HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Ms. Diana Whalen (Chairman)

Dr. John Hamm

Mr. Mark Parent

Mr. Gary Hines

Mr. Howard Epstein

Mr. Charles Parker

Ms. Marilyn More

Mr. Wayne Gaudet

Mr. Harold Theriault

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

WITNESSES

Aerospace & Defence Industries Association of Nova Scotia (ADIANS)

Mr. Michael Hollihan, President

HALIFAX, TUESDAY, MARCH 21, 2006

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Ms. Diana Whalen

MADAM CHAIRMAN: I'll call this meeting to order and get started. This morning we have with us Mr. Michael Hollihan, representing the Aerospace and Defence Industries Association of Nova Scotia. I think it's good timing, since at our last meeting we had, as witnesses, people from Composites Atlantic. So it follows up very nicely on that. I just have one administrative note, and that is that we're not joined by two of our members today but I think we can announce who they are, we now have two more members of the committee, Mr. Mark Parent and Dr. John Hamm, who will join us at our next meetings. Gary Hines is now a permanent member of this committee, rather than standing in.

What I would like to do is begin by having the members of the committee introduce themselves, and then we'll get underway from there.

[The committee members introduced themselves.]

MADAM CHAIRMAN: I'll turn the floor over to you.

MR. MICHAEL HOLLIHAN: Madam Chairman, my name is Mike Hollihan. I'm here today to give you a little overview of the Aerospace and Defence Industries Association of Nova Scotia and what it means to the Province of Nova Scotia. I think I have some figures here that may even shock some people. We're very pleased with them. On my front page I said, to provide an overview of the organizational development activities, really that's the business activities of the association rather than organization, on the second page.

So the background of our association goes back to 1995. At that point in time, most of you will remember we had some serious problems with deficits in Nova Scotia and in Ottawa. At the time, the federal government produced a White Paper on Defence, which made major cuts to the defence budget. The consequence of that, we had six bases in Nova Scotia close, or $1 billion taken out of our economy here in the province. At the time, there was a lot of discussion about what was going on. Some of you may or may not know that Nova Scotia took the biggest hit from those cuts from Ottawa in that time frame, which was 1994-95. I think the consequences of that, the 11 MPs who were elected to Parliament in 1993 all lost their seats three or four years later when they had an election, because we took some really serious hits.

It was out of those cuts and the closure of the base that a number of us got together, a group of us, about eight companies, to talk about aerospace and what it was going to mean to us and how bad it was going to be, because if you take $1 billion out, obviously you take a lot of jobs and a lot of people. Now the unemployment ranks didn't go up that high, because a lot of the people who were cut were transferred out. They were transferred to Ontario; they were transferred out West. They were people in uniform, so you didn't feel the cuts as much as you would have if you had taken $1 billion out of the economy and the people were unemployed in the province here. Just to give you one example of that, the Town of Shelburne lost 10 per cent of their municipal tax base with the closure of the base in Shelburne.

There were really serious things going on at that time, and it was out of that we got together and formed the association, primarily to see how bad it was going to be and how many more companies were going to be cut and who we should talk to about this and so forth. At the same time, the Cold War was over, and two major contracts that were here in the province, one at Litton, at the airport where they built the facility for 500 people, and the other was Composites Atlantic in Lunenburg, which was built to accommodate 200 to 250 people, both of those contracts were cut. In Lunenburg, they went down to, I believe, 10 people, 10 to 15 people.

At the Litton plant, which was built for 400 or 500, they were up to 150 when they got the cut, so they dropped down to around 25 to 30. What happened was there was a contract up for bids down in Greenwood, for the in service support of the Aurora aircraft. They directed that to Litton, which gave them a complement of about 75 to 80 people. They still have that contract today.

So we had those two facilities empty, and we had another six companies wondering when the axe was going to drop on them. That's when I got involved with them to form the association. We had eight members. We did a head count of our sales at that point in time, and it was around $200 million a year, and 2,000 employees.

We incorporated under the Societies Act as a not-for-profit organization. We have audited statements annually. We have 55 members. We have one staff person. We survive primarily on the fact that our executive puts in about $250,000 a year in hours of work for the association. I'm a volunteer. We only have one paid person in the organization.

In 1996, we did $200 million with 2,000 employees; in 2005, we've done $600 million with 6,000 employees. We are primarily military-focused, 75 per cent of our work is military and 25 per cent is commercial. The combined, because we always look at ourselves as DND and industry, as a group, as a very intricate group of people because whatever happens in the military affects us, so the combined DND, ADIANS contribution to the province is about $1.5 billion a year towards our GDP.

The direct employment, when you take the military and ourselves, we have 6,000; you take the combined, it's 20,000 direct people, if you take the numbers that people like to apply to direct, three to one, it's about 60,000 people involved in aerospace and defence. DND has 37 per cent of their equipment assets in the Province of Nova Scotia, that's everything from helicopters to planes to submarines to frigates to Maritime coastal defence vessels, et cetera. We are punching much above our weight when it comes to the rest of Canada, with DND. DND, themselves, spend $1 billion a year. In addition to the monies we get, they spend another $250 million a year on O&M, around the bases here and so forth. So if you combine DND with aerospace, it's about 6 per cent of your GDP and about 17 per cent of the workforce.

Last year, 2005, our industry signed $1 billion in orders for the Province of Nova Scotia. The biggest recipient of that was IMP, which received a contract for $540 million to maintain the CP140s down at Greenwood. I don't know if you people are familiar with the word offsets in industrial regional benefits. I'll just give you a little overview of what that means. When the federal Government of Canada, and Canada was the first nation to do this, to spend between $10 billion and $15 billion on their military, back 10, 12 years ago, maybe a little longer than that, they decided that all of the products they were buying had to be bought offshore. So if you were buying planes and helicopters and boats and submarines and so forth, you had to buy them in foreign countries.

We introduced an offset program, which meant that any company getting a contract to supply to the military, be it guns, be it planes or anything else, had to do an equal amount of work in Canada. So if somebody got a contract, like the Maritime Helicopter Program, and it was $3 billion, that company was responsible for doing $3 billion worth of work in-country. Then they introduced, at the same time, regional benefits. So they had to spread the benefits across the country. I mentioned earlier that Litton, at the airport, and Composites Atlantic, in Lunenburg, were two companies that were developed based on offsets and IRBs, industrial regional benefits. Whatever they spend in defence dollars on capital programs, the bulk, anything over $1 million requires an offset program. I'll go into some of these details just a little further along.

[9:15 a.m.]

The Canadian Space Agency is another curious agency. It was developed by Ottawa. It's mandated by legislation in Ottawa that they have to spend 10 per cent of their purchases in Atlantic Canada. We did a survey of that group three years ago, and at that point in time they had only spent 4 per cent of their monies here. That goes right back to day one when they started the Canadian Space Agency. There was a shortfall of $250 million worth of space work, that was supposed to come to Atlantic Canada but did not come. So there was a lot of commotion, we created a lot of commotion over that.

MacDonald Dettwiler, MDA, the space company in Canada, headquartered, I think, maybe in B.C. or Toronto, had a space office here. Today, that office is now 10 times larger than it used to be. I think they have about 60, 70 people here. Last year they made the announcement that MDA would be the centre of excellence for space in Atlantic Canada. Now the Canadian Space Agency is trying to catch up and spend monies that they owe Atlantic Canada. It's a great revenue source for our companies and so forth.

Also, we recognized that in our industry there was a major problem developing for skilled labour. So we formed the Human Resource Development Group in 2003, which is a separate association. That's an association that's combined with Skills Nova Scotia, community colleges and so forth. They have terrific programs now for training people for skills within our industry itself. Most people may have noticed in the past short while the large ads in the paper every weekend for skilled people out West. We are attacked by these people all time. We lose people continuously to the western provinces, Alberta, B.C. I'll give you an example, one company in P.E.I., two weeks ago, lost seven machinists from their shop. Well, seven machinists do a lot of work for a company, a small company in Atlantic Canada.

The outlook for 2006, I told you we did over $1 billion in direct sales in 2005. Under the major Crown projects, you see there $15 billion worth of work that's on the drawing boards in Ottawa. All of those programs you see below it are for programs for equipment or services in the Province of Nova Scotia. They're real. If you look at the frigate upgrade program, that's about $5 billion there. Fixed-wing search and rescue, a little over $1 billion. Those Coast Guard midshore patrol vessels, they talked about that, it's on-line right now; the joint support ships are for the replacement of the Protector and Preserver.

The Victoria-class in-service support, that's an interesting one and I'll show you that on the next slide. The airlift program is another $4 billion or $5 billion program. The EADS people were here last week for the M400. They're promoting their aircraft for that project, and looking for partners in Atlantic Canada and Nova Scotia. The CP140 upgrade in Greenwood, that's a $1 billion contract that's underway right now. The heavy-lift helicopters and the replacement for the 2.5 ton trucks, all of those programs have been approved on the drawing boards in Ottawa.

Continuing on there, an example of a major Crown program, which is the Victoria class in-service support, that will be about a $1.5 billion program. It will hire 100-plus jobs for people for over 15 years. It will be announced next month who the winners are. The three bidders there are Irving, Halifax Shipyards and BAE. BAE is an interesting organization. They're British Aerospace. They are one of the largest in Europe. They own 20 per cent of Airbus. In the last three, three and a half, four years, their employment levels in the United States went from 10,000 to 35,000 in acquisitions and they're attacking North America very - they have a lot of money and they want to start producing in dollars rather than euros, there is a major problem in currencies.

So the three - Irving is up against the Victoria Shipyards in British Columbia and Kiewit Marystown Shipyard in Newfoundland. That is a very hotly contested program. Lear has announced that if they get the contract, the work will be all done in British Columbia. Kiewit announced they will be doing all the work in Marystown. The subs are stationed here. There is no reason why we should lose that contract but you never know in this day and age where the work is going to go. But it's a classic, as I mentioned before, $15 billion; this $1.5 billion is part of that.

What I did for the benefit of the committee, I included in the package the DND expenditures in the province to let you see where we stand. All 10 provinces and the territories are shown there. DND, last year, spent $13 billion. You can see where Nova Scotia fits in. We're No. 3 on the list. It's almost $1 billion. We had 8,678 regular people; 3,071 civilian people working for them and that does not include our numbers which are 6,000 people working in the industry and $600 million.

I also included in there for your information where the money is being spent in the various 11 federal ridings in the province so you can have an idea where this money is spent.

Then, in the next section, we are part of the Aerospace Industries Association of Canada. I mentioned that 25 per cent of our work is considered commercial. Last year Canada is the fourth - some people say the third but at least the fourth - largest aerospace country in the world. There are only about four countries in the world that are capable of building aircraft and we happen to be one of them. Eighty-five per cent of what we produce is shipped out of the country so it's great for the economy. Last year, or in 2004, they did $21.7 million in sales.

The next page shows you how it's developed, revenue, in each of the provinces. Nova Scotia, you see there, $253 million. Remember, now, that's strictly commercial aerospace work and does not include DND figures in that work that we do in the $600 million. That $253 million is pure aerospace work.

The next page shows you the number of people working in that industry here. It's 3,500, compared to the other provinces, even Alberta. It shows how that $21 billion is spread

around. The interesting one there is Europe, $2.6 billion in sales. We've been attacking that front for the last two years, our association, and we're really seeing the benefits of that now. We've got five companies that have been certified by Airbus to do work for them. We have about three major contracts out of it now; Composites Atlantic is one; xwave has a $7 million contract with Airbus out of Germany on that tanker fleet, so it's really catching on now.

Because of the statistics you sent me, I looked at the GDP and I took the top three which you people have chained together there in that GDP which is agriculture, forestry, fishing, mining, gas and utilities, which is $1.6 billion. DND and ourselves, it's just about right on, the same number. That's basically my presentation.

MADAM CHAIRMAN: Well, thank you very much. Lots of information for us to digest there, in addition to our binders. I wonder who would like to begin with questions this morning. I'm looking to committee members.

MR. CHARLES PARKER: Well, maybe I'll start.

MADAM CHAIRMAN: Thank you very much. Mr. Parker.

MR. PARKER: An interesting presentation, sir. I just have a few little questions, I guess. The workforce you mention now is around 6,000 people in Nova Scotia?

MR. HOLLIHAN: Direct in our association.

MR. PARKER: Now, does that include the aerospace industry and the defence industry combined?

MR. HOLLIHAN: Yes.

MR. PARKER: Because I notice on the stats there, on the second last page, the aerospace workforce is 3,546.

MR. HOLLIHAN: That is strictly aerospace, and that's defence work. If you combine the two, it's about $600 million.

MR. PARKER: Or about 6,000 employees.

MR. HOLLIHAN: Yes, 6,000 direct jobs.

MR. PARKER: Okay, I just wanted to clarify that. You mentioned there are four countries in the world that produce aircraft, Canada being one of them. What are the other three?

MR. HOLLIHAN: The Europeans, the Americans and Brazil.

MR. PARKER: Okay, so Europeans, that's several countries combined.

MR. HOLLIHAN: That's Airbus. Airbus is owned 80 per cent by Europe and 20 per cent by Britain, BAE Systems. They own 20 per cent of the Airbus consortium.

MR. PARKER: So it's a conglomerate of several . . .

MR. HOLLIHAN: They took the industry and put it together in one big - what they call - Airbus, which they put together to challenge Boeing for the commercial fleet.

MR. PARKER: Okay. So there's none in countries that were originally behind the Iron Curtain, or in Asia.

MR. HOLLIHAN: They don't manufacture planes. What they are doing today, that industry is changing considerably. If you've been reading about Bombardier, who are coming out with their new series of jets, or their CSeries, they went out to the industry and asked for people to come on board as part of the development program, where you would develop a portion of the plane and if you developed that portion of the plane, you could build it in your own country. Japan, China and all those countries came in very fast. That's how all planes are built today. They ship them from all over the world. They're built in piece parts. The Airbus is brought to Toulouse, France, and assembled there. The Boeing planes are built around the world, and they bring them to Seattle and put them together there.

MR. PARKER: So in reality there are parts of planes manufactured in other countries but brought to these four main countries.

MR. HOLLIHAN: Well, the new 380, the big 600-, 700-, 800-passenger jobbie out of Airbus, the cockpit of that is being built in Lunenburg.

MR. PARKER: I want to turn attention here for a minute to the Victoria class subs, I guess. It's certainly important here to Nova Scotia and to our area. But the bids are coming up for three different locations: Newfoundland and Labrador, Nova Scotia and B.C. That's for repair work, is it, on the subs?

MR. HOLLIHAN: That's to maintain the submarines for 15 years.

MR. PARKER: When is that contract to be let?

MR. HOLLIHAN: The contract was in our paper last week. There's the article, $1.5 billion, and they claim the contract will be awarded in April. March 31^st is the year end for the federal government, so they anticipate this contract will be awarded in April or May.

[9:30 a.m.]

MR. PARKER: Presently, is that work being done here?

MR. HOLLIHAN: Well, when we bought the submarines, the first five years of warranty work came with the sub. So that work, right now, is being maintained by the contractor who built them, which is BAE. That contract is up this year, March 31^st. Now they're bidding on the 15-year service of the in-service support.

Just one other point on that, you have different levels of maintenance, you have first-, second- and third-level maintenance. The first level may be fuel and grease and oil and all of that sort of thing. Third-level maintenance is maintenance where you take the sub out of commission and put it in a building and do an overhauling. That's what you're looking at there, that $1.5 billion, where you take the submarine, put it in a house, tear it apart and put it back together.

MR. PARKER: It's competitive bidding, I'm sure. Do you have any inkling or feeling on where the contract may end up?

MR. HOLLIHAN: Well, I know what the other provinces are doing. They're all over Ottawa for it, every one of them are up there screaming and yelling, looking for the work.

MR. PARKER: There's considerable lobbying going on, then. I guess I just wanted to ask, in general, on behalf of the industries you represent or the companies, what are some of the products that are manufactured?

MR. HOLLIHAN: What we do here in the province?

MR. PARKER: Yes.

MR. HOLLIHAN: Well, I mentioned we're 75/25, 75 per cent in defence work and 25 per cent in commercial. So on the commercial side, you have companies like Composites Atlantic that build parts for Bombardier, for their fleet of aircraft, and then you have IMP that does a lot of work for Boeing, out of their facility in Amherst, and then you have eight to 10 people in the shop who build wire harnesses, cable harnesses and so forth for the industry.

Then on the defence side, you take everything from the Sea King helicopters, you read in the papers it's 30 hours of maintenance for one hour of flying and so forth, and you have the CP140 fleet at Greenwood, there are 18 of those, and we maintain them. If you go out to IMP's hangar, for example, at the airport, you can't shoehorn another plane into the building out there. It's block solid and there are helicopters there from Egypt, the United States, we even had the major Sea King Air Force One, up for overhaul here for the President

of the United States. The President of Egypt, he has two helicopters here right now. It's everything you want to put in that catch basin of repair and overhaul of vessels and planes.

MR. PARKER: Do any of your industries in the province build weapons of war, ammunition or anything like that?

MR. HOLLIHAN: I'm sure some of their parent companies would. We had a contract for ADATS, which was part of the reason Composites Atlantic was closed down, but that's a rocket launcher. We don't make the rockets, but we made their launcher that fired them. Of course you have Librascope, which is now owned by Lockheed Martin Canada or Lockheed Martin in the States. They do the firing systems on the submarines. All of those warships are all equipped with guns and bullets and everything else. They just go up to the ammunition dump here in Bedford and pick it all up.

MR. PARKER: What countries of the world would your member companies be working with?

MR. HOLLIHAN: Well, we're very unique here in Nova Scotia because we have the parent companies of all of the major defence and commercial airline people here or have offices here. We have Lockheed Martin that has about 100 people stationed here; we have L-3 that bought the old Litton factory out at the airport, they have about 275 people and they do about $600 million a year themselves in sales, the parent company; you have IMP, considered a major company in the industry itself, and as I mentioned a few minutes ago, they just rewarded a $540 million contract to maintain the CP140s. You have EADS Composites that's owned by Airbus and the Province of Nova Scotia. It's unique.

I think there's a lesson to be learned from the French. They were firm believers that you don't have to put factories in cities, that you could put them in rural locations and they are very successful. You look at a company like Michelin, a French company, building tires in three facilities around the Province of Nova Scotia, they're closing factories everywhere in Ontario and down in the States but they're building extensions to the factories here in Nova Scotia, and they built them in rural locations where you hire somebody 18, 19 years of age and they retire with you. You had Composites Atlantic here last week. There are about 250 employees there; 10 years ago there were 10 people and there are 250 there now. I would say that 99 per cent of their employees are sons and daughters of fishermen.

MR. PARKER: If I could just ask one more question, I just want to clarify the products that you're manufacturing. I guess they're shipped everywhere around the world, are they?

MR. HOLLIHAN: The eight-track vehicle, for example, they use in Afghanistan, that was developed in Canada, in London, Ontario, and it's the best military vehicle in the world

today. Six of the boxes that go inside of that to make up the communications package and so forth are totally put together here at the L-3 plant at the airport. A major contract.

MADAM CHAIRMAN: Ms. More.

MS. MARILYN MORE: Madam Chairman, there was a very interesting article in Saturday's ChronicleHerald, quoting you about the upswing in your sector. I was particularly interested in the area that talked about the human resource issues. You've touched on that a bit this morning. I'm just wondering, would you happen to know the gender breakdown in the workforce currently in the aerospace and defence industry in Nova Scotia, even just roughly?

MR. HOLLIHAN: I couldn't even guess at it, but I have visited most of our factories and the bulk of the hands-on work, assembling, wire harnesses and so forth, is being done by women. You go to, for example, Ultra or the Hermes plant over in Dartmouth, they have a couple of hundred employees there, and I would say the bulk of their staff is female.

MS. MORE: It mentions in the article about . . .

MR. HOLLIHAN: Excuse me, we have those statistics, if you need them.

MS. MORE: I would be most interested, if you could make them available. It talks here about the workforce forum at Shearwater in early May. I'm wondering, who exactly are you marketing that to? Who will be coming to that forum?

MR. HOLLIHAN: Well, they've started a program, and I don't want to speak for the human resource group because they have their own association and it would be worth your while to have them in someday to have a chat, but they formed an alliance with Skills Nova Scotia and the community college and the universities. What we're trying to do is convince people, as they go up through high school education and so forth, that there's a good life to live if you come into our companies, and there are plenty of jobs around for them. Where we're really short is in the skilled area, the machinists, the technical people and so forth, engineers. One of our companies, a human resource development company that is a member of our association, has a contract with Airbus to try to find 1,000 engineers for Europe, that's the shortage right now. They're 1,000 engineers short in their program.

MS. MORE: Do you have any direct knowledge, if that forum, for example, is going to be promoted among women to any extent?

MR. HOLLIHAN: What I'll do is - there's a reference in the back here to the human resource groups. They've done some studies on the demographics and so forth all over Atlantic Canada, including Nova Scotia - I'll get you some information on it.

MS. MORE: That group is sponsored by your organization or your partner?

MR. HOLLIHAN: Well, we started it, but because there was such a demand for the people and a specialty item of getting people to come into the industry, we spun it off into its own association. The province and the community colleges, they're all on the board of directors of that group. They put on training programs, they even go out into the Air Cadets and the Army Cadets and so forth to point out the benefits of working in the industry.

MS. MORE: That seems like a very proactive approach. I certainly commend you on that. Can you touch, in a little more detail, on some of the human resource issues that you think your industry is facing at the moment, and whether there's a role for the provincial government in helping to resolve or meet some of these needs?

MR. HOLLIHAN: I think they're very involved right now, Skills Nova Scotia, through the community college and so forth. To give you an example of it, we have these training centres around Atlantic Canada. Over the last year we had 30 people graduate from one group in Gander, Newfoundland. IMP hired 30 of them and brought them to Nova Scotia. Wherever they are, Holland College and so forth, everybody is there, over at the training school in Shearwater, wherever it is, people walk out the door and they go to work. It's almost the same as what it was before the Y2K in the software industry. People were hiring them the minute they graduated. Now a lot of them get hired before they graduate.

MS. MORE: I was curious, I think you're quoted in this article as suggesting that people are leaving for higher-paying jobs in Alberta, but they might not realize the cost of living is higher there and they may not actually be bringing home a lot more money. You're suggesting there should be better programs by government to explain to somebody what $50,000 means in Nova Scotia versus $80,000 in Alberta. Did you have any specific examples? Obviously they're doing the promotion on the Alberta end to attract people there. What were you thinking when you were suggesting there was a role for government in counterbalancing "the grass is greener in Alberta" argument?

MR. HOLLIHAN: Well, I think the government could be more proactive. There could be more articles written by the media and so forth on just exactly what you get. There were two great articles on the weekend in the paper, one on the tradespeople from Cape Breton, they had an article in there saying that most of their people are now going for three months and coming back for a month, because they can't afford to live out there. So they're taking the jobs in the camps and so forth where they're being found room and board, so they go, they're fully found, three months, then they quit, come back home, then they go back out for another three months. They are seeing that in the labour market, in the trades market.

In our particular case, as I mentioned earlier, in P.E.I., they lost seven machinists in one week. Now, there was a great article in the paper this week - I don't know if I cut it out or not. It showed the difference in salaries and so forth between the West and the East, but

where they showed the average house in Halifax is $195,000, and that same house in Alberta is $390,000. So if you're going to exchange your house down here and go out there and you're going to double the price of your home, then you start thinking about these things.

I really think there has to be an educational program put on so that people understand. Every single weekend there are work fairs going on here in the province to attract people. You may have seen the one for the Superstore. They did a program on television. They came in here to recruit 100 entry-level people to go into their Superstores in Ontario. Entry level is stacking the shelves. They were offering them $30,000 a year to move from Nova Scotia to Ontario for entry-level jobs at their Superstores, and they were trying to hire husband-and-wife teams, so instead of $30,000 now you were getting $60,000, they were giving you $5,000 relocation and so forth. Well, that's attractive to somebody if that's their level of work, entry level in the supermarket. When they get there and find out that they're living in Ontario and they find out that with $60,000 together, they better get a second job to keep up with the Jones.

[9:45 p.m.]

MS. MORE: So you're thinking there might perhaps be something on the government Web site that says, thinking of moving outside of Nova Scotia for a job, here's your reality check, and then having some of the facts and figures there?

MR. HOLLIHAN: Well, all you have to do is put in the newspaper a couple of times a month, the pay scale. There was a chap out in Sackville about a month ago who had an article in the paper where he said that here in the province we get taxed at $7,000, if you go to Alberta you get taxed at $14,000 of income. I'm sure a lot of people read that, because it showed each of the 10 provinces and we have the highest tax burden of all here in the Province of Nova Scotia. That's the reverse. You may want to go to Alberta because you can make your first $14,000 without being taxed.

MS. MORE: So the reality has to be matched by some good public policy on all aspects.

MR. HOLLIHAN: Yes, we need to see it.

MS. MORE: Okay. Thank you very much.

MADAM CHAIRMAN: Mr. Epstein.

MR. HOWARD EPSTEIN: Maybe you just want to be resident in Alberta in December, so you can put it on your income tax form, as to where your province of residence is.

MR. HOLLIHAN: Well, he announced again today he's going to give another $400.

MR. EPSTEIN: Well, maybe, I think he said maybe. Moving right along, Mr. Hollihan, can I ask you about a small point that you mentioned in passing early on? You were talking about base closures in Nova Scotia back in 1995, and you gave the example of the Town of Shelburne losing one-tenth of its property tax base when the local military facility closed up. I was just wondering if you know how that works? As I understand it, technically a town can't tax federal property but there's federal legislation in which they agree to pay property taxes to local municipalities on an ex gratia basis, and I think there's federal legislation, maybe called the Payments in Lieu of Taxes Act.

But I wonder if you know how they deal with that when they cease to use property, because they still own the property. Do you happen to know, would it go down to zero at that point or would they continue to pay some of the amount?

MR. HOLLIHAN: The problem with Shelburne was that there was no base housing. All the people lived in the town, around the town.

MR. EPSTEIN: Oh, so you weren't talking about the base itself, you were talking about the loss of people, people moving.

MR. HOLLIHAN: Yes.

MR. EPSTEIN: And weren't able to sell their property?

MR. HOLLIHAN: Well, no, the government bought the property, which . . .

MR. EPSTEIN: Which essentially took it out of the tax base. Is that what you mean?

MR. HOLLIHAN: The properties ended up, a lot of them, vacant. Look at Cornwallis as another example. They ended up selling off these gorgeous homes down there for $25,000, $30,000. Well, if you had a home in Cornwallis, on any one of the streets down there as a civilian, it would be a long time before you got $100,000 for yours if they're selling them for $25,000 on the base.

MR. EPSTEIN: Okay, good, that answers something there. I was curious as to how that would actually work in terms of losing the 10 per cent.

MR. HOLLIHAN; I know the statistic at the time, because it was headlines in the paper. I said, my God, that would be an awful hit, because you can't take up the water and sewer, you just have to spread it out over the balance of the people who live there.

MR. EPSTEIN: That's right, and if it's housing, you still need a fire department and so on. Let's move to something else. I'm wondering about the 55 members that you have in your organization. Are these all corporate members? Are you structured . . .

MR. HOLLIHAN: I'd say 45.

MR. EPSTEIN: And the other 10 would be?

MR. HOLLIHAN: Well, there's some university people there, ACOA is a member, economic development. The 45 would be . . .

MR. EPSTEIN: Would actually represent companies that are engaged in the business, is that right?

MR. HOLLIHAN: Yes. The bulk of them are small- and medium-sized companies.

MR. EPSTEIN: Do you have a membership list that you could give us at some point?

MR. HOLLIHAN: Sure.

MR. EPSTEIN: Would that be okay?

MR. HOLLIHAN: I'll give you a brochure that has a list of everybody.

MR. EPSTEIN: Fine. That would be a big help. I was wondering, in part, whether any of these are publicly-traded companies? I'm just going to give this to the clerk of the committee, and perhaps we can have copies made for everybody here. Sorry, go ahead, you were about to explain.

MR. HOLLIHAN: When you say publicly-traded companies?

MR. EPSTEIN: I mean companies that have shares traded on a stock exchange, that's what I mean.

MR. HOLLIHAN: I'm sure the parent companies - we have a lot of, like Pratt and Whitney has a large facility at the airport. Now Pratt and Whitney is owned by United Technologies, and they're traded on the stock exchange. So you would have that company. You would have MDA, MacDonald Dettwiler & Associates. The only large one is IMP, and they're not. Then we have Ultra Electronics from Hermes, and that's a European consortium, that's a publicly-traded company, and Airbus, obviously, EADS. But when you get down into some of the smaller companies, like the manufacturing, machining shops, and so forth, they would all be privately owned.

MR. EPSTEIN: Yes. For example, we had Composites Atlantic come talk to us, and they're privately held - well, they're owned . . .

MR. HOLLIHAN: They're traded in Europe, EADS.

MR. EPSTEIN: So of the 45 corporate members, the ones that are part of international consortiums, some of those would be publicly-traded companies elsewhere, but of the local companies, the ones that are essentially Nova Scotia companies, they're privately owned. Is that the picture?

MR. HOLLIHAN: That's correct.

MR. EPSTEIN: Are there any individual members making up the 55?

MR. HOLLIHAN: Well, myself, I have a consulting firm, one person. The way we do things, if you bid on the contract and it requires two or three or four people, then you hire consultants to work on the contract with you.

MR. EPSTEIN: Are all these companies manufacturing companies? What I'm wondering, particularly, is, you mentioned consulting, but I'm wondering if any of them are research companies?

MR. HOLLIHAN: Research and development. The companies that would be into this would be like DRDC in Dartmouth.

MR. EPSTEIN: What's that? I don't know what that stands for. I don't know that company.

MR. HOLLIHAN: It's a defence research group, which is a fairly large organization. They do major R&D for the defence industry. GDC, General Dynamics Canada, they have a group here that do it. And it's spotty, Hermes maybe has two people in their engineering group that are involved.

MR. EPSTEIN: So despite the fact that DRDC, which seems to be Defence R&D Canada has research . . .

MR. HOLLIHAN: I think they would have about 60 to 70 people there.

MR. EPSTEIN: But do they actually do research in their facility here?

MR. HOLLIHAN: Yes. The majority of it is marine. Of late, I should tell you about this, we've formed another group called MAST, Marine Security and Technology. It's primarily to do with security of our ports in the North, in the Atlantic and everything else.

We had a seminar here. We wanted to see how important it was to the industry. What we're trying to do - because a lot of this research and a lot of this product is in different companies and it may be just a sensor or something to use on satellites and so forth.

We had a one-day seminar and 107 people signed up for it from all over Atlantic Canada. We were amazed. We're putting together a business plan on it now, to look at the core technologies required, bringing it all together and DRDC is very involved in it, MacDonald Dettwiler is very involved in it, to see what products we actually have that could fit into the industry. If you look at Halifax Harbour, you start out with the bridges and then you just go around the harbour, and you've got the cruise ships right at the start of the harbour, you have the DND dockyards, submarines, all the various vessels, you go up to container ports, you go up to the basin and you've got the full Atlantic Munitions Dump for DND, and come down the harbour again and you've got all the industry along over there, and then you get into the oil and gas fields over there.

You have the prime harbour, if you're going to have a problem with anybody - Halifax, of all of the harbours in Canada, is the one that requires security the most. That's what we're looking at.

MR. EPSTEIN: Good point. In the membership list that you just handed out, it's cross-indexed with the type of business that the companies do. One of the categories is software design and simulation, which I assume is a kind of research, as well. Is that right?

MR. HOLLIHAN: Well, in the software side of the house, the bulk of the companies that are involved in that are in the IT sector. They tend to gravitate towards that group. One or two may have crossover in our association, but the bulk of the people in the software design in Nova Scotia would be part of the ITANS.

MR. EPSTEIN: As well, because there seems to be 13 of your members who have shown themselves as being active in that category. I heard you mention university memberships, and that led me to wonder about the research. Is there a link between your memberships and some of the universities?

MR. HOLLIHAN: It's not as good as it could be.

MR. EPSTEIN: Tell me about it. What's actually in place right now?

MR. HOLLIHAN: Well, we've gone through a restructuring of our association this year, memberships and so forth. When we started out, we were strictly manufacturing, that was our bread and butter. Over the last number of years, the last couple of years, we've seen - there used to be a program called DIP, Defence Industry Productivity, that allowed people to apply for funding for research and development. On the tail end of it, then capital purchases of equipment. We got very little in R&D down here, all the R&D was taking place

in Ontario and Quebec, but we would get major amounts of capital expenditures because the equipment would be bought and put in our plants. With the TPC program in Ottawa, which I think is the Technology Partnerships Canada - I'll have to research the name of it.

MR. EPSTEIN: This is a federal government program?

MR. HOLLIHAN: A federal government program. It's R&D, primarily driven by R&D, and of course the big companies using that money would be Bombardier, developing an aircraft, or CAE, simulation and so forth. The bulk of the monies is going to Ontario and Quebec. So what the federal government did through ACOA was put a pocket of money into Atlantic Canada, $350 million, and then they doubled that to $600 million recently, for research and development in universities. It was because of that program that a lot of the people who work in our industry have connections in the university.

We redid our bylaws and we put in new categories of people who could join, professors or universities themselves. They have a GINI group there at Dal. David Gough was the general manager of that department. He's a member of our association.

MR. EPSTEIN: Are there any particular barriers to interaction between your association and the universities?

MR. HOLLIHAN: None whatsoever. We welcome them.

MR. EPSTEIN: Sure, I didn't mean membership barriers, I really meant starting from the perspective that would recognize that a way in which manufacturing can be supported is if there's an active research community that's actually looking at background problems. I'm wondering if we're just missing out here on an aspect of this industry.

MR. HOLLIHAN: I think where we're missing out is all of the programs that I spoke about, that $15 billion worth of work, is a concentration - how you get that is you have to have best costs and best value - at one time they directed a lot of the work into regions but with the World Trade Organization that was eliminated. Now, everybody has got a bid and you've got to get it based on price and service to the industry itself. If you look at a lot of our companies, they require major certificates and different standards from the industry itself. Boeing has their standards, Airbus has their standards and, I think, Maurice Guitton alluded to that last week.

[10:00 a.m.]

What we find is, now, if, for example, like the Maritime helicopter program - that was $3 billion. The person supplying the main frame was Sikorsky and the person doing the in-service suite aboard the plane is General Dynamics with L-3. They needed somebody to develop a software program worth $200 million. We were lucky in that we had a company

in Nova Scotia that was capable of doing it. If we did not have that company here, we would have never got that work in Halifax, and that's xwave. They got a $200 million contract.

MR. EPSTEIN: Madam Chairman, do I have time to ask one more question? Is that okay?

MADAM CHAIRMAN: Yes, certainly. We just have one on the list.

MR. EPSTEIN: Okay, thank you. In that case, can we just go back to your term, offsets. Could you just explain that for me again, please.

MR. HOLLIHAN: Offsets in our industry means that if the federal government, through DND purchases - only through DND - a product from a foreign country - Sikorsky helicopters, made in the United States, that was a $3 billion program. Sikorsky has to do $3 billion worth of work in Canada to get that contract. They signed up for that, and they become offsets, or regional benefits, IRBs, we call industrial regional benefits.

Now, those offsets can be direct or indirect but it's 100 per cent.Ten chances to one, because you're buying something that's already manufactured, that your direct is low. So you try to get as high as you can. I've never seen it go over 20 per cent to the plane. Usually what happens is, in that 20 per cent, you may have a radar expert in Canada that's making radar. So Sikorsky will say, well, we can buy the radar from a Canadian company or we can buy the communications package from a Canadian company, but the program, itself, is 100 per cent. So if they can't give you a product on the helicopter, then they've got to find some other way.

Now, they're owned by United Technologies who own Otis, they own Carrier Air Conditioners. They find ways of putting $3 billion of work into your country. So that $15 billion that I talked about here, a lot of that - if we buy replacements for the Hercules, which is the 130s, and we've got 20-odd of those, that's going to be a $4 billion program. Whoever gets that - and I mentioned that we had EADS Airbus here last week - they were here telling us that this was going to be a $4 billion program and if we get it, we're going to do the bulk of the work here in Nova Scotia. This was music to our ears.

MR. EPSTEIN: Okay, thanks very much.

MADAM CHAIRMAN: Mr. Gaudet.

MR. WAYNE GAUDET: Thank you, Madam Chairman. I have a couple of questions. I guess, hearing your presentation this morning about the aerospace defence industry in Nova Scotia, it certainly is a very successful, probably more successful industry than I thought it was, that we had here in Nova Scotia.

I want to go back to a comment that you made in your presentation. You made reference that we had close to 6,000 direct employment in this industry. There are approximately 3,000 civilian jobs and I suspect most, or the bulk, are good paying jobs. The fact that, with this additional pressure coming from the West, I'm just wondering if the aerospace industry here in Nova Scotia is having some difficulties, or it's being affected in keeping their work force here in Nova Scotia. Maybe I'll start with that one.

MR. HOLLIHAN: Okay, just to clarify the workforce, itself, we have 6,000 people in our association, our member companies, that work directly in the aerospace and defence, ourselves. The number that was in there, that AIC, which is sort of the parent association, which is an aerospace association, all they track is people who work on airplanes.

MR. GAUDET: Right.

MR. HOLLIHAN: So when they say 3,000-some there in that chart, the balance of these people, the other 3,000, work on the defence side for us but they're all civilians.

MR. GAUDET: Okay.

MR. HOLLIHAN: Do we have challenges? Yes, we have challenges because most of the companies out West not only are looking for employees - I gave you the chart and the reason I gave you the chart on DND was to show you the big discrepancy in the money that DND is spending here versus what they're spending in other provinces. We are fighting much of our weight on that.

So last year, when the Maritime Helicopter Program was announced, which was $4 billion, every newspaper in Canada criticized the federal government because Nova Scotia got that contract. If you think that was bad, look at the $15 billion that's in the book that I just gave you. People - BAE and Irving, Halifax Shipyards - are bidding on that contract. The people in B.C. want that contract and the people in Newfoundland and Labrador want that contract. I'll tell you, there's a lot of lobbying going on to get that contract out of Nova Scotia. Now, every part of that $15 billion, every part in that book there, is for programs, equipment and services here in the Province of Nova Scotia. We have 37 per cent, almost 40 per cent, of DND's equipment assets right here in the province.

MR. GAUDET: Assuming Nova Scotia is lucky enough to be awarded that contract, do we have the workforce to do that tender work?

MR. HOLLIHAN: Well, the majority of that work is what you see at the Halifax Shipyards here in Nova Scotia. We have an unbelievable workforce in there. We have a lot of people in Trenton who would love to come down here and would fit the mould for that contract as well.

MR. GAUDET: So right now, in Nova Scotia, we have enough people to supply the workforce demand or the labour force demand in the aerospace and defence industry in Nova Scotia?

MR. HOLLIHAN: No, I wouldn't say that, I wouldn't say that at all. I don't think we do. Our biggest challenge and the challenge that I have, from the time when you try to get these statistics, is, what work are we not bidding on? If our shop is full and somebody sends a contract or a bid in, do you just throw it in the wastepaper basket and say, there's no sense in me bidding because I don't have the workforce for it? We have no way of tracking that unless we go to our members to do it. We plan to do that on a major study we're undertaking in Atlantic Canada starting next month.

MR. GAUDET: Is your industry doing recruiting, advertising or encouraging Nova Scotians to remain here in Nova Scotia to work in the aerospace industry?

MR. HOLLIHAN: Well, you're doing that all the time. You know, it's your fleet. I mean, take, for example, down in Lunenburg, that company we talked about, Composites Atlantic, they put their own classrooms in the building. If you go in the classroom at Composites Atlantic, you go in for an hour, they will give you an hour of pay in addition to it. So the two hours you spend in the classroom, they'll pay you for one hour just to go in and train on products, product development and so forth.

MR. GAUDET: You talked about the challenges, I guess we're talking about the successes. I'm just curious, you know, what other challenges does the industry have here in Nova Scotia?

MR. HOLLIHAN: We don't have a minister of industry. There's $5 billion worth of production into our GDP. You know, it's a big number there on the charts. It's 25 per cent of the GDP of the province and there's no minister of industry.

We have a resource-based structure, and it has been there since the 1800s. I put that last chart in there to show that all the combined forces of fisheries, agriculture and utilities, including our gas revenues, only equal DND and our industry combined at $1.6 billion. So the resource base of the province is 6 per cent of the GDP. So 6 per cent of your GDP, does it warrant having such a large infrastructure in fisheries, agriculture and energy all combined? We definitely need somebody, a person who concentrates on industry, growing industry.

I used Michelin before as an example. If you didn't have Michelin in three major communities, think of what you'd be losing today. They are closing factories around North America, and building and expanding here. Well, I'd have somebody in Paris tomorrow, at the Michelin headquarters, saying, hey guys, we have a great spot down here in Port Hawkesbury, for one. That's what we should be doing. If they love us enough to expand to

the three they have here now, why not go for a fourth one? It's the same way in our industry, why not? We should have people pounding on the doors for that $15 billion worth of work, but all of our work in our association is done by volunteers, $250,000 a year by people who volunteer their services, like myself.

MADAM CHAIRMAN: Mr. Hines.

MR. GARY HINES: One of the companies that you talked about early in your presentation that almost became a victim years ago to downsizing was Litton. You indicated that they had a facility that would accommodate up to, I think you said, 400 employees.

MR. HOLLIHAN: Maybe 500.

MR. HINES: Where are they now?

MR. HOLLIHAN: They're at about 275 now.

MR. HINES: The other question I'm going to ask you, and it's kind of a broad-based question, but pretending we were Santa Claus, what would your wish list include from the federal government and the provincial government? I know that you've outlined that a minister of industry would probably be your number one request that government participate in, but what would you ask the federal government to do and the provincial government, specifically?

MR. HOLLIHAN: Well, ACOA has been very helpful to us. In the past three years of my presidency, they've put close to $600,000 into our industry for us people to participate in the Paris Air Show, the London Air Show, CANSEC, which is a major show. They put us on the map. We formed the Atlantic Alliance of Aerospace and Defence Associations for Atlantic Canada so that we as a region could go after the work that I pointed out here. We, ourselves, in Nova Scotia, visited the other three provinces, encouraged them to join, make their own associations, and then put it all together into an Atlantic alliance.

ACOA is funding that beautifully. They have no questions with it whatsoever. They know the value of it. There were 47 people at the Paris Air Show last year, 47 delegates from Atlantic Canada, chasing business, which is the largest air show in the world, in Paris. I'll leave one of those books with you. There's an example of the working together as a team, with a big booth at the show, to attract business to Nova Scotia.

Airbus has a major problem. They sell their planes in dollars, and they manufacture them 60 per cent in euros and 40 per cent in dollars. They want to reverse that. They want to buy more products in North America. Since we were there 18 months ago, we now have five companies certified to do work with them, three companies in Atlantic Canada are getting work from them. The sales in 2003 to France were 8.4 per cent of that $20 billion you

see in there for AIC. In one year that jumped to 14 per cent, and it's over $2.6 billion now. We're getting great co-operation from ACOA and the federal government on this. At times I think they may be embarrassed about the amount of work that's in Nova Scotia.

[10:15 a.m.]

Let me give you an example, in 1996 we had a census, again we had one in 2001. You people may have been around when we did the census in 2001. We had lost about 1,000 people from one census to the next, which was a major drawback, because all of our transfer payments were based on population. Between 1996 and 2001, the federal government reduced their workforce, their military in Nova Scotia by 1,400 people, most of them married, but if you look at straight statistics, it's three to one. So if you had 1,400 military and they were direct, and you add three to that, it would come up to about 4,400 people who were taken off the census roll between one census and another.

In addition to that being about $100 million a year in salaries, you also caused a deficit in 2001 over 1996. So I think we had to repay Ottawa $150 million. Well, if somebody has that much control over your population - year to date from 2001 to 2004 or 2005, which is the next census, they're down 200 right now. So that's 600. Your Minister of Immigration had to get 600 people just to keep up with the loss that's being transferred out of the province. I think that's a major problem that you have here.

Where you have 10,000 people in one group, the military, you need to be tracking them on a daily basis, from a government's point of view, because if you don't, every four years you're going to have to pay back $100 million, $150 million to the federal government in transfer payments.

MR. HINES: Now in terms of the workforce, I know that we talk about the exodus of our workforce to the West. That's not brand new, because when I was 25 years old that was happening then. I came home. One of the things that we're weak on, and you can correct me if you wish, is that we concentrate, to a degree, to try to keep our workforce here, but we don't get the message back to them when they have gone, that, hey, there's something to come home for. I think they come on a vacation, and somebody tells them this is what's happening. I think perhaps that there's a communication problem there with bringing the workforce that we do lose back home.

People go West for adventure, they have no ties here and they get out of school and they go West for the big dollar. They get out there, and of course they find out the cost of living is high, so your disposable income is probably not any greater than if they were home working in the system. I think the education system for these individuals is twofold: one, if you can't keep them here, then you get the message to them to bring them back. Do you agree with that?

MR. HOLLIHAN: Well, we're blessed in certain ways, because a lot of industry, a lot of our workers are ex-military people. At some time during their career, they've either lived down East or were stationed here. The bulk of them want to come back down East when they retire. So you'll find that a lot of our workforce is military people, particularly in the IMP world, where they're doing servicing of aircraft and so forth. A lot of those people just can't wait to get back here after they retire from the military. So we're blessed with that.

But the young people, getting out of community colleges and so forth, the key right now is that they know six months before they graduate that they can go to work in our industry, so there's a job waiting for them, which is unique in the sense that we haven't seen that for 20, 25 years. We tend to grab most of them when they come out of skills training and university.

I think it's true what you say, a lot of the young people, if they graduate and go out West, then they put their roots down and they stay there. They always have the image of, well, I can go back to Nova Scotia but I'll be laid off next year or two years from now or five years from now or something. They don't have faith in our economy.

MR. HINES: I think that one of the problems we have, too, with our education and the suggestion within the education system is that we have, for years, promoted graduation from Grade 12 and move on to secondary education and university at that level. When we have a strong labour force, who know themselves at Grade 8, Grade 9 that they're not going to climb that hill and get the education, but they have skills. I think one of the things we've lost is an opportunity to branch off at Grade 9 or Grade 10 and allow them to go into community college.

Our requirements for community college are perhaps too high, from an academic standard, when these individuals have skills, if they have the opportunity to get off at Grade 9, Grade 10. You also run into the problem with, are we making it too easy for them to get off and therefore we're losing opportunities to educate. That's where the fine line is. How do you get that message out and provide that avenue for our youth to come out of a Grade 9 education and go into community college and come out with papers that will allow them to be more than just a common labourer? I think that's where one of the problems lies. Do you agree with me on that?

MR. HOLLIHAN: Yes, I do. You're talking about the British system, where when you get into Grade 8, Grade 9, they will test you for your skills and so forth to see whether you should go on to university or whether you should go into a trade and so forth, and then the type of trade that matches your various skills. I think that we've always put the push on, regardless. It's the North American way, to go to university. You have to be trained better, your children and everybody else. I think we've put a lot of emphasis on university. I think that is changing now. We put on workshops and we put on classroom training and so forth to train people.

I really think we have to look at the community college and see the standards that they're setting there now. There are people who could be easily trained as skilled tradespeople, carpenters, plumbers and so forth, and there's the demand for this. I noticed in the book I have here, in the statistics, if you look at the weekly wages for people in Nova Scotia, if you take in the industry, it goes anywhere from $650 to $800 a week, but the trades are all up at the top. They're good-paying jobs.

MADAM CHAIRMAN: Mr. Theriault, if you're still interested.

MR. HAROLD THERIAULT: Madam Chairman, I have just a couple of questions, more of an observation than anything, I guess. This is very interesting. I didn't believe that aerospace was this big in this province.

MR. HOLLIHAN: That's one of our problems.

MR. THERIAULT: Yes, it's not well enough known. I believe maybe our children don't know it well enough either. We do have a huge problem, especially in the rural areas of Nova Scotia. I think there's approximately - I'm not sure of the figure, but - well, we have 12,000 people graduating out of high school and 8,000 going into Primary schools. That's continuing, fewer and fewer every year. In the marine industry, in the fishing industry, we have a young fellow who comes down and works on our radar and our electronic gear, similar to what airplanes have. He receives around $15 or $16 per hour. The company, which I won't name, charges approximately $50 an hour.

He just pulled up baggage the other day for out West. He can get that $50 an hour out there all alone, without working for any company, working by himself. I don't know what the companies out there charge, and maybe he doesn't know what the cost of living is. But when one of these young people hears that they can get $50 an hour for fixing a radio or radar, they're gone, especially when they're getting $15 or $18.

The question is, I guess, what do aerospace employees receive here, compared to similar employees in the West, can you tell us that?

MR. HOLLIHAN: Well, you have to look at the different levels of pay. If you were to go into a plant like Composites Atlantic, they do not, and they try not to, have products that are built to prints, in other words, to take that cup and produce the cup. Somebody in China or India can produce the cup much cheaper than you. The products they try to do well on are engineered products. They do the engineering themselves, they get certified, and then they are specialty products for the planes and so forth. They can charge a much higher rate for that.

Then if you look at the process itself, you have the people who are strictly hands-on, you shape it and then put it in an oven and bake it and it comes out as a composite - that's

one level. Then you have a person who can operate the equipment, who now has computer skills and so forth - that's another level. Then you have the engineering people behind that. I would say that the base price for a person here in Nova Scotia who is in our industry would be between $60,000 and $70,000 a year, as an average.

MR. THERIAULT: To compare to out there at $80,000 or $90,000?

MR. HOLLIHAN: Yes, I would say there would be maybe a $20,000 a year difference in the two.

MR. THERIAULT: Do you believe that's making a difference in helping you get the contracts here? What will happen if you have to compete with the West later on, if we keep losing our people? Will that make it harder to get the contracts in the East?

MR. HOLLIHAN: I think so, but in addition to that, if we follow the articles in the newspapers and so forth, people keep saying that our productivity is about 20 per cent less than the U.S. That 20 per cent less than the U.S. is not made up over the skills of the individual, in most cases it's because of the equipment they use. Our equipment may be outdated, our computer skills may not be there and so forth. So I think what we need to do is a lot more training, on-the-job training for people to upgrade.

I mentioned Composites Atlantic, they're a great example of it. They have a full classroom the size of this room with 25 computers in it. You can go in there after hours, weekends and everything else, and they will put in training. As a matter of fact, they're certified now by the community college in Lunenburg as a training centre. We need to do a lot more of that in the companies themselves. The program we have that we give this $10,000 per job for payroll rebates, if we look at it and analyze why that is, it's because maybe the person you're hiring you could hire a skilled person someplace else or down in the States and in the southern part of the States and so forth.

I think the crisis that we're seeing now in skills shortages is bringing a lot of this to the forefront. We have a conference scheduled for - what's the date on that conference you mentioned?

MS. MORE: It's the 3^rd and 4^th.

MR. HOLLIHAN: To just explore those problems with people, where are we missing the boat on productivity, where are we missing the boat on skills shortages and so forth.

MR. THERIAULT: One more question. I don't know if you can answer it or not, but I hope you can. We've been hearing a lot about the Sea King helicopters. You mentioned them. You mentioned it again, and I've heard it a lot. If you fly one of those birds for one hour, you have to spend 30 hours of maintenance on it. Now can you tell me what this person

would do for 30 hours after one hour of flying? I mean, it seems to me, two or three people could build one of those in 100 hours, and they do.

[10:30 a.m.]

MR. HOLLIHAN: Well, not necessarily one person working for 30 hours. It could be 30 people working for one hour, right?

MR. THERIAULT: Whatever. (Laughter)

MR. HOLLIHAN: But, you see, our industry is so different than the automobile industry and so forth. We have unbelievable standards, standards that are brought on by the OEMs, or the people who make the equipment; Boeing, Airbus and so forth. Traceability is everything to us. By that I mean, if you make a bolt to go on a plane in your shop and you're just a little machine shop, you've got to keep track of that bolt for the rest of your life. The reason being, it's not because if we have a crash, that they want to come back and get you, the guy that made the bolt. They want to find out how many of those bolts you made from that same piece of metal and what planes are around now, because every one of those bolts have got to be replaced. Those type of standards and traceability that goes on - you've got to keep those records for 20, 25 and 30 years.

I mean, the Sea Kings get rebuilt about every couple of years. They talk about those old rust buckets and everything else but, you know something? I guarantee you, the day they take them out of service, there will be 10 or 15 countries in the world that will want to buy them and pay a big price for them.

MR. THERIAULT: Right on. Thank you.

MADAM CHAIRMAN: If the committee is all right with it, I'd like to ask a few questions from the Chair, if that's fine, just a few. Thanks.

I was looking at the list of membership as well and I'm wondering, xwave, you've mentioned a couple of times but they're not listed as members and neither is Aliant. They're obviously active in this one contract that you referred to?

MR. HOLLIHAN: Well, that was their first exposure to aerospace and defence when they got that $200 million contract and, obviously, they joined right away.

MADAM CHAIRMAN: So they're members now?

MR. HOLLIHAN: Yes.

MADAM CHAIRMAN: Okay, that was just one question. Also, I notice that the universities are not members of the association. Is that something that you've explored or do you feel they're represented in another way?

MR. HOLLIHAN: Yes, we just completed a complete business review of our association. I mentioned we got started 10 years ago. We were primarily worried about, how can we save a couple of plants and get a couple more working. So the first five or six years, it was just survival. Now, as we grow and are getting bigger and so forth - I mean, I mentioned $600 million. That doesn't include the Halifax Shipyards. They're not members. But if you were to add their work sales per year to ours, we'd be almost over $1 billion. What we see in the $600 million is just our own companies.

MADAM CHAIRMAN: Right.

MR. HOLLIHAN: To answer you directly on the universities, we changed the bylaws this year to allow for trade members to join. We just went with an ordinary book of bylaws when we started and now we can take university students, we can take anybody who wants to come in and be part of our association. We haven't gone out on a recruitment drive.

MADAM CHAIRMAN: No, but it changes the ground rules in terms of who can be involved?

MR. HOLLIHAN: Yes.

MADAM CHAIRMAN: Well, I mean, your growth is impressive anyway from originally eight members to 55 at the moment, I think, is the number you gave.

MR. HOLLIHAN: I think, more significantly, is the volunteer time put into our association. Really, it's volunteer time for business development for the province. There's very little recognition of that volunteer time by the members. Some people may say, well, you know, if he works for L-3, L-3 is doing business here, but in all cases, all of the people on my board put in unbelievable hours just to keep this industry going and promoting it around the world.

MADAM CHAIRMAN: Yes. Which, of course, is a benefit to us as we have seen in the figures you have given us, in terms of the contribution to GDP and so on. Certainly, I think we have all been impressed to learn more about the industry today.

I wanted to ask a little bit about immigration because we have been talking a lot about our own population here in Nova Scotia and how they can contribute to the industry, and how you need to develop skills among the young people who are graduating and coming through our education system. The question of immigration, of course, has taken a bit of a spotlight the last couple of years here in Nova Scotia. Is it a factor in the growth of your

industry? Are there demands from your members to try to, perhaps, recruit people overseas and bring them here?

MR. HOLLIHAN: I don't see that. I see it - for example, in Atlantic Canada, you will see IMP over in Holland College trying to hire their whole graduating class. I don't see it offshore because there's too much red tape involved in it.

MADAM CHAIRMAN: Okay. Could I ask you, if it was a little simpler to do that, do you think it would be attractive to the industry?

MR. HOLLIHAN: Well, our industry goes in cycles. When the industry is good in Canada, it's good in Europe.

MADAM CHAIRMAN: Okay.

MR. HOLLIHAN: The only problem they have in Europe right now is when they sell their planes, they sell them in dollars, and at the time when that was initiated the American dollar was 30 per cent higher than the euro. Today, it's 30 per cent less. So they just about lose on every plane they sell. They want to change their buying habits. That's why, when I mentioned BAE earlier, they've gone from 10,000 to 15,000 to 35,000 people. It's because they want plants in the United States. The question we have to ask ourselves is, why are they in the United States and not in Canada?

MADAM CHAIRMAN: Yes, exactly. That's an interesting point about the cycles being the same everywhere, so that if engineers are in demand here, clearly they would be in demand as well in other countries. Did you earlier on - I'm just wondering - did you mention that there might be 1,000 engineers that they were trying to recruit here to go to another location?

MR. HOLLIHAN: In Canada.

MADAM CHAIRMAN: For our own industry, or was it to go offshore?

MR. HOLLIHAN: No, for Airbus, just in Europe.

MADAM CHAIRMAN: So they would want those engineers from Canada to go to Europe?

MR. HOLLIHAN: Well, the first preference would be to get bilingual people, so you would head to Quebec and see what you can get from Bombardier. Of course, Bombardier build the aircraft. Their sales are about $12 billion a year so they've got a lot of engineers there. So that's your first choice. But they like dual citizenships and so forth. The average pay for an engineer in Toulouse, for instance, is about $85,000 to $95,000 a year.

MADAM CHAIRMAN: So that's another competitive force against you though, really, if they're trying to recruit those engineers to go elsewhere, even if they're with Canadian companies, isn't it?

MR. HOLLIHAN: Yes.

MADAM CHAIRMAN: Like a threat . . .

MR. HOLLIHAN: Well, the television is good too when you see the rides in Paris. (Laughter)

MADAM CHAIRMAN: Yes, well, that helps. (Laughter) I appreciate that. One other question I had and that related a little bit to the resentment. I think you referred to Nova Scotia getting certain contracts and there may be a resentment. I think it was nationally. I wonder if you could just clarify that for us. I mean, we have clearly lost a lot of employees and a lot of wealth as a result of that, so there's a balance but . . .

MR. HOLLIHAN: Well, it goes back to the image your province portrays to the rest of Canada, right? If you look at the structure of the Government of Nova Scotia and you go on the Internet, you'd never say that we had the size of DND here that we have, the size of our aerospace industry that we have. You look at, as I mentioned, Michelin, a French company. I mean, tires are not indigenous to Nova Scotia. We don't have rubber trees or anything else. So people don't have an image of Nova Scotia being an industrial province.

When you read, in Vancouver, that a $1 billion contract is going to a Nova Scotia company for helicopters, they say, what the heck? I mean, go on the Internet and look, you've got the Department of Fisheries, Department of Agriculture, you've got all of these departments and so forth but there is no industry with any reference to industry. You can go into the numbers and find the reference but your immediate image in all of our advertising, all of our promotion - we talk about tourism. It's a three month, four month industry but people know us for our tourism.

MADAM CHAIRMAN: Exactly, yes.

MR. HOLLIHAN: So they scratch their head and wonder why you put a $3.5 billion contract on our province. There's no stats - you cannot find one thing written in the province about aerospace and defence. I mean, would anybody realize that DND spends $1 billion here a year? You can't find it in any of the figures, any of the statistics.

MADAM CHAIRMAN: Right. Well, I certainly appreciate that. Are there any other members that would like to have a final question or two? No? We have some committee business so I will ask you to stay for a minute.

I would like to thank Mr. Hollihan for visiting us today and sharing some very interesting information about the size and growth of the aerospace industry here in Nova Scotia. Thank you very much for your time and I'm sure we have all learned an awful lot.

MR. HOLLIHAN: Thank you very much.

MADAM CHAIRMAN: For the committee members, if you want to refer to the agenda, there are a couple of items - actually, one that's not written there is that we do not have a vice-chairman at the moment for this committee. I believe it was Mr. Taylor previously and he is now a minister, so we need to select among our members and have a nomination, if we could, for a vice-chairman. I don't know if you want to do it today. I think it's best if we do but you may want to wait.

MR. GAUDET: I would suggest that we wait until (Interruptions)

MR. HINES: Either that or I'll nominate Mark Parent in his absence. (Laughter)

MADAM CHAIRMAN: I apologize, but I only heard of this this morning and we hadn't had a chance to speak previously. So the issue then is flagged for our next meeting and we'll make a decision then. That would be good.

The second one was a request that came. We just have one line on an e-mail, a request from CBRM, telling us that Clearwater employees would like to meet with the Standing Committee on Economic Development. I believe they had contacted our previous chairman about that but it was never brought up here in the committee. I'm afraid I don't have more information except that it would be to do with, I guess, labour conditions, or relations. I thought we might want to discuss that a little bit today.

We've had a couple of other examples that Darlene has helped me track down. One was the Aliant strike in 2004, when this committee actually asked to meet the employees. The response from the unions and from Aliant at that time were that they didn't want to come.

Another one was the National Gypsum strike where we had actually written a letter to encourage them to settle the strike and, I guess, would have seen them but they settled the strike in the meantime. So we don't have a labour dispute, as far as I know, at the moment with Clearwater.

MR. PARKER: Yes, there is.

MADAM CHAIRMAN: There is? Perhaps you could fill me in.

MR. PARKER: Well, it's at Highland Fisheries in Glace Bay and they're locked out at the moment over a rollback in their wages. It's a major dispute in Glace Bay.

MADAM CHAIRMAN: That has happened more recently, hasn't it?

MR. PARKER: Well, within the last month.

MADAM CHAIRMAN: Thank you, that gives us a lot more clarity on the issue. How did the committee feel about it? Mr. Epstein.

MR. EPSTEIN: I'm wondering if the clerk can tell us if we have other presenters lined up besides April 11^th. Is anyone else lined up after that?

MRS. DARLENE HENRY (Legislative Committee Clerk): No, I haven't booked anybody beyond April 11^th.

MR. EPSTEIN: Okay, so there might be a space.

MRS. HENRY: We're looking at April 20^th.

MADAM CHAIRMAN: Yes, we have two. In fact, April 13^th - although that would be two days after the meeting on April 11^th - and April 20^th are free. Mr. Theriault, I think you had a comment as well.

MR. THERIAULT: I think it would be great for Clearwater to come in here. I believe we have some big problems coming in our groundfishery. We're trying to compete with China here, with 30 cents an hour labour. They're sending their fish to China now to be processed. I think we had better have them in.

MADAM CHAIRMAN: Yes, Mr. Epstein.

MR. EPSTEIN: Well, one of the problems with the way in which the request has come to us is that it seems to have come simply on behalf of the employee group. If we're going to have a look at the industry because of strife that's current, we should certainly consider letting, at the very least, both sides of the dispute know that we are thinking of doing this and making available to both sides the possibility of them presenting. Hearing from one side when there's a labour dispute, it seems to me, is ill-advised at the least.

So my suggestion is that if our function is going to be to seek information and to educate ourselves, then we should let both the employer and the employee sides know that we're interested in pursuing this and extend an invitation to both sides. I see heads nodding. Is that okay?

MADAM CHAIRMAN: Mr. Parker.

MR. PARKER: At different times, I assume?

MR. EPSTEIN: Well, you know, I think if we do it at different times, then we're looking at dedicating four hours to a particular dispute, perhaps, spread over a week or two which doesn't seem very helpful. I don't see why we couldn't do it on the same day and maybe even sit for two and a half or three hours, if necessary. I don't know why we would necessarily have to assume that. It may be we can hear in two hours what it is we need to hear.

MR. PARKER: One after the other or at the same time?

[10:45 a.m.]

MR. EPSTEIN: If they're prepared to come and present together that would be a step forward, of course, but I think we can leave it to them to decide whether they want to present together or consecutively.

MR. GAUDET: What happens if Clearwater turns our invitation down?

MR. EPSTEIN: If the employer or, in some circumstances, the employee group turns us down, they turn us down but we're still interested in the dispute. I mean, we're trying to look at an industry - we're concerned about an industry and we're not trying to be labour mediators. That's not our job.

MR. THERIAULT: I want to learn more about the future of it, that's what I want to hear. It's going to get worse - free trade, you know.

MADAM CHAIRMAN: So if I'm hearing correctly then, we should contact both parties, both the employer and the employee groups and offer them the opportunity to come before the committee. My guess is an April 20^th meeting would be the best. We are meeting on April 11^th, so the following week - that's a Thursday, actually. The reason it's a Thursday is because it's the Easter weekend. We felt that the Tuesday would not be as attractive to members to come in right after the long weekend.

So if people are happy with that we will make that offer for the April 20^th meeting. Thank you very much. Ms. More.

MS. MORE: I just want to mention, if it is April 20^th, I will have to send my regrets. I won't be able to make that meeting but that's not a problem.

MADAM CHAIRMAN: Well, as I say, we're trying to help everybody in this one.

MS. MORE: Sure.

MADAM CHAIRMAN: Okay, so that's the second item. I guess that's all our business, really, at the moment then. We just have to announce that the next meeting is April 11^th. We are talking skill shortages with somebody from the Department of Education and we have Dr. Joan MacArthur-Blair of the Nova Scotia Community College. So thank you very much.

A motion to adjourn.

MR. PARKER: So moved.

MADAM CHAIRMAN: The meeting is adjourned.

[The committee adjourned at 10:47 a.m.]