The Nova Scotia Legislature

The House adjourned:
October 26, 2017.

HANSARD

NOVA SCOTIA HOUSE OF ASSEMBLY

COMMITTEE

ON

ECONOMIC DEVELOPMENT

Tuesday, March 7, 2006

COMMITTEE ROOM 1

Composites Atlantic

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Ms. Diana Whalen (Chairman)

Hon. Brooke Taylor

Hon. William Dooks

Hon. Judy Streatch

Mr. Howard Epstein

Mr. Charles Parker

Ms. Marilyn More

Mr. Wayne Gaudet

Mr. Harold Theriault

[Hon. Brooke Taylor was replaced by Mr. Gary Hines.]

[Mr. Harold Theriault was replaced by Mr. Stephen McNeil.]

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

WITNESSES

Composites Atlantic

Mr. Maurice Guitton, President and CEO

Mr. David Aulenback, CFO

[Page 1]

HALIFAX, TUESDAY, MARCH 7, 2006

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Ms. Diana Whalen

MADAM CHAIRMAN: We'll start just a minute or so early, because we're all here. I understand we have everybody who is expected this morning. What I would like to do is begin by welcoming our guests. I would ask the members of the committee to introduce themselves, and then we'll have the guests introduce themselves, and then we'll begin.

[The committee members introduced themselves.]

MADAM CHAIRMAN: I believe you may have some opening comments or a presentation.

MR. MAURICE GUITTON: Good morning, my name is Maurice Guitton, President of Composites Atlantic. I am in the company of David Aulenback, CFO of the company. First, I would like to thank you very much for having invited us here. Composites Atlantic was incorporated in 1987 under the name of Cellpack Aerospace. It was an offset requirement for Canada, in regard of the air defence/anti-tank system ADATS. The parent company at the time was Swiss/German in partnership with a company in Lunenburg, ABCO Industries. The partnership broke in 1991, due to the consolidation of the ADATS contract to America and the fall of the Berlin Wall. No more defence contracts at the time. So the company was stopped.

1

[Page 2]

At the time I was left with 15 employees, because the parent company decided to withdraw. I would like to thank you very much, again. The Government of Nova Scotia at the time helped me to resurrect the company, which I did. I was able to sell the company to a group called Aerospeciale in France, which today has become EADS. It's a great conglomerate today, which includes Airbus, BAE Systems, CASA and DASA, Germany. It's the second-largest aerospace/space defence group in the world. Today we belong to the EADS group at 50 per cent, and 50 per cent the Province of Nova Scotia.

Again, it was a great pleasure for me to work with the Government of Nova Scotia, because in 1991 I sold the company and restarted Composites Atlantic with 12 employees. Today our company reached, last year, $23 million, Canadian, with roughly 200 employees. This year our objective is $28 million to $30 million, with roughly 250 employees, well, 226 employees today, but I would say that by Christmastime we should be between 250 and 270.

We are addressing the aerospace industry, a little bit of defence, not as much as we used to - our share in defence is just 13 per cent. Most of the jobs we do are for the aeronautics, mainly Boeing, Airbus, Lockheed Martin and Bombardier of course. Bombardier represents 50 per cent of our business in Lunenburg today. One employee out of two is working for the Bombardier Group. Bombardier, Canadair, Learjet, Short Brothers in Ireland, those are the major companies we work for.

We do lots of training, as you can understand. The labour force of Lunenburg is excellent for us. Like I used to say to people when I first came to Lunenburg in 1988 - I was here in 1987 to incorporate the company, in 1988 I was hiring the first employee - I could see in the parking lot some old cars with holes in the door, not very rich types of equipment, and I'm very proud that today when you walk in my parking lot, my employees are owning better cars and trucks than even I own myself. We have developed wealth for this country.

We generally hire people with a Grade 12 level. Of course the professionals are professionals, so we hire professionals with the right diplomas and the right labels. We do take young people with a Grade 12 average, and we train those people - it takes roughly three years to train those people. We have internal courses we give, with the Nova Scotia Community College, and we have outside courses, in which we bring outside people in to do specific training, like with the CNC machining, the computer system and so on. We would like to develop a core business in Lunenburg and that's what we are doing.

MADAM CHAIRMAN: Thank you very much, I appreciate that. Questions from the committee? We can just begin.

Mr. McNeil.

MR. STEPHEN MCNEIL: Thank you for coming in. First of all, maybe we'd like to try to duplicate your success in the Valley. Around your training that you were just speaking

[Page 3]

of, are you in collaboration with the NSCC, in terms of training your employees? Or is all of that training taking place in-house, over that three-year period?

MR. GUITTON: Basically our training is very specific. What we do is very specific. Composite work - as you know composite is a long-fibre reinforcement with matrix resin. Sometimes I make presentations and a lot of people ask, what is composite? Well, we are like a cook. In cooking you have all kinds of ingredients and a recipe. We buy fibre, we buy resin, different fibres with different strengths, different resins for different types of things, like flame retardant, high temperature, impact resistant. We do our own cooking with our own recipe.

We have to train people. So what we did in the beginning was we bought courses from the Aerospace Association of Ontario, and we transferred the courses here. The administration of the course is done with some of the people from inside the plant, engineering people, technical people, and a teacher from the Nova Scotia Community College in Bridgewater. This is an ongoing thing.

At the present time, we are looking to launch a new program with the community college and different organizations in Nova Scotia which would be training taking place at the community college with support from Composites Atlantic in a technical way, even with machinery - if we have some machinery, we'll transfer some machinery - and they will be co-op courses. The employee will come for two weeks, stay two, three weeks on the campus at the community college for a one-year period. At the end of the year, they will receive their diploma; they will pass an exam and they will have a diploma recognized by the community college and the right people and ourselves, with a promise that with a group of people, a yearly promotion, Composites Atlantic will hire 12 people for the next 10 years. That is what we are going to launch.

As you are all aware, the government has changed recently. There has been some change in different places. Our file is still in the process to be approved, we hope. In the next couple of weeks, we hope it will be done, fairly soon, so we can advertise the program with the community college, recruit some young people - and young ladies - men and women, of course, and we'll try to get the promotion of 15 people, and start the courses for one year. Every year we'll take 12 people, automatically, for Composites Atlantic.

MR. MCNEIL: I noticed in the booklet that came out around your company, you had received two loans from the Province of Nova Scotia in 2004. One of them was for $416,000 and the other one was for approximately $3 million. Could you just describe, a little bit, what the purpose of those loans was?

MR. GUITTON: The $416,000 was an 18-year-old loan. Let me explain what that loan was. When the company from Switzerland withdrew from Nova Scotia, I received a letter, and the letter said, Mr. Guitton, we are asking you to cease all of the operation of

[Page 4]

Cellpack Aerospace. In the next three months, we are asking you to stop all of the operation, lay off the people, and sell the company.

Well, it's a tough letter. Unfortunately, and this is personal, but a month later my mother passed away, and 880 days later my father passed away. So I lost my company, my mother, my father in a matter of a couple of months. So, my reaction was I'm not going to drop the ball, I'm going to stick here, I'm going to resurrect this company, but I need some support. What I did was I went to the provincial government at the time and I opened the story in front of them. I have a group of people who agreed to meet with me, and I told the story. I said, look, what is happening is very unfortunate, but we do have to react. I know we have the technology, I know we have a beautiful plant, I know we have good employees. At the time we had 55 employees. The worst thing to do is to let go of everything and not continue to deliver the order I have in-house with a present customer. If I do deliver what I have in-house with the present customer, my customer will come back. And I want to have a clean file.

So I approached the government and I said, I need $0.5 million to finish the job, could you loan me the $0.5 million, which they did. As a matter of fact they said it would take 10 days, but 10 days later I had the money to continue. The time elapsed, three months, until we stopped the operation in December, but I delivered to the customers, everybody was happy. They knew I would be restarting the company. We had to negotiate to find a buyer, and we found Aerospeciale at the time.

During that time we used $416,000. We didn't use the $0.5 million. So it was what we used. We said, well, we will pay you back. We formed the company, 50 per cent was the province, 50 per cent was Aerospeciale. Aerospeciale gave us $1.5 million, the province gave us $1.5 million, that was $3 million, and the Swiss people wanted $2 million to walk away from the plant. We gave them the $2 million, we kept the extra $1 million, and I restarted the company with my crew, with my people, with $1 million plus the loan of the $416,000. That's the explanation of the $416,000.

MADAM CHAIRMAN: Next. Who has questions?

Mr. Hines.

MR. GARY HINES: Thank you for coming in this morning. Your overview certainly indicates a success story. As my colleague next to me said, maybe we can duplicate your success story in other areas of the province by following the same commitments to finesse that you have done. I'm looking through the book here, and it talks about the quality assurance department. It indicates that 10 per cent of your employees are involved in quality assurance. I wonder if you could just indicate to us how important that has been to you, and the benefits of having that involvement in quality assurance?

[Page 5]

MR. GUITTON: That was right at the beginning of the plant. I went to Europe, to Switzerland, as a matter of fact near Zurich for one year when we had decided to build the plant in Lunenburg. I was there for quality assurance and transfer of technology and know-how. In aerospace, space and defence business, to be able to operate today, even before, you had to have a level of certification. Everything we do today in our plant in Lunenburg is certified to a standard. Today, Composites Atlantic has reached the highest standard a company can operate in aerospace, space and defence today, called AS9100. It's ISO 9001 and 9002, plus AS9100, which is the highest standard that any company can operate under. An Airbus company and a Boeing company are operating under that standard.

I'm glad you are asking this question, and I'm very proud of my people and my company and my management that we are able - every year or every second year, a new upgrade, a new standard coming for different reasons - Composites Atlantic has always been able to fulfill the requirement and pass the exam. It is very restrictive, as you can understand. To tell you how restrictive it is, when you qualify a product, you qualify the machine, you qualify the space, and you qualify the person. Those people who are qualified to make that part are the only people who can do that part. If you have to do the part with another employee, you have to requalify that employee who is capable to do the part. It's zero defect. We cannot have any defect in what we do. When an airplane flies, we don't want to hear that there's a defective part from Composites Atlantic. Yes, it represents 10 per cent of our staff, and it could go up to 12 per cent, probably in the next few years.

[9:15 a.m.]

MR. HINES: So that has benefited you greatly, I would assume, in terms of maintenance of clientele, as well as new clientele coming to you as opposed to you having to be out there in the market looking for them.

MR. GUITTON: It's both. We do go in the field to find new customers, and we do have customers who come to see us, but we also have our supplier. One great thing that I think Composites Atlantic has achieved and we are proud of is when I am managing my employees, my management, I always tell people, if you can buy something in Lunenburg, you buy it in Lunenburg. If you cannot buy it in Lunenburg, you try to buy it in Bridgewater. If you cannot buy it in Bridgewater, you buy it in Halifax. If you cannot get it in Halifax, you go to Montreal. If you can't go to Montreal, you go to Toronto. Then after, you go to the United States or you go worldwide.

The meaning of that is it is very difficult, of course, to buy some material in Lunenburg, because we know it's made in Japan, but I'll give you an example. Composites Atlantic is creating direct work and direct employees in Lunenburg, but we are doing tremendous development in the country, talking about trucking companies, talking about Federal Express, getting business from us in Lunenburg. I want you to know that, for

[Page 6]

example, Federal Express has an account of over $10 million with us per year. It's carrying over $10 million in goods for us.

We developed suppliers to make crates to ship our products. We have developed quite a few companies around the province to do tools and machining for parts. As a matter of fact, some of you probably know, we were subcontracting in Amherst for the past 10 years, a lot of work in Amherst to Amherst Machining. Maybe some of you will remember Mr. Gerald Gosbee, who was the president of Amherst Machining, who decided to retire and stop the business. We bought the business, and we transferred the business to Mill Cove. We bought the old radar base in Mill Cove, and guess what, today our company is producing 100 per cent of the tools we need for the aerospace business, when we were subcontracting all over the world.

We have, as we speak, 12 employees in Mill Cove. Last year there was nobody, and we will keep growing Mill Cove as we are growing Lunenburg. We are fully integrated today from an idea to design to analysis to prototype to manufacturing to certification, calibration. Again, there, we have also made an agreement with the Province of Nova Scotia and InNOVAcorp to operate their lab on environmental testing. Guess what? Now we are able to do work for Boeing in Seattle, Airbus in Toulouse, and do some characterization of material, testing and certification right in Lunenburg. By doing that, they have a better price and they have a completely integrated product done from Lunenburg.

MADAM CHAIRMAN: Mr. Parker.

MR. CHARLES PARKER: It's an interesting company you have, for sure. It's sort of unique in many ways, in Nova Scotia, not only because of the product that you manufacture but in your ownership model, it's 50 per cent owned by the province and 50 per cent owned privately. I think that's what you had indicated. In fact I don't know of any other business in the province that's under that structure, although there could be. Is that model, plan to be continued, that it would be half-owned by the province and half-owned privately?

MR. GUITTON: For the moment, yes. I think it's a great model. It's a model with a proven concept that works. I'd like to say the concept maybe works because in my organization I have great people, I do respect my people, my people respect me. But we have one goal. We like to create jobs, we like to train people, we like to respect people and we want to grow the area of Lunenburg. We know that Lunenburg is an old fishing town and it is difficult to have the right people but we are hiring the people of the right label and we are bringing the people to where they are supposed to be.

The model, I think, should be extended to many more companies because I think that sometimes it's what a company needs, like us. We have major problems coming in the future for Boeing and Airbus. As you know, they are developing all those new super jumbo jets. We need money for research, we need money for investment of new tools and new machinery.

[Page 7]

Believe me, it's very tough because the governments of Thailand, Taiwan, Japan and China are trying to buy the market by a big chunk of the aircraft. You can read the newspaper every day and you see a deal made in Japan, a deal made in China. I mean, they are going to be selling 25 aircraft, A380s, the super jumbo jets in China. They are buying those aircraft but they also asked Airbus to put a company there to build the part for the aircraft. So those guys not only are the labour force which is cheaper than us, but they are also getting the best technology and machinery, so they are very competitive.

How will we succeed? Very simple. We know we have educated people in Nova Scotia. We know we have people with ideas. What we have to do is develop the idea, get the right machines, get the right process, keep our door closed, because we have proprietary technology. By doing that, we will succeed because the Chinese, the Japanese - not the Japanese but the Taiwanese - those people, will have a learning curve, it took a learning curve of 18 years for Composites Atlantic to be where we are today. It will take those guys - they are smarter than we are - probably 10 years because they are getting the stuff after us.

Like I told my management and people, well, in 10 years, if they are where we are today, in 10 years we will be somewhere else and that's what counts. Let them be there, let us do what we have to do, let's get support from our provincial and federal organizations and make sure we are successful. Our track record is second to none. We have grown this company at a rate of 35 per cent from day one and we are continuing to do it.

I hope that your committee, the province, the federal government will still support companies like us and lead the future.

MR. PARKER: Okay, sir, I want to ask, again, about your ownership model. It's 50-50. Are decisions made 50-50, like by a board of directors? Are they representative of both parties that are in the ownership model?

MR. GUITTON: The province is a silent partner, is a financial partner, also shares are owned by EADS, okay?

MR. PARKER: The voting shares?

MR. GUITTON: The voting shares, right. We have absolutely a great relationship with the province but not on the day-to-day operation. We are meeting time to time. As much as we can we invite them to come and see us and we have representatives, every other month, coming from the minister level or from employee levels of different places and people can see. Of course, we advise them every time we win a new contract, we have something special and new. It's well known, they know where we are, we have a track record.

[Page 8]

MR. PARKER: Okay. In any company there is always a risk, I guess, and hopefully you make a profit. Is the profit shared 50-50 if that were to happen or is it reinvested back in the company?

MR. GUITTON: We reinvest, we will reinvest. The province has been very fair with us. They have let us reinvest. The company in France has let us reinvest as well. I would also like to inform you that we also have a major line of credit from the EADS group which is at, what, $7 million. . .

MR. AULENBACK: Roughly $6 million right now.

MR. GUITTON: . . .$6 million. So not only do we have a loan and things from the province, and ACOA, but we also are drawing to a line of credit of $6 million, so it's very important. It's not coming just from one side.

MR. PARKER: Okay. I had a second question I wanted to ask, Madam Chairman. You make a whole variety of products, including products for the defence industry.

MR. GUITTON: Yes.

MR. PARKER: Can you indicate what type of products you make for the defence industry and are they sold to the Canadian Armed Forces, are they sold to other countries, or both?

MR. GUITTON: Yes. One major program, we had one, was called the ERYX Program, it was a collaboration between the Canadian Government, the French Government, the Norwegian Government. As a matter of fact, it is with this contract that we were able to sell the company to Aerospeciale France at the time. We were able to produce a tripod, which is a launching tripod for the anti-tank system. Unfortunately, the program stopped last year, after 10 years of existence. There may be a new generation in the future but right now it's a major program we have done in Lunenburg.

We did some work for Lockheed Martin, the launch tube, but as you know, since September 11th, all the contracts which were done outside the United States went back to the United States. There are no more contracts from Composites Atlantic on defence contracts done for the United States or for France. But we still think it will come back and we still have technology for that.

MR. PARKER: Do you sell to other European countries or other nations in the world?

[Page 9]

MR. GUITTON: Yes, we do sell to England and Italy. We won the contact on the EH-101 to produce a sponson of the helicopter. The sponson has two projections outside of the helicopter for the landing gear. You can see those red things, when the helicopter flies. We are doing a lot of work for them there. As well, we are doing work for, of course, the EADS airbus, ATR. We are producing a flap of the ATR aircraft prop, 42-72, which is very unique because we have business on this turboprop in France, the 72 and 42 ATR aircraft which is in direct competition with the Dash-8 aircraft, Cerion, and 200, 300, 400.

Guess what? We are the top of the market for those two type of aircraft. It's the only turboprop aircraft in the world today which is produced, the last one and the only one. Thanks to the price of the Euro going up, the market is going up again and I think we are going to have at least three or four good years with those two aircarft, two types of aircraft.

MR. PARKER: Okay, thank you.

MADAM CHAIRMAN: I would like to call on Mr. Epstein.

MR. HOWARD EPSTEIN: Thank you. I had questions that were actually quite similar to those that my colleague, Mr. Parker, just asked you. To some extent, I think some of my questions have been answered. Could we just go back to the ownership structure again?

MR. GUITTON: Yes.

MR. EPSTEIN: I'm wondering about the position of the two partners in the ownership of this company. First, I've heard you refer to the other owner as Aerospeciale and also it's . . .

MR. GUITTON: It's called EADS now.

MR. EPSTEIN: Aerospeciale was the former name?

MR. GUITTON: Aerospeciale was the first one and then Aerospeciale merged with DASA, Germany, CASA, Spain and BAE Systems in England to create the company EADS.

MR. EPSTEIN: Which is headquartered where?

MR. GUITTON: Headquarters are in Netherlands.

MR. EPSTEIN: In Netherlands, okay. I'm wondering about the arrangements between EADS and the Province of Nova Scotia, if either of the partners wanted to sell their shares. Is there any obligation between the two partners to buy each other out?

[Page 10]

MR. GUITTON: No, I don't think there is any obligation. But you have to understand that I think the lawyers and the people of Nova Scotia were very smart to make this kind of arrangement because, as you understand, in the aircraft business, there are liabilities, right? The Province of Nova Scotia provided financing to Composites Atlantic, to spin the business and do the business. On the other hand, the management and the role of EADS is unrepresented as their own responsibility for liability. If an airplane crashed it shouldn't be coming and suing the Government of Nova Scotia, right? So EADS is giving that protection. It's owned by EADS.

[9:30 a.m.]

MR. EPSTEIN: I understand what might have motivated the share structure in the first place, when the company needed operating cash in order to get started. It's very clear, you said that essentially they put in $1.5 million, or whatever the sum was at the time, and they became a partial owner. But the question, really, is whether it continues to make any sense for Nova Scotia to be a partner in a business that seems to be quite successful and thriving and making its way in the marketplace. What's the function now?

MR. GUITTON: The rationale of that is the following one: I created the company, I work hard at it with my management and my team, and as long as I will be in this company, I wish to retain this kind of arrangement, because if, tomorrow, we say, okay, let's buy the shares of the province, let's do a different arrangement, I think we will see that the company like EADS may say, alright, instead of continuing to invest in Lunenburg, Nova Scotia, why don't we put our money in Brazil.

MR. EPSTEIN: Well, except, of course, you have a plant there, you have a trained workforce, as you've emphasized to us.

MR. GUITTON: Yes, but, sir, when you are producing a part like this in Nova Scotia, no matter how good we are, we produce this part for $100, and if I go produce this part in Brazil and it costs me $25, sometimes companies make different decisions. I think the modern way of today, by sharing the risk on the financial, on the beginning and the R&D and the financial aspect of a new contract, we'll guarantee you the future of this company. You are buying into the future.

MR. EPSTEIN: If the other partner, EADS were interested in moving the company somewhere else, is it within the possibility . . .

MR. GUITTON: No, not moving the company. That's not what I said. I said if we stopped this partnership, the company will stay where it is. But they may decide, sometime, when they're selling their product in one place or another, then the job will be moved somewhere else. That's the risk we are taking.

[Page 11]

MR. EPSTEIN: You're talking about new jobs or expansion.

MR. GUITTON: Yes, absolutely. We are growing our company at the rate of 35 per cent, average, if tomorrow we stopped, if we just freeze where we are, we're going to stay the way we are. We would like to continue to grow by 35 per cent, because we are creating a lot of jobs.

MR. EPSTEIN: I don't know if I heard your answer to the question earlier, about whether the province shares in any profits. Does the province share in any profits of the company?

MR. GUITTON: No. Today's profit - the company is making profit, right?

MR. EPSTEIN: Yes.

MR. GUITTON: But all our profits are reinvested. We reinvest everything.

MR. EPSTEIN: And what debts does the company have?

MR. GUITTON: I would like David to answer that question. That's why I brought my CFO here.

MR. EPSTEIN: We heard about a line of credit.

MR. DAVID AULENBACK: The line of credit, that's the largest one. That was roughly $6 million. Let me just get the numbers here, and then I can tell you. We have it summarized on this page, right here. These are numbers from the end of December. There is about $6.3 million from our parent company. In total, our long-term debt is about $9 million. From ACOA-related programs, we have about $1.7 million. On all of those balances, all of those loans, our payments are current, up to date, and we've always paid off all of the ACOA program grants or loans that we got. We have a little bit of debt with a leasing company, $70,000, roughly. Then we have about $800,000 in total from various Nova Scotia affiliates and departments, the Province of Nova Scotia affiliates and departments, NSBI and the Office of Economic Development.

MR. EPSTEIN: Those are loans?

MR. AULENBACK: They are loans, yes.

MR. GUITTON: Repayable.

[Page 12]

MR. AULENBACK: Except for the one that was mentioned earlier, about the $416,000 granted as an innovation program, whereby if we hit certain employment levels on a year-by-year basis, that's forgiven.

MR. EPSTEIN: And that in fact has been forgiven.

MR. AULENBACK: No (Interruptions) We're only in year one. We have five more years, so that's ongoing.

MR. EPSTEIN: Okay. Fine.

MR. AULENBACK: We still have to meet our targets in order to get that.

MR. EPSTEIN: Alright, I get that. I think that's pretty clear. Can we go back to the second subject that Mr. Parker raised, which was the actual products that come out of the company. I take it that virtually all of this is plastics-derived material, is that right?

MR. GUITTON: Well, yes. It's composite, plastic, it's thermal plastic material like ABS, polyester. We do a few of those products. We transfer a few of them - modified transfer. It's long-fibre reinforcement, carbon fibre, Kevlar, Spectra, all the special fibres, with resin. I recommend each of you to go to a special home page we have in our computer, in the network, www.compositesatlantic/calbus.ppt. You will have a full disclosure - no, it's not in this book. You cannot find it in this book, because you have to have the /calbus.ppt. This will give you a presentation of the company with 250 pictures of what we do, and you will understand what we are doing.

MR. EPSTEIN: I wondered about your inputs, about where you get your raw material.

MR. GUITTON: Yes. Our raw materials, originally, are coming from the United States, Japan for the carbon fibre and France, with Kevlar the sole source was DuPont in Maryland, and the resin is coming, a little bit from Canada, America, Japan, France and England. Basically for resin and fibre, there's no more than 5 per cent, 6 per cent from Canada, the rest is all coming from the rest of the world.

MR. EPSTEIN: Is there any particular reason why that is? I had thought Canada had a fairly dynamic chemicals industry that generated a number of things that I thought might have been some of your inputs.

MR. GUITTON: Carbon fibre and the Kevlar fibre, those are proprietary technology and . . .

[Page 13]

MR. EPSTEIN: Kevlar certainly is.

MR. GUITTON: To build a plant to build carbon fibre, it's probably a $5 billion investment, to do one fibre.

MR. EPSTEIN: In that case, what I'm a little puzzled about is the story prior to the 1987-88 period. You really started to tell us, I think, from that time, if I followed correctly, that is the point at which there was some shakeup in the company and so on. It wasn't clear to me why the company was in Lunenburg in the first place. How long had it been there?

MR. GUITTON: The company was incorporated in 1987, under Cellpack Aerospace, in partnership, one-third with ABCO Industries in Lunenburg and two-thirds from Cellpack AG in Switzerland, Swiss-German, near Zurich. The company in Switzerland decided to withdraw from Canada, because the ADAT contract, which was sold to Canada, terminated. The idea was that this contract would be sold to America, but in 1991, as you know, the Berlin Wall fell. At the present time, a few directors of Cellpack died in Switzerland, and the new management decided to stop all the defence business. One plant in Germany was closed, one plant in Switzerland was closed, and of course Cellpack in Lunenburg, it was decided to be closed. That's where we moved the company. We sold the company to Aerospeciale.

MR. EPSTEIN: So it was originally founded in North America for sales in North America?

MR. GUITTON: Yes.

MR. EPSTEIN: Can we go back to the product? I think Mr. Parker was asking you about that 13 per cent of your product that would be the defence industry ones. I heard you mention the tripod for an anti-tank device, although now with more limited sales, helicopter sponsons, you mentioned a kind of flap for airplanes. Is that the list on the defence side, or is there more?

MR. GUITTON: No, that's all aeronautics.

MR. EPSTEIN: Okay.

MR. GUITTON: Except for the tripod and the launch tube.

MR. EPSTEIN: What is the launch tube?

MR. GUITTON: Launch tube - I'm sure on the television you have seen the people shooting aircraft with a stinger, a tube. That's what it is. It's not the weapon, it's just the tube.

[Page 14]

MR. EPSTEIN: I understand.

MR. GUITTON: All the equipment to go around - we have nothing to do with that. From Lunenburg, we cannot have the launch tube sold and shoot an aircraft. It's impossible. It's just a tube.

MR. EPSTEIN: I understand. So the launch tube, the tripod. What else comes in the defence category?

MR. GUITTON: There was another launch tube for Lockheed Martin, which was called the predator, and that's a type of launch tube. That's it.

MR. EPSTEIN: So it's mostly launch tubes, then, that would make up your 13 per cent.

MR. GUITTON: Yes. But we do have a little percentage of space. Space, we do 3 per cent in space, and we are the largest company in North America making helium pressure vessel tanks. So every time a rocket is launched, on a space shuttle, on a space station, the helium tank, which is the system to do the revolution for the propellant for the jets, is done in Lunenburg, Nova Scotia. We produce over 350 tanks per year. I was notified, by the way, last night that we have a NASA contract, to make the first stage of a helium tank for Lockheed Martin. We're going to have to invest in machinery and space to be able to produce over 100 tanks per year.

MR. EPSTEIN: I assume you must have export licensing from the Department of Defence for your . . . .

MR. GUITTON: Yes, goods and service.

MR. EPSTEIN: Can you tell us how that works? How often does that have to be updated?

MR. GUITTON: Every year, and we are under tight regulations and controls and a security system to make sure we fulfill the right procedure.

MR. EPSTEIN: Do they come and inspect, or do they actually have some staff on site all year long?

MR. GUITTON: They come to inspect, and we send the documents to the right place to make sure they are approved before it goes.

[Page 15]

MR. EPSTEIN: But they're not there all year long?

MR. GUITTON: No.

MR. EPSTEIN: Okay. Thank you very much, a big help.

MADAM CHAIRMAN: Ms. More.

MS. MARILYN MORE: Good morning. I want to follow up on a couple of statements you made earlier. You talked a little bit about your company's lease with InNOVAcorp in Woodside, which is in my constituency. I understand that you had the option to buy the assets and possibly re-lease the lab. Do I understand, from what you said earlier, that you did buy the assets but you moved them to Lunenburg?

MR. GUITTON: No. You're confused, the company was in Amherst doing machining for us. We bought Amherst Machining and we relocated in Mill Cove.

MS. MORE: Mill Cove, right.

MR. GUITTON: The Dartmouth plant is still operating in Dartmouth. It's an environmental simulation lab. It's still there.

MR. AULENBACK: We in fact added some machinery to that.

MR. GUITTON: As a matter of fact we added some buildings and machinery there.

MS. MORE: So is the work in that testing lab dedicated just to your products, or is it available, on contract, to other companies as well?

MR. GUITTON: It's available for the world to do testing, because InNOVAcorp had a testing facility to address many companies in this region. So we didn't want to cut that support, as a matter of fact we wanted to expand the support. Like David just mentioned, we have added a measure of equipment last year to be even better at what we do. Of course we use it for our own needs and our customers' needs, but if anybody wants to have some testing done over there, it can be done.

MS. MORE: So you've essentially taken over the management of that testing lab?

MR. GUITTON: The management and the equipment, yes, but the building is not ours.

[Page 16]

MS. MORE: You're still leasing it from InNOVAcorp.

MR. GUITTON: Yes.

MS. MORE: Okay, thank you for clarifying that.

MR. GUITTON: And our business is increasing by 10 per cent a year.

MS. MORE: Excellent. The other issue I wanted to pursue, you were talking about training opportunities.

MR. GUITTON: Yes.

MS. MORE: It made me wonder, what percentage of your current workforce is women?

MR. GUITTON: It's 35 per cent.

[9:45 a.m.]

MS. MORE: What do you do to promote, both work in your company and the training opportunities in the community college system and whatnot, for women in the community?

MR. GUITTON: We have some female engineers at our plant. We have lots of female co-op students coming to our plant. Some of them are in the field of mechanical engineering, some are in the field of chemicals, some are in the field of different, even biology, but it's not really our field. We try to get at least 35 per cent to 40 per cent of our population in training and co-op students, so they can feel how they like it or don't like it. We are very pleased, because many of those young kids, we do hire them. We have, in the past five years, hired 50 per cent of them. This is why we are trying to develop the new courses in Bridgewater, because we would like to hire at least 15 per year.

In drafting, for example, we hire people from the community college, and we have one person in drafting who's a man and the other person is a woman. I personally have one of my daughters, who is a mechanical engineer, working for me at the plant. I do promote women on the job.

MS. MORE: That's great to hear.

[Page 17]

MR. GUITTON: And we have quite a few women in accounting. We have a woman, a manager in Mill Cove, in the administrative field. We have women all over the place.

MS. MORE: That's good to hear.

MR. GUITTON: I wish we could go to 50 per cent, but the resources are not there yet. I think it's increasing, but it's not there. If I want to have 50 per cent resources in women, I cannot find the people.

MS. MORE: But you would like to work toward that goal?

MR. GUITTON: We are. We are increasing as much as we can.

MS. MORE: Some larger companies, I understand when they're sort of family- or individual-driven - you seem to have a lot of energy, expertise and motivation. I'm just wondering, do you have any sort of succession plan that would ensure the sustainability of your company in Nova Scotia?

MR. GUITTON: We have a business plan and long-term plan. I think our long-term plan goes to 2012, right?

MR. AULENBACK: Further.

MR. GUITTON: And even further. I do, we do try, as much as we can, now and in the future. The company, in the beginning, was what we called, built to plans, and I'll explain what I mean by that. The customer used to send us drawings, and from the drawings and their specs, we were making the parts. Well, we have learned that it was good at the time, it's still good, but it's not the future. Our future is develop the idea, identify the problem of the customer, where the customer needs something new, and what can we bring to the table to close the deal for 20 years.

The contract in aircraft are 35 years, generally. That's the duration of the life of an aircraft. If you qualify and certify the part in the beginning of that aircraft, you will get this part to the end of that aircraft. This is why we need money from the government, from our parent company for the research and development, because we have to capture those jobs. When we capture those jobs, they're there forever. It cannot be removed and moved somewhere else, because it would cost you a fortune.

Example, some of you may have seen in the past that we have announced that we won the diagonal brace for the Boeing 787. What is a diagonal brace? It's a long strut, which holds the engine to the wing. Now, we won that contract amongst 12 companies in the world, from Japan, France, from everywhere. Composites Atlantic in Lunenburg, Nova Scotia won the contract from Seattle from among everybody in the world. Why? It's because we have

[Page 18]

developed proprietary technology, and we are the only one that can make the parts the way it has been made. That's why we bought, as well, the new system which we implemented in ESL because we are going to be doing testing for this product for environmental simulation, hot temperature, low temperature, impact, strength for a three-month cycle, non-stop. That is because we have the idea in Lunenburg, Nova Scotia.

We are in the process and we have received some money from the provincial government and ACOA. We are trying to get a new one from ACOA for the window frame. When you are on an aircraft, you have window frames. What we are developing is a concept - we are developing this new aircraft, a 787 - where the new fuselage will entirely be made of composites. We are making this new window frame which we are developing with advanced technology. We bought the licence in Europe.

To make you understand what I'm saying, when you build a house, you have the carpenter frame your house and leave the place for the window. Then they put the window in the hole. The window has no strength for your house. It's the two-by-four that makes the strength of your house. In the technology we are developing, as an example, the window frame will be part of the fuselage and the strength. So you will be building a house where your window will also be the strength of your wall.

We have rebuilt the engineering and will develop a new technology, because we have a new process, we can adapt and be adapted to do that. We will be spending, probably, in the magnitude of $3 million to do that job. But there are 92 windows per aircraft. Each window will be costing a magnitude of $800 to $1,000 and we will have to produce 10 shipments a month. So it will be 9,200 windows at $1,000. That, we will tell you, the turnover of the company at the time.

Now, to do that, we will have to enlarge our plants, we will have to put more machinery, we have to buy more material, we have to train a lot more people. To do that, we need R&D and we need money. Otherwise, we can't do that. But when this is in Nova Scotia, it will go nowhere else. It has to stay in Nova Scotia.

MS. MORE: So your R&D, is most of it in-house or do you buy technology from other companies?

MR. GUITTON: We do both. We are continuously looking, searching for new ideas. We develop new ideas and concepts, as much as we can. When we see something which is unique and we can purchase, we do purchase. We have them essentially for two occasions.

We also have an engineering office in Montreal. We have 10 people in Montreal. Why Montreal? It's because it's the centre of aeronautics for Canada. When you do research for a Ph.D. in phenol analysis, you cannot find that person in Lunenburg. Those guys will

[Page 19]

never come to work in Lunenburg anyway. So with this office in Lunenburg, we address the markets and we address design and analysis there.

MS. MORE: So what percentage of your operation would be sort of dedicated to R&D and what percentage to the manufacturing side?

MR. GUITTON: I would say we do have, roughly, between 4 to 5 per cent R&D per year.

MS. MORE: But that's an area you would like to expand, is it?

MR. GUITTON: It will grow. Five per cent of the turnover is already made. It's good. I mean, of course we could do more but we're still a manufacturing company, you understand.

MS. MORE: Right. So do you have any contractual relationships with any of the universities, in terms of your R&D side?

MR. GUITTON: Yes, we do. Yes, with Dalhousie. Dalhousie and us, with a company called General Dynamics, we are developing a new console for the helicopter. That has been done in collaboration with them. I do have an agreement with Polytechnique. We are developing a new composite spring for the market. I am in the process of linking the organization with New Brunswick, to develop some new technology for different types of products. So we do spin-offs of the business around here. Yes.

MS. MORE: Well, thank you very much.

MR. GUITTON: You're welcome.

MADAM CHAIRMAN: Thank you. Mr. Gaudet.

MR. WAYNE GAUDET: Thank you, Madam Chairman. I would like to thank our guests for their interesting presentations.

It's hard to imagine that a Nova Scotia company, or a Lunenburg company is actually competing successfully worldwide in the aerospace industry. I guess I would like to start off with that. Why Nova Scotia? Why Lunenburg?

MR. GUITTON: We have our own recipe. (Laughter) I'm going to try to share my recipe with you. Well, the first thing is - and what you have to understand, I think our location is very interesting. Our location was built in 1987-88. Today it's an advantage and I'm going to tell you why. With the Internet, we can be bidding or doing anything as fast as anybody else in the world. What is important is to get the information, the right information.

[Page 20]

But what is unique at Composites Atlantic is no turnover. When somebody is treated well - and we do treat our people well, we have an outstanding medical system, pension plan and profit-sharing. So we treat our people the right way.

One area where it is very important is the time zone. It is very critical for business. We are only four hours from England in the time zone and five hours from France. We are 4.5 hours from Los Angeles. That means our company, from 7:30 a.m. in the morning when I get on the job, until 8:00 p.m. at night when I leave, I cover 12 hours of business per day, meaning, I'm doing 50 per cent more than anybody else. That's part of the success.

Another part of the success - and this is, maybe, me, my team - I don't know - we are always looking for new ideas and new technology. But I'm not only looking for it, we are trying to track the company and identify their problem. When we know they have a problem, we make a prototype. We develop the idea, we make a prototype. That's why you see that we are spending so much money on getting a loan for R&D and technology. I have to, with my team, develop a formula to win programs.

How do you see we win the program with Boeing, the diagonal brace? How do you see we win the program on the window frame? Well, 12 years ago, we heard that Boeing would be replacing the aluminum braces because they were too heavy. Going to composite, you're 40 per cent lighter. Well, if you can make an aircraft lighter today, what happens? You decrease the price of the seat, you spend less money on the fuel and you go on a longer distance.

So when you have a part which weights 100 kilos, and you have a part which weighs 65 kilos, even if the price of that part is cheap, it's more expensive by 50 per cent - even 100 per cent more - with a normal trip. It pays the parts. That is why we won the diagonal brace.

On the window frame, I was to a show - that's also the same thing. Composites Atlantic is always present at all the technical shows of this world. We represent our company there, we search, we look, we evaluate things. I saw a company with a new technology. Well, they were doing something which is not really different from what we do. The difference is, what we do in one hour they do it in 10 minutes. I said I was interested, I wanted exclusivity and I wanted to buy all this system for all North America. Tell me the price, I'm buying it. So we negotiated and, today, the end of this month, the new technologies, a new machine will be coming to Lunenburg and, guess what? We will be making those new window frames with the new technology for Boeing.

Boeing is here next week and they want to know all about it. We have already made a prototype by hand. They want the technology. If this happens, we have to double our Composites Atlantic in the next three years. We cannot do it alone. We need partners. We need EADS, we need the province. Or, if the province doesn't want to do it, we'll have to find another partner. But remember, when a job is created in Lunenburg, one job has an

[Page 21]

average of $12 for a labour guy, and we have engineers paid at $50,000, $60,000, $70,000. People working in tourism are paid $5 an hour, $5.50. Us, it's a long-term job, it's whole days all year long, and that's what Composites Atlantic is doing.

[10:00 a.m.]

Today, 250 employees - 250 employees we already have - we are speaking of business for more than 500 employees. And the tax, I made a study last year, Composites Atlantic has paid over $35 million in taxes in the past 10 years to the province. That's what we are doing.

MR. GAUDET: When I hear Airbus and I hear Boeing, and I hear you moved to Nova Scotia in 1987, I'm trying to understand why Nova Scotia. I'm very grateful that . . .

MR. GUITTON: It was an offset. I'll tell you what happened. ACOA was in charge in this country, to promote companies and businesses. They had a meeting in Halifax. I was not there, because it happened before my time. But probably a year before I arrived, ABCO from Lunenburg went to a seminar in Halifax and the company was Oerlikon-Buhrle from Switzerland, which was the main OEM subcontractor that produced the air defence anti-tank system, which I'm sure some of you have seen when you go to the air show. You see this tank with four canisters on each side, that's the launching system. The system was so advanced, it's still advanced today, that this system can kill an aircraft 160 kilometres before it arrives here.

So Canada bought the system. They needed an offset and the offset was 10 per cent for the province of the Atlantic. Those guys went to the seminar, and because they were doing filament winding in Mahone Bay, they said, oh, we can do filament winding. So the company in Switzerland said, I'm going to send you the package. They received a big box, one square yard of documents and specs. They received the documents, oh, metric system, couldn't do it. Specs, couldn't do it. So they sent back the whole thing, and said we're not interested.

What the people at Oerlikon-Buhrle did very well, but they said no, we know that you don't know, but we can sign your license to transfer the technology to Canada, and you will be trained to do the job. We need an offset in Canada, in an Atlantic Province. So the people from ABCO went to Switzerland, they saw a nice plant like ours in Lunenburg today, with all the equipment and technology, and said, why not. So they created the company Cellpack, and decided to transfer the technology. I was hired to do that.

MR. GAUDET: Earlier in your presentation, you talked about that your company has a large account with Federal Express, transporting your goods. I'm just curious, what challenges does your company have doing business here in Nova Scotia?

[Page 22]

MR. GUITTON: Training is a challenge. I would say there is good training, there are good universities to train, but we are very specific in what we do. Aeronautics for composites is a little different than aeronautics on the metal work. They do metal and maintenance. They can still get mechanics and stuff like that. The difficulty, it takes time to have a good employee to do composites. It takes three years. So we still have to be careful of what technology, which program we get, not to go too fast, because we'll not be able to deliver. So that's a challenge we have.

The challenge of the shipping, it could be a challenge when we work in what we call just in time. Supplier would like it today. The customer likes to have the parts in plus or minus one day. If you deliver a week earlier, or a week late, they are not happy, because they don't want to have to store it, they want the part to go to the assembly line. So we have to use the aircraft. Some day we'll bring a big aircraft company to fly our parts, you be sure. In five, six years from now for sure. Our holdings will be so big that we'll have bring an airline from Europe to be here.

MR. GAUDET: Does your company have difficulties in finding, recruiting employees?

MR. GUITTON: Up to today, no, because we are proactive. We hire people for next year. We are already training people for next year. We also pre-select them, pre-hire people. My management, I always want my management to have at least five people in the manufacturing department to be ahead, pre-selected, so if we need them, we just pull.

MR. GAUDET: You indicated earlier you can compete with Taiwan, with China, matching your experience versus cheaper labour. You're developing new technology, new engineering. But at the same time, the competition is doing that as well. I'm trying to understand, not necessarily tomorrow but down the road, how can your company survive the economics in the global market?

MR. GUITTON: Well, I said it. If you want me to make this cup and I want to make that cup, and you give me the drawing of this cup, I don't want to even touch it, I'm not interested. If you want me to give you a very unique cup, and very unique technology, which is much better than that cup, I will design that cup for you.

MR. GAUDET: But the competition can . . .

MR. GUITTON: No.

MR. GAUDET: No, they can't?

[Page 23]

MR. GUITTON: No. Absolutely not.

MR. GAUDET: Why not?

MR. GUITTON: Because, as you know, we are protected by patents, we are protected by special know-how. That's what we are keeping in-house to make sure they don't know. This technology that we have in Nova Scotia, there's things we do and nobody knows how we are doing it.

MADAM CHAIRMAN: If the committee is fine with it, I'd like to ask a couple of questions from the chair, if there's no objection. Thank you. Then, Stephen is on the list for the second round, because everybody has had a chance to ask questions.

One of my areas within the Liberal Party is as the Critic for Immigration. I'm wondering if you've had any involvement with supporting immigration through the Nominee Program?

MR. GUITTON: Hey, you are talking to an immigrant here.

MADAM CHAIRMAN: I love that.

MR. GUITTON: Well, let me tell you one thing. Speaking for myself, when you are an immigrant you have to have guts, otherwise you cannot survive, you cannot make it. You're asking me what I think about immigration. The first thing is the diplomas you get from wherever you come from are not recognized in this country. That's a major issue. Why a mechanical engineer coming from France - myself, I have a degree and I cannot certify the parts, because my education was not in Canada. So I hire people who have all the bells and whistles, even if I know the job 10 times better than they do, they certify it and I can't. Anyway, it works. Thank God, at least we can do something.

Another area which is totally unfair - I have three kids. My first daughter is a mechanical engineer. My second daughter is a teacher in French, history and geography. My third girl is going into science. I have paid everything to the penny, and I'm still paying. Why my kids, because they had good marks, could never have a bursary, were never selected because they said in black and white, if you are not born in Canada, you get nothing. That's discrimination. You want to know, I'm telling you. It's total discrimination.

If you bring people from overseas, and those guys are making the choice to be Canadians, then integrate those guys. You have people in Toronto, Montreal, who have Ph.D.s and they drive a taxi. That should not happen. But anyway, do you know what I said, I'm an immigrant, I keep my mouth shut, and I keep doing my business. If Composites Atlantic is successful, yes, it's successful, I'll tell you, I have no nets under me to protect me

[Page 24]

if something happens. It's better that I do it right, and I work hard, and my team is working hard. That's what an immigrant is.

MADAM CHAIRMAN: I appreciate your comments on that. You've raised a couple of really good issues. We've certainly talked a lot about credential recognition over the last number of years, with many different professional societies. It's a huge obstacle.

MR. GUITTON: If my daughter has a mechanical engineer diploma, goes to France, in six months she will be a French mechanical engineer, she will be recognized.

MADAM CHAIRMAN: Yes. So, clearly, we have created a lot of barriers in this province.

MR. GUITTON: Canada is way behind. You are behind, your nurse, your doctor, you are behind on every sector of activity. It's discrimination, believe me.

MADAM CHAIRMAN: Yes. I think we should say, at the same time, that we really appreciate the strong work that you've put into this company and to our province. I was thinking, following up on the question of succession planning, it seems to be in hearing the story of how the company has grown and prospered, that you've been very central to that, your commitment, even, to rescue the company, keep it growing here in Nova Scotia.

MR. GUITTON: You have two statistics with immigrants; immigrants who succeed, and those who don't succeed. That can happen. But the majority of immigrants have always succeeded. They all have created businesses, they all do something because - I have no family, I have nobody to go through. I have to do it on my own.

MADAM CHAIRMAN: Exactly. My more specific question had been about the Provincial Nominee Program which encourages immigrants now to come and to work in Nova Scotia companies under the entrepreneurial category. They're asking Nova Scotia companies to sponsor these immigrants as they come in, to give them some hands-on experience and exposure to Canadian business practice. I'm just wondering if you are one of those companies that have been matched with in-coming immigrants.

MR. GUITTON: I've had a few people. I will take more people. I will definitely take more people. But we have great difficulty to bring the people because there's major discrimination happening right there. For example, my company needs more supervisors for the field of manufacturing, people who have experience. Not that I cannot find or train somebody in this country. I have seen people here who have great education, especially when they come from university, and I can train the people. It could take a year. But if tomorrow I want to get, say, three supervisors for my manufacturing, I cannot get it because they're going to say to me, oh, Mr. Guitton, you have to post the job, and you have to wait. Who can

[Page 25]

we find? They would propose to me 25 candidates and they want me to hire one of those candidates which is not my need. So I hire nobody.

That's the answer. It's very simple. You need a reform in your system. I understand you have to prevent abuses because if you bring anybody for anything, you're going to be in trouble. But if you have a company like us who says, well, I would like to have an engineer for specific things, or a supervisor for specific things, and I have a track record, I'm doing things on my paper, I will turn right and I will have an advisor or somebody who recognizes what I want, this guy should be granted to come to Canada, no questions asked. Right now it's not working.

I'm a lucky guy to immigrate to Canada. I was lucky because my company, at the time in Switzerland, was spending multi-millions of dollars to invest so I could come. But if I would have applied to immigrate to Canada, I would have not been able to come.

MADAM CHAIRMAN: Yes, I understand this.

MR. GUITTON: I worked in Vermont before here. I spent 10 years in Vermont. I've been to five manufacturing plants. In Vermont, I got, immediately, a green card. It was there. You come, you get the card.

MADAM CHAIRMAN: So you found there are a lot of obstacles though. If you found the exact people you wanted overseas, because you have to post it for Canadian applicants, the timing is one of the issues? It just gets dragged out to the point where you can't meet your need?

MR. GUITTON: Yes, absolutely, you can't. You are not recognizing - I mean, I know tons of young ladies who would like to come to Canada to be nurses. They just dream. They've never been recognized. They just go sweep the floor. When they're not in France. I mean, come on.

MADAM CHAIRMAN: I agree. I think another day we will have to have more of that discussion.

MR. GUITTON: This is definitely discrimination.

MADAM CHAIRMAN: It's an interesting perspective from somebody who has come here and made your life here in Nova Scotia.

MR. GUITTON: Canada, Nova Scotia, if you will open and have a good plan, your population will grow by 20 per cent.

[Page 26]

MADAM CHAIRMAN: Well, we certainly want to go like that.

MR. GUITTON: You will get the right people, you will have great people.

MADAM CHAIRMAN: Well, thank you. I think we will have to talk another day and get some more perspective.

[10:15 a.m.]

MR. GUITTON: You're welcome.

MADAM CHAIRMAN: You mentioned about September 11th changing the market for defence. Could you give me a little bit of an idea - I know defence is not your biggest portion of your production.

MR. GUITTON: Absolutely. It's a great question you're asking. Since September 11th, America is closed in. It's very closed-circuit now. Everything is back to American. They are - I'm sorry to say that and I hope there is no American in this audience - but they are scared of their shadow now. They think there is somebody to attack them in their back every place they go. It's very unfortunate that they have reacted like that because I think the media in America are not really showing the true story of what has happened. I think - I mean, we all know the story with Iraq. Saddam Hussein was a dictator, right? He, maybe, was killing 500 per year, for whatever reason. Now they kill at least 1,000 people per month. It's worse. It's callous.

Since then, because of that, for whatever reason, why has Canada become restricted from being there? Why has the world been restricted? I mean, we lost all our contracts. They are all back to the United States. It's a closed system now and I think nobody deserves that. Canada, Europe, everybody doesn't deserve that. We have little bit of defence in Canada but it's very minimal. The frigate problem - but we are not in this business - will be a defence contract. The helicopter is sort of a defence contract but now it's very minimal. Too bad, too bad. I hope it will change. I hope the next administration will change that.

MADAM CHAIRMAN: Thank you very much. I will turn it over now to Mr. McNeil.

MR. MCNEIL: Thank you, Madam Chair. I want to go to back to what I had talked about earlier. Could you give me the employment targets that are part of that $416,000 . . .

MR. AULENBACK: I don't have that with me but I know that I looked at it yesterday and I remember the last one, in the sixth year we have to have a level of 207 people. We are already at 226.

[Page 27]

MR. MCNEIL: Okay. What were you at when the loan was given to you a year ago?

MR. AULENBACK: It would be 180, roughly, I think, 180, 190, something like that.

MR. MCNEIL: You had said that you have loans from the province totalling $800,000?

MR. AULENBACK: That was one of them. That's half of it, roughly.

MR. MCNEIL: Right. So am I to assume the other $380,000 is out of this $3 million loan that was also issued the same day?

MR. AULENBACK: Oh, that's not a $3 million loan. That was an agreement between the two shareholding parties and over a three-year period, $6 million was going to be given to Composites Atlantic to help develop our larger programs and to continue to grow the company. The first $2 million in the first year, $1 million from Sogerma EADS and $1 million from the province is capital. In 2005, we received $1 million from each party again as capital. Then in the third year, 2006, there will be $1 million from each party as a repayable, interest-bearing loan. That's the structure of the $3 million, $3 million from each side to continue to help grow the business to these programs.

MR. MCNEIL: What's the other $380,000 then?

MR. AULENBACK: The other $380,000 - well, there's a specific loan from the Department of Economic Development, interest-bearing, at - I think it worked out to 5 per cent, $350,000 for the window frame, that was just discussed.

MR. GUITTON: The prototype, yes.

MR. AULENBACK: Then the other one is the capital lease for the machinery from the lab in Dartmouth which is about $100,000 and we will pay it off by 2007.

MR. MCNEIL: You had mentioned during your presentation - and you said Nova Scotia Business Inc.

MR. AULENBACK: Yes.

MR. MCNEIL: Where are they involved in that?

MR. AULENBACK: That's the $416,000. It was originally Nova Scotia Business Development Corporation.

MR. MCNEIL: Okay.

[Page 28]

MR. AULENBACK: That's 15 years ago, or whatever it was.

MR. MCNEIL: Okay. When did you receive the loan of $350,000 from the Office of Economic Development?

MR. AULENBACK: Last February 28th. Wait a second. October 13, 2005. That was just last October.

MR. MCNEIL: So did you approach the Office of Economic Development?

MR. GUITTON: Yes.

MR. MCNEIL: At any time did the Office of Economic Development say, have you spoken to NSBI?

MR. GUITTON: No, no. But, for us, we will go see the province before we will go see NSBI because our relationship is, they are partners with us, shareholders. That is basically how we do it, like that.

MR. MCNEIL: The province has indicated to most people that when they became government, they created NSBI at arm's length from them, in terms of lending money. I'm just curious, so at no time they had suggested you go see NSBI or that this fit under the NSBI mandate or something that they. . .

MR. GUITTON: No, to be fair with you, gentlemen, it is myself who have those contacts and just by natural - by history, by past, I deal with that office and I go see that office.

MR. MCNEIL: So who do you see in the office?

MR. GUITTON: Marvyn Robar, generally. He sits on our board. He has been accounting our things all the time, giving us advice. He's a very competent person. He has always recommended to do the right things. I mean, that's why there's no magic. That's the way it is. Marvyn Robar, I've known this gentleman for 18 years. When we need some advice - for example, we are creating this new program with ACOA and the community college. I talked to him and he said, well, you know, in the past there have been some programs like that, well done, in such circumstances, so you should go talk to ACOA, talk to the province, the Nova Scotia Government. I get my advice and that's what I do. No specifics.

[Page 29]

MR. MCNEIL: You had mentioned earlier that the province accepts no liability for your company?

MR. GUITTON: No, they would have no liability for a plane crash.

MR. MCNEIL: They do have a financial liability if something were to go wrong with your company, is that right?

MR. GUITTON: Oh, like everybody, but why would it go wrong?

MR. MCNEIL: Well, spoken like a true businessman, right? (Laughter) Why would it? What's the upside for the province? I mean, you believe the upside for the province in being a 50 per cent partner in your company is that those jobs will be retained in Nova Scotia?

MR. GUITTON: Yes, that is what we are doing.

MR. MCNEIL: But the province has no day-to-day control over your operation, right? They're not involved in your decisions?

MR. GUITTON: We have a lot of communication and we have a lot of visits from many people. They know what we are doing and if they need information, they can call me, they can call Dave. Our books are open. We have never hidden anything.

MR. MCNEIL: But is part of that arrangement that if any contracts that you win - are you forced to create those jobs in Nova Scotia or can you create those jobs anywhere?

MR. GUITTON: Can I create jobs anywhere?

MR. MCNEIL: Does the province have a guarantee that if you won a contract tomorrow, as you would say, in Brazil, do they have a guarantee that you will create those jobs here in Nova Scotia to fill that contract?

MR. GUITTON: In that case, if tomorrow I got the contract in Brazil, the first thing, probably, the Brazilian would ask me to have some job done in Brazil, as manufacturing. But it's not in the manufacturing that you make money. You make money in engineering, design, material certification, characterization. My answer there is, it can only be done in Nova Scotia.

MR. MCNEIL: Thank you.

[Page 30]

MADAM CHAIRMAN: Mr. Hines.

MR. HINES: In looking at this and listening to you speak, you and I seem to have some things in common, in terms of believing how you're successful at business, and believing in the road blocks and the barriers that, perhaps, exist, and removal of those barriers. But I think it's your work ethics that you have brought to the table that has made your company successful, in part. My question to you is, you're not unionized?

MR. GUITTON: No.

MR. HINES: How have you managed to avoid that? Because if you're unionized, your cost of doing business will go up 30 per cent and your productivity will go down, probably, 25 per cent.

MR. GUITTON: Well, one reason I think we are not unionized - and I touch wood because you're never sure of anything - the first thing, there is nobody hired in my company if I'm not sitting to hire that person. I will be part of the people who select a new employee. I will make sure I will have a long, strong conversation with that employee. I will promise those employees that we will take care of them, for whatever problem they have, and I'm going to give you an example of that.

It is too common in this world that an employee doesn't show up in the morning, today, doesn't show up next week, that somebody will come back and say, well, this guy is no good, let's fire him. The word "fired" is not in my vocabulary, first. Secondly, my management, my people, should report to me why that person is off so often. I want to know. Generally, there is always a good cause. His wife is sick, his kid is sick, or something.

I don't believe that there are people who are not coming to work every day because they don't want to come to work. There is something that bothers them, a problem. I will give you an example.

One day, one guy was not here on a Monday. He wasn't in on Tuesday, was not here on Wednesday, was not here on Thursday, was not here on Friday. So my supervisor comes and says, this guy is no good, he's a new guy, he's no good. First thing, nobody gets hired, nobody gets fired, if I don't sign, so I want to know the cause. So I say, bring this guy to my desk, to my office. I sit down with him and say, what's your problem? He said, I just got a new job here, my car is not working, the muffler has to be changed, it is going to cost me $350, I don't have the money. I say, okay. Do you know it's around $350? Yes, it's around $350. David, come here. Give a cheque for $350 to this guy. Now you're going to be here every day. Maurice, I will be here every day. And the guy is here every day.

[Page 31]

I had another guy who came and said he had a problem, we know you have a problem. Again, the car. The guy wants to buy a car. He went to the bank and could not buy the car. The bank says, no, no, you don't get it, whatever. I say, who is your banker? Royal Bank. Very good, that's the bank we deal with. I call the manager. I say, I have a guy who wants to borrow $3,000 from you. He's a good employee. He has no car. This guy is willing to work and pay you the loan back. Will you help this guy? Well, he said, oh, no. I say, look, I'm doing $20 million business with your company per year. Could you do something for that guy? I have the message, Maurice. Tell your guy to come. The guy has got the car. The problem is finished.

I will give you another example. A lady told us in November her husband has cancer. This lady was devastated. She said, he may have two months to live. So word got spread throughout the company. The company decided to do a collect. This lady was in bad shape. Do you know what I did? I said, make a collect, whatever the collect is going to be the company will match 100 per cent of it. We give that to that lady. Her husband passed away just in the new year. This lady has to take 10 days off to sort out her life. I paid the 10 days for that lady. But you know what? This lady will perform and will help and support our company forever. That's what we do in Lunenburg.

I have tons of examples like this. I don't consider people like a number, I consider people like human beings and I treat people like human beings. I think this is why we have no union.

MR. HINES: I was looking through this binder that you prepared for us. It is quite evident in there that your company cares about the people who work for it. I see there are incentives, you work on an incentive basis, you work on opportunities to train, opportunities to improve their lot in life and you're getting the rewards for it.

Do you have a fear that someday it will get too big for you to operate that way, to have a hands-on with all your employees? It is very evident that you are conscientious in that respect. Can you maintain that conscientiousness in a larger company?

MR. GUITTON: Our company will never grow more than 300, 350 people. After that we will build another plant in Nova Scotia. That's my answer. When it becomes not manageable, when you cannot give the name of your employee, you don't know the name of your employee, that's where you have a problem. I know every employee by their name.

[10:30 a.m.]

MR. HINES: Thank you.

[Page 32]

MADAM CHAIRMAN: Ms. More, did you have questions?

MS. MORE: I did have one question. It was just a thought that came to mind. You mentioned earlier, sort of the worst-case scenario, about a lawsuit, if a plane crashed.

MR. GUITTON: Yes.

MS. MORE: I think it was in the context that the province would be somewhat protected from that because they wouldn't be responsible in the lawsuit. I am just wondering, does liability insurance for a company such as yours cover a significant portion of damages if one of your components were at fault?

MR. GUITTON: There are two types of insurance. The first thing, our company is insured for $800 million, lawsuits, if we make something wrong. But the fact that every product we make is made and certified to a spec, approved by our customer, the liability is transferred to the customer to the OEM, do you understand? So the risk we have, that that thing happened, will only be based on a negligence of somebody somewhere, unknown negligence, not on the basis of known defect. There is nothing leaving our plant if we know there is a defect. If somebody drilled a hole in the wrong place, it's recorded, the customer will know and give us the procedure to fix the hole or scrap the part. Do you understand? So the liability is very minimal because it will never be - if a plane crashed tomorrow, even if we have made a part for that company, that is OEM responsibility, right? It will only be if it is proven that the part has been defective that our insurance will come into play, but the province will never be touched.

MS. MORE: No, but you have to recognize that the security of the investment of the province, the public money that's in your company depends on the financial viability of your company. So that's why I was curious to know if there was any risk.

MR. GUITTON: But you know, when you are dealing with EADS and you have to report a minimum of 5 per cent every year, you can be sure there is a reason for it. They don't want to see a company fail. If this will happen, I will be replaced the next day.

MS. MORE: Okay, thank you very much for explaining that.

MADAM CHAIRMAN: I haven't anybody else on the list right now. Would any of the other members of the committee like to propose a second round of questions? I know a few of you have. No? Well, then, what I would like to do, although we are a little ahead of schedule, is allow you, if you would like to, a few minutes to summarize any points that you might like to raise again, or perhaps you're happy. Thank you, Mr. Guitton.

MR. GUITTON: On behalf of my team, the first thing I would like to say is I appreciate that we have this kind of discussion. Actually, you are the people in this country

[Page 33]

who know things, promote things, are aware of things. The first thing, I would like to invite all of you at any given time, if you are in the Lunenburg area and you would like to take a tour of our plant, you are welcome. I may be there, I may not be there, but David is there, whatever. You have the contact and it would be nice for you to take and see the environment, what we do.

I have a passion. The passion of my job is Composites Atlantic. It is definitely a choice I made to remain in Nova Scotia, to grow in Nova Scotia, this company, and support Lunenburg, as well, Nova Scotia. Nothing happens without hard work. I want you to know, if I have succeeded in one thing, I have been able to transfer to my team, hard work. And don't think what is happening with Composites Atlantic happened just because of myself. It happened because I have a great team, I have great workers, from the top to the bottom.

We have had some hard times. When September 11th happened, we had to let go, I think, 50 employees.

MR. AULENBACK: More than that.

MR. GUITTON: Seventy employees, just for six or seven months. I will tell you, we were not too happy but we talked to the people and, again, we promised the people they would be rehired and that's what we did. We rehired every one of them.

Sometimes we have an employee who decides to leave the company, just a few, the turnover is almost nil. One young man or young lady wants to marry somebody and they go to Prince Edward Island, whatever happened, they go and, guess what? They always come back. This is what I think we have achieved in Nova Scotia. We are very happy to have the Nova Scotia Government be a partner with us. We hope it will continue to be a partner.

I'm sure, in the future, you will see some strategic alliance happening at Composites Atlantic, as a people in this province. We have the composites side and there are people on the metal side. We have to start to boost the economy and do some alliance. That may happen in the future. We are working on it because Composites Atlantic will continue to grow. Like I said, we hope that maybe someday we will be building another plant somewhere in Nova Scotia.

MADAM CHAIRMAN: Thank you very much. Certainly, it has been very interesting for me and, I'm sure, members of the committee to learn more about your company, the history and the growth that you have experienced over the last 18 years.

I am certainly pleased to see your commitment to training and skills development, which is actually on our agenda for next meeting. As members of the Legislature, we are very concerned about the retention of young people in our province and offering them an

[Page 34]

opportunity. I think you have shown one example of how this can happen in a small community. We do appreciate that and we thank you for joining us, to both of you.

MR. GUITTON: Just one more word, because we didn't mention anything about it. Just make sure that the education level - people know that it's very important that the new generation in this world speaks another language, regardless if it's Japanese, Chinese, Spanish, French, German, whatever. Please make sure that in the new education system you graduate the kid with two languages.

MADAM CHAIRMAN: That's a good point, leading to the world economy. Thank you very much.

MR. GUITTON: Thank you.

MADAM CHAIRMAN: For members of the committee, our next meeting is Tuesday, March 21st and we will be discussing skills shortages at that time with somebody from the Department of Education and the new president of the Nova Scotia Community College. Thank you very much.

Is there a motion to adjourn?

MR. GAUDET: I move adjournment.

[We are adjourned.]

[The committee adjourned at 10:38 a.m.]