Transcript CANADA’S AEROSPACE INDUSTRY Innovation + Partnerships = Growth

CANADA’S
AEROSPACE
INDUSTRY
Innovation + Partnerships = Growth
Presentation to Partnership Group for Science & Engineering
by
Ken Laver, President, Messier-Dowty Inc.
September 1999
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
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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
Relative Growth - 1993 Base Year = 100
160
GDP
150
Aerospace
140
130
120
110
100
1993
1994
1995
1996
1997
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
Canadian Firms are World Leaders
in Selected Niche Markets
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Regional Aircraft
Business Aircraft
Commercial Helicopters
Landing Gear Systems
Small and Medium Turbine Engines
Flight Simulators and Visual Systems
September 1999
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
500
Non-Recurring Costs
Cash From Operations
0
Cumulative
Net Cashflow
-500
0
5
10
15
20
25
PROGRAM LIFE (Years)
Participation Requires Risk Sharing Partners
September 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
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$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
OEM
Current Platforms
OEM
Future Platforms
OEM
Systems
Integrator
Multiple Suppliers List
Systems
Integrator
Preferred
Suppliers
List
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
Bombardier’s Global Express
Project Management – Canadair
Final Assembly – de Havilland
Canadair
de Havilland
Landing Gear – Messier Dowty
BMW/RR–Europe
Mitsubishi–Japan
Sundstrand–USA
Shorts–UK
Other International Partners
Parker Bertea Aerospace – USA
Lucas – UK
Honeywell – USA
Liebherr – France
Hella KG – Germany
AlliedSignal – USA
Sextant Avionique – France
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
Office of Collaborative
Technology Development
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
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
Aerospace Industries Association of Canada
- 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