Nortel and the Avro Arrow myth

Andrew Coyne on the weakest part of RIM's case

Nortel and the Avro Arrow mythI’ll have lots to say about this Nortel nonsense in a bit, but for now let me just deal with the inevitable Avro Arrow analogy. Appearing before the Commons industry committee the other day, Research in Motion co-CEO Mike Lazaridis trotted out the well-worn Arrow story to pressure lawmakers into blocking Nortel’s deal to sell its wireless operations to the Swedish telecom giant Ericsson.

He told MPs that allowing Nortel’s next-generation wireless patents to go to a foreign-based company would be similar to Canada’s notorious decision to cancel development of the Avro Arrow aircraft in 1959….

Lazaridis noted that he has a model of the Canadian-designed Avro Arrow on his desk and that 2009 marks the 50th anniversary of its cancellation. “Fifty years later we consider the disposition of another beachhead built by Canadian ingenuity,” he remarked. “Let us learn from our history and not make the same mistake again.”

There are any number of things wrong with RIM’s case, but the first and worst is the notion that killing the Arrow was some sort of terrible mistake. Indeed, if the best RIM can do is cite the Arrow, darling of every nationalist drama queen and high-tech trainspotter who never bothered to actually inform themselves of the reasons for its demise, that tells you just how weak their case is — though it was enough to send the Toronto Star into one of its patented teenage swoons.

For those in need of a refresher course, let me point you to Michael Bliss’s classic history of Canadian business, Northern Enterprise, pgs. 474-477. I’m going to quote it at some length, because, well, it’s just so damning…

Born in war, with an original aim of making warplanes for the Pacific theatre, the A. V. Roe company of Canada made a bold but unsuccessful grab for peacetime leadership in aircraft design by producing one of the world first jet-propelled passenger planes, the C-102 Jetliner. The project was funded by [C. D.] Howe’s Department of Reconstruction and Supply. [However] no commercial airlines, including TCA [Trans Canada Airlines], which refused to bend to the minister’s pressure on this one, found the C-102 suitable to their needs. It was an impractical, premature leap onto a technological frontier, and was headed for the scrapheap anyway when the Korean War provided an excuse for concentration on military aircraft.

Avro had good luck with a conventional jet fighter, the CF-100 Canuck, which it designed and built for the RCAF, manufacturing almost seven hundred of them… The Canuck success led defence planners to commission Avro to design a successor, the project that became the CF-105, or Avro Arrow… Originally the Arrow was to use imported engines, fire-control systems and ground control systems. Gradually the military and the nationalists and the high-tech enthusiasts decided to have all these components manufactured in the country that could make anything, Canada….

By the time the Arrows flew [in 1958], it was clear that the project was a horrible mistake. Avro Canada was not an experienced aircraft manufacturer; the CF-100 was its only success and it had been plagued with design problems and delays… The firm’s frenetic expansion, highly self-conscious publicizing of its commitment to high technology (its ultimate space-age product was the Avrocar, a doughnut-shaped vertical take-off and landing craft that resembled nothing so much as a flying saucer…) and very heavy reliance on government contracts, camouflaged serious managerial weakness. The evidence suggests that A. V. Roe was a classic promotional company … built on wild optimism, taxpayers’ money, media gullibility and Canadians’ naive patriotism…

Costs of the Arrow went straight up in a decade of comparatively little inflation. By 1957 aircraft originally estimated at $1 million each would cost at least $8 million, probably much more. Arrow would cost six times as much as U.S.-designed interceptors. No one other than the RCAF wanted to buy the Arrow… The Arrow was consuming a huge proportion of Canada’s defence budget, and beginning to starve the other services for equipment. Even the Department of National Defence turned against it. Howe and the Liberal government decided to cancel the Arrow — after the 1957 election.

As it turned out, they never got the chance. It fell to the Diefenbaker Conservatives to kill the project in 1959. Controversial as that decision may have become in later years, at the time, as Bliss notes, it was not: “hardly anyone believed the program, which Canada simply could not afford, should be continued…. The Liberals’ only criticism of the Conservative decision was that they had not taken it sooner.”

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