Friday, June 4, 2010

Shipbuilding Announcement

It is hard not to be cynical about Canadian government shipbuilding announcements. After each big announcement, something always comes up to delay, extend, modify or outright cancel what has been proposed.
Yesterday's announcement in Ottawa that Canada will embark on a thirty year shipbuilding strategy for government ships should be good news and very welcome.
Taken on its face, it should resolve an outstanding problem of ship acquisition in this country. The last major defence acquisitions being a perfect example. After the industry geared up and built frigates, there were no more orders for significant naval vessels and Saint John Shipbuilding was forced to close and the present Davie yards in Quebec went into a tail spin from which it has not recovered. All the talent, machinery and expertise accumulated for the project was dispersed throughout the world, never to be reassembled.

This boom/bust cycle of intense activity followed by years of idleness is the inevitable result of the politicization of the ship acquisition process and the lack of a national strategy/policy. Certainly governments are responsible for the debt and deficits, but they are also responsible for providing a navy and Coast Guard. They need to figure out how to do so in a way that becomes straightforward, predictable and ongoing. Deficit reduction cannot be done on the backs of the navy, Coast Guard and the shipbuilding industry.

As usual with Ottawa announcements, one is never really sure what money they are using to make the announcements. Is it new money, is it money previously announced, etc., We will have to wait and see. It is fairly bold for a minority government to propose a 30 year project, let alone a five year one. Let's hope that this one makes so much sense that the opposition will be able to contribute to its success.

As to the shipyards, the announcement again hints at centres of excellence, but leans more toward toward "national shipyards," one on each coast. I hope they don't mean nationalized shipyards - that was fatal in the UK and would be fatal here. Private industry can run shipyards - look at the Washington Group in BC and the Irvings in Nova Scotia. It is being done even in the present climate.

Some months ago, before the Davie yard's most recent slide into creditor protection, Irving announced that they were in discussions with Davie to form a joint centre of excellence. Whether this will be on the table now, only time will tell. However this announcement could save Davie from doom. It needs more capitalization and more expertise that is for sure, but like all yards it also needs significant work. If the new announcement leads to that, the yard should survive, but it needs well funded, deep pocket, Canadian ownership.

What about the smaller yards in Newfoundland, Ontario and BC that are barely hanging on? If all government work goes to only two yards - one for naval, one for Coast Guard, them these yards have little hope of being more than sub-contractors if they find work at all. Any national shipbuilding strategy needs to consider all the yards.

Then there is the duty on foreign built ships. Nothing has been heard lately about the government's announcement to remove the duty from certain imported ships. This matter needs to be resolved at once so that shipowners and shipbuilders can get on with life.

Canada needs a national shipbuilding strategy, it needs funding for the many delayed ship projects, it needs to ramp up the shipyards to do the work, and it needs to attract the talent to the industry. Yesterday's announcement needs to meets these criteria, otherwise it will be just more wind from Ottawa.

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