By Ken Epps

During 2000 the Diesel Division of General Motors of Canada retained its position for the fourth
successive year as the largest military contractor in Canada. The London, Ontario-based company,
now the senior partner in the GM Defence subsidiary of General Motors, spent the year building
light armoured vehicles (LAVs) for the armed forces of Canada, Australia, the United States, and
Saudi Arabia. Countering a Canadian industry tendency towards military aerospace or electronics
products, GM Canada’s LAV line has been a major part of Canadian arms manufacture for two
decades. Indeed, in addition to several multi-million dollar orders from the Department of National
Defence since the late 1970s, including the most recent, four-phased order for 651 LAV III
Armoured Personnel Carriers exceeding $2-billion (Cdn), the Canadian Commercial Corporation
(CCC) reported in January, 2000 that the CCC was "instrumental in the sale of more than US$2.5
billion worth of LAV’s outside Canada since 1981" (DFAIT 2000).1 Moreover, GM Canada’s
prominence is set to continue for some time – particularly with regard to exports – as recent New
Zealand and US contracts likely will extend high rates of LAV production. In the latter case, a US
Army contract, signed in November 2000, ordered 466 LAVs from a joint venture company of
GM Canada and General Dynamics Land Systems in the US. The order is the first of several
expected to total 2,131 vehicles, worth in excess of $6-billion.

Despite the recent sale of its missile production facility in Northern Ireland, Montreal’s Bombardier
Inc climbed to second place in the year’s military contractor ranking. Much of Bombardier’s military
income is derived from three large service contracts in Canada: engineering support for the
Canadian Air Force CF-18 fighter aircraft, flying training and support for Canadian military pilots at
Portage La Prairie, and the NATO Flying Training in Canada program for which Bombardier
Aerospace is the prime contractor. (The last two programs required Bombardier to acquire and
maintain trainer aircraft which in the past were purchased for military inventories.) The NATO
program is training Canadian, Danish, Italian, British, and Singapore pilots at Cold Lake, Alberta
and Moose Jaw, Saskatchewan. In addition, Bombardier Aerospace built and delivered aircraft to
the armed forces of Greece, Denmark, Jordan, and Turkey.

CAE Inc, with major production facilities in Montreal, is the remaining member of the top three
companies in Canada which also regularly appear in international rankings of military manufacturers
(for example, see SIPRI Yearbook 2001, pp. 307-311). CAE reported military simulator and other
military system sales of $410-million for the fiscal year ending March 2001, almost double the arms
sales total of the next largest Canadian supplier. The company is seeking to expand this total. During
2000, CAE announced that it was abandoning a diversification strategy to focus on three areas, one
of which is military simulators.

Most military sales of SNC-Lavalin Group in Montreal are derived from its SNC Industrial
Technologies (or SNC Tec) subsidiary. With GM Canada, SNC-Lavalin is the exception to the
sector concentration of top ranked Canadian military contractors. SNC Tec produces munitions for
the Canadian Armed Forces and increasingly for foreign military customers. In its most recent
annual report, the company noted that "SNC Tec has successfully grown its international activities to
35% of revenues in 2000" (SNC-Lavalin Group 2000, p. 13).

The remaining contractors included in the following table produce a range of military electronics and
aerospace products including communications equipment (Computing Devices Canada and CMC
Electronics) and aircraft and aircraft engines (Bell Helicopter Textron Canada and Pratt & Whitney
Canada). In addition to manufacturing aerospace components, Magellan Aerospace and
Héroux-Devtek produce and export armaments – in the former case, Winnipeg subsidiary Bristol
Aerospace builds the CRV-7 air-to-surface rocket, and in the latter case, Kitchener subsidiary
Diemaco makes C-7 and C-8 automatic rifles for Canadian and NATO forces.

Industry trends

Extending a trend of recent Canadian military industry, Canada’s ten largest military contractors in
2000 were virtually unchanged from an equivalent ranking for 1999. Based on publicly available
data compiled by Project Ploughshares,2 all but one of the latest top contractors also were ranked
within the largest ten in the previous year3 and most have been ranked within the group of largest
military contractors for more than a decade. Moreover, there were no dramatic changes in internal
order – within the top five positions of the two most recent years the corporate names were the
same. The sole new addition to the 2000 ranking is Héroux-Devtek Inc of Longueuil, Quebec
which replaced Spar Aerospace Ltd of Toronto in tenth position.

Canada’s largest military contractors reflect the concentration and relative stability of Canadian
military industry which have existed for more than a decade. Apart from the dominance of the top
contractors, concentration of the industry may be seen in the sites of production (primarily in the
Montreal, Toronto and Ottawa areas) and in the industrial sectors where most military production
occurs. As demonstrated by column F in Table 1, five of the largest ten Canadian military
contractors are aerospace companies. Indeed, in Canada the aerospace sector often is taken to
include military production, with Industry Canada regularly reporting "aerospace and defence"
production and trade figures as the results of one sector.

At the same time, Canadian military industries have been less affected by the restructuring and
consolidation that have reshaped the industry in other industrialized countries since the fall of the
Berlin Wall. Judging from Canada’s largest contractors at least, the military corporate structure in
Canada has experienced limited post-Cold War upheaval. Apart from a decline in the military
shipbuilding industry (which arguably would have happened anyway) that eliminated Saint John
Shipbuilding in particular from the top contractors list, the companies of the 2000 ranking are
generally the same companies that existed in 1990, with all but Bell Helicopter Textron appearing in
the ranking of the top 20 contractors of 1990-914. Magellan Aerospace is the parent company of
two subsidiaries, Bristol Aerospace and Orenda Aerospace (formerly Hawker-Siddeley Canada),
which appeared separately in earlier top Canadian military contractor lists. The recently
amalgamated Héroux-Devtek Inc combines the operations of Héroux Inc and Devtek Corp, both of
which also appeared in earlier rankings. There also have been a few changes in ownership:
Computing Devices Canada has recently become part of the US-based General Dynamics
corporation and the controlling shares of CMC Electronics (formerly BAE Systems Canada and,
before that, Canadian Marconi) have been purchased from BAE in the UK by a Canadian
investment group. But company plants and production in Canada essentially are unaltered.

Columns A and B of the table demonstrate that the top military contractors in 2000 were major
recipients of prime contracts from the Department of National Defence (DND) and the Canadian
Commercial Corporation. Although central to ranking Canadian companies involved in military
production and service work, DND and CCC contracts are not the exclusive means of determining
the military sales totals of column G. The total may also be based on contract and sales data
reported in two other areas: subcontracts between a Canadian company and a foreign military
contractor and contracts with foreign military agencies not brokered by CCC. The latter may
include equipment such as aircraft classed by the government as civilian (and hence not requiring an
export permit) but sold for military end-use. The military sales total used to rank the companies is an
estimate derived from all reported sources and for some companies may be understated. In the
cases of CAE Inc of Montreal and Heroux-Devtek, the figures cited are defence sales as reported
in the company annual report.

The Canadian companies which make up the military industry tend also to produce commercial
goods and most sell more to the civilian market. Few companies are highly dependent on military
sales. Among the largest military contractors, although the majority rely on military customers for
more than one-fifth of their total sales (see column C), only Computing Devices Canada is
dependent on military markets to a large degree. Even in the case of the largest contractor, the
Diesel Division of General Motors, where military sales come close to matching commercial sales
within the division, the military dependency of the company would drop to less than two per cent if
military sales were matched against the total sales of the parent company, General Motors of
Canada.

The United States remains by far the largest export market for Canadian military goods, with
US-bound shipments exceeding shipments to all other countries combined, but Canadian companies
also export military products worldwide. Column D of the table lists the six top military contractors
for which there were reports of exports to Third World militaries during 2000.

1 The Canadian Commercial Corporation (CCC) is an Ottawa-based crown corporation which
assists Canadian companies with export sales to foreign governments and international
organizations. Typically, over 60 per cent of CCC-brokered sales are purchased by military
agencies.

2 The data is drawn from Project Ploughshares’ Canadian Military Industry Database and
accompanying files.

3 See The Ploughshares Monitor, December 2000, pp.16-17.

4 See The Ploughshares Monitor, March 1993, p.18.

References

DFAIT 2000, CanadExport, Jan. 17.

SNC-Lavalin Group 2000 Annual Report.

Table 1: Top 10 Canadian Military Contractors 2000

Legend

A Ranking within largest Canadian Department of National Defence prime contractors for the fiscal year 2000-2001.

B Ranking within largest military export prime contractors for fiscal year 2000-2001 as brokered by the Canadian Commercial Corporation.

C Estimated or reported military sales greater than 20 per cent of total company sales.

D Reported military sales or deliveries from Canada to one or more Third World countries during 2000.

E Foreign-owned or controlled.

F Commodity classification of major military products (1-Aerospace; 2-Electronics; 3-Marine; 4-Transportation; 5-Armaments).

G Estimated total value of military sales in millions of Canadian dollars for 2000 or closest fiscal year, compiled from Canadian Military Industry Database data and files. For Canadian-owned companies this includes military sales of foreign subsidiaries (*indicates the company reported a value for its military sales).