Defense Spin-Offs: Join the Green Revolution

Many people think the only thing green about military hardware is the paint color, but Cyclone Manufacturing is betting $50 million on a new, more energy-efficient manufacturing process that will produce greener commercial aerospace components from super-strong, lightweight composites originally developed for military jets.

It is a green win for both the manufacturer and their aerospace customers. For Cyclone, the new manufacturing process requires less energy, creating a smaller carbon footprint. For their aerospace customers, lighter weight structural components, horizontal stabilizers and the skins for wings mean lower fuel consumption, lower fuel costs and less pollution.

"The military is much more advanced in its use of carbon fiber and other composites," says Cyclone Manufacturing's President Andrew Sochaj. "By adapting the technology for commercial applications, we can offer our customers a broader range of products and services while reducing our impact on the environment." Based in Mississauga, Ontario, Canada, Cyclone manufactures components and sub-assemblies for Bombardier, Boeing, Lockheed Martin and Tier I suppliers. To help accelerate the new project, the Ontario government is providing a grant of nearly $7.7 million from its Next Generation of Jobs Fund. The five-year, $1.15 billion program helps companies develop green products, efficient technologies and other innovations for world markets.

Matter of Survival

"Fuel costs make a big difference in pushing the development of this technology, but I believe today's low fuel costs are temporary," Sochaj states. "We saw what happened to the North American automotive industry.

They did not develop more efficient cars and now they are in trouble. It is the same in aerospace. We have to do this to stay in business. It is a question of survival." The survival of Cyclone Manufacturing and other companies in the aerospace industry supply chains is equally vital for the economy of Ontario. The provincial economy has long been driven by advanced manufacturing industries such as aerospace, automotive and communications. In fact, Ontario has more manufacturing employees than any North American jurisdiction except California.

Today, manufacturing is facing tough challenges. Manufacturers are searching for ways to become more energy efficient and environmentally friendly. Most observers see the green revolution as a fundamental, far-reaching and permanent change in the manufacturing landscape.

To help Ontario companies adapt to this new greener industrial landscape, and accelerate the development of green-related opportunities, the Ontario government is implementing a five-point strategy.

The strategy involves partnering with companies through programs such as the Next Generation of Jobs Fund, streamlining regulations and reducing business costs, and investing $3 billion to support research and commercialization. It also involves investing more than $7 billion in post-secondary education, training and re-training, and committing more than $30 billion for public infrastructure including support for more renewable energy generation projects and a smart power grid.

INVESTING IN R&D

At Cyclone Manufacturing, planning began more than a year ago on how the company could best develop the new materials and production processes.

"This is new technology for us," Sochaj says. "We will have to work it through all the tube bending, sheet metal forming and extrusion stretch forming operations, and test it again and again to make sure all the new components meet the specifications set by Bombardier or Boeing or whomever." Cyclone is able to stretch key parts of its $50 million project budget through the R&D tax incentives available in Ontario, which can reduce a $100 research expenditure to less than $42 if the research is performed with a public research institution.

Fortunately, Cyclone has two of Canada's leading aerospace research institutes virtually on its doorstep.

Both the University of Toronto's Institute for Aerospace Studies and Ryerson University's Department of Aerospace Engineering have extensive research facilities in addition to offering academic studies from undergraduate through the PhD level.

In Ottawa, a one-hour flight away, there is also the Institute for Aerospace Research, Canada's national laboratory for aerospace R&D, and the David Florida Laboratory, Canada's world-class spacecraft assembly, integration and testing center.

"Ontario researchers have aerospace expertise and excellent facilities," Sochaj explains. "We have had preliminary talks. I expect it will take about three years before the new generation of products is ready for the market."

GRENER WAYS

Like Cyclone Manufacturing, many companies in Canada's aerospace industry are searching for new, greener, more efficient ways of doing business. Pratt & Whitney Canada, with 1,500 engineers working at their R&D facilities in Mississauga, Ontario, Canada, and Longueuil, Quebec, Canada, is investing $1.5 billion over five years to stay at the forefront of green engine technologies.

This commitment to R&D has helped power the growth of the Canadian industry to become the world's fifth largest aerospace producer. Over the past 20 years, Canada's share of the global aerospace industry has tripled. Cyclone Manufacturing is one of the more than 350 companies in Ontario's aerospace industry, most of which are found in the advanced manufacturing corridor that stretches from Kingston in the east and down through the Greater Toronto Area (GTA) to Windsor in the southwest.

Many of the world's largest aerospace companies have plants and/or research facilities along the corridor, including Bombardier, Goodrich Landing Gear, Pratt & Whitney Canada, Honeywell, MDA, COM DEV, Magellan Aerospace, Messier- Dowty, L3 Communications, Eurocopter and others.

THE NEXT GENERATION

Cyclone was established in 1964 and has grown to 310 employees with two facilities in Mississauga and another in nearby Milton.

The GTA space cluster, which includes Mississauga and Milton, is one of only seven significant aerospace assembly centers in the world. It generates more than $6 billion annually in sales, most of it from exports, and employs more than 20,000 people.

This concentration of aerospace talent and capital investment constitutes a significant economic force, one that the Ontario government is helping become even greener and more efficient, despite tough economic conditions worldwide.

Ontario's $500 million Advanced Manufacturing Investment Strategy offers interest- free loans to help aerospace companies adopt innovative technologies that will put them on the leading edge of global manufacturing.

It's currently supporting a variety of projects.

Diamond Aircraft Industries is investing more than $100 million to develop the DJET, an all-composite, single-engine, fiveseat jet aircraft.

FAG Aerospace Inc. is investing more than $17 million in cutting-edge manufacturing technologies and processes.

Héroux-Devtek is investing $28.5 million to establish a Centre of Excellence for Large and Complex Landing Gear Components.

These companies and others are building on the competitive advantages that exist in Ontario.

Proximity to the U.S. market is key, along with sophisticated communications and transportation networks that support just-in-time delivery strategies.

There is also a big talent pool in Ontario.

The post-secondary system of 20 universities and 24 colleges produces 29,000 graduates per year in engineering, sciences and math.

More importantly, aerospace manufacturing costs are lower in Canada than in France, the U.K., the Netherlands, Italy, Germany and Japan according to a comprehensive study of international business costs by KPMG that was released in 2008.

The Canadian cost advantage is even greater for innovative, research-driven companies that can take advantage of the R&D tax incentives.

Competitive tax rates create part of that advantage. Ontario's combined federalprovincial corporate tax rate of 31% for manufacturing is almost six percentage points lower than the U.S. average.

The Canadian industry also missed getting caught in the credit crunch that squeezed so many aerospace companies in other jurisdictions. Canadian banks, while not immune to the worldwide turmoil, were much better capitalized and therefore more stable. As a result, the Canadian banks actually increased their commercial loan portfolios during 2008.

AHEAD OF THE CURVE

One of the competitive advantages Ontario aerospace firms have is that the provincial government understands that the pace of innovation is accelerating and it wants to help companies stay one step ahead.

The Next Generation of Jobs Fund, the program that is supporting Cyclone Manufacturing's project, is designed to respond quickly to opportunities. It guarantees companies an answer to their proposal within 45 days.

The program supports high impact, large scale ($25 million+) projects in green manufacturing, clean tech, digital media, biopharma research and other targeted, knowledge-intensive industries.

There is little doubt that massive changes are coming. Some observers believe that the green revolution will have an impact on the scale of the development of the Internet or personal computers.

And there is little doubt that the green revolution will be won by companies like Cyclone Manufacturing that take risks and make smart investments. As Sochaj says, "It is a question of survival."

Cyclone Manufacturing Inc.
Mississauga, Ontario, Canada
cyclonemfg.com