Ranking Canada's military contractors. (Spotlight On Canadian Military Exports).

During 2000 the Diesel Division of General Motors of Canada retained its position for the fourth successive year as the largest military contractor in Canada. The London, Ontario-based company, now the senior partner in the GM Defence subsidiary of General Motors, spent the year building light armoured vehicles (LAVs) for the armed forces of Canada, Australia, the United States, and Saudi Arabia. Countering a Canadian industry tendency towards military aerospace or electronics products, GM Canada's LAV line has been a major part of Canadian arms manufacture for two decades. Indeed, in addition to several multi-million dollar orders from the Department of National Defence since the late 1970s, including the most recent, four-phased order for 651 LAV III Armoured Personnel Carriers exceeding $2-billion (Cdn), the Canadian Commercial Corporation (CCC) reported in January, 2000 that the CCC was "instrumental in the sale of more than US$2.5 billion worth of LAV's outside Canada since 1981" (DFAIT 2000). (1) Moreov er, GM Canada's prominence is set to continue for some time -- particularly with regard to exports -- as recent New Zealand and US contracts likely will extend high rates of LAV production. In the latter case, a US Army contract, signed in November 2000, ordered 466 LAVs from a joint venture company of GM Canada and General Dynamics Land Systems in the US. The order is the first of several expected to total 2,131 vehicles, worth in excess of $6-billion.

Despite the recent sale of its missile production facility in Northern Ireland, Montreal's Bombardier Inc climbed to second place in the year's military contractor ranking. Much of Bombardier's military income is derived from three large service contracts in Canada: engineering support for the Canadian Air Force CF-18 fighter aircraft, flying training and support for Canadian military pilots at Portage La Prairie, and the NATO Flying Training in Canada program for which Bombardier Aerospace is the prime contractor. (The last two programs required Bombardier to acquire and maintain trainer aircraft which in the past were purchased for military inventories.) The NATO program is training Canadian, Danish, Italian, British, and Singapore pilots at Cold Lake, Alberta and Moose Jaw, Saskatchewan. In addition, Bombardier Aerospace built and delivered aircraft to the armed forces of Greece, Denmark, Jordan, and Turkey.

CAE Inc, with major production facilities in Montreal, is the remaining member of the top three companies in Canada which also regularly appear in international rankings of military manufacturers (for example, see SIPRI Yearbook 2001, pp. 307-311). CAE reported military simulator and other military system sales of $410-million for the fiscal year ending March 2001, almost double the arms sales total of the next largest Canadian supplier. The company is seeking to expand this total. During 2000, CAE announced that it was abandoning a diversification strategy to focus on three areas, one of which is military simulators.

Most military sales of SNC-Lavalin Group in Montreal are derived from its SNC Industrial Technologies (or SNC Tec) subsidiary. With GM Canada, SNC-Lavalin is the exception to the sector concentration of top ranked Canadian military contractors. SNC Tec produces munitions for the Canadian Armed Forces and increasingly for foreign military customers. In its most recent annual report, the company noted that "SNC Tec has successfully grown its international activities to 35% of revenues in 2000" (SNC-Lavalin Group 2000, p. 13).

The remaining contractors included in the following table produce a range of military electronics and aerospace products including communications equipment (Computing Devices Canada and CMC Electronics) and aircraft and aircraft engines (Bell Helicopter Textron Canada and Pratt & Whitney Canada). In addition to manufacturing aerospace components, Magellan Aerospace and Heroux-Devtek produce and export armaments -- in the former case, Winnipeg subsidiary Bristol Aerospace builds the CRV-7 air-to-surface rocket, and in the latter case, Kitchener subsidiary Diemaco makes C-7 and C-8 automatic rifles for Canadian and NATO forces.

Industry trends

Extending a trend of recent Canadian military industry, Canada's ten largest military contractors in 2000 were virtually unchanged from an equivalent ranking for 1999. Based on publicly available data compiled by Project Ploughshares, (2) all but one of the latest top contractors also were ranked within the largest ten in the previous year (3) and most have been ranked within the group of largest military contractors for more than a decade. Moreover, there were no dramatic changes in internal order -- within the top five positions of the two most recent years the corporate names were the same. The sole new addition to the 2000 ranking is Heroux-Devtek Inc of Longueuil, Quebec which replaced Spar Aerospace Ltd of Toronto in tenth position.

Canada's largest military contractors reflect the concentration and relative stability of Canadian military industry which have existed for more than a decade. Apart from the dominance of the top contractors, concentration of the industry may be seen in the sites of production (primarily in the Montreal, Toronto, and Ottawa areas) and in the industrial sectors where most military production occurs. As demonstrated by column F in Table 1, five of the largest ten Canadian military contractors are aerospace companies. Indeed, in Canada the aerospace sector often is taken to include military production, with Industry Canada regularly reporting "aerospace and defence" production and trade figures as the results of one sector.

At the same time, Canadian military industries have been less affected by the restructuring and consolidation that have reshaped the industry in other industrialized countries since the fall of the Berlin Wall. Judging from Canada's largest contractors at least, the military corporate structure in Canada has experienced limited post-Cold War upheaval. Apart from a decline in the military shipbuilding industry (which arguably would have happened anyway) that eliminated Saint John Shipbuilding in particular from the top contractors list, the companies of the 2000 ranking are generally the same companies that existed in 1990, with all but Bell Helicopter Textron appearing in the ranking of the top 20 contractors of 1990-91. (4) Magellan Aerospace is the parent company of two subsidiaries, Bristol Aerospace and Orenda Aerospace (formerly Hawker-Siddeley Canada), which appeared separately in earlier top Canadian military contractor lists. The recently amalgamated Heroux-Devtek Inc combines the operations of Herou x Inc and Devtek Corp, both of which also appeared in earlier rankings. There also have been a few changes in ownership: Computing Devices Canada has recently become part of the US-based General Dynamics corporation and the controlling shares of CMC Electronics (formerly BAE Systems Canada and, before that, Canadian Marconi) have been purchased from BAE in the UK by a Canadian investment group. But company plants and production in Canada essentially are unaltered.

Columns A and B of the table demonstrate that the top military contractors in 2000 were major recipients of prime contracts from the Department of National Defence (DND) and the Canadian Commercial Corporation. Although central to ranking Canadian companies involved in military production and service work, DND and CCC contracts are not the exclusive means of determining the military sales totals of column G. The total may also be based on contract and sales data reported in two other areas: subcontracts between a Canadian company and a foreign military contractor and contracts with foreign military agencies not brokered by CCC, The latter may include equipment such as aircraft classed by the government as civilian (and hence not requiring an export permit) but sold for military end-use. The military sales total used to rank the companies is an estimate derived from all reported sources and for some companies may be understated. In the cases of CAE Inc of Montreal and Heroux-Devtek, the figures cited are defen ce sales as reported in the company annual report.

The Canadian companies which make up the military industry tend also to produce commercial goods and most sell more to the civilian market. Few companies are highly dependent on military sales. Among the largest military contractors, although the majority rely on military customers for more than one-fifth of their total sales (see column C), only Computing Devices Canada is dependent on military markets to a large degree. Even in the case of the largest contractor, the Diesel Division of General Motors, where military sales come close to matching commercial sales within the division, the military dependency of the company would drop to less than two per cent if military sales were matched against the total sales of the parent company, General Motors of Canada.

The United States remains by far the largest export market for Canadian military goods, with US-bound shipments exceeding shipments to all other countries combined, but Canadian companies also export military products worldwide. Column D of the table lists the six top military contractors for which there were reports of exports to Third World militaries during 2000.

(1.) The Canadian commercial corporation (CCC) is an Ottawa-based crown corporation which assists Canadian companies with export sales to foreign governments and international organizations. Typically, over 60 per cent of CCC-brokered sales are purchased by military agencies.

(2.) The data is drawn from Project Ploughshares' Canadian Military Industry Database and accompanying files.

(3.) See The Ploughshares Monitor. December 2000. pp. 16-17.

(4.) See The Ploughshares Monitor. March 1993. p.18.

References

DFAIT 2000. CanadExport, Jan. 17.

SNC-Lavalin Group 2000 Annual Report.

Table 1:

Top 10 Canadian Military Contractors 2000

   Company head office/main plant  A   B   C  D  E  F  G

 1 General Motors of Canada Ltd,
   Diesel Division, London         2   1   X  X  X  4  794
 2 Bombardier Inc, Montreal                   X     1  781
 3 CAE Inc, Montreal                       X  X     2  410 (*)
 4 SNC-Lavalin Group, Montreal     1   6            5  220
 5 Computing Devices Canada Ltd,
   Nepean                          7   5   X     X  2  212
 6 Magellan Aerospace Corp,
   Mississauga                     14  16  X        1  188
 7 CMC Electronics Inc, Montreal   9   3   X  X     2  125
 8 Bell Helicopter Textron Canada
   Ltd, Mirabel                               X  X  1  110
 9 Pratt & Whitney Canada Inc,
   Montreal                            18     X  X  1  >90
10 Heroux-Devtek Inc, Longueuil    18  2   X        1   86 (*)

Legend

A Ranking within largest Canadian Department of National Defence prime
contractors for the fiscal year 2000-2001.

B Ranking within largest military export prime contractors for fiscal
year 2000-2001 as brokered by the Canadian Commerical Corporation.

C Estimated or reported military sales greater than 20 per cent of total
company sales.

D Reported military sales or deliveries from Canada to one or more Third
World countries during 2000.

E Foreign-owned or controlled.

F Commodity classification of military products (1-Aerospace;
2-Electronics; 3-Marine; 4-Transportation; 5-Armaments).

G Estimated total value of military sales in millions of Canadian
dollars for 2000 or closest fiscal year, compiled from Canadian Military
Industry Database data and files. For Canadian-owned companies this
includes military sales of foreign subsidiaries ((*) indicates the
company reported a value for its military sales).