The Ploughshares Monitor December 2000 Volume 21 Issue 4
For the third year in succession, General Motors of Canada’s Diesel Division in London, Ontario emerged as Canada’s largest military contractor in 1999, based on military sales data compiled by Project Ploughshares. The industrial giant gained top spot through shipments of light armoured vehicles (LAVs) to the Canadian and Australian armies and to the Saudi Arabian National Guard. It reinforced its position in 1999 by purchasing MOWAG in Switzerland, the company which designed the “Piranha” LAV built under licence by GM Canada, and which also manufactures the vehicle for the military market. GM Canada’s military sales totaled an estimated $763-million in 1999, almost twice those of the second-ranked CAE Inc.
In the face of worldwide restructuring and consolidation of the arms industry, GM Canada is positioning itself to gain a significant part of the very competitive, multi-billion-dollar light armoured vehicle market. The acquisition of its former competitor MOWAG is part of the strategy. Similarly, CAE Inc of Toronto and Montreal recently underwent a corporate make-over intended, among other things, to enhance its self-described role as the global “premier designer and manufacturer of military flight and land-based simulation and training systems.” One-third of CAE’s 1999 income of $1.2-billion was derived from sales of flight simulators and training systems for military aircraft and of marine control systems for naval warships, including nuclear submarines.
Touting itself as “Canada’s number one defence contractor,” third-ranked Computing Devices Canada is most dependent on military markets and most likely to remain so. With manufacturing sites in Nepean and Calgary, the company derives an estimated 85 per cent of its income from military sales. (By comparison, GM Canada’s Diesel Division, which also produces locomotives, is less than 50 per cent dependent on military sales.) Computing Devices Canada is “the largest manufacturer of tank computers” [Jane’s Defence Weekly, 15 December 1999, p.32] according to one report, as well as prime contractor for the Canadian army’s $1.7-billion Tactical Command, Control and Communications System (TCCCS) project awarded in 1991. Now part of the giant General Dynamics conglomerate, Computing Devices Canada is promoting international sales of systems that “digitize the battlefield” using technologies developed for the TCCCS.
In a contrasting move, Montreal’s Bombardier Inc, the fourth largest military contractor, withdrew from one international arms market in late 1999 by selling its 50 per cent share in Shorts Missile Systems, a subsidiary manufacturing “Starstreak” high velocity and other missiles. Bombardier’s estimated military sales (the company ceased reporting defence sales in 1995) declined from 1998, with most of its 1999 military income derived from CF-18 fighter aircraft support and aviation training contracts with the Department of National Defence. This development may soon be reversed, however, as Bombardier pursues the global flight training market. Bombardier is the lead contractor for the NATO Flying Training in Canada program, an international pilot training program using Canadian ground facilities and air space, and it will soon draw hefty income from recently signed contracts with the air forces of Canada, Denmark, Singapore, UK, and Italy.
Fifth-ranked, Montreal-based engineering giant SNC-Lavalin Group, meanwhile, derives most military sales from operations of its SNC Industrial Technologies subsidiary which produces ammunition for Canadian army weapons, from rifles to tanks and howitzers. The munitions company is striving to expand exports, with some success in mostly Pentagon sales, but the Canadian government remains by far its largest customer.
Assessing military sales
Elite Canadian military contractors typically operate in global markets where a mix of military and commercial customers complicates assessment of military sales. In the case of Magellan Aerospace, whose Canadian subsidiaries Bristol Aerospace (Winnipeg), Chicopee Manufacturing (Kitchener), Fleet Aerospace (Fort Erie), and Orenda Aerospace (Mississauga) provide components and repair and overhaul services for military and civilian aircraft, the company reported a “defence sales figure” for 1999. Likewise, BAE Systems Canada B formerly Canadian Marconi Company B of Montreal, which builds a variety of military and commercial communications and navigation systems for worldwide markets, reported 1999 military revenues as 46 per cent of total sales (down from an 80 per cent dependency in the early 1990s). These two companies and CAE Inc provided the only military sales totals of the top ten Canadian military manufacturers in 1999, and the company figures are presented in Table 1 as reported.
In other cases, the line between military and commercial sales is less clear. Bell Helicopter Textron Canada of Mirabel, Quebec for example, a manufacturer of helicopters largely for commercial markets, regularly delivers helicopters to military end-users. Reported 1999 customers included the armed forces of Bulgaria, Venezuela, and Taiwan. Bell’s 1999 sales also included substantial income from the Canadian air force for the multi-year Griffon helicopter program (which is based on the commercial Bell 412) and related repairs. The Canadian subsidiary does not report a breakdown of its sales figures, however, and the reported contracts were used to estimate Bell Helicopter’s military sales total for 1999.
Similarly, Montreal-based Pratt & Whitney Canada builds turbine and turboprop engines for commercial aircraft, many of which are destined for military use. During 1999, Pratt & Whitney delivered turboprop engines to West Virginia for assembly and use in the Beech aircraft of the Pentagon’s Joint Primary Aircraft Training System (JPATS). The estimated annual value of this multi-year contract, combined with exports to the US military arranged through the Canadian Commercial Corporation, suggest a minimum value of $60-million for Pratt & Whitney Canada military sales during 1999. Additional contracts with aircraft manufacturers in Brazil, South Korea, and Poland, among others, resulted in shipments of engines for an unspecified number of military end users, thus the sales value of these shipments could not be assessed.1
The 1999 ranking of top Canadian military suppliers is drawn from contract information supplied by the Canadian government and the Canadian Commercial Corporation (CCC),2 and from data (including subcontract information) in company publications and press reports, all of which is compiled in Project Ploughshares’ Canadian Military Industry Database and accompanying files. Because neither the government, the companies, nor the media report the full extent of corporate dependency on military production, the rankings are based on reported company figures when available or best estimates when not. In both cases, these may be conservative.
1 Canadian companies rarely report military sales in financial statements, and foreign parent corporations may not delineate any sales of Canadian subsidiaries. Even if these figures were made available however, accurate derivation of military sales for many Canadian companies would be hampered by current government export control policy. For companies such as Bell Helicopter Canada and Pratt & Whitney Canada, exports of commercially-certified equipment to military customers typically do not require export permits or reports. As a result, tens of millions of dollars in military sales B the nature of the problem precludes an accurate estimation B are omitted from government arms trade figures every year because export controls are based on technical specifications, not end-use. (In Table 1 these exports B where reported B are included in the military sales figures.)
2 The Canadian Commercial Corporation is an Ottawa-based crown corporation which assists Canadian companies with export sales to foreign governments and international organizations. Typically, over 60 per cent of CCC-brokered sales are purchased by military agencies.
|Company head office/main plant||A||B||C||D||E||F||G||H|
|1||General Motors of Canada Ltd, Diesel Division, London||1||1||X||X||X||4||763|
|2||CAE Inc, Montreal||X||X||X||2||385*|
|3||Computing Devices Canada Ltd, Nepean||7||15||X||X||X||2||315|
|4||Bombardier Inc, Montreal||4||12||X||X||1||2501|
|5||SNC-Lavalin Group, Montreal||5||4||X||5||182|
|6||Magellan Aerospace Corp, Mississauga||13||3||X||X||1||180*|
|7||Bell Helicopter Textron Canada Ltd, Mirabel||6||X||X||X||1||136|
|8||BAE Systems Canada Inc, Montreal||5||X||X||X||X||2||126*|
|9||Spar Aerospace Ltd, Mississauga||6||X||X||1||85|
|10||Pratt & Whitney Canada Inc, Montreal||10||X||X||X||1||>60|
A Ranking within largest recipients of Canadian Department of National Defence contracts for the fiscal year 1999-2000.
B Ranking within largest recipients of military export contracts for fiscal year 1999-2000 as brokered by the Canadian Commercial Corporation (CCC).
C Estimated or reported military sales greater than 20 per cent of total company sales.
D Estimated or reported export sales greater than 50 per cent of total company sales.
E Reported military sales or deliveries from Canada to one or more Third World countries during 1999.
F Foreign-owned or controlled.
G Commodity-classification of major military products (1-Aerospace; 2-Electronics; 3-Marine; 4-Transportation; 5-Armaments).
H Estimated total value of military sales in millions of Canadian dollars for 1999 or closest fiscal year, compiled from Canadian Military Industry Database data and files. For Canadian-owned companies this includes military sales of foreign subsidiaries (*indicates the company reported a value for its military sales).
1 The Bombardier figure does not include the sale of defence subsidiaries during the year for $111.1-million.