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An icebreaker with ripple-effect potential: In-depth interview with James Davies, CEO of Davie shipyard

The Davie shipyard in Lévis was founded in 1825 and is Canada’s largest shipbuilder. The yard went through some hard times from the late 1980s to 2012, when it was plucked from the brink of bankruptcy by Europe-based Inocea Group. Since then, Davie’s solid turnaround has pre-qualified it as a partner in Canada’s National Shipbuilding Strategy and put it at the forefront of the effort to modernize the icebreaking fleet. CEO James Davies hopes this will include the contract to build super polar icebreaker the Diefenbaker.

Original article (French only) : La Presse

Before we get into the polar icebreaker and the economic spinoffs it would generate, can you tell me about what’s happened to Davie since Inocea stepped in?

I arrived in Quebec City in 2012, to do due diligence on Davie’s books and head up the acquisition. At that time there were only 25 employees working on the site. We overhauled the facility and delivered two vessels for Norwegian company Cecon.

Then, in 2015, we won the contract to convert the MV Asterix, a container ship, into a supply vessel for the Royal Canadian Navy. We rebuilt it, fitted it out, and are operating it for the navy.

In 2017 we won a contract to build two ferries for Société des traversiers du Québec and another to modernize three icebreakers for the Canadian Coast Guard. Last year we won a contract to build two federal ferries. This year we start modernizing the Canadian patrol frigates.

We have gone from 25 employees to an average of over 800 over the past five years.

In 2011 Davie was shut out of Canada’s Nation Shipbuilding Strategy, excluding you from a share of nearly $16 billion in contracts awarded by the federal government last year. Is that still a source of pain?

Davie’s finances and operations were a shambles in 2011—that’s why the federal government chose only two partners at the time, Seaspan in Vancouver and the Irving shipyard in Nova Scotia.

But our recovery has prompted the current government to reopen the process and pre-qualify us as an NSS partner. If it wasn’t for COVID-19, we’d already be an official partner. That official recognition coming soon.

The federal government realized that the shipyards in Vancouver and Halifax weren’t going to be able to deliver all their orders on time. They don’t have the operational capacity that we do.

Davie is Canada’s largest shipbuilder and has proven that it has the technical and technological capacity to deliver the ships of the future.

Yet last week rumors were circulating that Seaspan was back in the running to build the next polar-class icebreaker, the Diefenbaker, after having had the contract withdrawn last year. What’s happening there?

The federal government awarded the Diefenbaker contract to Seaspan, but it never started the work. That’s why Ottawa decided to withdraw the contract last year and give Seaspan another contract to build 16 smaller vessels instead.

Davie has the production capacity to deliver the Diefenbaker on time and on budget. We’re expecting a decision from the federal government very soon.

What would the contract mean in terms of economic and financial spinoffs?

It’s a big contract and we can deliver it. We have the capacity. This year we established the National Icebreaking Centre in Lévis. We already have one contract to refurbish three icebreakers and another to build six new icebreakers for the Canadian Navy.

The Diefenbaker is a polar-class icebreaker that will replace the Louis S. Saint-Laurent. It will help ensure Canadian sovereignty in northern waters. We’re talking about a $1.4 billion contract.

A Deloitte study estimates that construction of the Diefenbaker will create an average of 2,500 new jobs during the construction phase. That’s 1,340 jobs directly on site and 1,200 jobs at our subcontractors.

Are the majority of your subcontractors based in Quebec?

We do business with 900 different subcontractors and 90% of them are in Quebec. That means the spinoffs will benefit local businesses. Over the past eight years, we’ve pumped over $1 billion in salaries and investments into the Quebec economy.

If we get the Diefenbaker contract, we estimate that Davie will generate between $5 billion and $9 billion in spinoffs in Quebec over the next 20 years. The contract will give us a bridge to the start of construction on the six new icebreakers, which is slated to begin in 2026.

Is there a risk that Seaspan’s campaign to recover the contract might harm your chances?

We have demonstrated over the past ten years that we can deliver complex projects on time, which isn’t the case for Seaspan. They lack capacity and already have a lot on their plate.

Davie collaborates with all the players in Quebec’s shipbuilding industry, including Ocean Group and the Verreault shipyard.

We have an opportunity to develop singular shipbuilding expertise and establish a maritime innovation hub right here on the St. Lawrence River, just as the Scandinavian countries have done with Norway leading the way.