Provincial economy depends on global markets
ANY discussions about the provincial economy will usually include the word aerospace.
A lot of the aerospace enterprise in Manitoba revolves around maintenance, repair and overhaul, and even though that might not be so sexy it still requires a highly skilled and well-paid workforce.
But when we talk about the Manitoba aerospace industry we're really talking about elements of a global industry that just happened to have touched down in Manitoba.
Four aerospace companies in Winnipeg represent the lion's share of the work force and the value of work done.
Two of them -- Air Canada Technical Services (ACTS) and Standard Aero -- are in the process of being sold to non-Canadian buyers.
One of the others, Bristol Aerospace, is owned by an Ontario-based public corporation and the other, Boeing Canada Technology, is wholly owned by the U.S. aircraft manufacturer.
The point is that a major pillar of the provincial economy -- along with bragging rights that allows us to say we have the third largest aerospace sector in the country -- is entirely dependent on the global market and in almost all cases by non-Canadian owners.
A local product designer recently said that when it comes to designing any kind of product in Manitoba -- consumer or industrial -- the global market has to be considered the target audience because there aren't any products exclusive to the Manitoba marketplace except maybe a Salisbury House Nip.
The sale of the ACTS to a couple of U.S. private equity firms also underlines the folly in assuming there is any long term guarantee that a company will remain operating in one place or another. It was not long ago that ACTS was owned by a federal Crown corporation and its presence in Winnipeg had a measure of political imperative as well as any operational or strategic value in being located here.
Now there are concerns, not entirely unfounded, that work that had been done in Winnipeg might move to a lower cost centre in El Salvador.
The other side of the coin is the way Standard Aero has evolved. It is now on its fourth owner in a little more than 10 years -- two were British-based, and two were international private equity firms. But rather than become compromised, its power base in Winnipeg has been enhanced. Standard's CEO, Paul Soubry, Jr. is now also head of a Tempe, Ariz. company that was also purchased by the new owners, Dubai Aerospace Enterprise. It has proven to be a valuable investment for two previous owners whose interest were purely financial. Now it is owned by a company whose executives are veteran operators of high- tech aerospace firms. There is justified expectations that it could mean greater market leverage for Standard Aero.
But that is not to say that's the way these things will always work. Agricore United was recently acquired by Regina-based Saskatchewan Wheat Pool in a deal that was meant to create a large Prairie agriculture company that would be able to compete globally. That might be achieved, but it is likely to come at the cost of perhaps as many as 500 jobs from Portage and Main.
Buhler Industries is currently considering an offer to sell to a Russian company, Rostelmash Ltd., a virtual unknown in North America.
Like just about any manufacturing company that has grown over the past decade, Buhler Industries worked hard expanding its market reach. In Buhler's case the introduction of its large tractors into the Russian and eastern European market brought it to the attention of Rostelmash, a combine maker, giving it the idea to try to acquire the whole company. Officials from the Russian company have said their intention is to keep the Manitoba company operating here, but there is no guarantee that will happen.
A think tank report this week rated corporate Canada poorly when it comes to international mergers and acquisitions.
There has been much press over the past couple of years about international take-overs of Canadian companies. While there would be an obvious downside were that trend to continue unabated, it might be even more important for the sustained prosperity of a regional economy like Manitoba to ensure greater levels of operational efficiency and excellence regardless of who owns the enterprise.
martin.cash@freepress.mb.ca