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The Wednesday Report
Canada's Aerospace and Defence Weekly
Volume 4, Number 31                   August 1, 1990

We Canadians must get our heads out of the sand. As the rate of world change accelerates it seems that some Canadians increasingly deplore the adjustments critical to our staying relevant to the fast global pace. And that applies to the new Goods and Services Tax, commonly known as the GST. Like it or not, something had to be done. We can't very well say, "Wait world! We're not ready."
You in business can't do that. As you read in the following pages and in past issues, the industry is rapidly adjusting to meet new challenges. Canada as a country must do the same.
As you more than most Canadians know, the world economy is becoming increasingly integrated, competition is intensifying, and Canada must in every way possible position itself to compete. The GST, the government maintains, will improve our nation's competitiveness and help reduce the annual deficit by replacing the antiquated Federal Sales Tax (FST) system which is full of variances. The federal finance department points out that the faulty FST hampers exports and favours imports over domestic products. That certainly is bad for a country which exports some 30 percent of its output.
As the date for implementation of Canada's new sales tax approaches, businesses should begin to activate internal changes necessary to accommodate the tax's new processes. The GST, a broad-based, `value-added tax' is not
unlike tax structures found in some forty-eight other countries. The seven percent GST, effective next January 1 will apply throughout the nation's production and distribution chain and will parlay to goods and services consumed in Canada whether they are produced here or not. In contrast, Canadian products and services for export will bear no GST. That makes it a good tax system for your industries which export most of their output.
In many cases the old FST is applied to imported goods before marketing and distribution costs are incurred. Domestic producers often pay more. They pay the FST applied after their marketing and distribution costs are reflected in the price. This impairs the ability of some Canadian producers to compete with imported goods. In fact, under the current system, domestic products are taxed about one third more than imported products. That's unfair. The GST should put Canadians on an equal footing with importers for all goods and services sold in Canada. While that affects only a small portion of the aerospace and defence industries, it is worth noting. It will make a difference.
The GST is simple. Intrinsically, all businesses become tax collectors and tax payers. The 7 percent GST is paid on all business purchases, and seven percent GST is collected on all sales. If the GST paid is greater than the GST collected, than the difference will be refunded by the government. If the GST collected is greater than the GST paid, the difference is paid to the government.
Of course there are exceptions. Under the GST, sales tax on business inputs will be fully refunded having the effect of reducing the price of capital goods, thus leading to new investment. The GST will minimize tax avoidance and evasion activities, hopefully ensuring that the revenues needed to meet the government's deficit targets will be on the way. By improving Canadian economic performance, the GST should further contribute to a lower deficit.
Non-resident importers who make supplies in Canada will be treated like a Canadian business and will be required to collect tax as well as remit tax. These rules apply if the company or individual carries on a business in Canada; supplies admissions to a seminar, activity or event in Canada; or maintains a permanent establishment in Canada. Foreign publishers will also be required to collect tax on their subscription sales in Canada.
The bad news about the GST for us at The Wednesday Report and for Canadian subscribers is that you will be required to pay an additional seven percent on top of the regular subscription rate. In turn, if you are a business, you can claim that seven percent as a tax input.
And now the good news for us. The government has made an exception. Any subscription paid before December 31, 1990, for any length of time, will be exempt from the tax. So that means you will renew your subscription early, I'll keep my job longer, and the boss, Mike, will be less grouchy just kidding. 

Exempt from the GST are subscribers in the United States as well as those readers overseas who will not be subject to the sales tax because we export the publication to them. All in all the GST, in theory, should be a plus for the aerospace and defence industries. Let's see if it works in practice. Wanda Brox


"Our worst year ever!" is how Larry Clarke, CEO of Spar Aerospace Limited described 1989. But Canadian shareholder-owned Spar's fortunes appear to be improving. Recent quarterly statements show signs of progress. The company is taking on a new form which seems to make a lot of sense. Contracts like the January 26 award of the $146 million phase-I Radarsat are beginning to get under way. Spar trouble-shooter George Gomes appears to have put AN/SAR 8 back on the rails. And rumours of a new ownership arrangement see many doors opened for Spar within the international marketplace.

Spar's future is taking shape on numerous fronts. Chairman Larry Clarke who maintains control of the company through ownership of "special shares" with ten-to-one voting authority is said to be keen to diminish his involvement in the company and is supposedly seeking a strategic alliance with a 'multinational' through share equity or even by selling off a stake in the control of the corporation. Among the list of key suitors is France's Matra Espace whose attributes include ownership of its own satellite technology. Matra, said to be the prime candidate, has a significant worldwide matrix of business connections and ongoing relationships with developing nations seeking the benefits of space-based communications systems to accelerate their pace of development and industrialization. What more could Spar ask for?Amidst rumours that ownership at Spar Aerospace Limited is about to undergo a change, Spar's President John McNaughton, who seems to have taken the reigns of the company 'hands-free' from Clarke intervention, is reorganizing the corporation in what appears to be a gambit designed to trim and improve operational efficiency. Although unofficial at this time, Spar is being refashioned into three parts, each with its own president.

Three operating "Groups" within Spar will consolidate complementary divisions of the company allowing their managers to draw upon common services and better utilize engineering and financial resources. "We can almost get rid of three accounting departments," suggests one manager at Spar. Certainly, from the human angle, career paths within the new structure will be clearer and broader thus perhaps providing a route to solving a traditional Spar problem, low morale. Consolidating numerous operations into units will lessen the likelihood of having smaller divisions hungrily seeking the type of employee which another division is unwittingly in the process of laying off, a problem which is the epitome of the statement, "At times one hand didn't know what the other was doing," made by a member of the extensive Spar 'alumni'.

The perfect example of McNaughton's process which in part has been masterminded by Colin Young, an organizational specialist working with the president can be found in Spar's newly created "Advanced Systems Technology Group" (ASTG) which contains an array of five formerly independent segments and Spar-owned Astro Aerospace Corporation of California. The five subdivisions blended into the new group include: the Remote Manipulator Systems Division, the Defence Systems Division, the Electro-Optics Division, Terrestrial Robotics Division, and the Space Station Division. The other two "Groups" have yet to be finalized. They are believed to be the Montreal-based Space and Telecommunications Division which will become a single "Group" of its own, and forming the third "Group" will be the Gears and Transmission Division with Spar's Aviation Services Division, both located in Toronto.


Personnel moves accompanying Spar Aerospace Limited's restructuring, although that process is not complete, are expected to be expansive. Internal speculation at Spar has it that some 50 percent of Spar's "Corporate" management will be "cleaned-out". Thomas G. Mathers, formerly vice president of human resources has already left the company, and others from the so-called corporate segment will soon follow him. Sheldon Polanski, a vice president, Spar's legal counsel, and corporate secretary will soon be heading for Montreal to take up an executive management position there while Tony Anderson, presently the company's executive vice president, is being named in rumours as the probable new president of the Aviation Group or for a similar lofty title.

Heading the newly created "Advanced Systems Technology Group" of Spar will be Charles Dannemann its new President and Group Executive who will report directly to John McNaughton as will each of the three new President/Group Executive appointees. Under Dannemann will be newly designated Executive Vice-Presidents Terry Usher, Gil Branchflower, and John Stirling. Usher will have line responsibility for Space Systems and Products including Astro Aerospace Corporation in California; Branchflower is to be the Executive V.P. of the Mobile Servicing Systems portion of the Advanced Systems Technology Group; and John Stirling will become the Vice-President of the Electro-Optical segment. It is believed that William Fitzgerald, vice-president and general manager of the Montreal-based "Group" will likely remain in charge there. Of the Ottawa office of Spar, which "belongs" to "Corporate", little has been said.


In a healthy second quarter report The Boeing Company has reported ($U.S.) sales of $6.969 billion with earnings of $387 million or $1.12 per share, compared with 1989 sales of $5.072 billion, with earnings of $195 million, or $.57 per share. The improvement, according to Boeing, is primarily due to higher commercial transport sales volume and operating margin. Partially offsetting these gains was a higher effective federal income tax rate.

But, according to Frank Shrontz, Boeing's chairman and chief executive officer, the technical, cost and schedule problems on certain U.S. government developmental and production programmes have not been fully resolved. Although progress has been made, the impact of these operational problems, continued cost-share (principally related to the Advanced Tactical Fighter) and defence budgetary pressures will result in a significant 1990 operating loss for the company's defence and space business.

Accomplishments during the first half of 1990 include recovering its pre-strike production rates and then increasing rates on the 737, 757 and 767 programmes; certification and delivery of the 737-500; ratification of a new labour contract with de Havilland's hourly and general office bargaining units; completion of airworthiness testing of the United Kingdom's first E-3 AWACS; and the first test flights of the Airborne Optical Adjunct's integrated system and the MH-47E Special Operations Forces helicopter prototype.

Boeing's commercial transport order activity continued at a high level during the second quarter of this year with 15 customers announcing orders for 128 jet transports and 5 Dash 8 commuter aircraft valued at $11.5 billion. Record quarterly orders for 502 jet transports and 8 commuter aircraft valued at $25 billion were announced in the second quarter of 1989. The 1990 second quarter jet transport orders consisted of 44 737s, 54 747s, 26 757s and 4 767s. The customers included Korean Air Lines, Japan Air Lines, the Civil Aviation Administration of China, Iberia, and Southwest Airlines (U.S.A.).

During the first six months of 1990, the company delivered a total of 216 airplanes. The strike in the fourth quarter of 1989 had some carry over impact on first half deliveries. Comparable 1989 deliveries totaled 174 airplanes. Current schedules call for the delivery of 235 airplanes during the remainder of 1990.

Total firm backlog of unfilled orders at June 30, 1990 was $84.3 billion, compared with $80.6 billion at the end of 1989. Of the total June 30 backlog, $78.1 billion or 93 percent was for commercial customers and $6.2 billion or 7 percent was for the U.S. government. Comparable figures for the end of 1989 were $74.0 billion or 92 percent commercial, and $6.6 billion or 8 percent U.S. government.


An eighteen percent cut in numbers of regular service personnel is at the core of a plan to restructure the U.K.'s armed forces. However in announcing the outline decisions reached by his ministry's examination of the Options for Change, Secretary of State Tom King made it clear that he expected that there would be no early 'peace dividend' and that the government's intention is to ensure that its armed forces are better equipped and properly trained and housed.

The time scale for the cuts is put at 'by the mid-1990s'. However the overshoot on current year spending caused by a higher than expected rate of inflation which has already led to a short moratorium on defence contracts and contributed to the decision to cancel the RAF's last batch of Tornado aircraft will lead to decisions to implement some of the planned cuts within months rather than years. The brunt of these near term cuts is likely to be borne by the Royal Navy which has suffered from manpower shortages for several years. The frigate and destroyer fleet is to be cut from its current 'about fifty' level to 'about forty', but the higher proportion of Type 23 and later-batch Type 22 frigates which can run longer periods between dockings might mean a proportionately higher overall availability than at present.Submarines too are due for cuts. The current fleet of 27 boats will be cut to 'about sixteen' plus the four SSBNs which provide the country's strategic deterrent. Since 'about three quarters' of the fleet will be nuclear-powered the expectation is that the Oberon-class of diesel electric submarines will be withdrawn as the planned four Upholder-class boats enter service. At present at least one Oberon (HMS Olympus) is equipped to carry special forces and it is assumed that this capability will be retained in the smaller fleet. An announcement is expected within the next few days confirming the early withdrawal of up to four Leander-class frigates and Oberons to yield an annual saving in the region of £600 million (sterling).

The RAF will close two of its four bases in Germany. This will be associated with the phasing out of Phantom and Jaguar aircraft, but there are plans to maintain the Harrier and helicopter forces on the remaining bases. A total of six squadrons of nuclear-capable Tornado aircraft will be retained in Germany and the U.K., and the Buccaneer maritime strike force will be replaced by dual-capable Tornados equipped with Sea Eagle missiles. With the government still firmly committed to nuclear deterrence there will be a nuclear-tipped stand-off weapon for the Tornado. U.K. air defence will be entrusted to seven Tornado squadrons and armed Hawks, but at this stage there has been no specific mention of the proposed European Fighter Aircraft. A small number (probably 2 - 4) of Nimrod maritime reconnaissance aircraft will be withdrawn from service.

The Army faces the prospect of a 25 percent reduction in strength to 120,000 with the withdrawal of at least two divisions from Germany as the most drastic cut. The intention to earmark an 'Army contribution of the order of two divisions' for Germany 'when reinforced from the U.K.' has given rise to the suggestion that one division will be disbanded, and that another will be withdrawn to the U.K. possibly leaving some heavy lift equipment in Germany as prepositioned stores. The other position currently enjoying some following is that there will be force restructuring to create a 'strategic mobility' division combining existing commando, airborne/airmobile and some armoured assets in a single command.

The minister has been at pains to point out that the costs of establishing the infrastructure necessary to support the redeployed forces will be considerable. This and the need to proceed with the re-equipment that is necessary to satisfy his overall objectives will rule out the likelihood of an immediate reduction in the share of GDP taken by defence. However, on balance the cuts have been well received as a responsible contribution to the changing European scene which does not conflict with the government's commitment to NATO.


The first centre fuselage section for the Canadair Regional Jet (RJ) was recently delivered to Canadair's Dorval, Quebec factory from Short Brothers' factory in Belfast, Northern Ireland. The fuselage section is about 9.75 meters long and weighs around 1,270 kilograms. Other fuselage sections including cockpit and tailplane will be mated to the centre section followed by the wing assemblies. Shorts is also involved in other aspects of production of the RJ (see The Wednesday Report, July 11, page 8, "Update: Canadair's Regional Jet"). To date, orders and options for the RJ total 139 aircraft and deliveries are expected to begin in the second quarter of 1992.


In no small measure does the British government's EH101 project link to Canada's New Shipborne Aircraft (NSA) programme. As Britain's armed forces endure a metamorphosis of ominous proportions, those Canadians close to the NSA project must certainly be nervously monitoring each and every murmur emanating from the U.K. The following excerpt from a letter written by the British Secretary of State for Defence, Tom King, is instructive. As a response to a Report of the British Defence Committee entitled "The Procurement of the EH101 Helicopters and the Light Attack Helicopter", the missive is dated June 18.

"The (U.K.) government," says King, "shares the committee's view of the operational importance of the Royal Navy's anti submarine warfare (ASW) variant of the EH101 helicopter (Merlin). I therefore fully recognize the need for this helicopter to enter service as soon as possible provided we can ensure that, for an affordable price, the Royal Navy will receive an effective capability from the outset. At the moment, each equipment being incorporated into the helicopter has its own specification, but no contractor is responsible for overall performance. In the past, the practice has been to carry out modifications as necessary in service to improve an aircraft's performance progressively towards the required standard. The task of integrating the mission system which we are considering placing on a prime contractor, at a fixed price, would ensure that an overall specification for the helicopter and its equipment, expressed in terms of the aircraft's ability to carry out its ASW mission, will be met as it enters service.

This approach would involve greater expenditure during the development phase, as the committee notes, but would set a ceiling on costs in securing a contractual commitment to provide an effective capability and reduce the need for expenditure on modifications thereafter. Preparation of the necessary performance specification is now complete, and we plan to invite tenders next month for the award of a prime contract.

The committee has quoted a total cost of £40 million (sterling) per helicopter based on the amortization of development costs over 50 helicopters, the currently planned size of the first batch. The committee recognizes that this figure would reduce if the MoD ordered more than 50 helicopters, although no decision has been taken yet on the size or timing of a second batch.

The government also fully agrees with the committee's conclusion that production orders should not be placed until the Ministry of Defence is satisfied with the performance of the helicopter during development and with the pricing arrangements. Progress in development is now good, reflecting the improvements that the companies have made to the management of the programme.

The government notes that the committee believes it unsatisfactory that a maximum price was not secured as a condition of proceeding to development. I should point out however, that even though Westland was not willing to commit itself at the start of development to a maximum price for work on the common airframe, the incentive price that was agreed, based on a target price with the sharing of cost over and under-runs was a considerable improvement on previous arrangements with the company. Agreement in principle has now been reached with Westland on a maximum price for their share of the common airframe development and I expect the contract amendment to be signed shortly." - Right Honourable Tom King, British Secretary of State for Defence


Paul Flagg, senior vice-president of E.H. Industries (Canada) Inc. has announced two senior management appointments. Russell Fairley has been appointed to the position of Vice President, Plans and Controls and Ken Hill has been appointed Vice President, Business Management.

A design engineer, Fairley's duties include the establishment and implementation of plan and cost controls for the New Shipborne Aircraft (NSA) programme. He has extensive international experience in project management with several leading aerospace companies including work in systems integration on the Canadian Patrol Frigate programme and project engineering with a leading helicopter manufacturer.

Hill has assumed responsibility for the overall contractual, financial and industrial benefits management of the NSA programme and daily corporate operations. He is a graduate electrical engineer with a master's degree in project management as well as 20 years of management experience in large scale advanced technology projects including all commercial aspects of programme management.


Some 60 years ago, Fleet's founder, a U.S. Army Major, wanted to build airframes. Somewhere along the way between then and now, the company drifted, shifted, bought and borrowed, spreading its wings into electronics, space, cabinetmaking, naval programmes and more.

Today Fleet is selling off many of those acquisitions of the 1980s in a strategic manoeuvre that strives to consolidate company activities. "Fleet will continue to divest itself of businesses outside of its core area," says Bruce Gowan, V.P. Finance and Corporate Secretary. And the company's change in direction from recent days of aggressive acquisitions appears to be right on the money. The core businesses of Fleet's holdings are performing well and nearly at their maximum production capacity, he says.

Since the sale last November of Fathom Oceanology Limited and Fathom's Guelph, Ontario H.I. Thompson division, Fleet Aerospace Corporation has continued its execution of a new business plan which concentrates on Fleet's quintessential aerospace structural component manufacturing. (See The Wednesday Report, Dec. 6, 1989, page 7, "Indal Technologies Joined By Fathom Oceanology".) In its two key operations, a combined total of 1 million square feet, the Fleet plant in Fort Erie and its 500,000 square foot Aeronca Division counterpart in Middletown, Ohio, the corporation will generate revenues in excess of $190 million by the end of its fiscal year this fall.

Estimates indicate that there are as many as 9,000 aging commercial airliners operating in the free world that will be replaced by owners in the new decade. Fleet, regarded as one of North America's leading manufacturers of complex structural components for commercial and military aircraft wants its share of work from the deluge of airliner manufacturing that is expected.

Most of the operating companies which Fleet acquired in the 1980s tend to be outside of Fleet's core business area and are thus on the 'sale block'. "We are showing them," is how Bruce Gowan deftly describes the planned divestiture.

Of its U.S.-based holdings Gowan says, "Engineered Magnetics Inc. has been sold, the deal has not closed, but a deal has been made. Two individuals in Los Angeles are buying the operation, a deal which should close at $5.5 million (U.S.)."

Fleet's Langley division in California where the firm has just successfully negotiated a 3-year labour contract has also been "shown". That firm is profitable making cabinetry for various U.S. submarine and other naval projects.

"Aeronca is not for sale," confirmed Gowan emphatically. Fleet bought Aeronca in 1986 when it appeared to be in some considerable financial difficulty. In the first 6-months of operations during the current fiscal year, Fleet reported a small loss on its $90 million revenue, largely attributed to costs of start-ups and rejuvenation of Aeronca.

Sixty-two years ago, in 1928, Aeronca was born as a manufacturer of light aircraft, just two years before the birth of Fleet. From the outset, Aeronca Inc. built a model C-1 and C-2 lightplane finally going into production with the

C-3 "flying bathtub" which featured Aeronca's very own engine, a two-cylinder, 36 horsepower (overstated as 46 HP in period advertisements), four-stroke unit with a fixed-pitch propeller. During WW II Aeronca built component parts for the DC-3 and manufactured its own "Grasshopper", a light, utility aircraft which earned renown as a liaison plane performing wartime artillery spotting and other services to Allied troops in Europe, medivac of extreme casualties and other utilitarian roles. The firm also built the PT-19 and PT-23 Fairchild trainers and made the training gliders used to prepare pilots who would later fly the large, invading, Allied-troop-carrying gliders.

The two companies are almost congenital twins. The corporate histories of Fleet in Fort Erie, Ontario and Aeronca in Middletown, Ohio are stunningly similar. In the early 1930s, Fleet was located in Buffalo and Aeronca in Cincinnati. American Major Rubin Fleet was working on the development of biplane designs, one of which became the Fleet "Finch". At the same time, Gene Roche the designer who eventually created the original C-3 "flying bathtub" developed the "Aeronca" at Wright field. While Major Fleet had a penchant for the biplane design, Gene Roche felt that a single winged bird, the monoplane, was sufficient. Fleet's partiality for two wings was the greatest distinction between the two firms in the early days. Aeronca public relations officer Harry Pratt has been with the company for some forty years. He too has been impressed with the strong parallels between these airframe makers.

Both built small, single-engined aircraft in the pioneer days of aviation and each contributed substantially to the massive war effort as builders of airframes including the famous Cornell trainer which both firms manufactured during WW II. Fleet's "Canuck" and the ubiquitous Aeronca "Champ", both two-seat single-engined, high-wing monoplanes the "Canuck" with side-by-side seating, the "Champ" with tandem seating each established unforgettable legacies within general aviation.Today, Aeronca is working on 29 major programmes and according to Paul Myers, a marketing executive at Aeronca, the top three projects call for the manufacture of exhaust nozzles for the A-330 Airbus, the Boeing 747, and the Boeing 767. These welded, high-temperature structures are indicative of the size of component for which the Aeronca plant has manufacturing capacity. "We also build a huge propeller duct for the Bell Aerospace LCAC landing craft (hovercraft) which is some 15 feet in diameter," noted Myers.

The most celebrated Canadian holding of Fleet is SED Systems Inc. of Saskatoon, Saskatchewan: "It's more complicated..." was how Gowan described the "SED situation" during an interview with The Wednesday Report last Friday. "The sale of SED Systems requires the approval of the province," noted Gowan. Fleet has a buyer whose identity the company wishes not to reveal at present. Naturally, Fleet's corporate masters would handle any such pursuit gingerly. It hasn't been an easy situation. But, while SED has been plagued with management, financial, and ownership uncertainties, its reputation among its key clients is irrefutably on the plus side. In January, SED was awarded a $9.3 million follow-on contract from Paramax Electronics Inc. of Montreal to provide the integrated exterior communications systems for the second batch of six vessels in the Canadian Patrol Frigate programme (SRP II). In the same month, when The Wednesday Report asked a Paramax executive about the follow-on order to SED, (SED had been awarded the same piece of the CPF's electronics suite for the first six vessels) his rhetorical question in reply says it all: "Do you think we would have given SED the second contract if we weren't completely satisfied?"

Not unlike Leigh Instruments Limited of Kanata, Ontario, SED Systems was overburdened with crushing cost overruns on electronics subcontracts for the Canadian Patrol Frigate. The SRP I radio project was bleeding SED's never robust finances blanch. The possibility of bankruptcy had already arisen when Fleet, in January of 1987, acquired a majority of SED's shares and took control. Fleet provided important ingredients to the rescue of troubled SED under the categories of financial discipline and sound management. Fleet now has a buyer for a much healthier SED, and concurrent with its new strategies will concentrate on its traditional slice of the aerospace pie.

Fleet Aerospace Corporation has manufactured structural aircraft components for almost every major airframe project in North America including some components for the new McDonnell Douglas MD-11. Fleet manufactured numerous parts for Boeing's stable of aircraft including components for the 707; fins and rudders for the E3A/E6A; engine nacelles for the E3A's TF33; and APU doors for the 757. For Boeing Canada's de Havilland Division, Fleet makes the Dash 8 bonded wing and fuselage panels, the aft engine nacelles, and the inboard and outboard flaps and spoilers. For Grumman, Fleet manufactures the A6's inboard and outboard flaps, and for Lockheed, the CP140/PC3's flight stations. For McDonnell Douglas, Fleet builds the F-18A graphite avionics doors; the DC-9's flaps and ailerons; and the DC-10's flap vanes, spoilers, slat actuators and refueling doors. Structural manufacturing capability is not limited to airframes. Radar equipment subcontracted by Hughes Aircraft has included the F-18 radar rack assemblies. ITT, Lockheed Electronics and Raytheon have each placed substantial amounts of work with Fleet during the 1980s. Fleet has also manufactured satellite structures for Hughes and for Spar Aerospace Limited which contracted Fleet to build component parts such as bonded panels and other structures for: Anik C, SBS, Anik D, Westar, Brasilsat, and more.

Doing what it does best seems to be the unspoken motto for Fleet as it enters its 7th decade. How it got off track from its traditional airframe building role is a whole other story, but for certain, it appears that Fleet's management has identified the problem, changed the company's course, and remains rigidly on track with a remedial programme that recognizes what we all have said at one time or another, but by which not all of us abide: "Our first decision was the right one."

Fleet's 60th anniversary will be celebrated on August 25th in a regalia for its employees at the Fort Erie facility. The chatter there is likely to centre on such projects as the Boeing 767, the MD-11 and days of yore when every day meant the roll-out of another full-flying airframe. That setting couldn't be more apropos as the firm rolls into the new decade at twice its size at the start of the 80s a million square feet devoted to what the company's people have always done best. Have a great '60th', Fleet. And many more too.


The seventh copy of the legendary Avro Arrow may soon visit cities across Canada for the benefit of a new generation of Canadians, those who were only children when this mighty aircraft split the northern skies with its Mach-2 thunder. And although this new Arrow won't fly, it will be a solid realization of the dream of some of those closely associated with the project that at one time promised to place this country in the forefront of aerospace technology. "We will build a full-size, museum-quality replica of the Arrow," says Bill Turner, programme management chief for the Aerospace Heritage Foundation of Canada. "We want to educate young people about aviation in this country. We want to not only tell them, but show them the truth."

The Arrow, or CF-105, carried with it the hopes and dreams of thousands in Canada's aviation industry. From the airfield at Malton, five Arrows reached and then exceeded ceilings of 50,000 feet at speeds approaching twice the speed of sound. But it all came to an end in 1959 when the Conservative government of Prime Minister John Diefenbaker ordered an end to the programme. And then someone, no one is quite sure who, gave the order to cut the six flyable aircraft into scrap. "Who gave the order to cut up these six aircraft?" Turner asked more than 30 years later. "There are no records, no paper, just a lot of hearsay."

The rebuilt Arrow will form the centerpiece of a portable exhibit which will tour the country before being placed on permanent display. Because the cockpit of the aircraft stands much higher above the ground than those of modern day fighters, a separate cockpit module is planned, with full controls and instrumentation. The exhibit will also include an engine module, display boards and equipment salvaged from the original Arrows. "We have five P-13 Iroquois engines stashed away," Turner said. "We can produce maybe ten truckloads of real Arrow artifacts, parts and such, from all over Ontario... not to mention the documentation."

Although people know there were six finished Arrows torched when the stop-work order was issued by then Prime Minister John Diefenbaker, Turner claims there were some thirty aircraft in various stages of completion on the Avro production line. So far, the only Arrow parts on display are a nose section and some bits of undercarriage in the National Aviation Museum in Ottawa."It will definitely be developed and built in the Toronto area. This is, after all, where the Arrow was built, and where it flew. This Arrow project involves most of those Avro engineers still living in the Toronto area, a lot who worked on the actual production, plus plenty of aviation enthusiasts," said Turner. "Right now I've got a team of engineers working on the requirement specifications. The existing drawings have been put into a computer data base with help from Humber College and Ryerson Polytechnical Institute."

The next step will be the pre-production phase, once estimates of cost have been drawn up. The group plans to seek financial backers later this year although Turner said several sources of funds have already been found. The group is reluctant to state figures or give dates, but Turner estimated it will cost about $750,000 to build the replica and related displays, and the roll-out will likely be some time in 1992. "The emotion today over the cancellation of the Arrow programme is still tremendous," Turner said. "We know a lot about what really happened back then, but why point the finger? What good is it? It will just make people mad all over again."

The decision to cancel the Arrow project reduced Canada from a world leader in high performance aviation technology to the status of being just another client of the United States. Along with almost 30,000 workers who suddenly became unemployed, and $340 million washed down the drain, the decision of February 20, 1959, a date now known in aviation folklore as "Black Friday" forced Canada to join a long list of countries almost wholly dependent on the whims of Washington for aviation research and development. (See March 16, 1988, page 1, "A 30 Year Reflection: You Had To Be There".)

Within days, the greatest aviation design and development structure ever assembled was scattered to the winds. Most of the brain drain was southward, with thousands flocking to NASA, Boeing, Lockheed and other giant aerospace concerns. In fact, the day after the cancellation the American companies set up desks in the Royal York Hotel to hire Avro specialists.

The first-line fighter of the Canadian air force today is the CF-18 Hornet manufactured in the United States by McDonnell Douglas. More than thirty years after the government cited the demise of the manned bomber as one of its reasons for canceling the Arrow the CF-18s continue to intercept Soviet Bear bombers probing the fringes of Canadian air space. But that story too has been told many times. If you wish to obtain more information on the Arrow project, write to: Aerospace Heritage Foundation, 14 Eagle Road, Toronto, Ontario, M8Z 4H5.


The 43rd Annual Technical Conference of the Canadian Maritime Industries Association (CMIA) will be held at the Ottawa Congress Centre on February 11 and 12, 1991 and will include the sixth Canadian Shipbuilding and Offshore Exhibition (CSOE '91). Last year, CSOE '90 attracted well over 1,000 people. Papers of a non-commercial nature are sought by the conference to promote the technological advancement of the shipbuilding, ship repairing, offshore and ocean industries in Canada. Chosen speakers will be invited to a pre-dinner reception in the President's suite as head table guests at the banquet as well as receiving complimentary meeting registration. The CMIA will publish the papers in a bound volume for presentation to conference attendees and for distribution to libraries and press. Abstracts will be received no later than August 30, 1990 and should be sent to the attention of Mrs. Joy MacPherson, Canadian Maritime Industries Association, 801 - 100 Sparks Street, P.O. Box 1429, Station B, Ottawa, K1P 5R4.


The United States Air Force (USAF) has awarded a $2 million (U.S.) contract to Canadian Commercial Corporation (CCC) of Ottawa to fund a detailed environmental survey of the 21 active Distant Early Warning (DEW) Line radar sites in northern Canada.

UMA Engineering Ltd. of Edmonton, Alberta has been subcontracted to do the actual survey work in association with Hardy BBT Ltd. of Calgary, Alberta and Jacques Whitford Ltd. of Halifax, Nova Scotia. UMA is expected to report its findings in March 1991. Results of the survey will be used to assist in costing, planning, coordinating and executing the decommissioning or downsizing of DEW Line sites. All field survey work will be carried out by three five-member teams who will be transported by chartered aircraft operated by Aklak Air of Inuvik N.W.T., Adlair Aviation of Cambridge Bay N.W.T., and First Air/Bradley Air of Iqaluit N.W.T.

The DEW Line consists of 21 radar stations across the Arctic, stretching from the Alaska/Yukon border to the east coast of Baffin Island. It was established in accordance with the 1955 DEW Line Agreement between Canada and the United States. In 1985, Canada and the U.S. agreed to update the DEW Line with the North Warning System (NWS) and by late 1988 Phase One was complete, and eight DEW sites had been converted to NWS Long Range Radar Sites. At that time, DND and the USAF agreed to develop policy and procedure for either decommissioning or downsizing all DEW Line facilities in Canada which are no longer required. A binational working group was formed to oversee this process and a preliminary survey of the 21 active sites took place in the summer of 1989. Construction for Phase Two NWS which calls for the establishment of 36 unmanned Short Range Radar Sites in Canada has also begun. (See The Wednesday Report, October 11, 1989, page 4, "North Warning System Project Forges Ahead".)


Nine Canadian Rangers from Newfoundland and Labrador will compete in the annual Canadian Forces Small Arms Competition (CFSAC) for the first time this year. They will join 350 members of the Reserve and Regular Force; contestants from the British Army; Royal Canadian Mounted Police participants; and civilian members of the Dominion of Canada Rifle Association. Rifle, pistol, submachine-gun, light machine-gun, and sniper rifle competitions will be decided at the firing points of Connaught Range near Ottawa July 27 through August 3. The Queen's Medal, the highest military marksmanship award will be presented to the top Regular Force and Reserve rifle shots at the end of the eight-day shoot.


GE Aircraft Engines' F120 prototype engine has successfully completed component development testing, a major requirement for the U.S. Air Force flight clearance. The F120 is GE's propulsion candidate for the USAF Advanced Tactical Fighter (ATF) programme. F120 prototype engines are scheduled to fly in a Northrop/McDonnell Douglas ATF prototype and in a Lockheed/Boeing/General Dynamics ATF prototype this year.


Lieutenant-General Anton Slimak, Chief of the General Staff of the Czechoslovak Armed Forces made history by being the first in his position ever to visit Canada. Hosted by General John de Chastelain, Canada's Chief of the Defence Staff, Slimak conducted talks with senior defence officials at National Defence Headquarters and paid visits to Canadian Forces and industrial facilities in Toronto, Petawawa and St-Hubert. The visit lasted from July 21-25.

General John de Chastelain, in another historic first for Canada, is visiting Hungary this week where he will lecture students of the Zrini Miklos Military Academy in Budapest and tour active army and air defence units of the Hungarian armed forces. Canada's Chief of the Defence Staff (CDS) will also visit the U.S.S.R. for talks with senior military officers and political officials there. Canada's top military man will discuss with the Soviets a wide range of bilateral and multilateral topics such as military doctrine, arms control measures, European security, visits and exchanges. He will speak at the Voroshilov Military Academy of the Soviet General Staff and visit Soviet military installations in Leningrad and the Kola Peninsula among other areas.


Engine testing has begun for Embraer-Empresa Brasileira de Aeronautica S.A.'s CBA-123 prototype. The two 1,300 SHP Garrett TPF351-20 engines installed on the prototype ran for the first time on June 11 for a total of 52 minutes. By July 16 the two engines had clocked a total ground running time of 12 hours, 5 of which were logged on the port engine and seven on the starboard engine. The TPF351-20 was airborne for the first time on Garrett's Boeing 720B flying testbed on June 9 for three hours. A second flight of five hours took place mid-June. On both occasions the engines were restarted in the air, run at cruise and full power settings, and performed normally.


While numerous corporate changes take place within the fixed-wing side of McDonnell Douglas, its helicopter company is also reorganizing major elements of its management structure. The new plan seeks to expand the McDonnell Douglas Helicopter Co.'s position in the commercial market with NOTAR system technology while continuing to build quality military helicopters. Other actions being taken include significant cost and budget cutting measures. The reorganization establishes separate divisions for the company's four major business product lines (MDX, AH-64, MD 500 and LH) to be served by six divisional support organizations. To strengthen support functions, two new divisions have been formed Business Development and General Services."The company's financial performance in the past year makes it clear that a change in the way we do business is necessary," said company President Tom Gunn who has been faced with some tough decisions. "In conjunction with this, I have accepted the resignation or early retirement of several company executives."


BAe Commercial Aircraft has demonstrated its quick, innovative thinking in a move which perhaps points the way for other airframe makers to truly demonstrate product capability when the 'chips are down'. In response to the earthquake relief effort in Iran, the company has put at the disposal of the Iranian government and The Red Cross a BAe 146QT (Quiet Trader) freighter chartered from TNT International Aviation Services for a period of 21 days. The aircraft departed from Luton Airport on July 20 with a payload of over seven tonnes of relief supplies from The Red Cross, mostly tents and blankets. Supporting the aircraft's mission is a 15-man British Aerospace and TNT team comprising two crews and a maintenance and coordination support group. The aircraft is based in Dubai and will fly to Tehran on a regular basis to pick up relief cargoes. It will then fly to designated airfields near the disaster areas as directed by Iranian authorities. The BAe QT is capable of carrying a 10 metric tonne payload over a 1,000 nautical mile distance and can operate into airfields denied to other aircraft of similar size.


Canadian quality management has outshone 14 U.S. teammates. Litton Systems Canada Limited of Etobicoke, Ontario has been selected as the winner of the first SuperTeam Total Quality Management (TQM) award recognizing the Canadian-based firm's performance during the demonstration/validation (dem/val) phase of the U.S. Army's Light Helicopter (LH) acquisition programme. Put simply, Litton won the award because its participants demonstrated the best application principles of total quality management, more so than any of the other fourteen SuperTeam members. Litton provided complex, colour active matrix liquid crystal cockpit displays, display processors and related computer software programmes to support a number of demonstrations during the all-important dem/val phase.

The SuperTeam led by McDonnell Douglas and Bell Helicopter Textron is one of two consortia working through the dem/val process of the U.S. Army's LH project. (See The Wednesday Report, April 4, page 10, "British And German Potential Evaluated For LH Technology".) Litton Canada with 14 of the top U.S. aerospace firms make up the SuperTeam. To date almost all SuperTeam members have received TQM training to ensure that when the LH is built, it will be quality driven. This proving phase of the LH programme is scheduled to end in late summer.


Brigadier-General (retired) Patrick Carew of Kelowna, B.C. has received an honorary appointment as Colonel of the Regiment to the Royal Canadian Dragoons for a period of three years starting July 21. Carew will succeed Brigadier-General (retired) George Bell who served in this appointment since July 1984. Bell, of Toronto, has received an honorary appointment as Colonel Commandant of the Armoured Branch for a period of three years beginning October 1. Bell will succeed Major-General (retired) William Howard who has served in this appointment since October 1987.

Carew, in over 35 years, served in various regimental and training appointments with the Strathconas, the Fort Garry Horse and the Royal Canadian Armoured Corps School, as well as numerous senior staff appointments at Mobile Command Headquarters and National Defence Headquarters. He has held a number of command appointments including: commanding officer of the Royal Canadian Dragoons in Lahr, Federal Republic of Germany, base commander of CFB Suffield, Alberta, and commandant of the Canadian Land Forces Command and Staff College, Kingston, Ontario. He also participated in peacekeeping operations in Korea and Cyprus. Carew is a graduate of the U.S. Navy Post Graduate School, the National Defence College, the NATO Defence College, and the Canadian Army Staff College. Since January 1987 he has served as the honorary Lieutenant-Colonel of the British Columbia Dragoons.

Bell served in numerous senior staff appointments during more than 32 years of service, at Army Headquarters, Mobile Command Headquarters, and National Defence Headquarters. He also served as commandant of the Officers' Candidate School at Canadian Forces Base Borden, Ontario, as a member of the directing staff at the Canadian Army Staff College, Kingston, Ontario, and as chief instructor of the Royal Canadian Armoured Corps School at CFB Borden. As well, he commanded the Canadian contingent, United Nations Emergency Forces in the Middle East and was the Senior Canadian Military Officer serving with the International Control Commission in Indo-China. For ten years, Bell served as the Honorary Lieutenant-Colonel of the Queen's York Rangers and is currently a professor of strategic studies at York University and the president of the Canadian Institute of Strategic Studies.


Users of HP PCs can now go to 80386-25MHz performance. Hewlett-Packard (Canada) Ltd. has introduced its most powerful desktop personal computer. With a base list price of $8,095, the 25-MHz 80386-based HP Vectra 386/25 offers 25 to 50 percent greater performance than 20-MHz, 80386-based PCs. The HP Vectra 386/25 PC employs high-performance embedded controller hard-disk drives, HP super VGA with extended resolution, 2 Mbytes of near-zero wait-state 80 nano-second memory and a 32-Kbyte memory cache. Hard-disk drive capacities of 42, 84, 170 and 340 Mbytes with access times of 17 to 19 milliseconds are optional.


With bankruptcies and civil litigation proliferating, the news of one more comes as little surprise. We can only take note and learn lessons from the heartaches of others. But too often in past months there has been a familiar ring to each tale of corporate woe, a ring of familiarity that has caused many an industry watcher to catch his breath. Dealing with the federal government in one of its crown projects or industrial benefit schemes, not always, but in enough instances to raise eyebrows, has been the 'kiss of death'.

Take a federal government directed contract; the Atlantic Canada Opportunities Agency (ACOA); a state-of-the-art diesel engine assembly and testing facility in Sheet Harbour, Nova Scotia and put them all together with a German industrial giant and its diesel division and what have you got? For awhile, what appeared to be a recipe for success and a trusting partnership between a Canadian company NsC Corporation Ltd. and Krupp MaK of Kiel, West Germany was a dream made in heaven. The chronology of what went wrong is now a matter before the Federal Court of Canada in a suit for breach of contract and unjust enrichment involving Krupp MaK, its Canadian subsidiary KMDI of Mississauga, Ontario, The Queen in Right of Canada, and Halifax-Dartmouth Industries Ltd. (HDIL) of Halifax, Nova Scotia filed by NsC Corporation and related parties.

A separate action is also under way in the Supreme Court of Ontario which names among other defendants, Krupp, KMDI, the Ottawa lobbying firm of Corporation House and several individuals, all accused in whole or in part of breach of contract, breach of fiduciary duties, interference with contractual relations, and conspiracy to induce breach of contract. As this process unfolds, the diesel facility in Sheet Harbour, now in receivership, sits incomplete and the subject of thwarted attempts to purchase by Canadian Diesel Power Inc., yet another subsidiary of Krupp.

In 1988 Supply and Services Canada, acting on behalf of Transport Canada, let a contract for the mid-life refit of the Coast Guard icebreaker Louis S. St. Laurent to HDIL. In turn, HDIL awarded a subcontract for the propulsion system for the vessel to Krupp MaK because it presented the best industrial benefits to Atlantic Canada through its partnership agreements for the establishment of the new diesel facility. In 1989, according to the Federal Court suit, Krupp is accused of reneging on its agreement to invest in NsC Diesel Power Inc., setting in motion a series of financial problems which caused the facility to be placed in receivership.

Since February 9, 1990 when the facility was placed in receivership, only one company has come forward with a bid for the assets. This company is Canadian Diesel Power. Also since this date, the receiver Ernst & Young, the government of Nova Scotia agency the Nova Scotia Business Capital Corporation, Federal Public Works Minister Elmer MacKay responsible for ACOA, and officials of ACOA have been involved in a prolonged series of negotiations with Krupp aimed at resolving the fate of the state-of-the-art facility.

At this moment in time, the main victims of this business venture gone awry would appear to be the taxpayers of Canada, the people of Nova Scotia, and local area businesses. In several newspaper, TV and radio reports, the amounts of public funds invested in the facility are quoted as being anywhere from $2 million to $12 million. The Wednesday Report has researched the actual funding involved. The major outstanding amounts are: ACOA - $2.2 million, ABN Bank - $7.1 million, facility contractors - $5.8 million, NsC Corporation - $4.4 million.

Krupp has contributed no direct funding to the facility, but was obligated to invest $9.4 million in equity shares made up of $4 million in preferred shares and $5.4 million in common shares. Krupp has now offered through its subsidiary Canadian Diesel Power Inc. to purchase the incomplete facility from the receiver for $8.4 million, subject to receiving from ACOA and the Nova Scotia Business Capital Corporation grants totaling $11.5 million. They would have to pay out $2.2 million to complete the facility.


Prior Data Sciences of Kanata, Ontario has been awarded a three-year, $1.6 million software engineering support contract for the Director General, Maritime Engineering and Maintenance. The technical authority for the work is the Directorate, Maritime Combat Systems. Prior is to provide support for the navy's real time software on an "if and as needed" basis. In addition Prior will assist in the investigation and possible development of new systems, enhancements and modifications.

During the second quarter, the company received a key contract award in the defence and space sector when the U.S. Air Force selected Boeing for full-scale development of the SRAM T, a derivative of the Boeing Short Range Attack Missile (SRAM II). The four year contract calls for integration of SRAM T on the F-15E fighter-bomber.

Claimed to be the world's most sophisticated infrared airborne sensor, the Airborne Optical Adjunct (AOA) successfully completed its first system integrated test flight in May. The AOA's airborne sensor is critical to the Strategic Defence Initiative effort to create a missile defence system.

Defence and space sales in the first six months totaled $2.946 billion, $329 million higher than the comparable period of 1989. Defence and space programme sales for 1990 are expected to be slightly higher than comparable 1989 sales. Based on current programmes and schedules, total projected 1990 sales continue to be in the $27 billion range.

CEO Shrontz noted that the company's financial position at June 30 remained strong with cash and short-term investments of $3.613 billion. Gross and net inventories were $14.027 billion and $3.436 billion respectively. Comparable numbers at December 31, 1989 were cash and short-term investments of $1.863 billion, and gross and net inventories of $15.089 billion and $4.942 billion respectively.

Research and development expenses of $354 million, including cost share on government contracts such as the Advanced Tactical Fighter (ATF) were charges directly to earnings in the first half, compared to $329 million for the first half of 1989. The level of research and development expenditures for the full year of 1990 is expected to approximate the $754 million of 1989.

Other income in the first half was $207 million versus $196 million for the first half of 1989. The gain from the sale of the company's 15 percent equity in Peabody Holding Company was substantially offset by lower interest income in the first half of 1990.


August 14-15 -- The Maple Leaf Chapter of the Association of Old Crows (AOC) in cooperation with the Department of National Defence is co-hosting a "Back to Fundamentals" symposium (post glasnost and 'Open Skies'), in Ottawa. Topics include electronic reconnaissance and intelligence; ECM from chaff to decoys; communications; Electronic Warfare (EW) training; electro-optics; space EW; and signal processing. For additional information contact the symposium chairman, David Scribailo, AOC NE Symposium 1990, P.O. Box 41084, Ottawa, K1G 5K9.

August 21 The Canadian Defence Preparedness Association will hold a field visit for members and friends to Air Transport Group in Trenton, Ontario. Participants will hear and witness the CF capability for mobility preparedness and visit the Air Maintenance Development Unit. For more information contact Mr. Bond at (613) 235-5337.

September 16-19 -- The AIAC's "Twenty-Ninth Annual General Meeting" is to be held in the resort area of Whistler Village, British Columbia. The four day event combines an extensive AIAC business agenda with rest and relaxation in the beautiful surroundings of the mountains and offers an enjoyable schedule of activities for members, invited guests, and their spouses. For more information contact Belva M. Neale, Convention Coordinator, (613) 232-4297.

October 4 - The fall meeting of the Forum for Industrial Participation (formerly CIBA) will be held at the Ottawa Congress Centre from 8:30 am to 3:30 pm. The meeting is open to all who wish to attend. For more information please contact Bob Brown, (613) 733-0704.

October 9 The Canadian Defence Preparedness Association will hold a luncheon at the Radisson Hotel in Ottawa. The NATO procurement role for Canada and the U.S. will be addressed by speaker Tom Callaghan. For further information contact Mr. Bond at (613) 235-5337.

October 24-25 -- The Financial Post and The Wednesday Report will conduct the fourth annual defence conference for the Canadian defence industry. "The Canadian Defence Industry -- Building for the Future" will be held at the Westin Hotel in Ottawa. Topics include Procurement U.S.A. -- defence contracting in the build-down; Space Intelligence -- Canada's new role; and Quasi-Military Pursuits and Cross-Commercial Ventures. Participants will gain insight from those at the centre of change -- drawing on expertise from Europe and North America -- and advice from those making change an opportunity for the future. For further information contact the Registration Coordinator, FP Conferences, (416) 596-5681

November 6 The Canadian Defence Preparedness Association will host a luncheon in Ottawa at which DCDS or ADM Mat will present a brief on the Defence Services programme. For more information contact Mr. Bond at (613) 235-5337.

November 19 The Canadian Defence Preparedness Association will hold its annual general meeting. The basis of discussion will be Canadian research and development requirements and the ability of government, universities and industry to respond. The keynote speaker will be Dr. Stuart Smith and the luncheon speaker, Honourable William Winegard. The registration fee is $125.00. For further information please contact Mr. Bond at (613) 235-5337.

May 13-16, 1991 The fourth European Aerospace Conference will be held at the Maison de la Chimie in Paris. The Association Aéronautique et Astronautique of France, Germany's Deutsche Gesellschaft für Luft-und Raumfahrt and the Royal Aeronautical Society are organizing the conference which will deal primarily with "Launch Bases" and "Satellite Control Systems". Separate symposia will be organized around each topic. This conference, to be attended by well-known specialists, will provide an opportunity to national and multinational agencies, manufacturers, operators and researchers who design, produce, manage or use these large launch and control infrastructures to exchange information and views.

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Publisher and Editor In Chief: Micheal J. O'Brien
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William Kane (Washington DC)
John Reed (London, England)
Moshe Karem (Jerusalem, Israel)
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