Total TPC investment in Pratt & Whitney pushing $500 million with latest award for pre-competitive engine technology

Pratt and Whitney Canada (PWC) has received federal assistance for the seventh R&D project in as many years, bringing its total financial support under the Technology Partnerships Canada (TPC) program to nearly half a billion dollars. The amount increases to nearly $1.2 billion when factoring in assistance over a 13-year period under the defunct Defence Industry Productivity Program (DIPP) (see chart).

Partly as a result of the massive level of public support, PWC has become a major Canadian aerospace R&D powerhouse. Its expenditures are currently ranked third in the country behind Nortel Networks Corp and Magna International Inc. In the past five years, PWC has spent just under $2 billion on R&D, far outstripping all other players in the defence and aerospace sectors.

“PWC’s share (of TPC funding) coincides with their share of R&D in aerospace,” says Michael Lenihan, TPC’s acting director of aerospace and defence. “We think they do 40-45% of total aerospace R&D. The sums they spend are enormous.” Lenihan notes that TPC has provided $1.2 billion in financial assistance to the aerospace and defence sector since it inception in 1996.

NEWEST INVESTMENT

The latest TPC investment in PWC of $99.4 million will be used to support a $578-million pre-competitive R&D project for small- and medium-sized turbo engines. The federal funding will be directed towards four specific areas — environmental impact, cost reduction, technology readiness and design systems. It will be conducted at PWC’s headquarters in Longueuil PQ as well as Mississauga, Halifax and Lethbridge. The project will see PWC collaborate with nearly a dozen universities and the National Research Council (see chart below). The company states that TPC assistance allows the firm — a subsidiary Pratt & Whitney, East Hartford CT ,which is a division of United Technologies Corp —to engage in “game-changing” technologies .

Negative rulings from the World Trade Organization (WTO) in 1999 resulted in major changes to the TPC program (R$, November 24/99). All TPC support is now directed towards pre-competitive and non-product specific projects. The PWC project is no exception.

“This is for very generic engine technology. It could be for a helicopter or an aircraft,” says Dr Hani Moustapha, PWC’s manager of technology and collaboration programs. “It will be in four strategic areas.”

Those in the aerospace sector defend the use of the TPC program, both for its benefits to the companies receiving the assistance and to the country as a whole. TPC is routinely attacked as a corporate welfare slush fund by opponents of government assistance programs, most recently in an August 6 front-page story in The Ottawa Citizen. But these charges fail to recognize the global environment aerospace firms and companies in other sectors must compete in and the financial resources firms contribute to qualify for TPC funding.

For PWC, there’s no doubt that it would not be the major Canadian player it is today without programs like TPC which level the playing field among global competitors.

“TPC is an absolutely critical part of Pratt and Whitney’s activity in Canada,” says Moustapha. “Without the TPC loans we would be in bad shape in terms of investment. We could not sustain it without TPC.”

While DIPP provided varying degrees of assistance ranging from outright grants to assistance that was fully repayable, TPC assistance is typically made via repayable loans and covers up to one third of the project’s eligible costs. Lenihan says some repayment dollars from PWC are now coming in, although he won’t say how much.

“It’s in the millions and it’s from two of the early projects. The rest will start in the next one to three years We structure repayment terms over the life cycle of the project and that can stretch over a long period of time. Engine-type projects can be 10 or 20 years,” he says. “We only release aggregate numbers now but we may be releasing more specific repayment numbers in the future, driving down to the individual companies and projects.”

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