Aerospace industry seeking new R&D investment and revamped federal programs

The Canadian aerospace industry wants the government to revamp its R&D assistance programs and open its coffers to counter the decline in public investment in the sector over the past decade. In its new innovation paper —Aerospace — Meeting Canada’s Innovation Challenge — it calls for a “reinvigorated” national aerospace program and substantial new investments in basic research, pre-competitive technology development and demonstration and process improvements. And it contends that the new investments could best be delivered through a new aerospace Networks of Centres of Excellence and a not-for-profit, industry-led consortium.

The document was produced by the Aerospace Industries Association of Canada (AIAC) and it takes dead aim at an apparent decline in federal aerospace R&D assistance from $600 million annually in 1990 to $300 by 1999. It asserts that the sector is a “vital asset of Canada’s socioeconomic framework” and as such should be given priority when new innovation-related investments are contemplated.

The report calls for a doubling of current R&D investment by 2005, increasing to $1 billion by 2010 and sustained at 10% of industry sales. It adds that current R&D delivery programs must be overhauled, as they do not provide comprehensive coverage across the full R&D spectrum.

“Many of these entities and mechanisms have narrow, even rigid mandates and focal points,” states the report. “Too often, important investment opportunities are lost and scarce resources are wasted trying to ‘force fit’ programs such as Technology Partnerships Canada to fit circumstances for which they were not intended and are poorly suited.”

The document envisions a future in which several major aerospace firms attain global competitive advantage in their respective market segments and support a vibrant infrastructure of suppliers. It lays out stretch sales targets of $40 billion by 2007, $80 billion by 2014 and $150 billion by 2020. But it notes that the current success of the Canadian aerospace sector (fourth globally in terms of sales) is based upon a strong industry/government partnership and strategic investments. It asserts that unless both are enhanced, the sector will have difficulty remaining competitive.

Adding to the challenge is the trend towards outsourcing, in which the major firms are shifting product development and underlying innovation to lower tier suppliers. The AIAC report contends that these smaller firms are often not fully equipped to share risk, compress design and development cycles, simplify systems or adopt new design environments.

“The result is intense pressure for new investments in R&D, new capital equipment, quality and business processes,” states the report.

At the same time, federally funded aerospace R&D has decreased from 45% of total spending in 1990 to 25% in 1999, compared to 66% in the US and 50% in Europe.

“In the face of declining government investment in aerospace and in the absence of significant military procurement opportunities, the world product mandates of these (foreign-owned) firms risk repatriation to parent firms and countries, or countries where governments are prepared to be aggressive R&D investment partners,” states the report.

The AIAC document goes on to list a series of perceived deficiencies in the Canadian scene, from the small number of firms that actually perform R&D and a lack of collaboration among firms, to weak international R&D linkages and cash-starved R&D infrastructure.

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