Manitoba’s gain is Quebec’s loss

Thursday, August 30, 2007

Manitoba’s gain is Quebec’s loss

by Martin Cash

The industrial regional benefits associated with major capital purchases by the Department of National Defence are not supposed to become political footballs, but they almost always do.

Ottawa has taken delivery of the first of four Boeing C-17s that cost $3.4 billion. Boeing has agreed to spend about $1.9 billion (the cost of the planes minus the cost of the engines and 20 years worth of maintenance repair and overhaul) in direct or indirect work in Canada. That could mean anything from paper-clips to airplane production work.

A newspaper report out of Montreal this week quotes unnamed Quebec aerospace industry officials expressing concern that Quebec will not get its fair share of the work. Whereas the province may account for about 40 per cent of the aerospace activity in the country, reports from earlier in the spring indicated that the IRB (industrial regional benefit) allotment for Quebec will be in the 30 per cent range. Western Canada is supposed to get about 20 per cent.

That same report suggested that Boeing’s Winnipeg plant is getting some of that work. While that has been a widely held assumption for some time, Boeing officials in Winnipeg would not confirm that had happened.

Earlier in the year, senior Boeing Winnipeg officials told the Free Press the company had gone out and bid on work and won it in a competitive process and the company intended to apply to have that considered as an IRB.

At least part of Quebec’s consternation probably has to do with the fact that Bombardier, a direct competitor to Boeing, makes up a major component of that province’s aerospace industry.

Boeing must clear the IRB contracts with Industry Canada and while there is some room to manoeuvre, it is not hard to imagine that Boeing would naturally be attracted to suppliers it is already familiar with and just as naturally inclined to steer clear of competitors when negotiating IRBs.

Boeing’s Winnipeg plant is about as busy as it’s ever been and seems likely to continue in that state since it is working on composite parts for Boeing’s new 787 passenger jet whose order book already totals more than 500 planes.

Even though the plant is busy, irrespective of the IRBs related to the C-17 purchase, it seems likely that some of the $1.9 billion Boeing will spend in Canada will be at its Winnipeg plant.

Ideally, the IRBs are to be used for work that would enhance the technological capabilities of Canadian industry.

Earlier this year Eddy Morin, vice-president of business development in Canada for Boeing’s Integrated Defense Systems and a former general in the Canadian air force, said Boeing understands that Canada wants high-quality benefits with technological value.

Another possible recipient of Boeing contracts in Manitoba is the Composites Innovation Centre (CIC), although there is no confirmation that this will be the case.

Formed in 2003, the public-private partnership research centre has several projects underway in aerospace but also in unrelated areas such as the use of bio-fibres in composites. Since Boeing’s Winnipeg plant is the largest composites manufacturing operation in the country and is full to the brim with work on the 787, an innovative plane that will feature more composite parts than any commercial plane built in the past, Winnipeg is already on Boeing’s radar screen as far as composite parts manufacturing is concerned.

The fact that Boeing has supported the Composites Innovation Centre since it was formed in 2003 (a Boeing official co-chaired a national composites conference in Winnipeg earlier this month) senior officials in the province would welcome a deepening of the ties between the CIC and Boeing.

Some industry officials (from Quebec) might have you believe that Quebec is all that matters when it comes to Canada’s aerospace industry.

Just the same, Manitoba’s cluster is more than just Boeing and these IRBs might be a good opportunity for secondary suppliers to step up to the next level.

© 2007 Winnipeg Free Press. All rights reserved.

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