Liberals shrug off Lockheed warnings it will take business elsewhere unless F-35s purchased

by Lee Berthiaume (feat. David Perry)

National Post
June 10, 2016

OTTAWA — The Liberal government is brushing off threats from Lockheed Martin that the U.S. aerospace giant could take billions of dollars worth of work elsewhere if Canada doesn’t buy its F-35 stealth fighter.

Lockheed says it is studying whether to block Canadian companies from competing for future contracts associated with the F-35, which could total billions of dollars. The government, however, says whatever decision it makes on a new fighter jet will result in “very significant benefits” to Canada.

The exchange comes after Postmedia reported the government plans to buy a new jet fighter soon. The Liberals say no decision has been made, but it is believed they will purchase a small number of Super Hornets from Lockheed’s rival, Boeing Co., on an “interim” basis to avoid a competition.

Canadian companies have received about $750 million in contracts associated with the F-35 over the past 15 years. Industry Canada estimated in December 2014 that that was just the tip of the iceberg, with the industrial  sector standing to benefit from more than $9 billion in work over the life of the program.

Lockheed vice-president Jack Crisler, however, told the Ottawa Citizen that other partner countries are asking why Canada continues to receive work when it hasn’t committed to the stealth fighter. He said the company hasn’t decided to block Canadian companies from competing for future work, “but we’re evaluating it.”

“The good-faith intent … was that Canada will buy aircraft and they will be allowed to participate in the supply chain,” Crisler said. ““There’s not an entitlement to future contracts unless you’re buying aircraft.”

The agreement between Canada and other F-35 partners does specifically say that in order to continue to get work, countries have to buy the stealth fighter.

Defence Minister Harjit Sajjan’s spokeswoman, Jordan Owens, nonetheless said Crisler’s comments were “kind of odd because government has not made any decision yet” on a new fighter.

“But Canadians should rest assured,” she said, “that whatever decision the government makes will result in very significant benefits to Canadian industry.”

Lockheed appears intent on highlighting the potential economic ramifications of not buying the F-35. About 130 Canadian companies have supplied parts to the stealth fighter, the company says, and given that the U.S. and about 10 other countries plan to order 3,000 of the aircraft, the potential benefits for Canada are huge.

About 750 Super Hornets and their electronic warfare variant have been built for the U.S. and Australia. While the technology is older, Boeing says the U.S. Navy plans to operate the planes until 2040. In addition, the company has thousands of employees in Canada working on other commercial projects.

Defence analyst David Perry of the Canadian Global Affairs Institute said there will be an impact on Canadian industry whether the government buys F-35s or Super Hornets. However, one isn’t necessarily better than the other.

Participating in the F-35 supply chain, he said, will mean producing parts for thousands of high-tech fighter jets. However, none of the work is guaranteed and Canadian industry will have to compete hard to win. Boeing, in turn, could guarantee more work, not just for the Super Hornets, but for many of its civilian aircraft.

“The companies that win work on the F-35 are into the supply chain on the most advanced fighter aircraft on the market, and one that’s going to be in production for three decades to come,” Perry said.

“With the Super Hornet, you have a larger guarantee of work, and they would have more flexibility to offer creative industrial participation programs. So Canada might have a greater share of Canadian content going into the Super Hornet, or potential participation in Boeing’s commercial supply chain.”