"A minority equity stake in Hanwha Ocean or TKMS - negotiated as a condition of the CPSP contract award..." - This ia precisely the actual sovereignty play not just being a consumer buying milk every other week from the grocery store.
The "auto factory addiction" has me in stitches, if that's all the top folks in procurement want to get out of a major defence procurement deal, then maybe some actual defense heads need to be at DIA not just private sector businessmen.
While I also cringe at the 'auto factory addiction' it's worth noting that the 'defense heads' ran the down selection: It was the RCN and DND that said both of the finalists work and we'd be happy with either one. So it was left to general industry/politics to select between the two finalists.
Sure there is more room for the industrial benefits to tie in a little better with defense. But I think the approach of having RCN/wider-defense people pick a short list of platforms first, then using wider industry as a tie breaker isn't bad.
I believe the 2nd point in your asks (technology transfer and independant sustainment and upgrading of the submarines) is part of the program already.
It might not be full co-IP ownership, perhaps just and end-user license that allows for any and all work on our own submarines. But being able to fully sustain the submarines in Canada and upgrade/refit them our selves with whatever kit we chose is definitely part of it.
Interesting. I feel like, if this wasn't already being discussed behind the scenes, it's too late to introduce it to CPSP now, but I could be wrong about that. That does not negate the validity of the argument, and maybe they figure out a way to incorporate some of this idea somewhere. I feel like the token veto share is probably the best model, because it avoids the risk of a government with different priorities selling off the public stake in a defense Corp at a loss because of different priorities, a loss of public interest, or excesses of free-market beliefs.
I'm all for Canada demanding a stake in contract bidder, as long as it doesn't undermine the delivery timelines, or add too much red tape, or handicap some other part of the process as a surprise latter on. Also, there is the concern that shifting the foundation of the contract too late in the process risks derailing the process in some way that is not immediately obvious. There absolutely exists a way this could be done that is compatible with all the stakeholder's objectives, but there are more ways it could be done that are problematic, and until I see some more procurement wins, I'm not sure I trust our existing system not to flub implentation of a potentially beneficial idea like this.
Bottom line, I don't think there is much chance of this happening with the subs. But CPSP is not the last big project being accelerated right now, and maybe some of these ideas can be implemented with aviation, land systems, unmanned systems, and AI. But sticking the landing is going to be challenging.
Honestly, the automotive industry should be a lesson in why sovereing control of strategic industries is important. Without that sovereing ownership/leverage... Companies cna just pack up & leave when it is convenient (or more profitable) to do so, leaving us in the lurch. & Even in a perfect world, with great collaboration & cooperation with allies, there is still competition over who gets the key industries (& associated IP & benefits) - even when collaborating in broad terms, we might be competing with allies on the economic/industrial front.
Which brings me to subs - I would be flabbergasted if the 2 parties would ever agree to letting in a new sovereing player at this point in the game, at least when it comes to their own domestic/manufacturing entity. Establishment of a Canadian support company is a different matter though - Hanwha I think is explicity setting up a Canadian full service sustainment subsidiary - it should be possible & is certainly worthwhile to get a sovereing stake in such an entity, & start levering that towards our own production (a 30 year endeavour...)
Speaking of sovereing control, that is one reason (of several) I like the idea of a larger split fighter force - 65+ airframes of both F-35 & Gripen. We can leverage domestic production & work with at the sovereign level - Canada & Sweden - (via Saab & Bombardier) to partner on 6th gen fighters, CCAs & other aircraft. Being the bigger partner, we would chip in funds to let Saab cook - but being the bigger partner, we'd also finally have something every other G7 nation does - the sovereign ability to set requirements & develop a major combat/fighter aircraft.
Well said Mark - a tour de force. My angle was some equity ownership to ensure we're at the table (not necessarily full production) - automotive definitely has some lessons learned about what those investments could look like!
The Canadian Government used to own many companies (crown corp.) in strategic areas like Defense, aerospace, vaccine production, even oil and gas. Successive government sold those companies as they were not making a profit or they were seen as competing with the private sector. The doctrine is that government owned companies are not good, the private sector can do better. What we've seen in reality is crown corporation being purchase often by foreign companies and production being shut down, technology and capacity is moved abroad unless the Government makes big purchases. It does not help that a chorus will say that subsidizing R&D for new products with government money is a boodogle.
A recent example is Bombardier aerospace that could not get financing for their C-Series project to build an airliner designed and mostly built in Canada The Federal and Provincial Governments provided grants, loans and the Provincial Government became part owner of the program. The Chump administration seeing that this plane would eat Boeing's lunch put a 300% tariff on the plane citing foreign government funding. Public pressure made governments pull the plug as the program ran into cost overuns as they were trying to ramp-up production of an airliner using new technology that leaped over the competition. Critics in Canada (probably the same who complain of the Avro Arrow cancellation) saw Bombardier as a corporate leech and the program, IP, facilities were essentially given away to Airbus. It is clear that while the plane is a technological success, it takes years, a lot of patience and money to make these programs successful. Airbus gets a new generation plane for the price to ramp-up production.
So all this to say that Governments come and go and what the government of the day invests in may be sold by the next and history has shown that most if not all of them disappear before they reap the benefits.
If the Government owns (whole or part of) the business, it WILL have to continue funding R&D, ramping up production, something that may take more time than practical for the project and have to build the political support everytime there is a large investment to be made. If we were to invest in submarines, the next generation Canada will purchase will be in 30 years from now so it would have to rely on maybe the sale of 2 to 3 every few years if the program is successful. IMO, there may be more of a chance to sell jet fighters or AWACS to other countries than submarines.
"A minority equity stake in Hanwha Ocean or TKMS - negotiated as a condition of the CPSP contract award..." - This ia precisely the actual sovereignty play not just being a consumer buying milk every other week from the grocery store.
The "auto factory addiction" has me in stitches, if that's all the top folks in procurement want to get out of a major defence procurement deal, then maybe some actual defense heads need to be at DIA not just private sector businessmen.
While I also cringe at the 'auto factory addiction' it's worth noting that the 'defense heads' ran the down selection: It was the RCN and DND that said both of the finalists work and we'd be happy with either one. So it was left to general industry/politics to select between the two finalists.
Sure there is more room for the industrial benefits to tie in a little better with defense. But I think the approach of having RCN/wider-defense people pick a short list of platforms first, then using wider industry as a tie breaker isn't bad.
I believe the 2nd point in your asks (technology transfer and independant sustainment and upgrading of the submarines) is part of the program already.
It might not be full co-IP ownership, perhaps just and end-user license that allows for any and all work on our own submarines. But being able to fully sustain the submarines in Canada and upgrade/refit them our selves with whatever kit we chose is definitely part of it.
Interesting. I feel like, if this wasn't already being discussed behind the scenes, it's too late to introduce it to CPSP now, but I could be wrong about that. That does not negate the validity of the argument, and maybe they figure out a way to incorporate some of this idea somewhere. I feel like the token veto share is probably the best model, because it avoids the risk of a government with different priorities selling off the public stake in a defense Corp at a loss because of different priorities, a loss of public interest, or excesses of free-market beliefs.
I'm all for Canada demanding a stake in contract bidder, as long as it doesn't undermine the delivery timelines, or add too much red tape, or handicap some other part of the process as a surprise latter on. Also, there is the concern that shifting the foundation of the contract too late in the process risks derailing the process in some way that is not immediately obvious. There absolutely exists a way this could be done that is compatible with all the stakeholder's objectives, but there are more ways it could be done that are problematic, and until I see some more procurement wins, I'm not sure I trust our existing system not to flub implentation of a potentially beneficial idea like this.
Bottom line, I don't think there is much chance of this happening with the subs. But CPSP is not the last big project being accelerated right now, and maybe some of these ideas can be implemented with aviation, land systems, unmanned systems, and AI. But sticking the landing is going to be challenging.
Its definitely not a model we're used to in Canada. All good points regarding timelines, contract foundations, etc!
Honestly, the automotive industry should be a lesson in why sovereing control of strategic industries is important. Without that sovereing ownership/leverage... Companies cna just pack up & leave when it is convenient (or more profitable) to do so, leaving us in the lurch. & Even in a perfect world, with great collaboration & cooperation with allies, there is still competition over who gets the key industries (& associated IP & benefits) - even when collaborating in broad terms, we might be competing with allies on the economic/industrial front.
Which brings me to subs - I would be flabbergasted if the 2 parties would ever agree to letting in a new sovereing player at this point in the game, at least when it comes to their own domestic/manufacturing entity. Establishment of a Canadian support company is a different matter though - Hanwha I think is explicity setting up a Canadian full service sustainment subsidiary - it should be possible & is certainly worthwhile to get a sovereing stake in such an entity, & start levering that towards our own production (a 30 year endeavour...)
Speaking of sovereing control, that is one reason (of several) I like the idea of a larger split fighter force - 65+ airframes of both F-35 & Gripen. We can leverage domestic production & work with at the sovereign level - Canada & Sweden - (via Saab & Bombardier) to partner on 6th gen fighters, CCAs & other aircraft. Being the bigger partner, we would chip in funds to let Saab cook - but being the bigger partner, we'd also finally have something every other G7 nation does - the sovereign ability to set requirements & develop a major combat/fighter aircraft.
Well said Mark - a tour de force. My angle was some equity ownership to ensure we're at the table (not necessarily full production) - automotive definitely has some lessons learned about what those investments could look like!
Canada, may you achieve the best outcome. The politicisation of our tortuous journey to AUKUS, is full of lessons for others.🇦🇺
You're right, its not the panacea it originally appeared to be!
The Canadian Government used to own many companies (crown corp.) in strategic areas like Defense, aerospace, vaccine production, even oil and gas. Successive government sold those companies as they were not making a profit or they were seen as competing with the private sector. The doctrine is that government owned companies are not good, the private sector can do better. What we've seen in reality is crown corporation being purchase often by foreign companies and production being shut down, technology and capacity is moved abroad unless the Government makes big purchases. It does not help that a chorus will say that subsidizing R&D for new products with government money is a boodogle.
A recent example is Bombardier aerospace that could not get financing for their C-Series project to build an airliner designed and mostly built in Canada The Federal and Provincial Governments provided grants, loans and the Provincial Government became part owner of the program. The Chump administration seeing that this plane would eat Boeing's lunch put a 300% tariff on the plane citing foreign government funding. Public pressure made governments pull the plug as the program ran into cost overuns as they were trying to ramp-up production of an airliner using new technology that leaped over the competition. Critics in Canada (probably the same who complain of the Avro Arrow cancellation) saw Bombardier as a corporate leech and the program, IP, facilities were essentially given away to Airbus. It is clear that while the plane is a technological success, it takes years, a lot of patience and money to make these programs successful. Airbus gets a new generation plane for the price to ramp-up production.
So all this to say that Governments come and go and what the government of the day invests in may be sold by the next and history has shown that most if not all of them disappear before they reap the benefits.
If the Government owns (whole or part of) the business, it WILL have to continue funding R&D, ramping up production, something that may take more time than practical for the project and have to build the political support everytime there is a large investment to be made. If we were to invest in submarines, the next generation Canada will purchase will be in 30 years from now so it would have to rely on maybe the sale of 2 to 3 every few years if the program is successful. IMO, there may be more of a chance to sell jet fighters or AWACS to other countries than submarines.
That's great context Luc - I think I agree with most except the fighter & AWACS bit!
May one ask where these billions are coming from?
UC, my quip would be the main estimates. But it sounds like an existential question for an another newsletter!
Just an FYI….NO ONE is going to talk to you. Your name says IAM AN IDIOT!