I am firmly convinced that there is going to be some transfer from Canada to the country of origin as well.” He added that Canadian industry has unique abilities in combat and sonar systems that the French and British will want to include in their submarines. Said Anderson: “I don’t know that you would see it written in terms of ‘Canada agrees to buy your submarines, but you must buy our sonar,’ but there is no doubt in my mind that the Canadian negotiators, both government and industry, are going to be looking for opportunities for Canadian companies.”

Meanwhile, the effective naval defence committee will argue the case for the submarine project in a cross-Canada publicity campaign. It plans to encourage Canadian organizations, municipalities and individuals to support the program, and committee members will be available to debate those people who oppose the submarine purchase. Noranda Forest Inc. president Adam Zimmerman said that the committee was formed because many naval and business people were “dismayed” by the fact that the submarine project appears to be in jeopardy. Zimmerman added that Canada, with one of the longest coastlines in the world, simply needs a stronger navy. And with $8 billion to be spent increasing the navy’s firepower, many Canadian businessmen are now strongly behind Beatty’s program.

-TOM FENNELL with WILLIAM KNAPP in Toronto

WILLIAM KNAPP