14 avril 2020 | Local, Terrestre
Canada's $14-billion deal to sell armoured vehicles to Saudi Arabia is going ahead and will keep a London defence giant rolling, but some say questions remain about future business between General Dynamics Land Systems Canada (GDLS) and the desert kingdom.
Canada's $14-billion deal to sell armoured vehicles to Saudi Arabia is going ahead and will keep a London defence giant rolling, but some say questions remain about future business between General Dynamics Land Systems Canada (GDLS) and the desert kingdom.
The federal government said it's lifting a moratorium on new permits for military exports to Saudi Arabia, a critical step for London since GDLS, with about 2,000 employees in London, has a nearly 40-year relationship supplying armoured vehicles to the Saudis.
But Ottawa also said it's appointing an advisory panel of experts to review Canada's arms export process and to push for an international inspection for arms sales. That could threaten future business, warned analyst David Perry, vice-president of the Canadian Global Affairs Institute.
The Canadian-Saudi deal, with GDLS at the centre, negotiated by the former Conservative government and inherited by the Liberal successor, had come under sharp attack, with some critics calling for it to be scrapped, amid concerns about Saudi Arabia's poor human rights record.
“If I was a worker I would be tremendously relieved and happy they made the decision,” Perry said of the federal government. He stressed reviews of the contract determined there was no indication GDLS vehicles were involved in human rights violations.
“This went back and forth for a few years, and the government reviewed and threatened to cancel this contract outright. I think there has been irreparable harm. If you're another country open to exports, they may be thinking twice about doing business with Canada,” said Perry.
“They (Saudi Arabians) have options when it comes to sourcing. I think they may be thinking in the future about where they source (their military equipment).”
Lifting the cloud from the Saudi deal comes at a critical time on the London business landscape, with the fallout of the coronavirus pandemic and the lockdowns that have brought new uncertainty for many employers.
In clearing the air on the deal, the federal government also revealed it would have been on the hook for up to $14 billion if it had cancelled the contract to sell light armoured vehicles to the Saudis, a deal that dates to 2014.
The review panel, however, poses a level of uncertainty in future business dealings, Perry noted.
“A new export panel will offer another layer of review. I don't know how to interpret that. It depends on who is appointed to that panel,” he said.
In 2018, after news broke that the Saudi government had ordered the murder of dissident journalist Jamal Khashoggi, the Trudeau Liberals announced a review of all Canada's existing arms sales to Saudi Arabia. Ottawa also slapped a moratorium on new export permits for shipments of military goods to Riyadh.
Existing military contracts, such as the GDLS deal, were not affected by the moratorium. But in 2018 Prime Minister Justin Trudeau publicly talked about trying to find a way to end shipments of armoured vehicles to Saudi Arabia.
Thursday, Foreign Affairs Minister François-Philippe Champagne and Finance Minister Bill Morneau said the suspension of approval of new Saudi permits is now lifted. They cited a government review last September that found no credible evidence linking Canadian exports of military or other controlled goods to Saudi human rights violations.
But the moratorium on trade with the Saudis has already affected the Canadian defence sector to the tune of about $2 billion, according to a memo sent to the foreign affairs minister from two top foreign affairs and international trade officials.
“(Twenty) companies that have a history of exporting to KSA (Kingdom of Saudi Arabia) suggest that approximately $2 billion in trade has been affected since August 2018. A number of Canadian exporters to KSA have suspended their business development operations . . . The open-ended nature of Canada's moratorium on new export permits, and the lack of identified conditions that would allow a resumption of permit issuance, present a high commercial risk for Canadian companies,” the memo says.
Perry, who shared the memo with The Free Press, said he has heard similar concerns from the Canadian defence sector.
“I have spoken to businesses that have lost business opportunities” from the moratorium on arms trade with Saudis.
“This is welcome news,” he added of the lifting of restrictions, “but the government has introduced uncertainty into Canadian defence industry and exports.”
Political scientist Erika Simpson at Western University also questioned the role of the panel, saying there are few details about its authority and adding that only Global Affairs has the authority to impact trade agreements.
She also questioned why the contract appears to have been reduced by $1 billion in value. When the Conservatives announced it in 2014, it was worth $15 billion. Ottawa now says it is a $14-billion contract.
“I think $1 billion is a lot of money. What happened to $1 billion?” asked Simpson, an associate professor of international politics. “This is good news, but I want to know where the $1 billion went.”
GDLS Canada declined comment Friday.
Perry also questioned the timing of the announcement. With more than three million Canadians expected to be left unemployed due to the COVID-19 crisis, Ottawa could not jeopardize thousands of jobs across Canada, he said.
“As important as this is in Southwestern Ontario, it is not just Southwestern Ontario,” he said.
London Liberal MP Peter Fragiskatos downplayed down the idea the review panel could dampen further GDLS business.
“I don't think so. This government is behind this contract, this workforce, 100 per cent. On the contrary, I would say a review is a good thing. It will bring greater transparency to the arms program. I welcome it,” the London North Centre MP said.
He also stressed the Saudi deal is only about half complete, meaning about six more years of work may remain before there needs to be a discussion about future contracts.
“I am pleased to say the least. It was in the making for some time, but it is a very good result not just for the company and its workers, but for the city,” said Fragiskatos.
It's too soon to draw conclusions about the future of work by GDLS for the Saudis, since that depends largely on who is at the table negotiating future deals, said Bill Pettipas, former president of GM Defence, which General Dynamics bought and renamed.
Pettipas bargained several arms contracts with foreign powers, including a multi-billion dollar deal with the U.S. army to supply it with Stryker armoured vehicles.
“It depends on individuals, on relationships. It will get resolved. It will normalize eventually. That relationship has been going on since the early 1980s,” said Pettipas. “Time takes care of things.”
Officials with Unifor Local 27, the union for many GDLS workers in London, couldn't be reached for comment Friday. Unifor's national office declined comment.
17 décembre 2023 | Local, Sécurité
Today, the Honourable Bill Blair, Minister of National Defence, accompanied by General Wayne Eyre, Chief of the Defence Staff, are visiting Latvia – home to Canada’s largest foreign military deployment
7 décembre 2018 | Local, Aérospatial
Les conclusions du rapport du vérificateur général soulignant une pénurie de pilotes militaires au Canada résonnent particulièrement au Manitoba, où la formation initiale des pilotes des Forces armées canadiennes est donnée et supervisée. Un texte de Pierre Verrière Il est difficile de parler de l'Aviation royale canadienne sans évoquer le Manitoba. Pendant la Seconde Guerre mondiale, les pilotes de tout le Commonwealth venaient y suivre leur formation avant d'être déployés en Europe. Depuis 1992, la troisième École de pilotage des Forces canadiennes située à Portage-la-Prairie, à une heure de Winnipeg, assure la formation de base des pilotes canadiens. Enfin, c'est à Winnipeg qu'est situé le quartier général de la 2e Division aérienne du Canada, responsable de l'instruction des pilotes. Or, ce sont justement ces pilotes qui font gravement défaut, selon le vérificateur général du Canada. Ce dernier met notamment l'accent sur les pilotes de chasse. Selon le vérificateur, il en manque plus du tiers pour satisfaire aux exigences opérationnelles. Parmi les raisons évoquées, on compte le rythme auquel les pilotes quittent l'aviation, qui est plus rapide que celui auquel elle peut en former de nouveaux. Entre avril 2016 et mars 2018, l'Aviation royale canadienne a ainsi perdu 40 pilotes de chasse qualifiés et en a formé seulement 30 nouveaux. Ce problème n'est cependant pas nouveau ni étranger pour les responsables de la formation des pilotes. Article complet: https://ici.radio-canada.ca/nouvelle/1139188/penurie-pilotes-forces-armees-canadiennes-manitoba
25 septembre 2019 | Local, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
By Byron Callan This year has shaped up as a record one in terms of the volume of major defense transactions so far announced. Considering deals of $100 million or more in announced value where defense is the primary factor, the 2019 total exceeds $61 billion. Of course, the largest single example is the Raytheon-United Technologies Corp. (UTC) merger. There are reasons to expect heightened activity in 2019 and 2020. Some reasons are known and others can be assessed, but one that does not appear to be affecting market expectations is the Raytheon-UTC deal. Since it was announced on June 9, the companies' share prices have declined from the June 7, close: Raytheon's by 4% and UTC's by 5.7%. The S&P 500 has been flat. However, share prices of peers have risen—General Dynamics is up 5.4%, L3Harris Technologies has increased 6.2%, Lockheed Martin and Leidos have climbed 7% and Northrop Grumman is up 14.4%. These price moves may be attributable to safe-haven seeking by investors who were spooked by global economic concerns and trade wars, but the budget deal reached by Congress also was a factor, as were July earnings reports. The price reactions, however, do not suggest that investors are particularly concerned about the impact of the competitive strength of the Raytheon-UTC union and its ability to take market share away from peers. Nor do they suggest that the deal will trigger a rush by defense-focused companies to merge with commercial ones. Were the latter to be the case, the price reactions may have been similar to Raytheon and United Technologies'. There have been other known developments that raise the question of what is next. Kaman Corp. sold its industrial distribution business for $700 million and will seek to redeploy that capital into engineering products businesses, some of which could involve defense. L3Harris signaled in June that it is undertaking a portfolio cleanup after the completion of the merger, and so there should be divestitures from that company. Textron announced in August that it was reviewing “strategic alternatives” for Kautex, which makes blow-molded fuel systems and other parts primarily for the automotive industry. Presuming that it leads to a sale of that business, Textron will have cash, some of which might be spent on defense. There are general factors as well that could spawn sector merger and acquisition activity in 2019-20. One of the biggest is the potential uncertainty surrounding the outcome of the 2020 U.S. elections. Buyers and sellers have to weigh a number of variables. If the current administration is reelected and control of Congress remains split at least through 2022, then it may be safe to assume that the status quo will continue. One variable within the status quo is how contractor portfolios could be affected by the ongoing efforts of the Pentagon to better align its programs with the National Defense Strategy. Like the Army's “night court” process, this may yet spawn a reassessment of specific programs and their future growth outlook. But if the status quo does not prevail, defense contractors could face a wall of uncertainties in 2020 and may choose to act before rather than after these uncertainties are clarified. First, they will have to assess which Democratic candidate could win the primary cycle and then the nomination. If it is a centrist candidate, the Defense Department spending outlook might not change all that much, although exports to some countries might be curtailed and there could be changes in some Pentagon budget priorities, particularly for nuclear forces modernization. A more progressive-leaning candidate might raise the risk of a more subdued defense budget outlook, particularly if fiscal resources are instead directed toward health care, infrastructure, student debt and other nondefense priorities. Second, there will have to be an assessment of whether a Democratic win of the White House could also flip control of the Senate to the Democrats. If there is a Democrat in the White House but a Republican majority in the Senate, the Senate could still check budgets or policies that may be detrimental to defense. It might also block efforts to roll back changes to tax laws made in 2017. A third variable to be assessed is the attitude of a new administration toward defense mergers and acquisitions, contractor financing and risk. A more progressive administration could look very differently at the structure and financial status of contractors. All these variables will lead to different analyses of current and future value in defense. Is it a good time to hunker down and wait to see what happens or to act in the time that remains in 2019-20 before investors and creditors draw their own conclusions? These uncertainties alone suggest that some will act in anticipation of a change rather than just wait and see. https://aviationweek.com/defense/opinion-after-major-mergers-what-s-next-defense-market