Monday, October 16, 2017

A Game Changer for Canada: Airbus Takes a Majority Stake in Bombardier's C Series Program

          By Henry Stewart

Here's something which, over the next few weeks, will completely destroy several very, very traditional "Chinese Walls," erected decades ago within the Canadian aerospace industry.

Until today, those information barriers (originally erected around business verticals to prevent exchanges that could lead to conflicts of interest with the Federal government) separated not just Canadian aerospace military and civilian providers, but also the aeronautical and space focused providers which traditionally populated the Canadian aerospace industry.

But not anymore. Airbus, a European multinational corporation that designs, manufactures, and sells civil and military products for both the aerospace and space sectors, is poised to buy a majority stake in the Bombardier C Series program.

As outlined in the October 16th, 2017 Globe and Mail post, "Bombardier teams up with Airbus to secure C Series future," Bombardier Inc. has struck an agreement "to sell control of its marquee C Series airliner program to Europe's Airbus Group SE, a bet that handing the keys to a better-financed global giant will ensure the Canadian plane maker's future in the face of relentless competition and punishingly high tariffs imposed by the United States."

As outlined most recently in the October 8th, 2017 post, "Au Revoir, Bombardier," the C Series program has been at the centre of major political and investor drama in Canada since its inception, and has driven Bombardier to the brink of bankruptcy.

According to the Globe and Mail article, the Quebec government supports the transaction with Airbus, as does the Caisse de dépôt et placement du Québec, a major Bombardier shareholder. Ottawa has also offered a preliminary endorsement of the transaction, saying "it would require review under federal investment law."

As outlined in the article:
Although Bombardier itself has not been sold, the deal is an acknowledgment that the company could not go it alone in the global market for passenger airlines.
Under the agreement, Airbus will take a 50.01-per-cent interest in the C Series limited partnership for no cash consideration.

In exchange, it will offer Bombardier's 100- to 150-seat plane its global procurement, sales, marketing and customer support expertise. Bombardier's stake will be 31% and Quebec will own about 19% when the deal is finalized.

Of course, Airbus is comprised of both military and civilian subsidiaries, as well as aerospace and space components and possesses an aggressive Canadian subsidiary which would surely like to expand its list of successful contracts. Boeing's fight with Bombardier over the C Series has already influenced the Canadian military procurement of new Boeing F-18's.

This is certainly a novel situation for Canadian industry to be in. As outlined in the October 12th, 2017 post, "Osborne Steps Down at Canadian MDA as it Responds to Questions About its US Based "Maxar" Future," US based MacDonald Dettwiler (MDA) president Howard Lance even called Airbus the only company able to compete with MDA/ MAXAR across the various business verticals.

And now both companies are well entrenched in the Great White North and able to use a wide variety of both domestic and international business resources to influence procurement decisions. Will the Federal government be strong enough to control the power these two behemoths bring to the table?

Time to queue up the explosions and stand by for action. Anything can happen now.

Henry Stewart is the pseudonym of a Toronto based aerospace writer.

Researchers, Heal Thy Selves!

          By Brian Orlotti

According to Alan Bernstein, the president and CEO of the Canadian Institute for Advanced Research (CIFAR), the Canadian scientific and research community needs more than money. It needs a "bold new vision" of how to perform scientific research.

Bernstein at the 2015 Canadian Science Policy Conference (CSPC), which took place in Ottawa, ON on November 25th - 27th, 2015. As outlined in his Wikipedia entry, Bernstein has received a variety of awards and accolades including "the McLaughlin Medal of the Royal Society of Canada, the Robert L. Noble Prize from the National Cancer Institute of Canada, the Genetics Society of Canada Award of Excellence, the 2001 Australian Society of Medical Research Medal, four honorary degrees, the 2007 Medaille du merite from the Institut de Recherche Clinique de Montreal, the 2008 Gairdner Wightman Award and the Order of Canada in 2002. He is a Senior Fellow at Massey College, University of Toronto. In 2015, Bernstein was inducted into the Canadian Medical Hall of Fame." Screenshot c/o Canadian Science Policy Centre.

As outlined in his October 12th, 2017 MacLean's post, "It’s time for a bold new vision for Canadian fundamental science," Bernstein made the point that aside from the need for more funding, the Canadian research field has large barriers to entry, especially for young researchers.

He questioned why ambitious young researchers would choose a career in science when the odds of securing a grant are only between 8-12% in health research, or when average funding for physical sciences has remained nearly unchanged for the past decade at less than $35,000 per year and is lower today than in the early 2000s. Bernstein warned that Canada risks losing an entire generation of scientists unless it finds ways to attract and fund the best young researchers.

Bernstein provided two examples for Canada to learn from.
  • The first was the last "golden age" of Canadian science funding i.e 1997-2007 which saw large across the board funding increases. According to Bernstein, "that transformation wasn’t just about money: It also profoundly changed the landscape for research in Canada. New agencies to fund research infrastructure, health research and genome science were created as were new programs like the Canada Research Chairs, the Indirect Costs Program and the Canada First Research Excellence Fund. These changes were not easy; real change rarely is. For example, the creation of the Canadian Institutes of Health Research (CIHR) in 2000 was the culmination of an intense and difficult national discussion that lasted almost two years."
  • The second example was more recent, more difficult and occurred in the UK, whose government recently introduced major changes including the merging of eight separate agencies into a single entity overseen by a single board and chief executive; UK Research and Innovation. In essence, the second example produced a fast-moving system composed of increasingly international, interdisciplinary, and collaborative units operating under a centralized structure. 
Bernstein noted that the UK model appeared too ambitious for Canadians given that the committee that wrote the 2017 Canada's Fundamental Science Review, which was headed by Canadian physician David Naylor, rejected similar changes for Canada as being "too risky."

But he thinks we should do it anyway.

Bernstein did agree with the crux of the 2017 Naylor report’s findings, namely that Canada’s scientific research structure suffers from 20 years of balkanization and bloat, with too many agencies (in traditional academic style) at each other’s throats with varying cultures, rules, grant levels and partner requirements.

This disunity and lack of coordination has compromised the Canadian research establishment’s ability to plan and act strategically.

Bernstein stated that Canada’s research system must place far more emphasis on interdisciplinary and international research teams, rather than the current individualist "superstar/prima dona" oriented approach.

This notion has met resistance from senior researchers who fear encroachment on their individual fiefdoms. Bernstein himself sees no conflict between individual  and team-based research, arguing that the Canadian system should utilize both.

There are hundreds of academic space science conferences going on every month in Canada and around the world. Most focus not just on publicizing and promoting new research and developments, but also depend on driving revenue generating and fee paying undergrad admissions to the faculties and organizations being promoted, whether or not there are jobs available for the surviving graduates and post docs. This particular, just concluded event was sponsored by a variety of universities, colleges, institutes, associations and private organizations. After all, low cost, well trained and pliable help is hard to find. Graphic c/o MSSA

While streamlining bureaucracy and bringing squabbling fiefdoms into line are positive steps, the Canadian research field must take more immediate steps to make itself more attractive to young talent.

After all, we live in a time when the tech industry is using multiple incentives to entice new talent (bonuses, catered meals, gym memberships, paid training) and senior academics draw six figure salaries at their respective institutions, but Canadian graduate students live in poverty and squalor..

Researchers heal thy selves.
Brian Orlotti.

Brian Orlotti is a regular contributor to the Commercial Space blog.

Friday, October 13, 2017

Short List for the $950Mln CDN Supercluster Initiative

          By Henry Stewart

The Canadian government has selected nine consortium's for its supercluster program shortlist, including the MOST21 aerospace focused bid led by Montreal-based flight simulator maker CAE Inc., and an agrifood focused proposal spearheaded by Calgary-based Agrium Inc., which includes Richmond BC based MacDonald Dettwiler (soon to be re-branded as "MDA" in much the same way as what was once Kentucky Fried Chicken is now known only as "KFC").

Screenshot of the MOST21 website taken on October 13th, 2017. The Canadian aerospace community is mostly on-board with this choice. As outlined in the October 10th, 2017 Aerospace Industries Association of Canada (AIAC) post, "AIAC Applauds Shortlisting of Aerospace Supercluster," quoted AIAC president and CEO Jim Quick as expressing his "delight" at the choice. The October 10th, 2017 CARIC newsletter quoted Consortium for Aerospace Research and Innovation in Canada (CARIC) CEO Denis Faubert as stating that, "It’s a strong message from the mobility industry: a willingness to participate actively to the creation of jobs and wealth in Canada. This supercluster may become a major player and narrative for Canada’s role on the international scene." Graphic c/o MOST21.

As outlined in the August 31st, 2017 post, "MacDonald Dettwiler is Part of an Alberta Based Agrifood ‘Supercluster’ Proposal," the agrifood proposal plans to explore the uses of satellite data and other technology to improve crop yields.

Left out of the final selection is Satellite Canada which, as announced in the August 3rd, 2017 post, "Satellite Canada Applies for Innovation SuperCluster Funds," put together a consortium of thirty-nine Canadian space focused corporations, associations and academic institutions willing to contribute time, effort and up to $328Mln CDN, to apply for the Federal supercluster matching funds.

An overview of the nine remaining successful applicants is included with the October 10th, 2017 Globe and Mail post, "Short list for $950 million supercluster initiative revealed." For more on the program, its worth checking out the October 12th, 2017 Federal government Innovation superclusters initiative (ISI): Program guide.

Final bids, due from the shortlisted groups by November 24th, could end up being different from the current shortlist. The consortiums have been encouraged to add more participants, including those from unsuccessful applications, in order to create “more ambitious job-creation plans.”

It's also worth noting that not everyone is enamored with the supercluster concept. A good place to start exploring that is the October 11th, 2017 Financial Post article, "Tech accelerators are booming — what's not clear is whether they work."

Henry Stewart is the pseudonym of a Toronto based aerospace writer.

Thursday, October 12, 2017

Osborne Steps Down at Canadian MDA as it Responds to Questions About its US Based "Maxar" Future

          By Chuck Black

This blog, along with quite a few of the internal staff at the Richmond, BC based MacDonald Dettwiler (MDA) office, has known for a week that Don Osborne, the president of MDA's Information Systems Group, was resigning his position. 

It's unusual to have a conference call during the blackout period leading up to the formal quarterly announcement of earnings, which in this case will be on November 2nd, 2017. But Maxar CEO Howard Lance held one anyway. He even included Osborne as part of his leadership team as recently as today, as can be seen from these power-points taken from the October 12th, 2017 Maxar Shareholder Luncheon and Webcast, which Lance hosted. During the presentation, Lance introduced the other MAXAR executives by name but forgot to mention Osborne, although he was prominently listed in the power-point presentation. For a complete audio recording of the presentation, check out the webcast  and presentation here. Graphic c/o MDA/Maxar.

But now it's official. According to an October 12th, 2017 e-mail from Wendy Keyser, the manager of marketing communications with the MDA Information Systems group:
Don Osborne has chosen to step down from his position as president of MDA effective October 31st. We’ve begun a search for the best internal or external candidate to lead MDA with a focus on Canadian nationals.

Don has been a valuable member of the team and we appreciate his many contributions to our success. We wish Don the best in all his future endeavours.
Osborne, at least until his resignation takes effect at the end of the month, is the senior Canadian based MDA employee of the new San Francisco, CA based Maxar Technologies Ltd. As outlined in the October 5th, 2017 post, "MDA Acquisition of DigitalGlobe Closes; New US Based Combined Company now called Maxar Technologies," the new Maxar technologies includes the old Space Systems Loral (SSL), MDA and DigitalGlobe, which have been combined into a single entity.

Earlier this month, Osborne sent out an e-mail to internal MDA staff stating that he would be leaving his role effective October 31st. The blog became aware of the e-mail last week and requested clarification from Osborne, Keyser and MDA director of public affairs Leslie Swartman.

In response, MDA released the resignation announcement from Keyser. 

As outlined in the October 12th, 2017 Maxar Shareholder Luncheon and Webcast: the revenues by market and by product line and the synergies expected from elimination of duplicate costs and increased size expected to be realized over the next two years. According to Lance, only Netherlands based Airbus Group can compete with Maxar synergies, "but they're not organized (for commercial operation) the way we are." According to Lance, "MDA and SSL never integrated. Even across Canada, MDA is not integrated. And so the opportunities, we put some of that on pause while we were waiting for the closing, the opportunity now to integrate the whole enterprise, is extremely attractive. That's what's going to deliver the synergies. Its going to deliver an operating cadence and a level of efficiency which we believe is going to be helpful to all four of the (Maxar operating) businesses." In essence, now that the sale has closed, Maxar can integrate, synergize and cut costs. Graphic c/o MDA/Maxar.

But Keyser also released answers to several questions this blog was originally hoping to discuss with Osborne. Here are both the original questions and their responses from Keyser:
  • The deal has closed and there's no doubt that the acquisition is a net positive for the company as a whole. But what's next for MDA in Canada?
MDA is – and will continue to be – one of Canada’s leading technology companies and an internationally recognized leader in space robotics, satellite antennas and subsystems, surveillance and intelligence systems, defense and maritime systems, and geospatial radar imagery. 
MDA has provided government and commercial customers with innovative space systems and solutions for decades. 
The acquisition of DigitalGlobe creates a company that has the scale, resources and technology to create even greater growth and innovation, enhancing our ability to invest, innovate and grow these businesses and our Canadian presence. 
The MDA brand associated with the company’s Canadian business will serve a vital role as part of the Maxar Technologies portfolio. 
MDA will continue to operate independently and be led by a Canadian leadership team, and will remain committed to our enduring and valued partnership with the Canadian government and our Canadian employees. 
  • The Federal government put the kibosh on US control of MDA and its sale to ATK in 2008, mostly because RADARSAT-2 was considered essential to Canadian security and needed to remain under Canadian control. How will the re-organization, acquisition and new corporate structure affect the launch and operation of the follow-on RADARSAT Constellation (RCM)?
This acquisition in no way affects the completion and launch of the RADARSAT Constellation Mission (RCM), which will be a Government of Canada-owned satellite mission. 
  • SpaceQ has indicated that MDA will continue under the MDA name and banner in Canada for the foreseeable future but others disagree. The October 5th 2017 Washington Technology post, "Inside MacDonald Dettwiler's new 'Maxar' era as DigitalGlobe buy closes," even quotes CEO Howard Lance as stating that, "each business unit within Maxar will operate under its current branding as the new name is rolled out through the remainder of this year." Will this re-branding include MDA in Canada?
While we will be phasing out use of the name MacDonald, Dettwiler and Associates, the ‘MDA’ brand name will continue to be used by all of our Canadian businesses and serve as a vital brand within the company portfolio. 
Being an instrumental part of Maxar Technologies will mean that the MDA brand, an icon of Canadian technology growth and innovation, will continue.
  • The same article mentions a second re-org in 2019, when the company becomes "fully American." How will this second re-org affect Canadian operations?
While we cannot discuss future, or forward-looking, plans for our business, rest assured that MDA’s Canadian operations will continue to be managed by an experienced Canadian management team, who will continue executing MDA’s Canadian business plans and investments for growth. 
We remain fully committed to our enduring and valued partnership with the Canadian Government and our Canadian employees.
Of course, any future experienced Canadian management team won't include Osborne. And the real concern at the Canadian MDA offices is over the "synergies" expected to be achieved by consolidating the  services of Space Systems Loral (SSL), MDA and DigitalGlobe into a single entity.

As outlined in the September 6th, 2017 SpaceQ post, "Cambridge Facility Sees Workforce Reduction of 49% Since Honeywell Acquired Com Dev International," the last time a US based space company attempted to develop synergies with a recently purchased Canadian subsidiary, the end result was a substantial loss of Canadian jobs.

Here's hoping that doesn't happen this time. 
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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