2015 Rank: #3
General Dynamics Land Systems, a perennial contender in CDR’s Top 10 list, gets our nod for the top spot. GDLS’s LAV 6.0 Light Armored Vehicles are the Canadian Army’s main ground combat transport capability. The firm’s three Southern Ontario manufacturing and research and development campuses comprise Canada’s workhorse combat vehicle production center. Furthermore, a favorable currency situation, stemming from the weak loonie, puts the company in an advantageous export position going forward.
GDLS has also made substantial progress on its controversial deal with Saudi Arabia, whose benefits on the defence front are unquestionable. The contract, which could generate a reported USD $10 billion in sales, will confirm the company’s position, as one of the Canadian defence industry’s most successful exporters (neither the Canadian government nor GDLS have disclosed precise details of the agreement, due to the political sensitivities). The deal will also lead to the creation or preservation of thousands of man-years of manufacturing work. This in a sector, that had been hard hit, following troop drawdowns related to Western deployments in Iraq and Afghanistan. Furthermore its benefits will spread far beyond GDLS’s main facilities and Alberta production plant, as the firm employs a vast supply chain of about 500 sub-contractors.
As if that were not enough GDLS’s LAV production capabilities will be enhanced during a time when a recent increase in the use of improvised explosive devices in the Syria/Iraq theatre of operations, where Canadian trainers are deployed, underscores the importance of the blast-resistant vehicles. The LAV 6.0’s safety features, notably its innovative “double V” hull technology, which GDLS developed in house, are widely recognized to be among the industry’s most advanced.
As of this writing, the new Liberal government, has said it will stand by Canada’s commitments to Saudi Arabia. From a national defence perspective that position makes sense. However GDLS isn’t putting all of its eggs in that one basket. The company continues to produce vehicles for the United States and other export markets. For example last year GDLS announced a teaming arrangement with Thales Australia, to bid for work in the “land down under.”
#2 Lockheed-Martin Canada
2015 Rank: #4
Led by Charles Bouchard, a highly-decorated former Royal Canadian Air Force general, Lockheed-Martin Canada advances to the number two spot in this year’s Top Ten, due to the company’s bounce back, after the Canadian government shelved plans to procure F-35 Lightning II Joint Strike Fighters. Lockheed’s recent success has been driven by several factors. These include its capabilities on the naval front, where the Trudeau regime is expected to divert increased funds during coming years.
For example Lockheed-Martin’s combat systems integration work for the Royal Canadian Navy, where it earned its spurs on projects such as the modernization of Canada’s frigates, is set to grow. In April of 2015, the company was awarded an implementation contract related to the Arctic Offshore Patrol Ships. There had been indications that Lockheed was going to land the deal, the first implementation contact awarded related to the combat ships slated to be built under Canada’s National Shipbuilding Strategy.
However confirmation of the AOPS win, which could be worth as much as $170 million over the life of the agreement, is particularly good news as it also positions Lockheed-Martin to get work on other NSPS ships, such as the Canadian Surface Combatants. Indeed Lockheed-Martin’s performance on the frigate modernization program was likely a key reason that the company was selected for the AOPS mandate. Late last year the Canadian government formally recognized that Lockheed’s combat systems meet the navy’s performance requirements. Individual acceptance was achieved on eight of Canada’s 12 frigates.
That said, the big elephant in the room relates to the fact that the Joint Strike Fighter program is far from dead. Production of the aircraft in the United States is proceeding slowly but surely. In fact the next generation fighter jet will soon be sold on a “fixed-price” basis south of the border, an indication that its design configurations are reaching a general acceptance stage. This is important because the various aircraft that Lockheed-Martin has sold here in Canada such as the C-130J Hercules and CP-140 Aurora, continue to perform well for the Royal Canadian Air Force. As a result, says Bouchard, when Canada does start thinking seriously again about next-generation fighter capability, it will have to take a new look at the F-35.
#3 CAE
2015 Rank: #2
CAE’s world-leading technologies, focus on innovation, export prowess, and ambitious future plans, grab the company another strong CDR Top Ten ranking. The simulation and training provider’s strengths start at the top. Marc Parent, its CEO, and Gene Colabatistto, head of its defence division, are seasoned veterans. As if that were not enough, Mike Greenley, general manager of CAE Canada, was named CDR’s Defence Executive of the Year for 2016 (see our January/February issue).
CAE’s importance is magnified by the fact that it is one of the Canadian defence industry’s few top-tier global suppliers of dominant OEM capabilities. CAE’s 8,000 employees (4,000 of which are based in Canada) service and support 160 training and simulation sites in 35 countries. Close to 90% of revenues come from outside the country. Going forward, CAE’s export prowess will be reinforced by the cheap loonie, which makes the services it sells on the international stage cheaper in US dollar terms.
Domestically, CAE employees and company trained instructors are a fixture on Canadian Armed Forces’ bases across the country. The company is the prime contractor for the NATO Flying Training in Canada (NFTC) program, the operational training systems provider of aircrew training for the CC-130J transport aircraft and CH-147 Chinook helicopters, as well as an in-service support and software integration sub-contract provider to the CF-18 fighter program.
CAE is also currently incorporating common-database imaging technology into DND’s CP-140 Aurora and CH-146 Griffon simulators.
Maintaining this dominant position requires a constant focus on innovation. During the past decade CAE has invested nearly $1 billion in research and development, and expanded its offerings far beyond its traditional aircraft flight simulator base. That trend is likely to continue. For example the company recently received a contract to design a simulator for Canadian Coast Guard Bell 412/429 helicopters, which Greeley says will be “one of the most advanced ever developed.”
CAE has also set its sights on the Contracted Airborne Training Services program for which it has submitted a proposal. A win there would provide scalability potential, due to the company’s strong network of international clients, to whom it could market similar services. Longer-term, CAE’s capabilities seem like the ideal fit for the Canada’s future pilot training initiative, which is expected to unfold during coming years.
#4 Thales
2015 Rank: #1
CDR’s pick as Canada’s Top Defence Company of 2015, grabs a top spot again this year, due to its growing importance to Canada’s National Shipbuilding Procurement Strategy. According to Jerry McLean, Thales Canada’s managing director (defence & security), the company’s main strength is its ability to leverage its 1,800 person Canadian base, while drawing on technology and capabilities supplied by its France-based parent (Thales Group), one of the world’s largest defence contractors.
Thales Canada’s personal are spread among six locales, which generate close to $500 million in annual sales. These include a Toronto-based rail transport controls division (a global center of excellence for these capabilities), a Montreal-based optronics division and a research lab in Quebec City. Thales Canada is also well tied into key sources of Canadian innovation. For example the company has partnered with Queen’s University, where ongoing work and research is done on the Canadian Army’s Land Command Support System (LCSS).
According to McLean, a Royal Canadian Navy veteran, this strong local base provides Thales considerable flexibility in arranging offset and in-service support work, when it sells technology from its global affiliates to the Department of National Defence. “The model could work well as Thales broadens its penetration in the Canadian cyber-security market,” says McLean. “It’s an increasingly important area, which we hope to focus on more during coming years.”
Thales Canada’s deep, long-term relationship with the Royal Canadian Navy and Canadian Coast Guard is crystalized in their combined use of Thales’s Interdepartmental Maritime Integrated Command, Control and Communications technology. Known as IMIC3, the system provides the two services a shared picture of the maritime environments they operate in. It also gives Thales strong credentials and a base to use to market other offerings.
For example during the past year, Thales’s long-term partnership with Seaspan has led to work on the Offshore Fisheries and Science Vessels and Offshore Oceanographic Science Vessel, and design-mandates related to the Joint Support Ships project. NSPS could also provide new opportunities on the combat front, stemming from Thales’ systems integration and sensor-supply capabilities. According to McLean, these would be a perfect fit for the Canadian Surface Combatant vessels, which are inching through the procurement cycle.
#5 L-3 Communications
2015 Rank: #5
L-3 Communications grabs the number five spot again this year, due to its growing capabilities, many of which were put to use in Canada’s contribution to the coalition against the Islamic State. As Peter Gartenburg, vice-president (operations) at L-3 Canada notes, the company supports three of the categories of aircraft used by the Royal Canadian Air Force in its Middle East Stabilization Force role. These include the F-18A fighters, Airbus CC-150 Polaris re-fuelers and CP-140 Auroras. In addition, L-3 Wescam supplied EO/IR sensors used during the mission and another L-3 division supplied a datalink product.
L-3 MAS’s Mirabel MRO facility, where Canada’s fighter jets are maintained and overhauled, will be further tested during coming years, due to Canada’s decision to prolong the life of its ageing F-18As. The good news is that the highly regarded facility, appears to be well-positioned to take on the challenge. The US Navy recently gave its stamp of approval by awarding L-3 MAS a contract to do “depot” maintenance on some of its own F-18s. This is thought to be the first time in modern history, that a US fighter jet will land on Canadian soil to be repaired and overhauled by a Canadian company.
L-3 will also have a big role to play in the construction and maintenance of Canada’s National Shipbuilding Procurement Strategy ships. The company, which recently set up the L-3 Canada Marine Systems unit, as a single entry point to manage its naval and marine offerings, certainly has the credentials. For example its L-3 MAPPS division supplied the integrated platform management systems that are installed on five of the Royal Canadian Navy’s classes of ships.
L-3 MAPPS leveraged its success on those contracts to also land work on the Arctic Offshore Patrol Ships, the first of which is currently being built by Irving Shipbuilding in Halifax. Other opportunities include Project Resolve, the interim auxiliary replenishment ship, that will be refurbished by Chantier Davie and used by the Royal Canadian Navy, until it gets the Joint Support Ships it has been promised. If the company performs well in those roles, L-3 MASS will be regarded as the frontrunner in the bidding for further NSPS mandates.
#6 IMP Group
2015 Rank: #8
IMP Group jumps two spots in the rankings this year, due to the company’s capabilities in key areas, that will be in high demand by the Department of National Defence during coming years. These include program management, engineering, integrated logistics support, technical publications, supply chain management, as well as maintenance repair and overhaul.
According to Carl Kumpic, IMP Aerospace and Defence’s vice-president (international marketing), the Atlantic Canada-based firm has facilities spread across the country, grouped in six divisions: Aviation, Airline, Healthcare, Information Services, Properties & Industrial and IMP Aerospace & Defence itself. This positions it well to satisfy the Department of National Defence’s increasingly demanding value proposition and Industrial Technical Benefits (ITB) requirements.
IMP’s long relationship with the Royal Canadian Air Force includes service and support work on transport, demonstration and patrol aircraft as well as on marine, SAR and troop transport helicopters. For example IMP is currently doing major structural modernization of 14 of Canada’s CP-140 Auroras. The increasing versatility of these long range aircraft, which are now doing ground as well as marine patrol work, could lead to the program being expanded to the four aircraft not presently included.
IMP’s Cascades Aerospace unit, which earlier this year completed its first Block 7 upgrade installation on a C-130J Super Hercules, is also seeing momentum. Last year the unit delivered the 100th upgraded CC-130 aircraft to the Department of National Defence. Cascades is leveraging capabilities developed within that partnership to grow its export work, notably with Mexico, where it recently delivered two upgraded C-130Ks.
Kumpic also sees numerous further opportunities on the horizon. IMP is part of Team Spartan, which recently filed a bid on Canada’s Fixed-Wing Search and Rescue Aircraft program. IMP’s role would consist of Canadianizing Alenia C-27As and installing mission systems on them. Canada’s CH-149 air-sea rescue helicopters, which IMP services at its Halifax-based Cormorant Support Center, will also need significant work to extend their useful lives. IMP is also actively pursuing new opportunities on the naval front. For example company officials believe they can add considerable value to the upcoming Arctic Offshore Patrol Ships and Joint Support Ships in-service support (AJISS) project.
CORPORATE DATA
#7 Irving Shipbuilding
2015 Rank: #7
Halifax-based Irving Shipbuilding, which was selected to build the combat portion of the National Shipbuilding Procurement Strategy vessels, thus naturally ranks as the country’s most important naval defence contractor. Led by Kevin McCoy, a no-nonsense former US Naval officer, Irving racked up numerous successes during 2015, notably on the first Arctic Offshore Patrol ship, for which the company had 29 of the projected 64 building blocks under construction (by early April).
According to McCoy, Irving Shipbuilding has also been working closely with the Royal Canadian Navy on planning for the Canadian Surface Combatants, which are slated to be the company’s next big project. Irving, which has been charged with modernizing seven of Canada’s 12 frigates, of which the last is currently in its Halifax-based yard, built up considerable capabilities on the mandate, which should be directly transferable to the CSC initiative.
That said, McCoy isn’t taking anything for granted. Last year he initiated a company wide-policy that targets new ways to drive down costs. One example: the company’s managers set up “AOPs/Opportunity Registers” where employees are encouraged to provide suggestions on how to improve process efficiencies.
A key challenge, as on all major Department of National Defence procurements, has been figuring out ways to maximize Canadian content on the CSCs. “Canada has not built a major combatant vessel in 25 years,” notes McCoy. “So we are working with all of our Tier 1 contractors to maximize their capabilities. In cases, where we have to go outside the country for components (such as for the high-powered, specialized diesel engines needed in some combat ships) we do our best to maximize the offsets we deliver.”
McCoy is also highly cognisant of Irving’s role as not just an industry leader, but as a social and regional leader as well. “NSPS is about more than building ships, it is about delivering as much opportunity as possible for all stakeholder groups,” says McCoy. “These include small businesses, aboriginals and women.” During 2015 alone Irving Shipbuilding hired 265 professionals and tradespeople at its recently rebuilt yard. McCoy also notes that more than $900 million in contracts have been awarded to Canadian companies for the yard upgrade and AOPS project work.
#8 Meggitt Target Systems
2015 Rank: #6
Meggitt Target Systems gets our nod for the number eight spot in CDR’s Top Ten, due to company’s growing importance as Western armed forces increasingly focus on training and simulation. Meggitt Training Systems Canada, a subsidiary of Meggitt Defence Systems UK, adopted the Meggitt Target Systems brand name last year, to enable it to offer a broader range of products and services to supply those needs.
The Canadian Meggitt brand comprises two divisions. Meggitt Training Systems Quebec’s 66 Montreal based employees provide live-fire and virtual weapons training systems to Canadian military, law enforcement, security and commercial gun range customers. The division made big news in August 2015, when it won a $25 million contact to provide in-service support to the Canadian Armed Forces for Meggitt’s Small Arms Trainer (SAT) and Indirect Fire Trainer (IFT).
Meggitt’s SAT simulator units which accommodate five-firing lanes, can be used for both individual and collective military marksmanship and judgmental training operations. The SAT system’s importance vastly exceeds the mere dollar figures devoted to it, as almost all of Canadian Armed Forces personnel do some small arms training, and most will at some point be presumably exposed to the technology. Meggitt’s Indirect Fire Trainer (IFT) for its part is used to train students in Forward Observer (FO), Forward Air Control (FAC), Fire Direction Center (FDC) and mortar crew skills proficiency. As Paul Romeo, the division’s director of business development notes, the unit also continues to provide support to the US Army on several key projects. These include several variants of marksmanship trainers and the Stryker Embedded Trainer.
Meggitt Target Systems’ Alberta division for its part manufactures and distributes a suite of unmanned air, land and surface vehicle targets, which are used in live-fire training and weapon system tests and evaluations. These include the Hammerhead and Barracuda unmanned marine surface targets, the Vindicator aerial target, the Mosquito helicopter target and the Badger unmanned ground vehicle target. Last summer, the division grabbed considerable attention by partnering with Lockheed-Martin to host an unmanned vehicle demonstration for Royal Canadian Navy personnel and other industry stakeholders. According Peter Longstaff, Meggitt Target Systems’ president, the company also boosted export sales during 2015, due to growing demand in several key international markets.
#9 Seaspan
2015 Rank: #9
Seaspan gets our nod for the number nine spot, due to the company’s revamp of its production capabilities, and its ongoing work on Canada’s frigates and submarines, coupled with its positive outlook going forward. During the 2015 election campaign Prime Minister Justin Trudeau pledged to free up new funds to rebuild Canada’s navy. If Trudeau respects that commitment, Seaspan, one of contractors selected to build those ships, who’s recently renovated Vancouver Shipyards form of core of Canada’s West Coast naval construction capabilities, will be one of the big winners.
According to Brian Carter, the president of Seaspan Shipyards, work on the HMCS Regina, the fifth Canadian frigate that the company will be upgrading, as part of the Halifax-class modernization program, is scheduled to be ready by April 2016. In fact the company has been so successful, that it will also be doing work for the New Zealand navy’s frigates next year. Work on Canada’s Victoria class submarines, which the company is completing in partnership with Babcock, is also advancing steadily, says Carter.
Seaspan’s work partnership with the Canadian Coast Guard on the first of the new vessels that it is projected to build under the National Shipbuilding Procurement Strategy is also proceeding apace. As of the end of 2015, construction on the first of three projected Offshore Fisheries Science Vessels (OFSV), notably construction of 15 of 37 the blocks that will be required, was well underway on-time and on-budget. Seaspan also got good news late last year, when the Trudeau government committed to going ahead with the Joint Support Ships that the company is projected to build and which it is currently doing design work on. According to Carter, the company has already begun procuring materials that will be needed on the project, for which he expects construction to begin in 2017.
Carter also points out that Seaspan’s influence extends far beyond the immediate work done in its yards. For example by the end of December of last year, the company had given out $381 million in sub-contract “value” to 150 Canadian suppliers. Better still, the majority of these were small and medium sized businesses and many were Native-owned.
#10 General Dynamics Mission Systems – Canada
2015 Rank: #15
General Dynamics is unique in the Canadian defence sector in that two of its divisions made CDR’s Top Ten list this year. General Dynamics Land Systems grabbed the top spot. However these is a good case to be made that General Dynamics Mission Systems – Canada, which jumps into the Top Ten this year, due to its innovative rebranding and its promising capabilities is just as innovative. The unit supplies the Canadian Armed Forces with the Land Command Support System, the LAV Reconnaissance Surveillance System, CP-140 incremental modernization work and scores of other high value-added, cutting edge services.
Last year General Dynamics Mission Systems – Canada, changed its name from General Dynamics Canada, to “better reflect its access to the products and technologies” within the organization’s parent’s global supply chain. The majority of General Dynamics Mission Systems – Canada employees, are spread amongst three locales (in Ottawa, Calgary and Halifax), from which they supply a variety of prime contractor and systems integration services to domestic and international clients. These include airborne mission systems, communications systems, displays, advanced acoustic signal processors and advanced anti-submarine warfare systems and products.
General Dynamics Mission Systems, which bills itself as one of Canada’s largest providers of C4ISR services, has two attributes that make it punch far above its weight in the Canadian defence industry. The first is the substantial value that the company’s highly skilled engineers, software designers, manufacturing technologists add. The second relates to its strong export prowess, which, like that of many Canadian exporters, could grow during the coming years, due to a favorable currency situation.
However General Dynamics Mission Systems – Canada isn’t ignoring opportunities on the home front. The company recently announced a joint-venture with Finmeccanica which would provide in-service support to Alenia’s C-27Js, as part of team Spartan, which is bidding on the Fixed-Wing Search and Rescue aircraft initiative. General Dynamics Mission Systems also plays a lead role in team Triton, a grouping that is seeking to help the Royal Canadian Navy upgrade its Underwater Warfare Suite (see our profile in CDR’s January/February 2016 issue).
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