Pentagon Orders with General Dynamics in Canada Exceed $1-Billion

Kenneth Epps Americas, Conventional Weapons

Author
Kenneth Epps

The Ploughshares Monitor Summer 2010 Volume 31 Issue 2

Following recent major Canadian military industry acquisitions, US corporation General Dynamics has emerged as the dominant recipient of Pentagon contracts brokered by the Canadian Commercial Corporation (CCC).

The crown-owned Canadian Commercial Corporation has reported that three subsidiaries of US-based General Dynamics Corporation together won more than $1-billion in Pentagon contracts during the 2008-09 fiscal year. General Dynamics Canada in Ottawa, the country’s largest military electronics manufacturer, was awarded $13.1-million in Pentagon contracts in 2008-09. General Dynamics OTS-Canada, the sole Canadian manufacturer of military explosives and ammunition, received US orders totaling $165.2-million. And General Dynamics Land Systems Canada, which produces the Stryker combat vehicle used by US forces in Iraq and Afghanistan, received Pentagon contracts worth more than $944-million. The combined contract value of $1.12-billion for the three subsidiaries made General Dynamics by far the largest recipient of Pentagon orders placed with Canadian-based companies during the 2008-09 fiscal year. Indeed, it is the first time that the annual value of US military contracts brokered by the CCC has exceeded $1-billion for a single parent corporation. The total is more than three times the $360-million reported by the Canadian government as the total value of military goods exported by Canadian companies to all non-US countries during 2006, the latest year for which a figure is available.

The Defence Production Sharing Agreement between Canada and the US mandates the CCC to operate as the prime contractor for all US military orders worth more than US $100,000 with Canadian companies. As its website notes, the CCC offers “the US DoD [Department of Defense] a guarantee of contract performance according to the terms and conditions of the contract, backed by the Government of Canada. This ensures that the specifications, terms and conditions of the contract will be met. CCC signs a separate domestic contract with the Canadian supplier.”1 This procedure is not required for military subcontracts, however.

Every year Canadian companies ship a significant but unreported volume of components, parts, and services to US military manufacturers, including parent companies. (When the Canadian government reported the value of military goods subcontracts with US companies up to the early 1990s, the total was roughly equal to the value of prime contracts with the Pentagon, i.e., to the value of contracts arranged through the CCC.) This means that the real value of all military equipment shipped by the three General Dynamics subsidiaries – the total of subcontracts with US military contractors and Pentagon prime contracts arranged through CCC – likely far exceeds the $1.12-billion reported by CCC.

The rise of US-based General Dynamics to become the preeminent actor in Canadian military exports stems from recent corporate acquisitions. In the early 2000s the key Canadian subsidiary producing military goods was General Dynamics Canada, created by the parent corporation purchase of Computing Devices Canada, based in Ottawa and Calgary. In 2003 General Dynamics acquired the London, Ontario manufacturing facilities of GM (General Motors) Defence to form General Dynamics Land Systems Canada. Most recently, General Dynamics OTS-Canada arose from the acquisition in 2006 of SNC Technologies Inc (SNC TEC) of Le Gardeur, Quebec.

The results of corporate acquisitions can be seen in accompanying figures. Figure 1 shows the dramatic increase in the value of Pentagon contracts with General Dynamics Canadian subsidiaries, from a total of less than $30-million in fiscal year 2000-01 to $1.12-billion in 2008-09. The concomitant rise in General Dynamics’ portion of the total value of Pentagon orders with Canadian companies is shown by Figure 2. The figure tracks the percentage of US military prime contracts placed with the Canadian Commercial Corporation that were awarded to General Dynamics companies. From just over three percent during the 2001-02 fiscal year the portion has risen to 68.28 percent in 2008-09, or more than two-thirds of all Pentagon contracts awarded through the Canadian Commercial Corporation.

 

Note

  1. See Canadian Commercial Corporation 
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