Final Evaluation of the Structured Financing Facility — Final Report

1.0 Introduction

This report presents the findings and conclusions of an evaluation of the Structured Financing Facility program. This section provides an overview of the context within which the Canadian shipbuilding industry is situated, a profile of the program, the purpose and scope of the evaluation, and challenges and limitations for the evaluation. Section 2 provides an overview of the methodological approach. Section 3 discusses evaluation findings by evaluation issue. Finally, conclusions and lessons learned are presented in Section 4.

1.1 Context

1.1.1 Overview

The Canadian shipbuilding industry is composed of shipbuilding, ship repair, small ship conversion, professional services and equipment suppliers. Shipyard activities include the construction, repair and conversion of ships; the production of prefabricated ship and barge sections; the manufacture of offshore oil and gas well drilling and production platforms and various heavy industrial steel fabrications; and specialized services performed in a shipyard.

The shipbuilding sector in Canada is subject to cyclical growth and decline in activity because of various factors, including the declining competitiveness of the Canadian marine industry, growing international competition in shipbuilding, and fluctuations in government procurement activity.

During the early 1980s, the industry was characterized by overcapacity, poor productivity and low capital expenditures. This resulted in an industry-led rationalization from 1986 through to 1993, to which the federal government provided assistance totaling $197.9 million for expenditures related to capacity reduction, diversification, and employee adjustment and financing costs.¹

Rationalization initiatives resulted in capacity shrinkage of some 30% in Ontario, Quebec and British Columbia, a reduction of some 5,480 employees, and improved competitiveness in most of the yards in those provinces. The major Atlantic shipyards did not participate in the rationalization because of a commitment by the Department of National Defence for the construction of frigates². The smaller Atlantic yards were occupied with new construction, repair and overhaul, and building niche vessels.

The Canadian shipbuilding industry continued to decline though the balance of the 1990s, with an overall trend of lower revenues and employment. Employment from shipbuilding declined by more than 50 % from 1990 to 2000, and began levelling off as of 2003. Employment stood at less than 4,000 in 2005; the industry generated revenues of about $525 million annually from about 30 shipyards across Canada.³

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Footnotes

¹ 36^th Parliament, 1^st Session, Edited Hansard — Number 220, Monday, May 3, 1999. Return to reference 1

² Standing Committee On Finance, Evidence, Thursday, June 8, 2000. Return to reference 2

³ Statistics Canada, Annual Survey of Manufacturers. Return to reference 3