According to the one of the major Canadian media companies, a Crown Corporation - (The Canadian Commercial Corporation or CCC is a federal Crown corporation mandated to support the growth of international trade by helping Canadian exporters gain access to foreign government procurement markets.) is joining forces with the axis of evil to attempt to thwart the P8 buy and saddle the CAF with another orphan aircraft that will never be bought by another country.
Brazil swaps C-390s for Swedish Gripens and for Indian howitzers and Medium Range SAMs.
After listening to Flynn's commentary about the advantages of paying the 10% commission on Foreign Military Sales perhaps we would be better off pursuing Government to Government contracts rather than Government to Business contracts. Apparently the FMS approach comes with more market support.
Government of Canada agrees to buy F35s with market support from US DoD.
Government of Canada agrees to sell GDLS LAVs, Rheinmetall AD, Rheinmetall PATH autonomy kits and UGVs, GDOTS 81mm, 84mm, 105mm and 155mm rounds, wings, engines, landing gear, fuses, shotguns ....
PSPC buys Canadian Goods and Services, "sells" them to DND at zero dollars, DND "sells" or "donates" them to accredited foreign and international buyers and "buys" goods and services in return. And is allowed to charge a small service charge or commission. Based on the FMS standard 5 to 10% is probably appropriate.
What is the Extension for the DND Sales Department?
First Bombardier.....As a part of receiving government help and financing over the years Bombardier was not to become a defence contractor. (No AVRO again) They could not develop Defence only products period. With the relative recent paring back of the corporation to just biz jets they are freed of that commitment. Also Bombardier's only short to medium growth areas are Gov, Defence and special mission areas. So there is the push. Now add the political aspect of current Government, Laurentian elite and Quebec Inc. pure hate of Boeing and here we are.
Other points, one example going back years Kory Teneycke (well he is the one that told me) wanted to "buy Canadian" with defence procurement, he even said even it cost 3 times as much. (this is the basis of National Shipbuilding Program) The thinking was that that it would help build a natural Conservative base in with a large Canadian MIC. The Harper government did start down this path but a recession, Afgan war and budget realities came first. Plus the realization that many of the workers were CAW (now UNIFOR) and their leaders are very much NDP/LIberals. Add to the fact that Liberals for years have work the opposite plan. Example Bombardier.
Plus there is a look that the current political parts of the gov want to push any real programs to the right.
Not talking about trying to flog abysmal defence projects. Talking about selling stuff that people want to buy....stuff that is already being manufactured in Canada and being sold for profit overseas.
I could add to my list above Oshawa built pickup trucks by GM.
We make good stuff. There are opportunitis to boost those sales.
Even if DND doesnt need or want the gear themselves they can make a profit selling Canadian goods overseas.
Current stuff is supported by CCC. But Canada itself is sometimes not a great supplier. IE Bell helos to PH, LAV to the house of Saud, etc.
Oh and GM in Canada. The pickup trucks built in Oshawa are just assembled its just an overflow plant. The current stamping plant on site just presses past model service parts. GM received billions to convert CAMI in Ingersoll and Oshawa to EV. Then moved the production to Mexico. The Equinox one of the better sellers and its home base was Ingersoll but they moved it to Ramos, 250,000 units to change the plant over to Brightdrop and 50,000 units but in reality zero units. Now GM (and everyone else) is putting the breaks on EV production. (wow would have ever guessed?) So the CAMI plant is siting doing almost nothing.
Oh and this in Brightdrop. The Brightdrop President just moved on too. Take this to battle!
The legislation apparently exists in the National Defence Act for DND to become a broker or distributor.
Proposal:
That DND constructively engage with the legislation and establish, if such a department does not already exist, its own sales department that would work in conjunction with Public Services Procurement Canada (procurer) and Global Affairs Canada (supplying international office space and contacts).
The US situation wrt FMS
On March 9, 2023, the Biden-Harris Administration submitted to Congress a proposed Fiscal Year (FY) 2024 Budget request of $842 billion for the Department of Defense (DoD), an increase of $26 billion over FY 2023 levels and $100 billion more than FY 2022.
Secretary of Defense Lloyd J. Austin III released a statement on the President's FY 2024 budget.
www.defense.gov
Procurement of weapons and systems cost $136 billion in 2022 and $107 billion was spent on research and development of weapons and equipment. The military also spent over $10 billion on the construction and management of military facilities and $1 billion on family housing.
The United States spends more on defense than any other member of the G7.
www.pgpf.org
On average, Allies and partners purchase approximately $45 billion annually in U.S. arms, equipment, and training via FMS, and from 2021 to 2022, implemented FMS purchases grew by 49 percent.
Foreign Military Sales (FMS) are a key U.S. arms transfer mechanism and an important tool of U.S. foreign policy. Overseen by the U.S. Department of State and implemented through the U.S. Department of Defense, FMS is one of many ways the United States promotes interoperability and strengthens...
www.state.gov
PS I would disregard the 49% growth in one year - cf COVID and Ukraine.
But.....
45/136 is roughly 1/3 of the US capital budget and the capital budget is 136/766 or 18% of the DOD budget. So about 6% of the DOD budget, or 33% of their capital budget is offset by Foreign Military Sales.
Transition of the Associate Deputy Minister of National Defense – June 12, 2023
www.canada.ca
6% of 26.5 is 1.6 BCAD annually.
Canada's defence capital budget is 6.1 BCAD
1.6/6.1 is equivalent to a 26% increase in the capital budget.
How...
Have PSPC engage with Canadian industry and have them set up the Government of Canada as a distributor entitled to OEM pricing. Typically that can mean a discount from MSRP, or Manufacturer's Suggested Retail Price, of 10 to 40%.
Then start selling.
But don't go for the bespoke stuff. That is shop window stuff that often acts as a loss leader - kind of like Formula 1 racing teams.
What you want to sell is nuts, bolts and gaskets. And Rockwell Automation modules.
You build a reputation by being able to source and supply hard to come by kit in a timely fashion.
And by supplying advice on how to use it.
Don't try and sell the CSC. The AOPS and Seaspan's Multi Purpose Vessels, possibly even the Fisheries and Science vessels might have legs once fully debugged.
But generally speaking the real money is in selling gaskets and controls, providing maintenance and training, and of course, consummables.
My favourite personal example is Tetra Pak. I worked for a company that is older than Tetra Pak. Both of them came from Sweden and Tetra Pak started up down the road from my employer. My employer was in business for 60 years and internationally recognized as a national champion when Tetra Pak's owner presented them with a wooden mock up and a business plan in the 1940s. Of course my employer turned down the opportunity.
40 years later Tetra Pak bought my employer, kept what it wanted and put the rest of it back on the open market.
My employer's model was the sales of Swedish stainless steel to industry. They made their sales by supplying high quality machines, engineered to specific tasks and well supported with marketing and maintenance. I was part of the sales engineering group. We met with end users, sussed out their needs, looked through our catalogue for canned solutions that could be combined into systems with as little customizing as possible. Some customizing would always be required though.
We found that we were losing sales to Tetra Pak. We couldn't compete. Tetra Pak was giving away not just the engineering but also stainless steel hardware, the mechanicals, electricals and controls.
They were making their money from the consummables. In their case the consummables are the cardboard cartons that hold you kids' drinks, your juices, milks and soups. They have replaced Dole's old tin cans as ubiquitous containers. And every time one of those cartons drops off the filler Tetra Pak makes money.
They also make money by supplying onsite maintenance staff, that uses parts sourced and marked up by Tetra Pak, as well as training client staff that use the same parts stream.
One example of parts supply that I have used in the past?
Client in Kelowna requests part from Scarborough for inventory. Scarborough source part from Lund in Sweden. Lund sources part from other department in Sweden. Other department sources part from other department in Stockholm. Stockholm sources part from distributor in Germany. Germany sources part from distributor in Belgium. Belgium source part from original manufacturer in the US. The US contacts their subsidiary to manufacture and supply the part. The part followed the reverse trail to the client. Everybody charged shipping, handling and margin along the trail. 1200 CAD part became a 12000 CAD part.
The part that Scarborough requested from Lund was manufactured down the road in Brantford and could be purchased directly by the end user at 1200 CAD. ca 1985.
That is where the money is to be made.
.....
Now, I note that the CAF is not world renowned for either its maintenance or logistics. But what if the trades were profit centres that paid their own ways?
Would that not also benefit the CAF directly?
....
What else could Canada supply? Shells? Bullets? Small arms? Training? How about GMC truck chassis that could be supplied to people like Roshel for customizing and resale?
Buy this from GMC with a Government of Canada OEM discount.
Contract Roshel to customize to suit the needs of the end user (eg Ukraine).
Sell or donate or sell at a reduced price to Ukraine.
....
And yes @KevinB , I am fully aware of the jiggerypokery that accountants can pull with a system like this, and that FMS sales numbers should not be taken at face value.
People like these make a good living out of buying and reselling. Many of them are distributors for multiple suppliers and many of them compete with each other selling the identical equipment from the identical suppliers.
All pump suppliers in Alberta - Renown Industries Limited, NETZSCH Canada Inc, Redmont International Ltd, Trisons Production Services, Rotor-Tech Canada L…
ARCHIVED The U.S. Government shall deliver to the Contractor, at the time and locations stated in this Contract, the Government-furnished property described in the Schedule or specifications. If that property, suitable for its intended use, is not delivered to the Contractor, the Contracting...
buyandsell.gc.ca
You can't keep your ships in the water, trucks on the road or planes in the sky due to lack of parts. But other people are making money sourcing, storing and delivering parts and service.
If there was ever an aspect of the DND that would benefit from a Public Private Partnership it would be this field.
Canada seems to have good luck in the wheeled AFV market, from the Senator to the LAV. It would seem for large component Sales that would be a promising start. I agree with the rest of your comments.
Canada seems to have good luck in the wheeled AFV market, from the Senator to the LAV. It would seem for large component Sales that would be a promising start. I agree with the rest of your comments.
Canada has no problem with automotive component sales. It is one of the largest businesses in the country.
The biggest problem is that there is no home grown Defence Prime OEM. This very much was a government policy. They did not want a Prime that they would have support like other countries, UK and BAE, Italy and Leonardo, Sweden and SAAB, etc. (please refer to my post above.)
I would say OZ does a better job of pushing Thales Bushmaster.
To push international sales on a scale would need an industrial policy that has never been seem in this country.
We would need to develop a homegrown OEM. (I have ideas, posted wayback in a different thread) But most here a results based and would not like to see the sausage it would take to make a Prime.
GM in Canada. In Oshawa the plant was once called the Autoplex the largest automotive manufacturing site in North America. Now down to one truck line and a stamping operation for CCA service parts. CAMI in Ingersoll is converted to Brightdrop EV (no production) St Catharine Powertrain plant building V-8 and G6 transmissions. Transmissions are ending and production of those are moving south to make way for a EV something that now has been delayed. Plus 3 CCA parts warehouse. That's it.
From a high of:
Oshawa HQ with a many hundreds of employees to an almost empty building.
Oshawa plant with 3 lines and integrated stamping plant
CAMI (started as JV) in Ingersoll
Scarborough Assembly making large vans
St Catharine's, Powertrain with plants making V-8 engines
Sainte Therese QC, building Firebird and Cameos
St. Eustache QC, Truck and Bus building GMC city buses. Now Nova Bus div of Volvo AB.
Windsor ON, Transmission plant and a Trim plant
London ON, GM diesel building LAV's and diesel electric traction train engines. Trains were in the purchased by Cat and closed. GM sold LAV business to GD.
Canada has no problem with automotive component sales. It is one of the largest businesses in the country.
The biggest problem is that there is no home grown Defence Prime OEM. This very much was a government policy. They did not want a Prime that they would have support like other countries, UK and BAE, Italy and Leonardo, Sweden and SAAB, etc. (please refer to my post above.)
I would say OZ does a better job of pushing Thales Bushmaster.
To push international sales on a scale would need an industrial policy that has never been seem in this country.
We would need to develop a homegrown OEM. (I have ideas, posted wayback in a different thread) But most here a results based and would not like to see the sausage it would take to make a Prime.
I think a lot could be done without having to invest in a National Champion. In fact it might be better not to have one. Keep the competition open.
Have the FMS group look at all the kit the CAF uses, and maybe our NATO, ABCA allies as well (and I shouldn't forget the CPTPP group) and establish itself as a clearing house. Not just for Canadian manufactured kit but for parts for kit used by Canadians but manufactured overseas and/or used overseas.
A lot of people are suffering from "Just-In-Time" hangovers and Chain of Supply disruptions. Being able to source parts for 60 year old M113s either remanufactured originals or upgraded replacements, might turn out to be lucrative.
Canada seems to have good luck in the wheeled AFV market, from the Senator to the LAV. It would seem for large component Sales that would be a promising start. I agree with the rest of your comments.
Important Facts Canada’s Auto Industry: Driving jobs, investment, and innovation Facts about the automotive industry in Canada: Economic Contribution Auto manufacturing contributes over $16 billion to Canadian GDP. Manufacturing sales of motor vehicles and parts were $74.2 billion in 2020...
www.cvma.ca
1,358,657 vehicles were produced in Canada in 2020.
Canada is the 11th leading vehicle producer in the world.
Canada contributes approximately 10% of all vehicles produced in North America.
Canada is dependent on exporting outside of its own borders, with domestic consumption of just 12% of the vehicles it manufactures within its borders.
GM in Canada. In Oshawa the plant was once called the Autoplex the largest automotive manufacturing site in North America. Now down to one truck line and a stamping operation for CCA service parts. CAMI in Ingersoll is converted to Brightdrop EV (no production) St Catharine Powertrain plant building V-8 and G6 transmissions. Transmissions are ending and production of those are moving south to make way for a EV something that now has been delayed. Plus 3 CCA parts warehouse. That's it.
From a high of:
Oshawa HQ with a many hundreds of employees to an almost empty building.
Oshawa plant with 3 lines and integrated stamping plant
CAMI (started as JV) in Ingersoll
Scarborough Assembly making large vans
St Catharine's, Powertrain with plants making V-8 engines
Sainte Therese QC, building Firebird and Cameos
St. Eustache QC, Truck and Bus building GMC city buses. Now Nova Bus div of Volvo AB.
Windsor ON, Transmission plant and a Trim plant
London ON, GM diesel building LAV's and diesel electric traction train engines. Trains were in the purchased by Cat and closed. GM sold LAV business to GD.
Any all of that is remaining could go away on the wave of a corporate wand (not that it wouldn't be without much pushback from governments and unions). Without a very robust domestic market, hanging a good part of our economy on one sector turns us into a national version of a one industry town.
Any all of that is remaining could go away on the wave of a corporate wand (not that it wouldn't be without much pushback from governments and unions). Without a very robust domestic market, hanging a good part of our economy on one sector turns us into a national version of a one industry town.
Yes and a major reason is government policy for the retreat of the auto industry in Canada. Plus a giant hemming help of the industry destroying CAW. In the nineties we were producing over 2 times as many cars as we purchased. The size of the Canadian market had little to do with the production of vehicles. But increase in taxes, energy, lsbour, regulations and border thickening has created the problem. Trust me on this as they say around here this is my lane.
Yes and a major reason is government policy for the retreat of the auto industry in Canada. Plus a giant hemming help of the industry destroying CAW. In the nineties we were producing over 2 times as many cars as we purchased. The size of the Canadian market had little to do with the production of vehicles. But increase in taxes, energy, lsbour, regulations and border thickening has created the problem. Trust me on this as they say around here this is my lane.
The Australian experience does tend to show that, ultimately, whether the auto industry stays or not in an economy the size of Australia (or Canada) is beyond the influence of national governments. The interplay of the changing technology and economics of the auto industry, combined with the financial health or distress of a manufacturer, will play a very large role in determining whether a company stays or not.
GM in Australia was happily accepting financial assistance right up until it formally announced its departure.
When companies are struggling to survive, the fate of an outpost in a small market is pretty low on their list of priorities.
Yes and a major reason is government policy for the retreat of the auto industry in Canada. Plus a giant hemming help of the industry destroying CAW. In the nineties we were producing over 2 times as many cars as we purchased. The size of the Canadian market had little to do with the production of vehicles. But increase in taxes, energy, lsbour, regulations and border thickening has created the problem. Trust me on this as they say around here this is my lane.
US-based corporations retrenching to domestic production, particularly in 'right-to-work' states, and moving production to cheap off-shore labour markets apparently had nothing to do with it.
@KevinB is right enough that Canada's reputation is crap. Especially in military procurement.
But there are some bright spots that Canada could expand on. I suggest that one of them is the CSA brand. It is a viable program with international recognition that buys Canada mutual acceptance of products with international agencies.
It is a given that our procurement system is not fit for purpose. It has to be changed.
I think that one way to start that change is to rebuild the military procurement system based on predefining standards which would be open and publicly available, permitting all suppliers, Canadian and overseas, a clear understanding of baseline requirements. The concept is common to the CSA and to other regulatory bodies. Canadian Food Safety Regulations. Canadian Building Code. Canadian Electrical Code.
This would, I believe, be reinventing an old, disused wheel.
During WW2, when confronted with the problem of wanting three suppliers to produce one truck that met military needs Canada devised the Canadian Military Pattern, or CMP. Dodge, Ford and GM all produced trucks to this same standard.
Perhaps the CMP standard could be re-raised as a sub-group of NATO standards.
A clear set of standards would reduce uncertainty on bids and, probably, encourage more companies to compete. That in turn should reduce the cost of acquisition and speed up the delivery time.
And it doesn't just have to be a vehicle thing. It can apply as broadly as CSA or CEC standards.
....
Yes. We are in a deep hole. But we can't just stay there.
@Kirkhill the issue is that Canada has a bad rep as both a Defense consumer, and a broker of materials.
The GoC has derailed several sales to non NATO (and even some NATO member) countries.
That in its own right means that very few companies will invest in anything Defense related inside Canada for an external sale.
@Kirkhill the issue is that Canada has a bad rep as both a Defense consumer, and a broker of materials.
The GoC has derailed several sales to non NATO (and even some NATO member) countries.
That in its own right means that very few companies will invest in anything Defense related inside Canada for an external sale.
As I said. A deep hole. But sitting at the bottom is no solution.
Edit.
It will take time to build a reputation. And perhaps a good place to start would be to stop asking and start buying. Recognize that we have no bargaining power and start spending money on 80% solutions that are on the market and available.
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