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CANADA’S CANADA’S AEROSPACEAEROSPACEINDUSTRYINDUSTRY
Innovation + Partnerships = Growth
September 1999
Presentation to Partnership Group for Science & Engineering
by Ken Laver, President, Messier-Dowty Inc.
Canada’s Aerospace Industry-a fast growing, global competitor
• 400+ firms comprising a full range design, manufacturing and support capability
• A Canadian jobs and growth leader
• 1998 sales of $15 billion
• 70,000+ direct employees
• Led the world in growth this decade
• Now the 5th largest aerospace industry in the world - poised to move to 4th.
September 1999
Strong, Consistent Growth
Sales have doubled in the last 10 years
Since 1993, growing at triple the rate of Canada’s GDP growth
Impressive growth in world market share
Forecast strong growth into the next decade
100
110
120
130
140
150
160
1993 1994 1995 1996 1997
GDP
Aerospace
Relative Growth - 1993 Base Year = 100
September 1999
Civil Products for Export Markets
• 1998 Exports - $12 billion, 75% of output
• Cumulative Trade surplus 1990 to 1998 - more than $20 billion
• Canada’s most successful advanced technology exporter
• Commercial customers account for more than 80% of sales - leading the world in defence conversion
September 1999
September 1999
Canadian Firms are World Leaders in Selected Niche Markets• Regional Aircraft• Business Aircraft• Commercial Helicopters• Landing Gear Systems• Small and Medium Turbine Engines• Flight Simulators and Visual Systems
Innovation is Vital to Global Competitiveness in Aerospace • A technology driven industry where global
competition is intense• A broad spectrum of R&D in product and
process technologies• 12% of sales a typical R&D intensity• Product life cycles can be 25+ years• Up-front development costs are often a ‘bet
the company’ proposition
September 1999
A “Bet The Company” Business- long payback periods
Participation Requires Risk Sharing PartnersSeptember 1999
A Sustained Record of Investment-investing today for tomorrow
• Aerospace firms are among the top R&D performers in Canada
• $1.4 billion in 1998 - more than $10 billion of technology investments in the last 10 years
• 15% of all industrial R&D in Canada• Annual expenditures average 12% of sales• Sustained R&D is essential to maintaining
technology advantage - product and process
September 1999
Partnerships Play a Vital Role
• Internationally, governments are an important investment partner - sharing the risk
• Launch aid, defence R&D spending, directed procurement, regulatory barriers, etc.
• A high value economic sector, strategic to a nation’s economic growth
• Important spin-off benefits• Growing role of private sector partnerships
September 1999
DIPP - the Foundation of Canada’s Aerospace Industry
• $3.6 billion invested 1959 - 1995
• A 4:1 industry:government investment ratio
• Cumulative sales - $160 billion
• A 25:1 sales to investment ratio
• A 18:1 exports to investment ratio
• An investment partnership that was instrumental in the growth of the industry
September 1999
Technology Partnership Canada -today’s Investment Partnership
• A successful investment partnership that levels the playing field for Canadian firms
• Risk and reward sharing, with repayable contributions - essential to industry growth
• Since 1996, $580 million invested in 39 projects leveraging $2.5 billion in private sector technology investment
September 1999
How TPC Works-leveling the playing field
September 1999
TPC and the WTO-clarifying the rules of the game
• TPC ruled a prohibited export subsidy
• Issue is not support for R&D, but export contingency of that support
• We welcome Minister Manley’s commitment to a WTO compliant TPC that will retain an innovation and R&D focus
• Industry is working with officials to restructure TPC so it fully complies with WTO
September 1999
Changing Industry Dynamics
• Significant consolidation through the ‘90s
• A global industry with a complex network of prime manufacturers and suppliers
• Primes seeking fully integrated solutions and suppliers expected to become partners - sharing in technological and financial risks
• The rewards are preferred, long-term relationships
• Cascading affects down the supply chain
September 1999
Changing OEM Procurement Practices
Past Platforms Current Platforms Future Platforms
OEM OEM OEM
Systems IntegratorMultiple Suppliers List
Preferred Suppliers List
Systems Integrator
Full Value Proposition Suppliers
September 1999
Implications for Canada-competition is intensifying
• Fewer, but bigger, longer-term programs - investment requirements are huge - partnerships essential to success
• Technology capabilities are an essential competitive discriminator - even for SMEs
• Firms must be able to participate in Integrated Product Development Process
• Survival means enhancing management and technical/design expertise
September 1999
A Partnership Model
de Havilland
BMW/RR–Europe
Mitsubishi–Japan
Sundstrand–USA
Shorts–UK
Landing Gear – Messier Dowty
Other International PartnersParker Bertea Aerospace – USALucas – UKHoneywell – USALiebherr – FranceHella KG – GermanyAlliedSignal – USASextant Avionique – France
Bombardier’s Global ExpressBombardier’s Global ExpressProject Management – CanadairFinal Assembly – de Havilland
Canadair
Courtesy of Bombardier Aerospace, 1997
September 1999
Collaborative R&D a Critical Tool
• Makes more efficient use of R&D resources - avoids duplication of effort
• Reduces cost and risk of non-proprietary R&D• Broadens corporate knowledge base• Accesses expertise in national labs and universities• Improves communication and ties between industry
and research community, and between different industries
• Capitalizes on external research• Strengthens capabilities of suppliers• Strengthens position with customers
September 1999
Technology Road Mapping
• Facilitate and stimulate collaborative R&D - a framework for action
• A consensus on shared marketplace driven, enabling technology requirements
• A joint 1996 government/industry initiative
• 50 Technologies in 8 streams identified and described
September 1999
AIAC/NRC Joint Office
• A unique public private partnership
• Focal point for structuring multi-disciplinary research consortia - an SME emphasis
• Assist firms overcome the barriers to collaboration - develop business cases, provide generic tools, identify funding sources, give advice and guidance
Office of Collaborative Technology Development
September 1999
Universities an Important Partner
• Canadian universities are important R&D resource that we have only begun to tap
• Aerospace firms are increasingly turning to universities for technology solutions - industry R&D spending at universities is on rising
• University researchers are seen as strategic partners in technology development initiatives
• Regrettably, as yet we have been unsuccessful in creating an aerospace NCE
September 1999
Partnerships - priority for AIAC’s Technology Council
• Focal point for facilitating product and process innovation in the Canadian aerospace industry
• Building and sustaining world class Canadian capabilities – is the key objective of the Council
• Building partnerships, between firms with governments, universities, and other research establishments is our priority
September 1999
Aerospace Industries Association of Canada