Dassault Aviation of France is making an aggressive bid to sideline the F-35 and to sell its own jet fighter to Canada, offering to transfer technology, create jobs and share billions of dollars in business if Canada buys its Rafale fighter to replace its outdated fleet of CF-18s.
Dassault leads the French consortium that makes the twin-engined Rafale for the French air force. The Rafale, unlike the F-35, has been combat-tested in Afghanistan, Libya and Mali. Although not yet sold outside France, India has announced plans to buy the Rafale on the strength of pledges to transfer the technology. The agreement provides that 108 out of 126 Rafales will be built in India, not France.
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A similar deal with Canada would allow major components to be manufactured here, according to Dassault's vice-president, Yves Robins.
"Should the Canadian industry wish to assemble or produce part of the Rafale in Canada, we are fully open to it," Robins told CBC News in Montreal.
Robins said the "intellectual property" associated with the Rafale would be part of any sale, including the source codes for the fighter's computer system as well as the know-how to adapt and update the aircraft — both hardware and software — throughout its lifespan.
"The Rafale will be Canadianized," said Robins.
This would mean, he said, "transfer of technology to the Canadian industry, creating high-value jobs and integrating the Canadian industry in the global supply chain."
Robins said the jobs created in Canada would far exceed those that would flow from a purchase of the F-35.
The Rafale's backers dismiss concerns that a French plane will not work well with U.S. forces, saying it did just that in both Afghanistan and Libya. They add that its attachment points for bombs and missiles are built to NATO standards.
Contest comes down to earth
Even so, the Rafale offer suggests the contest for billions of dollars in fighter sales to Canada is increasingly focused on the spinoff benefits — meaning, jobs on the ground — and less on how the competing planes perform in the air.
All the rival fighters claim to be fully capable of conducting sovereignty patrols in the Arctic, as well as combat missions such as the overthrow of Libyan dictator Moammar Ghadafi in 2011. Canada's CF-18s took part in that operation, but are due to retire over the next five years.
Prime Minister Stephen Harper's governing Conservatives had picked Lockheed Martin's F-35 stealth fighter to replace them, until the government's lack of candour about the cost provoked a political storm and a scathing report by the auditor general in 2012. That forced the government to retreat, saying it would "hit the reset button."
After years of delays and cost overruns, the F-35 program is still in its early stages. Canada's fighter purchase is now going nowhere as the government tries to decide whether to stick with the F-35 or to hold a competition with some or all of its rivals — the Boeing Super Hornet, Dassault's Rafale, the Eurofighter Typhoon and the Saab Gripen.
Jobs, jobs, jobs
By coincidence or not, the Dassault bid comes a month after the Canadian government announced a new procurement strategy emphasizing the creation of jobs.
Discussing the plan in Vancouver last week, Public Works Minister Diane Finley said, "The whole idea behind it is, anyone who is competing on the procurements, the various ones, has to make sure that they are investing in Canada — that Canada's getting benefits."
Dassault says that's exactly what it is doing, and that it already has a supplier network in Canada, led by Thales, a French multinational specializing in aerospace and defence hardware. The Thales plant in Montreal produces actuators that move the flaps on the wings of the Rafale.
Thales Canada CEO Mark Halinaty told CBC News that the company employs 1,300 Canadians, and that an influx of French military technology could be exploited for growth in many other fields. Already, Thales makes control systems for commercial aircraft, railroads and the Canadian Forces.
"It's not just about transferring technology and know-how for a particular program," said Halinaty.
"What that does is provide us with the expertise which allows us to develop our own Canadian-originated projects, which we can then export."
Not just a chance to bid, but a 'guarantee'
Robins, the Dassault VP, added that "we are not only limiting this offer to the Rafale."
Robins said that Dassault's partnerships with hundreds of other French companies will allow it to include Canadian industry in other high-tech projects — in space, unmanned drones and avionics. This, he said, would be "a guarantee of activity amounting at least to the equivalent of the procurement budget for the aircraft — and going much further later on."
To date, the Canadian government has budgeted $9 billion for the purchase. Robins said Dassault would promise in writing to invest that much in Canada.
"This is a commitment. A contractual commitment, even with penalties written in the contracts. We are not saying the Canadian industry could potentially, maybe go up to $10 (billion) or $11 billion by bidding for such-and-such contracts. We are saying we guarantee this return to the Canadian industry. It's a totally different philosophy from some of our competitors."
That's a direct shot at Lockheed Martin, which says it will offer Canadians the chance to bid on "$11 billion in opportunities" over the life of the F-35 program. There's no guarantee that Canadian firms would win those contracts.
Even so, Lockheed Martin vice-president Steve O'Bryan says he has already signed $600 million in contracts to build parts of the F-35 in Canada.
"These are real contracts ... all before Canada has even decided on a single airplane," O'Bryan told CBC News.
"This isn't mundane work. This is software, this is avionics, this is composite work. These are the technologies in the aerospace industry you need for years to come."
From stealth fighters to windmills
In the Ottawa suburb of Gloucester, a small company called GasTOPS is one of Lockheed Martin's 70 Canadian suppliers. Having developed a specialized sensor for another stealth fighter — the top-secret F-22 — GasTOPS now makes an updated version for the F-35. It's an early-warning system that checks the oil flow for microscopic pieces of metal which might indicate a looming engine failure.
Although the devices are worth $5,000 each, the F-35 production line is still not rolling at full speed and Lockheed Martin has only bought 500 of the sensors so far. But GasTOPS has expanded into a much larger market for the same sensor: for wind turbines, which are in use all over the world.
Dave Muir, the CEO of GasTOPS, says "the key thing is these are knowledge-based, what you would call highly qualified, professional jobs. These are jobs that are hard to come by. They're hard to create."
Of course, Dassault is not Lockheed Martin's only rival. Although the Eurofighter and Saab bids are not seen as strong contenders at the moment, Boeing's Super Hornet, like the Rafale, has combat experience and lower operating costs than the F-35. It's an updated version of the CF-18s Canada currently uses, which Boeing says implies an easier learning curve for Canadian pilots. The U.S. has bought dozens of Super Hornets to bridge the gap until the F-35 reaches full-rate production.
As a global aviation company, Boeing also has a network of 200 suppliers in Canada and, like Dassault, dismisses Lockheed Martin's offer on jobs as inferior.
For now, though, all the fighter companies interested in Canada's business can only wait for the government to make a decision: will it hold a competition, or not? And will its decision reflect the commitment to Canadian jobs, or not?