OTTAWA — Hanwha’s submarine bid has within a few short months become a potential lifeline for Canada’s auto industry. The South Korean corporation is partnering with the Auto Parts Manufacturers Association (APMA) to build military armoured vehicles in Canada.
It’s a strategy that could help it win a lucrative contract and keep the tariff-hit auto sector from sinking further.
The vehicles would be made for the Canadian Armed Forces, while also being manufactured for global exports.
AMPA president Flavio Volpe said in an interview with CTV News on Wednesday that Canadian auto plants are making 30 per cent fewer vehicles this year because of U.S. tariffs. But the partnership with Hanwha has the possibility of injecting new life into stagnant auto plants and creating thousands of jobs.
But there’s a huge caveat.
The deal is contingent on Hanwha being awarded the massive contract to build up to 12 diesel-electric submarines for the Royal Canadian Navy (RCN).
After submitting their initial requests for proposals in March, Hanwha and its German competitor ThyssenKrupp Marine Systems (TKMS). were asked by the federal government to sweeten their bids. The winner is expected to be chosen in June.
CTV News asked TKMS about how it improved its bid, but did not get a response before the publication deadline.
Under the terms of the agreement, vehicle parts manufacturers would come together under a consortium named Project Arrow Defence. Volpe emphasized that this venture would be “51 per cent Canadian owned, with a Canadian CEO.”
What is ‘Project Arrow Defence’?
The consortium would build five types of Hanwha vehicles that are estimated to be worth $10 billion over two years.
“It’s equivalent activity to bringing one fully functional auto assembly plant here,” said Volpe.
He added that it took about a week and half to negotiate the joint venture with Hanwha. The deal came together at 2 AM Wednesday morning after the agreement was approved in both Seoul, South Korea and Toronto, Ont.
A news conference announcing the partnership took place eight hours later in an Ontario manufacturing plant.
In the memorandum of understanding, Hanwha would build five of its armoured vehicles in Canada, including the K-9 Thunder self-propelled Howitzer, which looks like a small tank.
Other vehicles that could be manufactured by the consortium include:
- The K-10 Ammunition Resupply vehicle
- Redbank Infantry Fighting vehicle
- Chunmoo Multiple Launch Rocket System
- Drone ground vehicles
A more secure future for auto workers
Volpe says Project Arrow Defence envisions a more secure future for auto workers.
“Once you make a truck it’s gone. But in defence, given that there are less jobs, they’re more secure. You win a contract to build, but you also win the maintenance contract. You get to maintain and repair it for a generation.”
In a news release Hanwha says the initiative would provide Canada with the “ability to produce its own defence equipment enabling the conditions that directly benefit domestic industry and ensure Canadian sovereign control.”
Secretary of State Stephen Fuhr, who oversees defence procurement was asked by reporters on Parliament Hill, if the partnership with APMA improves Hanwha’s chances of winning the submarine contract.
Fuhr is not involved in evaluating the bids and said that he learned of the deal from a CTV News article.
He said that both Hanwha and TKMS know what’s at stake and “are putting their best foot forward.”
“We need to create jobs. If you look at some of the industries that are still being hit pretty hard by tariffs, steel and aluminium, auto, forestry… We need to provide other opportunities for Canadians, and defence procurement is going to be one of those opportunities we’re going to leverage.”
Defence analyst Dave Perry of the Canadian Global Affairs Institute calls the Hanwha-APMA venture “pretty attractive.”
“I think we should credit the government, which has come up with a process to really drive some pretty intense competition between two big suppliers for a very big procurement project.”
Perry estimates the submarine procurement could be worth $120 billion dollars over 30 years or more.
