Transcript draft investment deck, summer 98

January 2002
Think Canada
Think Bottom Line
Think Aerospace Industry
Think Investment
Canada
‹#›
Aerospace - an Established Platform
Why Canada?
The Aerospace Edge
Summary
Canada
‹#›
Canadian Aerospace and Defence… Performance Proven
• Approximately 700 firms with 93,000 employees
• Gross Sales of $20.5 Billion in 2000
• Invested approximately $900 Million in R&D (2000)
• Globally competitive with exports of 76% of output
• Extensively integrated in the global aerospace and defence industries
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey 2000/2001, December 2001.
Canada
‹#›
…A Presence in Major Market Segments
Canada's Aerospace and DefenceRelated Products – 2000
• Significant capabilities in all product
Other
Defence
9%
segments...
Space
5%
Airframes
44%
• ...with particular strengths in commercial
aircraft and dual-use electronics
• …and a strong aerospace and defense
service industry
Other
Aircraft &
Parts
20%
Avionics
9%
Propulsion
13%
Source: Statistics Canada, Canadian Aerospace and Defence
Sector Survey 2000/2001, December 2001.
Canada
‹#›
A Continuously Strong Record of Performance...
Aerospace
Exports vs Total Sales
30
$ Billions
25
20
• In 2000, aerospace sales by the G-7
totaled $189 billion $ U.S.
15
10
5
0
1999
1998
Exports
2002f
2001f
2000
Total Sales
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey
2000/2001, December 2001.
• Continued strong growth in past
three years
Canada’s Share of Global Aerospace Sales
6
(Based on Constant 1999 Prices and 1999 ECU’s)
5
4
• From 1976 to 1998, Canada’s share
of world production more than
tripled
3
2
1
0
1993
1994
1995
1996
1997
1998
1999
Source: The European Association of Aerospace Industries (AECMA)
Aerospace Output, 1999
7 Largest Western Aerospace Nations
• Canada was sixth in sales in 1999
(Based on Constant 1997 Prices and 1999 ECU’s)
Italy
2.43%
Canada
5.54%
Japan
6.37%
Germany
Canada
6.37%
France
11.32%
U.K.
11.63%
U.S.
56.34%
Source: The European Association of Aerospace Industries (AECMA)
‹#›
…Leading in Several Aerospace Products
Company
Product Lines
% World
Market Share
Bell Helicopter Canada
Civil helicopters
35
Bombardier
20-90 seat turboprop and turbojet regional
aircraft
40
CAE
Commercial simulator
Visual simulation sector
75
70
Various companies
Landing gear
New large aircraft landing gear
31
60
Pratt & Whitney Canada
Small gas turbine engines
34
Honeywell
Transport aircraft environmental control
systems
58
Canada
‹#›
...and Leading Edge Space Companies
• Strategic International Partnerships
- USA (NASA) partner for over 3 decades - from Alouette to RADARSAT
- special relationship with the European Space Agency for over 2 decades
- only non-European country with quasi-associate status
- extensive bilateral cooperation with other European and Asian countries
• World - leading capabilities
- space robotics and moveable spacecraft antennas (EMS and MD Robotics)
- many space microwave subsystems (COM DEV)
- turn-key earth observation data receiving, processing, archiving and
distribution (MDA)
- Satellite communications systems consulting (Telesat)
- Synthetic Aperture Radar (MDA)
• Larger export proportion than other spacefaring nations
Canada
‹#›
Aerospace - an Established Platform
Why Canada?
The Aerospace Edge
Summary
Canada
‹#›
Canada: a Dynamic, Competitive Economy
— Open for Global Business
Canada's economic fundamentals and
relative cost advantages provide a
first-rate business environment.
Report Card
Overall government budget in surplus.
Canada provides:
Excellent economic fundamentals
Low inflation and low interest rates.
Easy access to markets
A cost-competitive business
environment
An excellent place to live
Geography and NAFTA provide easy
access to the world's most prosperous
market.
Large stock of skilled workers; low
start-up costs; competitive tax system
(particularly for R&D); strong technological
environment; positive business climate.
Superb overall quality of life.
Canada
‹#›
Canada’s Strong Fiscal Situation
• Canada's fiscal situation has turned around
dramatically:
The Institute for Management Development
ranked Canada as the best fiscally
managed country in the G-7 in 2000
- In 1993, Canada’s deficit (as a percentage of
GDP) was 8.7%, the second highest in the
G-7 and significantly above the U.S. rate.
Federal Budgetary Balance
Public Accounts Basis
C
% of GDP
C
Surplus
+
0.0
- However, by 1997, Canada posted a surplus –
the first G-7 country in the 1990s. In 1999,
Canada had the highest financial surplus
relative to GDP of the G-7 countries.
-3.0
-6.0
Source: Finance Canada
Federal Program Spending
% of GDP
10
8
6
4
2
0
-2
-4
-6
-8
-10
Total Government Surplus*
17.5
Public Accounts Basis
Projected
15
20
00
**
20
01
**
20
02
**
19
99
19
98
19
97
19
96
19
95
19
94
12.5
19
93
% of GDP
- Federal government spending (as a % of
GDP) is at a 50-year low, the key source of
the Canadian fiscal turnaround.
Deficit
10
* Includes federal, provincial/state and local ** Projections
Source: OECD Economic Outlook, June 2001
Canada
‹#›
Low Inflation and Low Interest Rates
1
20
00
99
98
97
Sources: Statistics Canada and the Federal Reserve Bank of St. Louis
Long-Term Interest Rates
• Canada's excellent fiscal situation and
low inflation are reflected In low domestic
interest rates.
96
0
95
- Over the past five years, Canadian
inflation averaged 1.7% — 30% lower
than the U.S. rate.
2
94
Canada have an inflation target that locks
the inflation rate in the 1% to 3% range.
3
93
• The federal government and the Bank of
Year-Over-Year % Change
Inflation
4
%
10
8
5
3
1993
1994
1995
1996
1997
1998
1999
2000
2001
Last data point plotted: October 31, 2001
Source: Bank of Canada, Government long-term bond, last Wednesday in the month
Canada
‹#›
Streamlined Border Flows ...
• Since the enactment of the North American
Free Trade Agreement (NAFTA) in 1994,
Canada provides long-term assured access to
the North American market — nearly 400
million people with a combined GDP of over
$9.4 trillion ($U.S.).
• In addition to eliminating tariffs, NAFTA
Annual Transborder Crossings Total Number of Trucks and Canada-US Air Passengers
Entering Canada
20
Air
15
provides procedures for:
10
- border facilitation;
- movement of personnel;
- investment and intellectual property
protection; and
- product certification.
• The North American market is serviced
through a well integrated transportation
system which is among world’s best.
- Automated permit ports, transponder
identification systems and joint
processing centres are being tested and
deployed.
Canada
Truck
5
0
80
82
84
86
88
90
92
94
96
98 2000
Source: Statistics Canada
"Pratt & Whitney has a worldwide distribution network. Customs
operations have been streamlined to the point that the
Canada-US border plays no role in our distribution system."
Brian McGill, Director of Transportation
Pratt & Whitney Canada Inc.
‹#›
...and Short Distances to Markets
• Almost half of the U.S. population lives within a
•
•
10 hour drive of Toronto, and over 60 percent
within a two hour flight.
Business travel between Canada and the U.S.
has increased considerably since the inception
of the “Open Skies*” Agreement (February, 1995)
Direct air service between major cities in Canada
and the U.S. has nearly doubled in 6 years.
*Under “Open Skies” Canadian Air Carriers gained unlimited rights to
establish routes from any point in Canada to any point in the United
States. Similarly, U.S. carriers also gained unlimited access to the
Canadian market (with a phase in period for up to three years)
300 mi
St. John's
600 mi
Victoria
Edmonton
Calgary
Vancouver
Seattle
Regina
Winnipeg
Milwaukee
Increase in Transborder
Routes Since Open Skies
Charlottetown
Québec
Fredericton
Montréal
Halifax
Ottawa
Toronto
Boston
Windsor
Chicago Detroit
Cleveland
Pittsburgh
St. Louis
New York
Philadelphia
Baltimore
Washington
San Francisco
D ire c t
S c he dule d
f light s o nly.
Denver
165
Atlanta
Los Angeles
Houston
89
Miami
Feb. 1995
Feb.2001
Mexico City
S o urc e : T ra ns po rt C a na da
Canada
‹#›
Superior Quality Workforce
Higher Education Achievement*
World Rank
1st
• The overall skill level of Canada's workforce
3rd
Yearbook, Canada has the highest percentage
of individuals achieving at least college or
university education.
Index
ranks high among competing countries.
• According to the Word Competitiveness
2nd
9th
15th
20th
30th
* Percentage of the population that has attained at least tertiary education among 36 countries
considered in the World Competitiveness Yearbook, 2001.
“ High-tech companies are pursuing skilled people
wherever they are available, and Canada has emerged as
one of the top sources.”
Alan McMillian, CEO at PlanetIntra
Canada
‹#›
Low Labour Costs
Cost of Labour — Manufacturing*
U.S.=100
140
$U.S. per hour
109
100
94
86
86
Italy
U.K.
81
• According to the U.S. Bureau of
Labor Statistics, labour costs in
Canadian manufacturing (wage and
non-wage) are the lowest in the G-7.
• Occupational wages are also lower
in Canada for knowledge workers.
Germany
Japan
U.S.
France
Canada
* Figures are for 1999. Source: U.S. Bureau of Labor Statistics, September 2000
Occupational Wages — Knowledge Workers, 1999
Full-time, full-year wages* ($U.S. PPP**)
Life Science Professionals
$42,097
Physical Science Professionals
Computer Programmers***
Electrical and Electronic Engineers
Chief Executives
$46,348
$36,467
$48,945
$59,608
$49,469
$52,423
$54,960
$62,309
$101,240
* Canadian data have been converted to full-year assum ing a 52-week work year.
** Purchasing power parity for 1999
*** date for computer programm ers based on average for 1997, 1998, 1999
Source: IC calculations based on Statistics Canada Labour Force Survey and U.S. Bureau of Labour
Statistics Occupational Employm ent and Wage Estimates
Canada
‹#›
Competitive Corporate Taxes
• Canadian locations compare
Corporate Income Tax Rates
well internationally in terms of
statutory corporate income tax
rates.
- The federal government
and some provinces have
announced sharp cuts in
corporate taxes, to take
effect over a five-year
period.
including capital tax equivalents
46.6%
44.9%
41.5%
40.0%
38.6%
- The Economic Statement
and Budget Update
accelerated the pace of this
tax relief.
35.6% 34.9%
• By 2005, firms in Canada will
have a 5.1% corporate income
tax rate advantage over U.S.
firms (including capital tax).
Canada
2000
2001
2002 2003
2004 2005
Source: Finance Canada
‹#›
Programs for Investing in Technology Development
Canada’s aerospace and defence industries benefit from a list of programs including:
• Technology Partnerships Canada – risk-sharing partner in technology development
• National Research Council
• Institute for Aerospace Research – aerospace R&D and testing
• Industrial Research Assistance Program – support for small and medium-sized Canadian firms
• The Aerospace Manufacturing Technology Centre (AMTC) – facilitate next generation
manufacturing, particularly among SMEs.
• Export Development Corporation (EDC) – export financing and insurance services
• Industrial and Regional Benefits (IRB) – industrial participation in major Crown procurements
• Defence Industry Research Program – financial and scientific support for industry-initiated research
• Granting councils – support university and project research through partnerships of universities with
industry
• University Chairs – increase number of environmental university chairs in eco-efficiency areas
(engineering, environmental science and business) in order to produce more graduates, enhance
university research and strengthen research networks
• Canadian Commercial Corporation – guarantees contract performance for Canadian exporters,
especially for sales to governments
In 2000, these government mechanisms contributed to R&D
expenditures totaling $740 Million in the Canadian aerospace
sector, and accounted for 12% of total R&D expenditures
Canada
‹#›
First-Class Technological Infrastructure
• Canada's technological infrastructure is
1st
Technological Infrastructure*
World Rank
6th
second only to the U.S. among the G-7 — we
rank above or very close to the U.S. in terms
of:
14th
15th
19th
23rd
30th
- internet users and internet hosts,
- computers per capita, and
- computer instructions per second.
• Building a universal, competitive, leading
edge "Information Highway" is a
government priority.
U.S.
Canada U.K. Germany Japan France
Italy
* Standing among 49 countries. Index based on 12 characteristics including investment in telecommunications,
computers in use, computer power, internet connections, number of telephone lines, cost of telephone calls and use
of robotics.
Source: World Competitiveness Yearbook, 2001
“Canadians are well known and respected around
the world for developing advanced technology and also
for having good business and trade practices.”
Chris Piché, Chairman and CEO of West
Vancouver-based Eyeball.com Network Inc. –
July 7, 2000
Canada
‹#›
Low Production Costs
Manufacturing Unit Labour Cost Index
$U.S. Basis
• Growing productivity, skilled
110
workers, and low labour costs make
businesses competitive.
- Canada's competitive position
vis-à-vis the U.S. has improved
substantially since 1991.
Index 1992=100
100
90
80
70
60
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 992000
Source: U.S. Department of Labor, Bureau of Labor Statistics, August 2001
“ Our records for safety and productivity place the TMMC
team among the industry’s best. And when it comes to
quality, vehicles built at our Cambridge facility are among
the highest rated vehicles in North America.”
Takanori (Tak) Sakaue, President
Toyota Motor Manufacturing Canada Inc.
Canada
‹#›
Reasonable Cost of Living
among the G-7.
• In particular, the cost of living in most
large Canadian cities is better than or
comparable to that in similar U.S.
cities.
- And, Canadian cities rank better
than U.S. cities in terms of the
level of crime, pollution,
environment and leisure
facilities.
Canada
Cost of Living — World Rank*, 2001
Index: New York City = 100
• Canada has the lowest cost of living
175
150
125
100
75
48th
42nd
35th
31st
27th
25th
20th
* Rank among 49 countries considered in the World Competitiveness Yearbook 2001
Source: IMD
‹#›
Positive Business Climate
Business Environment of Top Ten
Countries, Rank in 2001-2005
• The Economist Intelligence Unit ranks
Canada highly in terms of its overall
business climate.
2nd
3rd
4th
World Rank
1st
5th
6th
7th
8th
9th 10th
• Moreover, Canadian laws are among the
best in the world at preventing unfair
competition.
Note: The business environment is based on several indicators including market potential, tax and labour
market policies, and the political background.
Source: The Economist (EIU), August 24th, 2001
Competition Laws — World Rank
“Canada is a very business friendly country, and Ottawa
is an excellent environment for knowledge based
industry. The physical environment is outstanding,
education leads are high, the work ethic is strong and
costs are very competitive. It’s just a great place to
expand our business .”
Roderick Bryden, President & CEO
of World Heart Corporation
Index, Ranked by Fairness
3rd
8th
7th
19th
31st
30th
27th
Source: World Competitiveness Yearbook
2001
Canada
‹#›
Government as a Partner for the Knowledge Economy
• The economic policies of the government of Canada are focused on making Canada a
world leader in the global knowledge-based economy of the 21st century.
Commitments include:
- Making Canada the most connected Government to its citizens by 2004.
- Making high-speed broadband access available to Canadians in all communities
by 2004.
- Becoming one of the top five countries for research and development by 2010.
- Shaping a “National System of Innovation”; and
- Providing marketplace frameworks/services benchmarked against the best in the
world.
“A knowledge-based workforce, a competitive R&D
tax structure, government support programs such as
Technology Partnerships Canada, and well-established
infrastructure in Canada: these attributes make Canada
the top choice for Pratt and Whitney in considering future
R&D investments in the ever-competitive world of aerospace.”
Gilles P. Ouimet, President
Pratt & Whitney Canada Inc.
Canada
‹#›
Aerospace - an Established Platform
Why Canada?
The Aerospace Edge
Summary
Canada
‹#›
Aerospace is a Proven Investment Platform...
Canadian-based companies offer investors unique opportunities
• Team with Canadian-based multinationals, including:
- Bombardier Aerospace – third largest commercial airliner manufacturer
- Pratt & Whitney Canada – small gas turbine power for the world
- CAE – corners the commercial flight simulator market
- Bell Helicopter Canada – one of the world’s leading commercial helicopter
manufacturer
• Access capabilities of companies that supply the OEMs, e.g.:
- Avcorp – Winner of a Gold Award for entrepreneurial achievement at the Canadian
Productivity Awards
- Haley Industries – one of the world’s most technologically advanced foundries
- NMF Canada – world leader in processing large, machined wing panels
- Spar Aviation Services – one of only 11 Lockheed-approved C-130 Maintenance and
Modification Centres.
- Composites Atlantic – advanced composite components for commercial aircraft,
space structures, rocket motor cases, etc.
Canada
‹#›
A Healthy Investment History
Aerospace
Distribution of Investment Expenditure
• Total investment in the
aerospace industry reached
$2 billion in 2000.
$ Millions
1600
1400
1200
1000
• Investment in R&D was
$820 million in 2000 and is
forecasted to reach $840
million by 2002.
800
600
400
200
0
1998
1999
Plant & Equipment
“Magellan Aerospace competes globally and is
dedicated to creating technology, new products
and jobs in its operations.”
2000
2001f
R&D
2002f
Other
Source: Statistics Canada, Canadian Aerospace and Defence Sector Survey
2000/2001, December 2001.
Richard R. Neill, President
Magellan Aerospace Corp.
Canada
‹#›
Unique Access to the U.S. Market
• The U.S.A. consumes 50% of G-7 aerospace production with a strong domestic
industry.
• Canada has a special relationship to access this market
- For U.S. military purchases, Canada is considered part of the North American
Defence Industrial Base
- Special trade agreements can facilitate participation in US military projects
 Defence Production Sharing Agreement
 Defence Development Sharing Agreement
• The U.S. market accounts for the majority of Canadian aerospace and defence
exports – on average $5B annually. Boeing alone purchases in excess of $800M from
Canadian companies.
• 60% of the Canadian aerospace and defence industry output is attributed to
subsidiaries of US firms operating in Canada – a high level of cross-border
integration.
Canada
‹#›
Some Investors Who Have Chosen Canada
Canada
‹#›
Aerospace - an Established Platform
Why Canada?
The Aerospace Edge
Summary
Canada
‹#›
Canada Offers Much
• Canada's economic fundamentals are
excellent — government policies are
geared toward competitiveness.
"Aerospace is truly a global business and
these wins [move of Power Management and
Generating systems to Toronto, expansion
of plants in Montreal and Summerside, and
investment of more than $50 million in a new
headquarters, engineering and
manufacturing facility] for Canada were
made possible by the excellent business
climate here: sound fiscal management in
the public sector, attractive R&D tax
incentives, and unique opportunities to
partner with Governments to achieve growth.
It is clear to me that the decisions taken at
the Corporate level of our global business to
focus our growth here show great
confidence in Canada."
David O'Blenis, President,
Honeywell Canada
• Canada provides assured access to the
world's richest economy, in addition to
having a large and growing domestic
market of its own.
• Canada provides a cost-competitive and
future-oriented environment for
business:
- quality, productive workers;
- a competitive tax system;
- prime locations for R&D activities;
- abundant energy at low prices; and
- an excellent infrastructure.
• Canada is an outstanding place to live,
invest and do business.
Canada
‹#›
For more information:
Contact:
Aerospace and Automotive Branch
Industry Canada
235 Queen Street
Ottawa, Ontario K1A 0H5
Ron Watkins
Director General
(613) 954-3343
[email protected]
Nathalie Couture
Industry Development Officer
(613) 954-7774
[email protected]
For more information, visit Strategis, Industry Canada’s award-winning
Web site:
http://strategis.ic.gc.ca/aerodef_e
Canada
‹#›
For more information (continued):
R&D Tax Credit:
John Jones
Science Policy Coordinator
Scientific Research Section of Revenue Canada
Tel.: (613) 941-1130
Fax: (613) 957-3622
e-mail: [email protected]
Technology Partnerships Canada (TPC):
Jeffrey Parker
Deputy Executive Director and Director
Aerospace and Defence
Industry Canada
Tel.: (613) 941-6747
Fax: (613) 954-9117
e-mail: [email protected]
Canada
‹#›