Preserve or boost aerospace R&D funding says Canadian association

Aero Montreal chairman, Heroux-Devtek’s CEO Labbe, says cutting R&D funding would hurt industry's growth.

Comments Off on Preserve or boost aerospace R&D funding says Canadian association February 14, 2012
by Canadian Press

Montreal — Governments should maintain or increase aerospace research and development funding despite efforts to pare budget deficits, the head of Montreal’s aerospace industry association said Monday.

“It’s a big payback for the government,” said Gilles Labbe, chairman of Aero Montreal and CEO of landing gear manufacturer Heroux-Devtek.

The aerospace executive told the Canadian Club of Montreal that the industry shouldn’t face the budget axe because it generates wealth for the country.

The Canadian aerospace industry exports 80 per cent of its manufactured goods and employs more than 40,000 people, including thousands of engineers.

“We export over $16 billion of the product outside the country so we create wealth for the country through employment and investment,” Labbe said at a news conference.

Governments support a quarter of the $1.4 billion invested in research and development in the industry annually.

At the very least, Labbe said Canada’s Strategic Aerospace and Defence Initiative funding and existing tax credits should be maintained.

The landing gear company executive said he doesn’t know what federal Finance Minister Jim Flaherty will announce in his upcoming budget, but any cuts in research and development funding would hurt the industry’s growth.

Prime Minister Stephen Harper pledged at the Davos Economic Forum to making innovation a key element of the upcoming budget by rethinking how Ottawa doles out more than $6 billion to stimulate research and development.

Improving innovation and competitiveness has been the goal of governments long before Harper came to office, and according to a 2010 measure, Canada still ranks 14 of 17 peer countries.

The government-commissioned Tom Jenkins report released in the fall will guide some of the coming changes, but not all.

Jack Mintz of the University of Calgary’s School of Public Policy recently said he believes Ottawa is giving close consideration to a recommendation made in the report known as “smart procurement,” which would call on companies bidding for federal contracts to demonstrate innovation.

The budget is also certain to tackle the much criticized Scientific Research and Experimental Development program, which hands out $3.5 billion in tax credits each year to some 25,000 companies. The intent is to tie funding more closely to results in terms of commercial products.

Labbe also said the U.S. government’s decision to slow procurement of its Joint Strike Fighter program will cause short-term pain, but that should be offset by the growing commercial and business jet business.

“We’ll build more airplanes, but more gradually,” he said.

U.S. President Barack Obama presented a budget request Monday that will, among other things, save US$15.1 billion over five years by slowing the F-35 program.

The U.S. still plans to purchase 2,400 planes over several decades. Orders from other countries, including Canada, should raise that total to 3,000 aircraft.

Heroux-Devtek has more than $750,000 worth of product on each plane.

Labbe is discussing the change with the plane’s manufacturer Lockheed-Martin, but said he doesn’t believe the slowdown will lead to layoffs.

During the 2009 downturn, the company was able to avoid most job cuts through job-sharing until orders picked up.

This time, the commercial and business jet markets are heating up for an expected run of at least five years.

“We’ll grow in the coming years, we will balance all this to keep our people busy.”
© 2012 The Canadian Press