Canada needs a new shipbuilding strategy that will help domestic firms become more globally competitive, says the president of the Shipbuilding Association of Canada (SAC).

But Peter Cairns is not calling for policies that enable Canadian companies to build ships for overseas markets. He wants Ottawa to introduce tax breaks and other incentives so that Canuck firms can beat out international rivals on domestic deals to build ships that sail in Canadian waters.

"To think that people think we can't design a small ship in this country is absolutely ludicrous," said Cairns during a recent speech at the Ocean Industries BC conference in Vancouver.

Ottawa-based SAC, which represents Canada's ship-building and ship-repair companies across the country, is forecasting $8.6 billion worth of demand for Canadian vessels over the next 15 years.

Bayne Stanley, Business Edge
International Marine Consultants vice-president Francis Lin says the B.C. shipbuilding sector has to rise to the challenge.

The demand breaks down as $2.8 billion for commercial ships - including ferries and merchant vessels - and $5.8 billion for federal ships, including navy ships, Atlantic ferries, coast guard vessels, Department of Fisheries and Oceans boats and others.

Cairns, a retired admiral, said it's wrong for domestic ships to be built overseas with Canadian money.

He is calling on Ottawa to combine its accelerated capital cost allowance program with its structured-financing facility and introduce other measures designed to spur private investment.

"I understand people going for the best price," he said. "I wouldn't really want to curtail the taking of the best price. But what I would really like to see is that we could get ourselves on a footing where we are somewhat competitive with the best price, so that we are an alternate to the Canadian owner - as opposed to just being dismissed out of hand."

He suggested Ottawa's negotiations on free-trade deals with China, Singapore and the European Free Trade Association could pose greater challenges to the Canadian industry.

"I'm always amazed at these free-trade nations - like South Korea and Norway in particular - because they are mature industries that were developed from a protectionist base," said Cairns. "Their governments protected them, their governments allowed them to flourish, and now that they're flourishing and mature, they go to free trade.

"We have never had any of that support. I don't want to whine here, but the fact of the matter is that it's real hardball for us to deal with these guys, who in fact are way ahead of us."

He said Canada has done nothing for this sector since 1986. Ottawa, he said, views shipbuilding as a "sunset" industry, creating a myth that it is unimportant.

"The government doesn't like the structured financing at the moment, because they think it smacks too much of subsidy," said Cairns.

Francis Lin, vice-president of North Vancouver-based International Marine Consultants Ltd., agrees with Cairns' call for a national shipbuilding strategy.

"Every country's government assists the industry," he said.

International Marine provides project management, case studies, feasibility studies, budget planning and other consulting work for shipyards and marine companies, including BC Ferries and charter operators in B.C., other parts of Canada and overseas.

A marine engineer who served with Vancouver Shipyard for more than 20 years, Lin noted companies such as AMEC, Canron Construction West Corp. and Tri-Star Industries are among the most active firms in B.C.

They build a variety of equipment, including large panels used on ferries, piping modules, pressure tanks and storage tanks while also supplying engines, cranes, pumps, winches, generators and other machinery.

Lin said he would like to see B.C. firms get more consideration for BC Ferries projects, but added the B.C. shipping industry also has to "come up to the challenge" and push for jobs that it wants. No job is too big, he added.

Cairns estimated Canada has a 15-year window to turn its troubled industry around, because history shows other countries took that amount of time to revive their shipbuilding sectors.

He pointed to Germany's Flensburger SchiffbauGesellschaft as an example of a company that was able to right its financial ship with government help. "In 1986, they were broke," said Cairns. "They didn't have any money. Since about the year 2000, they've been the world's most modern shipyards. Investment was made by the German government (and) private investment."

In 2004, Flensburger received the controversial $325-million contract from BC Ferries to build three Super-C class vessels for the company's major routes.

The deal, which is subject to a 25-per-cent import duty, sparked vociferous complaints within the B.C. shipbuilding sector, even prompting ardent right-winger and former premier Bill Vander Zalm to participate in a news conference with the B.C Federation of Labour against the agreement.

The issue of foreign-built vessels is not likely to go away anytime soon in B.C., which accounts for one-third of the national shipbuilding industry. BC Ferries plans to replace its aging 22-ship fleet over the next 15 years.

David Hahn, the company's president and CEO, has characterized B.C. shipyards as being too small, too expensive and too technologically obsolete to build large ferries.

"It's true (large ferries) can be built cheaper offshore - because we haven't been able to make the investments that had the policies to support the industry that the offshore guys have had," said Cairns.

But he does not expect overseas firms to be the only ones outside B.C. to bid on new ferry contracts. Other firms from other parts of Canada will bid on the lucrative deals, he noted, and he wants BC Ferries to give fair consideration to other Canadian proposals.

"They've been happy to go to Germany, so there should be no reason why they can't go to the Great Lakes or to Eastern Canada," said Cairns.

Ottawa is expected to announce details soon on calls for proposals for icebreakers, coast guard patrol boats, a project dubbed by Chief of Defence Staff General Rick Hillier as a "Big Honking Ship" to transport troops, and several other vessels.

One program under way is a contract for joint-support naval ships. Bidding closed on Sept. 28 and four consortia are competing for two positions to do the actual detailed design.

"And the winner of (those) two positions - long after I die - will actually build the ship," said Cairns. "It's a very long and stupid process, but that's the way it is."

As they wait for word on government deals, B.C.-based shipbuilders are getting plenty of work from the offshore oil and gas sector. Since B.C. does not allow offshore oil and gas exploration, the equipment is used on the East Coast and internationally.

Lin of International Marine said in his view there is nothing the B.C. marine industry cannot handle.

"We have been building all the C-class ferries in B.C.," he said. "We built two super-ferries in B.C. At that time, they were put together by a consortium. Everybody built a certain part of the ferry. That type of program can be done again in B.C. and there's nothing stopping the B.C. marine industry from doing that."

He added an abundance of coastal land will allow for the construction of large shipbuilding facilities.

"The B.C. industry will rise to the challenges again - whatever they may be," said Lin.

Graham Robbie, proposals manager for Vancouver-based Aker Yards Marine, part of the Aker Yards Group that operates 16 shipyards around the world, said Canada is well served with engineering talent to support the offshore petroleum industry.

However, he added, there is a shortage of experienced people.

"We're finding that we have to bring in graduates and train them within the company, because finding people with 10 to 15 years of experience is almost impossible," said Robbie.

(Monte Stewart can be reached at monte@businessedge.ca)