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was the bilateral Canada/U.S. trade agreement. Five months after winning the election, four months after passing the FTA, the Tories killed the rebuilding programme of the 1987 white paper while at the same time slashed DND's budget and dashed the hopes of Canada's 85,000 serving sons and daughters who were not seeking a financial panacea, but craved a policy framework within which they could do their job structuring a defence force relevant to Canada's needs.

For 1992-93, defence is off the political `goodies' list and on the chopping block. Disingenuous talk about disarmament and the recent introduction of Canada's first annual report on exports of military goods from Canada may be ground work for the shellacking DND can expect.

Deficit reduction and civil service trimming are nearing the top of the Tory political priority list. Heads up. Defence is highly vulnerable with more than 25,000 DND civil servants working in Ottawa alone. Certainly the federal Tories, with the exception of an exceptional politician, Paul Dick, have nothing to lose in the Ottawa ridings.

The defence community has only a soft-spoken voice and minimal public support. There is no industrial lobby group such as the powerhouse that exists in the U.S. Furthermore the traditional silence required of generals and admirals adds to the inborn vulnerability of an institution that must remain subservient to its political master.

Neither the Oka crisis nor the Gulf War have had a generous impact on defence. Listening during the Gulf War to the television pundits who were consumed with American military might as if it were our own provided the first clue. Listening to the population thereafter provided the preeminent proof. In neither case, Oka nor the Gulf War, did the Department of National Defence get the kudos deserved by the CF. In neither case did popular opinion swing to favour prioritized support for the department or for national security in general.

Heads up. There could be trouble in the wind.

Micheal J. O'Brien

Volume 5, Number 12 March 20, 1991


Comment:

HEADS UP!

The Mulroney government must plan now for a federal election in the next thirty months. Party machinery will soon begin to generate and "spin" some good news for the general population, plan a major central issue for an election campaign, and above all, summon and prepare the Party's finest workers for a formidable contest.

For the '88 election, the Tories vitalized their core Conservative crew by introducing policy that essentially fulfilled 1984 promises to bolster defence in Canada.

The Tory government gave the appearance of acting as a team of real Conservatives. And real Conservatives came out in droves to support them. These spirited Canadians typically support the universal Conservative credo which vouches for a strong, secure nation wherein the entrepreneurial spirit is nurtured by a non-interfering government which also recognizes that people create prosperity, not governments.

The Tory Party won the 1988 election on the backs of its tough, hard-working, powerful, Conservative base. The core issue of the election



LSVW COMPETITION HEATS UP AS PMO EVALUATES BIDS THIS WEEK

The Light Support Vehicle Wheeled (LSVW) Project which will replace Mobile Command's geriatric fleet of 2,800 rusting, 5/4 ton Chevrolet cargo trucks has entered into the evaluation phase with the submission of four bids to the Military Operational Support Trucks Programme Management Office (MOST PMO). Competing for the contract to supply up to 3,300 vehicles in five configurations are Freightliner of Canada Ltd./Mercedes Benz Trucks; Invar Manufacturing Ltd. of Batawa, Ontario with Chrysler Canada; UTDC Inc. of Kingston, Ontario teamed with Steyr-Daimler-Puch AG of Austria; and Western Star Trucks Inc. in Kelowna, British Columbia associated with IVECO of Italy.

Colonel Malcolm Campbell, MOST Programme Manager said that evaluation teams gathered on Monday morning to begin reviewing four proposals which were submitted in time to meet the March 11 deadline. Six other companies which were also issued a Request For Proposal (RFP) in September 1990 — including British Aerospace, Flexicoil, Ford Canada, General Motors of Canada Diesel Division, LTV, and Oerlikon Aerospace — subsequently withdrew from the competition.

Campbell says that DND is seeking to acquire "a commercial vehicle with military enhancements" having a capacity in the range of 1.5 to 2.0 metric tonnes. The vehicle will be required to carry a shelter, three men and a trailer load. As price will be a major factor in determining the value of the contract, the new LSVW will represent a "minimum cost replacement to replace the existing capability". Central to the four bids is the vehicle being offered by each contending team.

Invar Manufacturing Ltd. submitted a uniquely all-Canadian bid disclosing that the main cab and chassis unit of its proposed vehicle is the Chrysler Canada Dodge W350 truck fitted with a turbo-charged diesel engine and a four-wheel drive line. The W350 truck would come directly off the Chrysler Canada production line and modifications to such parts as axles and tires would be undertaken by Chrysler prior to shipment to Invar for completion of the militarization. Company officials at Invar say they are pleased to be able to propose "the only all-Canadian bid" and single out this uniqueness as what they believe to be a `leg over' in the competition.

UTDC has proposed the `Noriker', a vehicle adapted by Steyr-Daimler-Puch for military applications which includes commercially proven equipment from the Volkswagen LT vehicle series. Bob Gawley, manager of Marketing and Communications at UTDC says that his company will provide a prototype built and tested in Austria and fully compliant with RFP specifications. The prototype will undergo further testing in Kingston to ensure that Canadian components can be successfully integrated into the vehicle.

Western Star Trucks hopes to fulfill DND's LSVW requirement with the IVECO (Fiat) Model 40.10 built by Western Star under Licensing Agreement with IVECO. The IVECO 40.10 is designed to perform for a twenty-year lifetime and is currently in military service with at least ten NATO countries. The Western Star LSVW bid contains the support of its dealer network which includes a dealership adjacent to every Canadian Forces Base in Canada.

Campbell told The Wednesday Report that Freightliner is offering a `Unimog' vehicle. Oddly, when contacted on Monday, Freightliner of Canada President John Mosier said he did not know if he should reveal this or other details of his company's bid. He was invited to think about it, but no further response had been received from his firm at press time.

The winning bid is expected to be announced between August and September and deliveries of the LSVWs will commence one year following the contract award. Campbell has been given no indication that the LSVW Project will be affected by budget constraints.

SUBSCRIPTION RATES TO INCREASE THIS YEAR

The Wednesday Report's yearly subscription rates will increase by ten percent effective March 20 for new subscribers, however, our current subscribers may renew their subscriptions any time before December 31 at the old rates. This is the publication's first rate increase since June 10, 1987 and is required to offset postal rate escalations and other cost increases.


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THE AIR EUROPE COLLAPSE

Europe's aerospace and airline industries are trying to digest the failure of the Air Europe airline business. They believe that its collapse could have significant knock-on effects on at least two major European manufacturing businesses. Fokker may be compelled to place F100 aircraft in mothballs as they leave its production line. Air Europe was only part way through a planned purchase of fifteen of the Rolls-Royce powered twinjets and around ten aircraft are still undelivered. Netherlands sources believe that Fokker will have no option but to complete at least some of the outstanding order and is planning to place the aircraft concerned in long term storage. However the costs of financing the manufacture and ensuing storage are considerable and could impact deeply on Fokker's near term fortunes.

Rolls-Royce will also be hit by the fact that Air Europe planned to purchase six McDonnell Douglas MD-11s powered by its Trent engines for delivery in 1993 and had options on a further twelve aircraft for delivery at six per year. It also had outstanding orders with Boeing for eight 737-400s and twenty 757-200 aircraft. The effect of the loss of orders for engines and spares could be a hole in the Rolls-Royce order book in excess of $488 million.

Financial experts are still picking over the bones of the airline's failed ILG parent, but it has already emerged that in the boom years ILG was notoriously cash short but was able to secure 110 percent loans against the security of its aircraft and use the `extra ten percent' for the day to day running of its business. Air Europe had expanded from the travel market into the provision of scheduled services to account for around 25 percent of all landing and takeoff slots at London's Gatwick airport. The cost of expansion probably reached $7.3 million per year and it seems that operating losses were compensated by a series of leasing deals and trading in new aircraft and options on those that were yet to be delivered. There are reports that some of the Air Europe subsidiary interests — including freight and spares operations — might be sold as going concerns, but in the absence of a buyer for the principal business its 1,970 staff are to be dismissed.

The Air Europe collapse is only one of several effects of the downturn in civil aviation to impact on Fokker and Netherlands industry sources believe that deliveries to other customers in the leasing market, and possibly to Iran Air and Taiwan ALC, might be deferred. Nevertheless they believe that the plane maker is reasonably well placed to ride out the crisis.

John Reed, London Editor

HOMECOMING FOR SAILORS FROM THE GULF

One of the first Canadian sailors to the Persian Gulf was the first to lead his troops back home last week. Captain (N) Duncan Miller, commander of the Canadian task group 302.3 led the first 118 men and women from his command off a Boeing 707, bringing them home from the war. Over 300 family members and friends cheered from the tarmac at CFB Shearwater, Eastern Passage, N.S. as the returning veterans disembarked.

Miller called his seven-month tour of duty in the Gulf "the highlight of my career". His command vessel, HMCS Athabaskan was the first Canadian warship to enter a combat zone since the Korean War. During the February 24-27 land offensive for the liberation of Kuwait, Athabaskan came within two kilometers of the occupied emirate's coastline. The destroyer was acting as escort for the U.S. Navy hospital ship USS Comfort, at that time taking part in a large Marine amphibious fient to fool Iraqi shore defences. (See The Wednesday Report, March 6, page 8, "Canadian Naval Forces `Attacked' Kuwait in Marine `Assault'".)

The three-ship Canadian task groupHMCS Athabaskan, Terra Nova and Protecteur — are steaming their way back to Halifax with an expected arrival some time within the next two weeks. HMCS Huron, which left Halifax three weeks ago to replace Athabaskan is still in Gibraltar awaiting further orders. Huron will likely be ordered back home within the next week.

The personnel sent home early were considered non-essential for the ships' voyage home. Among the lucky returnees were members of the 118th Air Defence Battery based at CFB Chatham, N.B. The Royal Canadian Artillery members were seconded "sailors" for the operation, providing added defence against air attack with their shoulder-launched Javelin 1 missiles. But with the destruction and early defection of the Iraqi Air Force, Miller admits the only armed threat they faced was when a Scud missile made a chance hit on their land base at Qatar. No one was injured.


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Patrick McManus, Halifax

TOP CPF MAN RETIRES FROM SENIOR SJSL POST

One of the leading figures of the Canadian Patrol Frigate (CPF) programme, Vice-Admiral James Wood has retired from his post as senior vice-president of Saint John Shipbuilding Limited (SJSL), effective March 1. Wood, who also served as president of Saint John Naval Systems (SJNS) in Halifax, was supposed to retire the previous year, but agreed to stay on a little longer "just to help get things over the hump".

After joining the navy as an ordinary seaman in 1949, Wood rose to the rank of commander, Maritime Command in 1983. During his tenure as Canada's top sailor, Wood steered the fleet through some difficult years. The navy was plagued with the problem of its aging ships just at a time when replacements were many years away. Before his promotion to commander, Maritime Command Wood was posted at National Defence Headquarters in Ottawa where he served on the committee to decide on a new frigate for the navy.

Wood's reputation as a frank and outspoken commander may have cost him his fourth star in 1986, when he was passed over for promotion to Chief of the Defence Staff (CDS) by Lieutenant-General Paul Manson of the air force. Although the CDS post was considered due to the navy — an admiral has only held the CDS position once in the last twenty years — it was thought by some insiders that Wood's spirited defence of the senior service cost him points with his political masters. He retired in 1987 just two years short of his compulsory retirement.

After a year away from the military, "to expunge my soul of any conflict", Wood joined SJNS in March 1988. The company was set up by SJSL in order to develop an integrated logistics support package and training systems for the CPF programme. As company president, Wood steered the firm toward the civilian marketplace, developing maintenance and refit packages for organizations like the U.S. Coast Guard. Wood estimates that more than fifty percent of SJNS business is presently in the civilian sector. Now retired, Wood plans to relax and spend his leisure time between his homes in Halifax and Prince Edward Island.

Patrick McManus, Halifax

BAe/THOMSON/GIAT/OERLIKON SHAPING EUROPE'S MISSILE BIZ

Plans for the merger of British Aerospace and Thomson-CSF's missile interests have been shelved. Although the official word is that negotiations have been `adjourned', European sources have been saying for several weeks that the deal was dead in the water and would not survive.

The merger had been hailed as one of a series of moves which would eventually transform the face of the European defence industry. In practice it was overtaken by the course of events. The nature of the market has changed, and the international situation, far from compelling the two companies to merge, has forced them to consider ways in which they may be able to collaborate without restricting themselves by an all-embracing agreement. Moreover the French company's success in winning a major order for its Crotale missile in Saudi at the end of last year has upset the `balance of power' between the two companies that had been fundamental to the proposal. In at least the mid term BAe would seem to have no comparable dowry to bring to the marriage.

It may be no coincidence that British Aerospace (Dynamics) has made tentative inquiries concerning a possible purchase of Oerlikon's defence business (excluding Oerlikon Aerospace Inc.) which was recently put on the sale block in Zurich. BAe watchers believe that although Oerlikon's medium calibre activities could be of interest to another BAe subsidiary, Royal Ordnance, the Dynamics company is primarily interested in the Contraves fire control business, acquisition of which would presumably go part of the way towards redressing the effects of the `adjournment' of the Thomson deal. France's GIAT Industrie may also be interested in the Oerlikon business.

In the meantime, Thomson-CSF has acquired a slightly over fifty percent share in the U.K.-based Pilkington Optronics electro-optic business. The Pilkington unit has recently not been trading profitably after the loss of a major contract to its leading U.K. competitor Avimo. Observers consider that since Thomson also has the former Philips Usfa and the TRT electro-optic businesses under its control it may have decided to pursue a sector-by-sector approach to expansion rather


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than going via the `big ticket' missile route.

John Reed, London Editor

ROHDE & SCHWARZ TO REP TWO MORE EMC TEST LINES

Kanata, Ontario-based Rohde & Schwarz Canada Inc. has expanded its line of Electromagnetic Interference (EMI) test equipment with products from Amplifier Research Corporation and KeyTek Instrument Corporation. Amplifier Research products now represented by Rohde & Schwarz include RF power amplifiers, antennas and TEM cells as well as a field monitor system and fibreoptic control devices. The KeyTek product range covers Electromagnetic Capability (EMC) testing for pulsed EMI with emphasis on Electrostatic Discharge (ESD), Electrical Fast Transient (EFT) and surge testing. The additional products enable Rohde & Schwarz to offer complete EMC test systems for both emissions and immunity testing.

CZECHOSLOVAKIA'S LET RECEIVES FIRST CT7 ENGINES FROM GE

GE Aircraft Engines has shipped two CT7-9 flight test engines to LET in Kunovice, Czechoslovakia. The turboprop engines — the first to be delivered to LET by GE — will power the LET L610 regional airliner which is scheduled for first flight late this year. The CT7-9 powerplant will provide the L610 with a greater payload/range than would be offered by other engines in its class.

CAE TO SUPPLY RJ FLIGHT SIMULATOR TO GERMAN AIRLINE

DLT, a German commuter airline and subsidiary of Lufthansa German Airlines, has selected CAE Electronics Ltd. of Montreal, Quebec to provide a full flight simulator for the Canadair Regional Jet (RJ), under a contract valued at approximately $16 million. Before the simulator is delivered in the fall of 1992, pilots will be trained at the Canadair RJ flight training centre to be located at CAE's facilities. (See March 6, page 10, "CAE Electronics To Host Canadair RJ Training Centre".) DLT will eventually be restructured to include CAE Electronics and Canadair as partners in a joint venture flight training company.

EGYPTIAN APACHE SIMULATOR CONTRACT GOES TO CAE-LINK

CAE-Link Corporation has been awarded a $29 million contract from the U.S. government to develop and build an AH-64 Apache attack helicopter combat mission simulator for the Egyptian Air Force. The contract also calls for the supply of spares and support equipment, maintenance training and two years of contractor logistics support. The simulator — to be delivered early in 1994 — will be built at CAE-Link's facilities in Binghamton, New York and will include the company's Army Tactical Digital Image Generator (ATACDIG) visual system.

C-17 ENGINE SYSTEMS UNDERGO EXTENSIVE TESTING

The new McDonnell Douglas/U.S. Air Force C-17 airlifter is undergoing tests of its Pratt & Whitney F117-PW-100 engine systems in Quartzsite, Arizona. (See The Wednesday Report, January 16, page 9, "McDonnell Douglas Completes Assembly Of First C-17".) Flap impingement tests were recently completed during which portions of the C-17's high-lift blown flap system were mounted on the test fixture placed behind the engine. The Pratt engine was then `spooled up' to evaluate vibration and temperature levels. Primary fuel qualification testing has also been concluded, the results of which have been approved by the U.S. Air Force.

Power extraction tests are now being conducted to determine engine response to maximum demand from all aircraft electrical and hydraulic loads which are turned on during the tests. The electronic engine control — the "black box" that controls thrust reverser actuators and monitors engine parameters — is also being checked out.

Ongoing engine bleed subsystem testing is now 80 percent complete.

Upcoming tests of the thrust reverser using various engine power settings are scheduled for later this month. The "directed flow" thrust reverser system is a new feature of the F117-PW-100 engine and is being fine-tuned by McDonnell Douglas to meet new C-17 requirements. All engine


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system testing will be concluded in time for first flight of the C-17 scheduled for mid-year.

CHINOOK RETIREMENT CAUSES BOEING (ARNPRIOR) LAYOFFS

The recent retirement of the Canadian Forces CH-147 Chinook (see The Wednesday Report, March 6, page 3, "CF Cuts: 409 Squadron Shuts Down And Chinook Gets Dumped") has prompted Boeing Canada's Arnprior Division to lay off 40 employees in April. Three Chinooks at 447 Squadron, CFB Edmonton will be retired on April 1, while the remaining four helicopters in the Chinook fleet at 450 Squadron, CFB Ottawa will be taken out of service on August 1. The company is continuing efforts to secure alternate work in an attempt to avoid the elimination of an additional 20 jobs as aircraft support is phased out. The Arnprior facility has conducted repair, overhaul and modification on Canada's Chinook troop transports for over twenty years.

BAe 146 SIMULATOR RECEIVES FAA APPROVAL

British Aerospace Inc. announced last Friday that its BAe 146 simulator has obtained FAA certification to Phase II Level C standards. Training of 146 crews on the simulator — which is capable of training pilots for both BAe 146-200 and -300 models — began Monday at the British Aerospace Training Centre in Sterling, Virginia near Dulles International Airport. The simulator was manufactured by Reflectone Inc. of Tampa, Florida and developed and tested with the cooperation of BAe project test pilots and BAe Training Centre instructor pilots.

SHORTS JOINS 601-3A MARKETING TEAM FOR ASIA-PACIFIC

Short Brothers PLC has joined the Canadair Group of Bombardier Inc. of Montreal, Quebec in marketing the Challenger 601-3A widebody business jet in the Asia-Pacific region. The Shorts office in Hong Kong will begin supporting Challenger marketing while maintaining its role in the Shorts Tucano military trainer programme. Skytech Aviation Services Ltd., a marketing services subsidiary established in London by Shorts will assist Canadair with Challenger marketing efforts in Denmark, Finland, Ireland, Norway, Sweden and the United Kingdom.

PEOPLE: ROHDE & SCHWARZ APPOINTS FOULGER SALES MANAGER

Peter Foulger is now Sales Manager, Communication Products with responsibility for national sales of Rohde & Schwarz's HF/VHF/UHF transmitters, receivers, antennas, direction finders, avionics, trunked radios, FM radio paging and broadcast transmitters. Foulger was previously employed by Varian Canada Inc. as Sales Manager, Electron Devices.

PEOPLE: HEIDT APPOINTED DE HAVILLAND PRESIDENT

W. Daniel Heidt has been appointed president of Boeing Canada, de Havilland Division. Heidt will continue to serve as the division's executive vice-president and general manager until April 1. Immediately prior to joining de Havilland in October 1989, he held the position of vice-president commercial programmes at Textron Lycoming.

CALENDAR

April 9 — "Thrive or Survive in the Deregulated '90s" is the theme of a Financial Post Conferences/Air Canada one-day conference in Toronto at the Harbour Castle Westin dealing with, among other issues, the `open skies' concept proposed by transportation minister Doug Lewis. For additional information contact FP Conferences at (416) 350-6200.

April 9-10 — The Subcontractors IV (SUBCON IV) Exhibition — a special purpose trade show organized by External Affairs and International Trade Canada — will be held at the Montreal Convention Centre. The exhibition offers a unique opportunity for Canadian subcontractors to display their products to carefully chosen U.S. and Canadian primes and first-tier subcontractors in the aerospace, electronics and defence industries. To be considered for an invitation to SUBCON IV, those who wish to participate should contact Rose Bechamp, Project Coordinator, International Defence Programmes, Aerospace and Marine Division (TDA), External Affairs and International


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