canada 1 january 2002 think canada thinkaerospace industry thinkinvestment think bottom line
TRANSCRIPT
Canada 3
Canadian Aerospace and Defence… Performance Proven
• Approximately 700 firms with 93,000 employees
• Gross Sales of $20.5 Billion in 2000
• Invested approximately $900 Million in R&D (2000)
• Globally competitive with exports of 76% of output
• Extensively integrated in the global aerospace and defence industries
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey 2000/2001, December 2001.
Canada 4
…A Presence in Major Market Segments
• Significant capabilities in all product segments...
• ...with particular strengths in commercial aircraft and dual-use electronics
• …and a strong aerospace and defense service industry
Canada's Aerospace and Defence-Related Products – 2000
Airframes44%
Other Defence
9%
Space5%
Other Aircraft &
Parts20%
Avionics9%
Propulsion13%
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey 2000/2001, December 2001.
Canada 5
A Continuously Strong Record of Performance...
• In 2000, aerospace sales by the G-7 totaled $189 billion $ U.S.
• Continued strong growth in past three years
• From 1976 to 1998, Canada’s share of world production more than tripled
• Canada was sixth in sales in 1999
Aerospace Output, 19997 Largest Western Aerospace Nations
(Based on Constant 1997 Prices and 1999 ECU’s)
Source: The European Association of Aerospace Industries (AECMA)
0
1
2
3
4
5
6
1993 1994 1995 1996 1997 1998 1999
Canada’s Share of Global Aerospace Sales(Based on Constant 1999 Prices and 1999 ECU’s)
2.43%
5.54%
6.37%
6.37%
11.63%
11.32%
56.34%
Italy
Canada
Japan
Germany
France
U.S.
U.K.
Source: The European Association of Aerospace Industries (AECMA)
0
5
10
15
20
25
30
1998 1999 2000 2001f 2002f
Exports Total Sales
AerospaceExports vs Total Sales
$ Billions
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey 2000/2001, December 2001.
Canada 6
…Leading in Several Aerospace Products
Product LinesCompany % WorldMarket Share
35
40
7570
3160
34
58
Bell Helicopter Canada
Bombardier
CAE
Various companies
Pratt & Whitney Canada
Honeywell
Civil helicopters
20-90 seat turboprop and turbojet regional aircraft
Commercial simulatorVisual simulation sector
Landing gearNew large aircraft landing gear
Small gas turbine engines
Transport aircraft environmental control systems
Canada 7
...and Leading Edge Space Companies
• Strategic International Partnerships- USA (NASA) partner for over 3 decades - from Alouette to RADARSAT
- special relationship with the European Space Agency for over 2 decades
- only non-European country with quasi-associate status
- extensive bilateral cooperation with other European and Asian countries
• World - leading capabilities- space robotics and moveable spacecraft antennas (EMS and MD Robotics)
- many space microwave subsystems (COM DEV)
- turn-key earth observation data receiving, processing, archiving and distribution (MDA)
- Satellite communications systems consulting (Telesat)
- Synthetic Aperture Radar (MDA)
• Larger export proportion than other spacefaring nations
Canada 9
Canada: a Dynamic, Competitive Economy— Open for Global Business
Canada's economic fundamentals andrelative cost advantages provide afirst-rate business environment. Canada provides:
Excellent economic fundamentals
Report Card
Overall government budget in surplus.
Low inflation and low interest rates.
Easy access to marketsGeography and NAFTA provide easyaccess to the world's most prosperousmarket.
A cost-competitive businessenvironment
Large stock of skilled workers; low start-up costs; competitive tax system(particularly for R&D); strong technologicalenvironment; positive business climate.
An excellent place to live
Superb overall quality of life.
Canada 10
C
• Canada's fiscal situation has turned around dramatically:
- In 1993, Canada’s deficit (as a percentage of GDP) was 8.7%, the second highest in the
G-7 and significantly above the U.S. rate.
- However, by 1997, Canada posted a surplus – the first G-7 country in the 1990s. In 1999, Canada had the highest financial surplus relative to GDP of the G-7 countries.
- Federal government spending (as a % of GDP) is at a 50-year low, the key source of the Canadian fiscal turnaround.
Canada’s Strong Fiscal Situation
CC
The Institute for Management Development ranked Canada as the best fiscally managed country in the G-7 in 2000
Federal Budgetary BalancePublic Accounts Basis
Source: Finance Canada
0.0
-3.0
-6.0
% of GDP
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-200
0
2000
-01
2001
-02
Surplus
Deficit
+
Federal Program SpendingPublic Accounts Basis
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-89
1999
-00
2000
-01
2001
-02
10
12.5
15
17.5
% of GDP
Projected10
* Includes federal, provincial/state and local ** ProjectionsSource: OECD Economic Outlook, June 2001
Total Government Surplus*
1993
1994
1995
1996
1997
1998
1999
2000*
*
2001*
*
2002*
*
02468
-2-4-6-8
-10
% o
f G
DP
Canada 11
• The federal government and the Bank of Canada have an inflation target that locks the inflation rate in the 1% to 3% range.
- Over the past five years, Canadian inflation averaged 1.7% — 30% lower than the U.S. rate.
• Canada's excellent fiscal situation and low inflation are reflected In low domestic interest rates.
Low Inflation and Low Interest Rates
Sources: Statistics Canada and the Federal Reserve Bank of St. Louis
Source: Bank of Canada, Government long-term bond, last Wednesday in the month
Last data point plotted: October 31, 2001
Long-Term Interest Rates
1993 1994 1995 1996 1997 1998 1999 2000 20013
5
8
10
%
Inflation
93 94 95 96 97 98 9920
00 0
1
2
3
4
Yea
r-O
ver-
Yea
r %
Ch
an
ge
Canada 12
Streamlined Border Flows ...
• Since the enactment of the North American Free Trade Agreement (NAFTA) in 1994, Canada provides long-term assured access to the North American market — nearly 400 million people with a combined GDP of over $9.4 trillion ($U.S.).
• In addition to eliminating tariffs, NAFTA provides procedures for:
- border facilitation;- movement of personnel;- investment and intellectual property
protection; and- product certification.
• The North American market is serviced through a well integrated transportation system which is among world’s best.
- Automated permit ports, transponder identification systems and joint processing centres are being tested and deployed.
Source: Statistics Canada
Annual Transborder Crossings -Total Number of Trucks and Canada-US Air Passengers Entering Canada
Truck
Air
80 82 84 86 88 90 92 94 96 98 20000
5
10
15
20
Brian McGill, Director of TransportationPratt & Whitney Canada Inc.
"Pratt & Whitney has a worldwide distribution network. Customs operations have been streamlined to the point that the
Canada-US border plays no role in our distribution system."
Mil
lio
ns
of
Cro
ss
ing
s
Canada 13
...and Short Distances to Markets
• Almost half of the U.S. population lives within a 10 hour drive of Toronto, and over 60 percent within a two hour flight.
• Business travel between Canada and the U.S. has increased considerably since the inception of the “Open Skies*” Agreement (February, 1995)
• Direct air service between major cities in Canada and the U.S. has nearly doubled in 6 years.*Under “Open Skies” Canadian Air Carriers gained unlimited rights to establish routes from any point in Canada to any point in the United States. Similarly, U.S. carriers also gained unlimited access to the Canadian market (with a phase in period for up to three years)
Calgary Regina
Halifax
Los Angeles
Denver
New York
Boston
Philadelphia
Washington
BaltimoreDetroitChicagoCleveland
St. Louis Pittsburgh
Milwaukee
Houston
Atlanta
Vancouver
Toronto
Montréal
Seattle
Miami
Mexico City
San Francisco
Winnipeg
300 mi
600 mi Charlottetown
St. John's
Edmonton
VictoriaOttawa
Windsor
QuébecFredericton
Increase in TransborderRoutes Since Open Skies
89
165
Feb. 1995 Feb.2001
Source: Transport Canada
Direct Scheduled flights only.
Canada 14
• The overall skill level of Canada's workforce ranks high among competing countries.
• According to the Word Competitiveness Yearbook, Canada has the highest percentage of individuals achieving at least college or university education.
Superior Quality Workforce
“ High-tech companies are pursuing skilled peoplewherever they are available, and Canada has emerged asone of the top sources.”
Alan McMillian, CEO at PlanetIntra
* Percentage of the population that has attained at least tertiary education among 36 countries considered in the World Competitiveness Yearbook, 2001.
Canad
a
Japan U.S
.
France U.K
.
Germ
any
Italy
In
dex
1st 2nd
3rd
9th15th
20th
30th
Higher Education Achievement* World Rank
Canada 15
• According to the U.S. Bureau of Labor Statistics, labour costs in Canadian manufacturing (wage and non-wage) are the lowest in the G-7.
• Occupational wages are also lower in Canada for knowledge workers.
Low Labour Costs
* Figures are for 1999. Source: U.S. Bureau of Labor Statistics, September 2000
Cost of Labour — Manufacturing*
140
109100 94 86 86 81
Germany Japan U.S. France Italy U.K. Canada
$U.S
. p
er h
ou
r
U.S.=100
Occupational Wages — Knowledge Workers, 1999
* Canadian data have been converted to full-year assuming a 52-week work year.** Purchasing power parity for 1999*** date for computer programmers based on average for 1997, 1998, 1999Source: IC calculations based on Statistics Canada Labour Force Survey and U.S. Bureau of LabourStatistics Occupational Employment and Wage Estimates
Life Science Professionals
Physical Science Professionals
Computer Programmers***
Electrical and Electronic Engineers
Chief Executives
$49,469
$52,423
$54,960
$62,309
$101,240
Full-time, full-year wages* ($U.S. PPP**)
$42,097
$46,348
$36,467
$48,945
$59,608
Canada 16
• Canadian locations compare well internationally in terms of statutory corporate income tax rates.
The federal government and some provinces have announced sharp cuts in corporate taxes, to take effect over a five-year period.
The Economic Statement and Budget Update accelerated the pace of this tax relief.
• By 2005, firms in Canada will have a 5.1% corporate income tax rate advantage over U.S. firms (including capital tax).
Competitive Corporate Taxes
Source: Finance Canada
44.9%
41.5%
38.6%
35.6% 34.9%
40.0%
46.6%
Corporate Income Tax Rates including capital tax equivalents
2000 2001 2002 2003 2004 2005
Canada 17
Programs for Investing in Technology Development
In 2000, these government mechanisms contributed to R&D expenditures totaling $740 Million in the Canadian aerospace
sector, and accounted for 12% of total R&D expenditures
Canada’s aerospace and defence industries benefit from a list of programs including:
• Technology Partnerships Canada – risk-sharing partner in technology development
• National Research Council •Institute for Aerospace Research – aerospace R&D and testing •Industrial Research Assistance Program – support for small and medium-sized Canadian firms•The Aerospace Manufacturing Technology Centre (AMTC) – facilitate next generation
manufacturing, particularly among SMEs.
• Export Development Corporation (EDC) – export financing and insurance services
• Industrial and Regional Benefits (IRB) – industrial participation in major Crown procurements
• Defence Industry Research Program – financial and scientific support for industry-initiated research
• Granting councils – support university and project research through partnerships of universities with industry
• University Chairs – increase number of environmental university chairs in eco-efficiency areas (engineering, environmental science and business) in order to produce more graduates, enhance university research and strengthen research networks
• Canadian Commercial Corporation – guarantees contract performance for Canadian exporters, especially for sales to governments
Canada 18
• Canada's technological infrastructure is second only to the U.S. among the G-7 — we rank above or very close to the U.S. in terms of:
- internet users and internet hosts, - computers per capita, and- computer instructions per second.
• Building a universal, competitive, leading edge "Information Highway" is a government priority.
First-Class Technological Infrastructure
“Canadians are well known and respected around the world for developing advanced technology and also
for having good business and trade practices.”
Chris Piché, Chairman and CEO of West Vancouver-based Eyeball.com Network Inc. –
July 7, 2000
* Standing among 49 countries. Index based on 12 characteristics including investment in telecommunications, computers in use, computer power, internet connections, number of telephone lines, cost of telephone calls and use of robotics. Source: World Competitiveness Yearbook, 2001
I nd
ex
Technological Infrastructure*World Rank1st
6th
14th
19th15th
30th
23rd
CanadaU.S. U.K. JapanGermany ItalyFrance
Canada 19
Low Production Costs
• Growing productivity, skilled workers, and low labour costs make businesses competitive.
- Canada's competitive position vis-à-vis the U.S. has improved substantially since 1991.
“ Our records for safety and productivity place the TMMCteam among the industry’s best. And when it comes to quality, vehicles built at our Cambridge facility are amongthe highest rated vehicles in North America.”
Toyota Motor Manufacturing Canada Inc.
Takanori (Tak) Sakaue, President
Manufacturing Unit Labour Cost Index $U.S. Basis
60
70
80
90
100
110
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 992000In
dex
199
2=10
0
Source: U.S. Department of Labor, Bureau of Labor Statistics, August 2001
Canada 20
Reasonable Cost of Living
• Canada has the lowest cost of living among the G-7.
• In particular, the cost of living in most large Canadian cities is better than or comparable to that in similar U.S. cities.
- And, Canadian cities rank better than U.S. cities in terms of the level of crime, pollution, environment and leisure facilities.
Cost of Living — World Rank*, 2001
Japan U.K
.
France Ita
ly
Germ
any
U.S.
Canad
a
Ind
ex:
New
Yo
rk C
ity
= 1
00
48th
42nd 35th 31st 27th 25th 20th
* Rank among 49 countries considered in the World Competitiveness Yearbook 2001Source: IMD
75100125150175
Canada 21
Positive Business Climate
• The Economist Intelligence Unit ranks Canada highly in terms of its overall business climate.
• Moreover, Canadian laws are among the best in the world at preventing unfair competition.
Note: The business environment is based on several indicators including market potential, tax and labour market policies, and the political background.Source: The Economist (EIU), August 24th, 2001
Business Environment of Top TenCountries, Rank in 2001-2005
Nether
lands
U.S.
U.K
Canad
a
Switzer
land
Irela
nd
Finla
nd
Singap
ore
Sweden
Hong Kong
Wo
rld
Ran
k
1st 2nd
3rd 4th
5th 6th 7th
10th9th8th
Competition Laws — World Rank
Italy
Japan U.K
.
France U.S
.
Canad
a
Germ
any
Ind
ex, R
anke
d b
y F
airn
ess
31st 30th27th
19th8th 7th
3rd
Source: World Competitiveness Yearbook 2001
“Canada is a very business friendly country, and Ottawa is an excellent environment for knowledge based
industry. The physical environment is outstanding, education leads are high, the work ethic is strong and
costs are very competitive. It’s just a great place toexpand our business .”
Roderick Bryden, President & CEO of World Heart Corporation
Canada 22
• The economic policies of the government of Canada are focused on making Canada a world leader in the global knowledge-based economy of the 21st century. Commitments include:
- Making Canada the most connected Government to its citizens by 2004.
- Making high-speed broadband access available to Canadians in all communities by 2004.
- Becoming one of the top five countries for research and development by 2010.
- Shaping a “National System of Innovation”; and
- Providing marketplace frameworks/services benchmarked against the best in the world.
Government as a Partner for the Knowledge Economy
“A knowledge-based workforce, a competitive R&D tax structure, government support programs such as
Technology Partnerships Canada, and well-established infrastructure in Canada: these attributes make Canada
the top choice for Pratt and Whitney in considering future R&D investments in the ever-competitive world of aerospace.”
Gilles P. Ouimet, PresidentPratt & Whitney Canada Inc.
Canada 24
Aerospace is a Proven Investment Platform...
Canadian-based companies offer investors unique opportunities
• Team with Canadian-based multinationals, including:
- Bombardier Aerospace – third largest commercial airliner manufacturer
- Pratt & Whitney Canada – small gas turbine power for the world
- CAE – corners the commercial flight simulator market
- Bell Helicopter Canada – one of the world’s leading commercial helicopter manufacturer
• Access capabilities of companies that supply the OEMs, e.g.:
- Avcorp – Winner of a Gold Award for entrepreneurial achievement at the Canadian Productivity Awards
- Haley Industries – one of the world’s most technologically advanced foundries
- NMF Canada – world leader in processing large, machined wing panels
- Spar Aviation Services – one of only 11 Lockheed-approved C-130 Maintenance and Modification Centres.
- Composites Atlantic – advanced composite components for commercial aircraft, space structures, rocket motor cases, etc.
Canada 25
AerospaceDistribution of Investment Expenditure
$ Millions
0
200
400
600
800
1000
1200
1400
1600
1998 1999 2000 2001f 2002f
Plant & Equipment R&D Other
A Healthy Investment History
• Total investment in the aerospace industry reached $2 billion in 2000.
• Investment in R&D was $820 million in 2000 and is forecasted to reach $840 million by 2002.
“Magellan Aerospace competes globally and is dedicated to creating technology, new products
and jobs in its operations.”
Richard R. Neill, PresidentMagellan Aerospace Corp.
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey 2000/2001, December 2001.
Canada 26
Unique Access to the U.S. Market
• The U.S.A. consumes 50% of G-7 aerospace production with a strong domestic industry.
• Canada has a special relationship to access this market- For U.S. military purchases, Canada is considered part of the North American
Defence Industrial Base- Special trade agreements can facilitate participation in US military projects
Defence Production Sharing Agreement Defence Development Sharing Agreement
• The U.S. market accounts for the majority of Canadian aerospace and defence exports – on average $5B annually. Boeing alone purchases in excess of $800M from Canadian companies.
• 60% of the Canadian aerospace and defence industry output is attributed to subsidiaries of US firms operating in Canada – a high level of cross-border integration.
Canada 29
• Canada's economic fundamentals are excellent — government policies are geared toward competitiveness.
• Canada provides assured access to the world's richest economy, in addition to having a large and growing domestic market of its own.
• Canada provides a cost-competitive and future-oriented environment for business:
- quality, productive workers;- a competitive tax system;- prime locations for R&D activities;- abundant energy at low prices; and- an excellent infrastructure.
• Canada is an outstanding place to live, invest and do business.
Canada Offers Much
David O'Blenis, President,Honeywell Canada
"Aerospace is truly a global business and these wins [move of Power Management and Generating systems to Toronto, expansion of plants in Montreal and Summerside, and
investment of more than $50 million in a new headquarters, engineering and
manufacturing facility] for Canada were made possible by the excellent business
climate here: sound fiscal management in the public sector, attractive R&D tax
incentives, and unique opportunities to partner with Governments to achieve growth.
It is clear to me that the decisions taken at the Corporate level of our global business to
focus our growth here show great confidence in Canada."
Canada 30
For more information:
Contact:
Aerospace and Automotive BranchIndustry Canada235 Queen StreetOttawa, Ontario K1A 0H5
Ron Watkins Nathalie CoutureDirector General Industry Development Officer(613) 954-3343 (613) [email protected] [email protected]
For more information, visit Strategis, Industry Canada’s award-winning Web site:
http://strategis.ic.gc.ca/aerodef_e
Canada 31
For more information (continued):
R&D Tax Credit:John JonesScience Policy CoordinatorScientific Research Section of Revenue CanadaTel.: (613) 941-1130Fax: (613) 957-3622e-mail: [email protected]
Technology Partnerships Canada (TPC):Jeffrey ParkerDeputy Executive Director and DirectorAerospace and DefenceIndustry CanadaTel.: (613) 941-6747Fax: (613) 954-9117e-mail: [email protected]