The Ploughshares Monitor Winter 2005 Volume 26 Issue 4
In 2004 Canada’s 10 largest military contractors sold over $2.9-billion in equipment and services to Canadian and foreign armed forces. According to public data compiled by Project Ploughshares, 2004 military sales for most of the top companies were higher than those for 2003.
Despite overcapacity in the global arms market, the largest Canadian contractors were able to increase sales to military customers in 2004, boosting the estimated total for the 10 companies from just under $2.5-billion in 2003 to more than $2.9-billion. Indeed, the military sales of the majority of the top suppliers rose in 2004 – in some cases substantially. For General Dynamics Land Systems in London, Ontario sales for 2004 increased by a third and for Bell Helicopter Textron Canada of Mirabel, Quebec, they more than doubled over the previous year. Two companies – Magellan Aerospace of Mississauga and Northstar Aerospace of Toronto – saw slightly reduced revenues. Only Bombardier Inc of Montreal experienced a significant drop in revenue from military customers in 2004 and as a result it was not ranked in the top five Canadian military contractors for the first time in at least a decade.
Table 1 provides a summary of Project Ploughshares’ latest ranking of Canada’s largest armed force suppliers. Column A ranks the largest 10 companies in order for 2004 and Column B lists the same companies’ ranking in 2003. Although their relative ranking changed somewhat between the two years, nine companies were on both lists, underlining the stability within this highest echelon of the Canadian military industry. The new member to the top ranking is L-3 Communications Canada. Its 2004 military sales stemmed from two recently acquired subsidiaries: Spar Aerospace based in Edmonton and MAS (formerly Bombardier’s Military Aviation Services) based at Mirabel near Montreal. The sole company displaced in 2004 from earlier top 10 rankings is Héroux-Devtek of Longueuil, Quebec.
Columns C and D of the table provide the company rankings among the top 20 contractors according to total equipment or service contracts awarded by, respectively, the Canadian Department of National Defence (DND) and by the Canadian Commercial Corporation (CCC) on behalf of foreign (mostly US) military departments. The columns demonstrate that some companies derived their position in the table largely from Canadian and foreign military prime contracts. For example, General Dynamics Land Systems was the largest recipient of military export contracts in 2004 and SNC-Lavalin was the second largest contractor with both DND and CCC. Other companies were not ranked among the top 20 contractors for either contracting agency, underlining the importance to many Canadian suppliers of earlier multi-year prime contracts and especially the importance of subcontracts. For top-ranked CAE, for example, most military sales came in the form of subcontracts for the supply of training simulators for military aircraft built by major aerospace companies.
The dependency on military sales varied among the largest contractors as it does within the Canadian industry generally, and column E identifies those companies where military sales made up more than one-fifth of total sales. Most Canadian companies undertaking military work also sell to civilian markets and for many (for example, four of the largest 10 companies), military contracting is a relatively small segment of overall income. Conversely, only a small minority produces almost exclusively for military customers. These include General Dynamics Land Systems Canada, which manufactures several variants of armoured vehicles.
Although the largest military customers remain the Pentagon and the Department of National Defence, Canadian companies also ship military equipment worldwide, including to customers in Latin America, the Middle East, Africa, and Asia. Column F identifies the companies that reported sales in 2004 to states in the Third World, including Brazil, Saudi Arabia, Jordan, Pakistan, India, South Korea, and Malaysia.
Finally, Column G identifies the foreign ownership of the largest Canadian contractors in 2004. Half of the top 10 companies were Canadian corporations. The other half were subsidiaries of US corporations and, in particular, of US corporations that also are major Pentagon contractors. Given longstanding Canadian government policy that encourages integration of the North American military industry – supported by the permit-free flow of military goods between Canada and the US – US ownership of many Canadian-based military contractors should not come as a surprise.