"O'Connor has $8B military 'wish list"

[Edward Campbell]

This is from our friend and irregular participant Jack Granatstein in today’s Globe and Mail.  It is published under the Fair Dealing provisions of the Copyright Act.

http://www.theglobeandmail.com//servlet/story/LAC.20060704.CODEFENCE04/TPStory/Comment/

Paper promises or real defence purchases?

This equipment is genuinely needed, says historian J.L. GRANATSTEIN, and the Conservatives appear intent on doing what they say

J.L. GRANATSTEIN

Hallelujah and hosannas. That seems to be the response of the supporters of the Canadian Forces to last week's extraordinary string of announcements. On Monday, it was $2.9-billion for three Joint Support Ships for the navy. On Tuesday, the army got the news that it would get 2,300 medium trucks at a cost of $1.2-billion. The next day, it was medium- to heavy-lift helicopters, at least 16 of them, for $4.7-billion, and on Thursday $8.3-billion worth of strategic and tactical lift aircraft. The total is $17.1-billion, a good week's work for the military, and extraordinarily quick work by the Conservative government. In fewer than five months in office, the Harper government has moved decisively to meet the most pressing requirements of the Canadian Forces.

The equipment is genuinely needed. The army's trucks, for example, are more than 20 years old and cost, most sources agree, more in ongoing maintenance than they are worth. The new vehicles, besides creating jobs in Canada, will save the Canadian Forces money that can be used for other purposes than trying to keep old clunkers on the road.

The Air Force's 32 C-130 Hercules are also overused and costly to keep flying. Getting 17 new C-130Js will provide tactical lift into the future and, with the four C-17s also being purchased, give Canada at last a capacity to respond to major domestic crises (an earthquake in British Columbia or an ice storm in Montreal, to cite only two possibilities) without needing to beg the United States for heavy lift. The C-17s will add capabilities to the Canadian Forces as well, giving the military a strategic flexibility it has never before had.

Similarly, the helicopters and the Joint Support Ships meet pressing needs. Canada stupidly sold its Chinook helicopters to the Dutch a decade ago, and we have paid the price ever since. The JSS will replace the navy's two ancient replenishment ships and add a roll on/roll off capacity and the ability to transport a company and a half of soldiers.

But the Canadian Forces still have requirements that must be met if Canada is to truly rebuild its military capacity. Word from Ottawa suggests the government is backing away from its plan to purchase Stryker Mobile Gun Systems, a wheeled artillery platform in an armoured hull. Instead, the old Leopard tanks are apparently to be kept in service until 2015. The artillery will require new guns now, and consideration will need to be given to acquiring a newer main battle tank. (The decision to scrap the Stryker purchase, some say, will come about because the "black hats," the armoured corps, rule at National Defence Headquarters -- the Minister, the Chief of the Defence Staff, and the Vice-Chief are all tank drivers by trade). And the Joint Support Ships, while a huge improvement over the present, cannot transport the personnel or the equipment required to deploy a task force abroad. Only what General Rick Hillier called "a big honking ship" can do that, and ideally the navy should have two or three of those.

Above all, the services need more soldiers, sailors, and airmen and women. With a nominal strength of just above 60,000 and an effective strength of 53,000, the Canadian Forces need the government to meet its pledges to quickly add 13,000 regulars, as well as another 10,000 reservists. In an era of nearly full employment and an aging population, this will not be easy. The problem will be made even worse by the pending retirement or resignation of at least 10,000 members of the military in the next several years. These are the technicians, the warrant officers and the majors, who make the military function. How they can be replaced is problematic at best.

Still, it's good news tonight. The one caveat is that Canadians have been promised military goodies in the past and seen contracts ripped up before. The infamous EH-101 Cormorant helicopter deal, tossed aside by Jean Chrétien in his first days in office in 1993, is the most recent example of partisanship trumping defence needs. Paper promises do not always translate into boots on the ground, ships at sea, or aircraft overhead. It could happen again, not least because the Conservative government is in a minority position with all three opposition parties soft on defence. Former defence minister Bill Graham would likely say that he isn't, and there is some justice in that. In his tenure much of the planning for the present purchases was done, and he deserves credit for his work in pressing the Martin government to begin to repair the wreckage of the Canadian Forces. It is equally true, however, that not one contract was let by the Liberals for any of the equipment the Conservatives announced plans to buy. Every indication suggests this government actually intends to do what it says.

So hallelujah and hosannas. There will be a long wait for even the first elements of new equipment to come into service, but Canadian Forces' morale will rise simply as a result of the announcements. Within five years, the military will be able to respond better to domestic and international crises than at any time in the past half-century.

J. L. Granatstein writes on behalf of the Council for Canadian Security in the 21st Century (http://www.ccs21.org).

I appreciate his note of caution: there are, indeed, many a slip twixt cup and lips and much can – will happen between promise/fanfare and delivery.  Dr. Granatstein is also very right to point out that the five recent big announcements need to be followed by dozens (scores?  hundreds?) more – small, big and (big honking ship) even bigger.

 

[George Wallace]

A good read, but this paragraph is right out to lunch and Mr. Granatstein should research a little more into what the MGS really is, as well as the "System of Systems" that was flaunted:

But the Canadian Forces still have requirements that must be met if Canada is to truly rebuild its military capacity. Word from Ottawa suggests the government is backing away from its plan to purchase Stryker Mobile Gun Systems, a wheeled artillery platform in an armoured hull. Instead, the old Leopard tanks are apparently to be kept in service until 2015. The artillery will require new guns now, and consideration will need to be given to acquiring a newer main battle tank. (The decision to scrap the Stryker purchase, some say, will come about because the "black hats," the armoured corps, rule at National Defence Headquarters -- the Minister, the Chief of the Defence Staff, and the Vice-Chief are all tank drivers by trade). And the Joint Support Ships, while a huge improvement over the present, cannot transport the personnel or the equipment required to deploy a task force abroad. Only what General Rick Hillier called "a big honking ship" can do that, and ideally the navy should have two or three of those.

The Stryker Mobile Gun System is not a wheeled artillery platform.  It is a POS that was proposed as a replacement for the Leopard tanks and one of three elements in the System of Systems that included the MMEV (a new ground role for the ADATS) and TOW.  And although both the Minister and CDS are former RCD, the plans to follow through with the MGS would have done more harm to the Armour Corps than to the Artillery, so there definitely was no partisanship there.  I'm sure we should now point him in the direction of all the discussions we have already had on this site about the MGS, MMEV, System of Systems, etc and their worth or lack there of.

 

[geo]

As an arm wide revamp, an MGS / MBT mix would be a good thing.
Only tracked or Only wheeled is not, IMHO advisable.  Amongst others. the South Africans, Italians, French all have a MGS variant that could be considered (don't think we need to spend R&D$) as an ability enhancement (not a ability replacement).

 

[Kirkhill]

I can only think that Geo has it right here.  The French mix ERC-90s and AMX-10s with their LeClercs.  The Italians have Centauros and Arietes.  The Spaniards have both Centauros and Leopard 2s.  All of them are recently confirmed mixes - not make do decisions because they can't afford better.    I would further suggest that the French have seen more service out of their ERC-90s than they have had out of any of their MBTs.  Likewise for the Italians and their Centauros.

I don't know if Stryker MGS is good, bad or POS.  That's for others.  But while I see the continuing need for a Heavy Cavalry assault/shock force based on the MBT and tracked support vehicles I also see the need for a far-ranging wheeled Light Cavalry force (Dragoons, Mech Infantry or otherwise) that needs some large calibre, long range fire power that can keep up.

As Geo says - there are options.  As George says - they have been discussed at length.

 

[Scoobie Newbie]

"As George says - they have been discussed at length."
Exactly and lets leave the comparisons to those threads.

I liked the article except for MGS/Armoured running NDHQ bit.

 

[Kirkhill]

Further to the Airbus/BAE debacle -

BAE has been given an audited price for its EADS shares to take to its shareholders.  They are considering their options.

Summary: 

-- Aggregate consideration for the Company's 20 per cent. interest in Airbus of euros 2,750 million (£1,903 million) 

-- Net proceeds to BAE Systems, after offsetting outstanding loans between BAE Systems and Airbus and transaction costs, of approximately euros 1,650 million (£1,142 million) 

-- Price determined by the independent expert appointed in accordance with the terms of the shareholders' agreement between BAE Systems, EADS and Airbus 

-- Proposed Disposal subject to the approval of BAE Systems' shareholders 

-- Having received the determination of the Price, the Board of BAE Systems will now consider its recommendation to shareholders regarding the Proposed Disposal 

-- Further details regarding the Proposed Disposal will be set out in a circular to be sent to BAE Systems' shareholders shortly (ends) 


Click here for the full text of this announcement, on the BAE Systems website. 

http://www.defense-aerospace.com/cgi-bin/client/modele.pl?session=dae.16882086.1133972074.Q5cKasOa9dUAAFC2ZcA&modele=jdc_34

What really had me grinning though is this line from the linked full text release :

BAE SYSTEMS PLC

2 July 2006



  Not for release, publication or distribution in or into the United States,

              Canada, Australia, Japan or the Republic of Ireland.

Everybody avert their eyes and forget everything you just read.  ;D

What hath the internet wrought?

 

[Scoobie Newbie]

Perhaps you should forward that to the minister of Public Works.  I wonder what Airbus' official Army.ca spokesman has to say.

 

[Scoobie Newbie]

http://ir.baesystems.com/bae/news_presentations/reg_announc/rnsitem?id=1151906421nRNSC5294F&t=printer

REG-BAE SYSTEMS PLC  Airbus valuation
03/07/2006



RNS Number:5294F
BAE SYSTEMS PLC
02 July 2006

BAE SYSTEMS PLC

2 July 2006



  Not for release, publication or distribution in or into the United States,

              Canada, Australia, Japan or the Republic of Ireland.


          BAE SYSTEMS PLC PROPOSED DISPOSAL OF ITS AIRBUS SHAREHOLDING


BAE Systems plc ("BAE Systems" or the "Company") announces that the price (the "
Price") payable by European Aeronautic Defence and Space Company EADS N.V. ("
EADS") in relation to the proposed disposal of BAE Systems' entire interest in
Airbus S.A.S. ("Airbus") (the "Proposed Disposal") has today been determined by
an independent expert to be e2,750 million (£1,903 million(1)).


Summary:


-        Aggregate consideration for the Company's 20 per cent. interest in
        Airbus of e2,750 million (£1,903 million)

-        Net proceeds to BAE Systems, after offsetting outstanding loans between
        BAE Systems and Airbus and transaction costs, of approximately 
        e1,650 million (£1,142 million)

-        Price determined by the independent expert appointed in accordance with
        the terms of the shareholders' agreement between BAE Systems, EADS and 
        Airbus

-        Proposed Disposal subject to the approval of BAE Systems' shareholders

-        Having received the determination of the Price, the Board of BAE
        Systems will now consider its recommendation to shareholders regarding 
        the Proposed Disposal

-        Further details regarding the Proposed Disposal will be set out in a
        circular to be sent to BAE Systems' shareholders shortly


This summary should be read in conjunction with the full text of this
announcement.


Enquiries:


BAE Systems
Andy Wrathall (Investor relations)                        Tel: +44 1252 383 820
John Neilson (Media relations)                            Tel: +44 1252 384 795


Goldman Sachs International (Financial adviser to BAE Systems)
Simon Dingemans                                            Tel: +44 20 7774 1000
Dominic Lee


Gleacher Shacklock LLP (Financial adviser to BAE Systems)
Tim Shacklock                                              Tel: +44 20 7484 1150
James Dawson


This announcement is for information purposes only and does not constitute an
offer or invitation to acquire or dispose of any securities or investment advice
in any jurisdiction.


Goldman Sachs International, which is authorised and regulated by the Financial
Services Authority, is acting exclusively for BAE Systems in relation to the
matters described in this announcement and is not advising any other person and
accordingly will not be responsible to any person other than BAE Systems for
providing the protections afforded to the customers of Goldman Sachs
International or for providing advice in relation to the matters described in
this announcement.


Gleacher Shacklock LLP, which is authorised and regulated by the Financial
Services Authority, is acting exclusively for BAE Systems in relation to the
matters described in this announcement and is not advising any other person and
accordingly will not be responsible to any person other than BAE Systems for
providing the protections afforded to the customers of Gleacher Shacklock LLP or
for providing advice in relation to the matters described in this announcement.


This announcement includes 'forward-looking statements'. All statements other
than statements of historical facts included in this announcement, including,
without limitation, those regarding the Company's financial position, business
strategy, plans and objectives of management for future operations are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors which could cause the
actual results, performance or achievements of the Company or the markets and
economies in which the Company operates to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements.  The Company cannot give any assurance that the
Proposed Disposal will be completed or that it will be completed on the terms
described in this announcement.


This announcement is not an offer for sale within the United States of any
security of the Company. Securities of the Company, including its ordinary
shares, may not be offered or sold in the United States absent registration
under the U.S. securities laws or unless exempt from registration under such
laws.



  Not for release, publication or distribution in or into the United States,
              Canada, Australia, Japan or the Republic of Ireland.



          BAE SYSTEMS PLC PROPOSED DISPOSAL OF ITS AIRBUS SHAREHOLDING



1.  Introduction


BAE Systems plc ("BAE Systems" or the "Company") announces that the price (the "
Price") payable by European Aeronautic Defence and Space Company EADS N.V. ("
EADS") in relation to the proposed disposal of BAE Systems' entire interest in
Airbus S.A.S. ("Airbus") (the "Proposed Disposal") has today been determined by
an independent expert to be e2,750 million (£1,903 million(1)).


Due to its size, the Proposed Disposal requires the approval of BAE Systems'
shareholders at an extraordinary general meeting (the "Extraordinary General
Meeting").  Having received the determination of the Price, the Board of BAE
Systems will now consider its recommendation to shareholders, details of which
will be set out in a circular (the "Circular") to be sent to shareholders
shortly.



2.  Background to and Reasons for the Proposed Disposal


BAE Systems' 20 per cent. shareholding in Airbus (the "Airbus Shareholding")
represents a minority shareholding in a business over which BAE Systems does not
have full control.  Furthermore, the Board of BAE Systems has determined that
the Airbus Shareholding is non-core to the long-term development of BAE Systems.
On 7 April 2006, BAE Systems therefore announced that it had entered into
discussions with EADS regarding the disposal of its Airbus Shareholding.


In accordance with the provisions of the shareholders' agreement dated 11 July
2001 between EADS, BAE Systems and Airbus (the "Shareholders' Agreement"), BAE
Systems served upon EADS on 7 June 2006 a formal notice of exercise of its put
option requiring EADS to purchase the Airbus Shareholding on the terms set out
in that agreement.  On 20 June 2006, in accordance with the Shareholders'
Agreement, BAE Systems and EADS appointed N M Rothschild & Sons Ltd and
Rothschild & Cie (together, "Rothschild") to act as an independent expert for
the purposes of determining the Price.  Rothschild today informed BAE Systems
and EADS of its determination of the Price.



3.  Information on Airbus


Airbus is a leading manufacturer of commercial aircraft.  The Airbus product
line includes a comprehensive range of passenger aircraft models, from the
100-seat, single-aisle A318 jetliner to the new, long-range 555 (or more) seat
A380.  In addition to commercial jet airliners, Airbus produces freighter
aircraft and is developing the A400M military transport aircraft.


The Airbus Shareholding represents 20 per cent. of Airbus' ordinary issued share
capital.  The remaining 80 per cent. of Airbus' ordinary issued share capital is
owned by EADS.  Airbus has no other shareholders.


For the year ended 31 December 2005, BAE Systems' 20 per cent. share in Airbus
generated profits before taxation of £254 million on sales of £3,002 million.
As at 31 December 2005, BAE Systems' 20 per cent. share in Airbus represented an
amount of net assets of £110 million and gross assets (including goodwill) of
£5,847 million.


On 13 June 2006, Airbus announced that the delivery schedule for the A380
programme would undergo a delay of six or seven months due to production ramp-up
issues, which are likely to limit aircraft deliveries to nine in 2007 and result
in further delivery shortfalls in 2008 and 2009.  Airbus stated that these
delays were caused by industrial issues, which are mainly traceable to
bottlenecks formed in the definition, manufacture and installation of electrical
systems and resulting harnesses.



4.  Principal Terms of the Proposed Disposal


The Proposed Disposal would be structured as the sale by BAE Systems to EADS of
BAE Systems France (Holdings) S.A.S., a wholly owned subsidiary of BAE Systems
and the entity that holds its 20 per cent. shareholding in Airbus.


Under the terms of the Shareholders' Agreement, the form of the aggregate
consideration to be paid by EADS to BAE Systems will be determined by EADS prior
to completion of the Proposed Disposal.  EADS can elect to satisfy the aggregate
consideration in cash, by an allotment of shares in EADS to BAE Systems, or by a
mixture of cash and EADS shares.  In the event that EADS were to elect to
satisfy part or all of the consideration by an allotment of EADS shares, the
number of shares is to be determined on the basis of the average closing mid
market price of EADS over the period of ten trading days prior to completion of
the Proposed Disposal.  Depending on prevailing market conditions, BAE Systems
will seek to sell any EADS shares received as part of the consideration for the
Proposed Disposal as soon as it deems the sale both practicable and attractive
for the Company.


The Proposed Disposal is conditional upon the approval of BAE Systems'
shareholders at the Extraordinary General Meeting.  If BAE Systems shareholder
approval for the Proposed Disposal is obtained, completion of the transaction
will take place not later than ten days after the date of receipt of such
approval.



5.  Financial Effects of the Proposed Disposal and Use of Proceeds


Although the Proposed Disposal would result in significant near-term earnings
dilution, it would strengthen BAE Systems' financial position.  The Proposed
Disposal would also enable BAE Systems management to focus on the Company's core
defence and aerospace businesses, which it believes offer good prospects for
growth both organically and through selective acquisitions.


The aggregate consideration for BAE Systems' 20 per cent. shareholding in Airbus
is e2,750 million (£1,903 million).  Following repayment of debts outstanding
between BAE Systems and Airbus at completion and the payment of transaction
related costs, net proceeds to BAE Systems are estimated to be approximately
e1,650 million (£1,142 million).


It is anticipated that there would be no material taxation payable on the
Proposed Disposal, although this would require formal clearance from HM Revenue
& Customs.


It is expected that the Circular will contain additional information regarding
the use of proceeds in the event that BAE Systems shareholder approval for the
Proposed Disposal is obtained.



6.  Management and Employees


So as to provide continuity of pension rights, it is intended that the Airbus UK
employees would remain in the BAE Systems group pension plans and that the
contributions for both employees and Airbus UK would remain unchanged.  These
arrangements are the subject of continuing discussions between BAE Systems and
EADS.  BAE Systems also understands that EADS has reiterated its strong
commitment to Airbus' UK operations and the sites at Broughton and Filton.



7.  Extraordinary General Meeting and Shareholder Approval


The Proposed Disposal will be subject to the approval of BAE Systems'
shareholders at the Extraordinary General Meeting.  The Circular containing
further details of the Proposed Disposal and setting out the notice of the
Extraordinary General Meeting will be sent to BAE Systems' shareholders shortly.



Enquiries:


BAE Systems
Andy Wrathall (Investor relations)                        Tel: +44 1252 383 820
John Neilson (Media relations)                            Tel: +44 1252 384 795


Goldman Sachs International (Financial adviser to BAE Systems)
Simon Dingemans                                            Tel: +44 20 7774 1000
Dominic Lee


Gleacher Shacklock LLP (Financial adviser to BAE Systems)
Tim Shacklock                                              Tel: +44 20 7484 1150
James Dawson



This announcement is for information purposes only and does not constitute an
offer or invitation to acquire or dispose of any securities or investment advice
in any jurisdiction.


Goldman Sachs International, which is authorised and regulated by the Financial
Services Authority, is acting exclusively for BAE Systems in relation to the
matters described in this announcement and is not advising any other person and
accordingly will not be responsible to any person other than BAE Systems for
providing the protections afforded to the customers of Goldman Sachs
International or for providing advice in relation to the matters described in
this announcement.


Gleacher Shacklock LLP, which is authorised and regulated by the Financial
Services Authority, is acting exclusively for BAE Systems in relation to the
matters described in this announcement and is not advising any other person and
accordingly will not be responsible to any person other than BAE Systems for
providing the protections afforded to the customers of Gleacher Shacklock LLP or
for providing advice in relation to the matters described in this announcement.


This announcement includes 'forward-looking statements'. All statements other
than statements of historical facts included in this announcement, including,
without limitation, those regarding the Company's financial position, business
strategy, plans and objectives of management for future operations are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors which could cause the
actual results, performance or achievements of the Company or the markets and
economies in which the Company operates to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements.  The Company cannot give any assurance that the
Proposed Disposal will be completed or that it will be completed on the terms
described in this announcement.


This announcement is not an offer for sale within the United States of any
security of the Company. Securities of the Company, including its ordinary
shares, may not be offered or sold in the United States absent registration
under the U.S. securities laws or unless exempt from registration under such
laws.


---------------------------------

Notes:


(1)  All figures in this announcement, excluding the historical information set
out in Part 3, have been converted at an exchange rate of e1.445 = £1.000,
unless otherwise stated.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

DISUUURRNVRBRUR

small e before a number denotes euros

 

[MarkOttawa]

Excerpts from Toronto Star article July 4, "Drones on military wish list" (article also forms start for new thread  "The "Wish List" Part Deux")
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1151963410111&call_pageid=968332188774&col=968350116467

'Canada's air force hopes to buy a fleet of sophisticated aerial drones — unmanned "eyes in the sky" — to patrol Canadian territory and waters as well as spy on enemy troops in hot spots like Afghanistan, a top general says.

Lt.-Gen. Steve Lucas, the head of the air force, said he hopes the purchasing process for 18 drones, valued at $500 million, will begin this fall.

As well, the air force hopes to finally move on the long-delayed purchase of 19 new search-and-rescue aircraft [that's a story in itself]
http://toyoufromfailinghands.blogspot.com/2006/03/somehow-aircraft-just-dont-get.html

for an estimated $2 billion to replace the old Hercules planes now doing the task, he said...

Lt.-Gen. Andrew Leslie, the new head of the army, said he wants to tweak capabilities to cope with evolving conflicts that demand a mix of guerrilla fighting and development work.

"I think what we're doing in places like Afghanistan will be our stock-in-trade for a good many years," Leslie told the Star, describing the mission as "dangerous and complicated."

With that in mind, he and his colleagues are now talking with the government about the next investments to enable troops to fight more effectively. His wish list includes the next generation of night vision goggles, new communications gear, improved protection for the troops and new technology to combat rocket propelled grenades, which have killed and wounded soldiers in Afghanistan...

Leslie's also looking at a few shake-ups with the current army — and that could include reversing a decision to mothball Canada's fleet of Leopard tanks.

It's said that Leslie is no fan of the mobile gun system [my emphasis - MC] — an armoured vehicle equipped with a 105-mm gun that critics say would leave troops vulnerable to attack.

Leslie also envisages a "smarter" battle force, using battlefield sensors and spy planes to detect enemies...'

Mark
Ottawa