Winnipeg Free Press

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BUSINESS EDITOR: STEVE PONA 697- 7264 business@ freepress. mb. ca I MARKET DETAILS B6,7 I winnipegfreepress. com THURSDAY, JUNE 28, 2012 B 4 I NNOVATE Manitoba, along with the national organization Startup Canada, met about 300 entrepreneurs and supporters over the last couple of weeks in Winnipeg and Brandon. The point of the activity was to celebrate and encourage entrepreneurship. Entrepreneurs would probably prefer if you could just send money. That's right. Access to capital continues to be a critical problem. As one technology- industry specialist said, encouraging the bootstrapping of businesses into success is one thing, but eventually some capital is required. There is an acute awareness of the issue in the community and a mobilization of energies is underway. The Winnipeg Chamber of Commerce is not likely to turn the city into a Silicon Valley of the north, but it has a fairly wellheeled task force putting the final touches on a draft policy on venture capital. " People talk about the deals being done in other provinces and it is just not happening here as much as it should be," said Chuck Davidson, vice- president policy at the Winnipeg Chamber of Commerce. " There is an increased awareness of the importance on the issue of capital right now." If innovation and the growth in homegrown enterprises are crucial to the ongoing health of the economy, then such activity needs to be supported, one way or another. More investment capital might not have directly saved the National Research Council's Institute for Biodiagnostics that's closing down and leaving about 60 wellpaid researchers and scientists out of work. But who knows what its fate would have been if more companies emanating out of the research done at the NRC could have been formed and funded and grown into sustainable enterprises. " We do need a bank for technology companies in our community. That's a statement of fact," said Harry Schulz, a veteran business development player in the medical technology field in Winnipeg. Schulz is a managing director of Linn Grove Ventures, an American/ Canadian fund that's raising $ 125 million to invest in agribusiness technology companies in the Red River corridor. " It is important for our infrastructure, our ecosystem, for innovation, that we have some leadership in the community to enable that to happen," he said. So the chamber is out there marshalling interested parties and trying to present a model that will work in the province. The consensus is that provincial money is needed to fund the super- high- risk idea- to- prototype period, but not for later stages - from $ 250,000 to $ 5 million and beyond. Gary Brownstone, CEO of The Eureka Project, the business incubation centre at the U of M's Smartpark, is also trying to formalize a fund concept he has that includes marrying capital and management at the earliest stages of a company's formation. He realizes that during these uncertain economic times no one is throwing extra money at anything. And since the laboursponsored- fund debacle of a decade ago, the provincial government maintains a fairly conservative attitude about investing in a sector that has at least a 70 per cent failure rate at the best of times. " There is a public image risk," Brownstone said. " Who wants to be seen squandering public money in difficult economic times." But if this stuff were easy we'd all be rich. The province launched Commercialization Support for Business Program Manitoba last year and there are plenty of suggestions as to how it can be tinkered with to better aid early stage companies. Also, some are pitching a way to broaden the Community Enterprise Development Tax Credit to include tax credits for approved funds as well as individual investors. The chamber is also revisiting the whole issue of figuring out some palatable way to get Manitoba public sector pension funds to put more money back into the province. It's important work that continues to demand serious effort. martin. cash@ freepress. mb. ca MONTREAL - After failing to attract buyers for its airframe business, insolvent aircraft maintenance firm Aveos Fleet Performance is seeking court approval today to break up and sell the unit's assets to several buyers for $ 10.8 million, says the monitor overseeing the company's dismantling. The prospective buyers include three Canadian firms, two U. S.- based companies and one liquidator. The purchase prices paid by the companies weren't disclosed in case Aveos has to return to the market if the transactions don't close. No single buyer was found to restart the airframe unit's operations because its business model in Canada " has a limited role in a global context" and is not globally competitive, the monitor's report says. The buyers include Avianor Inc. based in Mirabel, Que., Avmax Aviation Services Inc. of Calgary and Discovery Air Technical, a subsidiary of Yellowknife- based Discovery Air ( TSX: DA. A). Premier Aviation Overhaul Center of New York, which has an operation in Trois- Rivi�res, Que., and Illinoisbased Aircraft Services Inc. will also acquire parts of the business. Liquidator Maynards Industries Ltd. will buy several lots of equipment it will sell by private sale or at public auction in September before Aveos plans to vacate Air Canada hangars in Montreal, Winnipeg and Vancouver. Work on repairing and overhauling airframes has increasingly gone to lowcost operations in Asia, Latin America and elsewhere. Consequently, the assets were offered in smaller " digestible" lots so that Canadian maintenance, repair and overhaul ( MRO) operators could have an opportunity equal to that of a global buyer to acquire parts of the business. " The result is that most of the strategic asset buyers under the transactions which are being recommended for approval are MROs operating in Canada who intend to expand their current service offerings or develop new lines of service in Canada, utilizing these specific assets," said Jonathan Solursh, chief restructuring officer at Aveos. The airframe unit received 22 bids for its various parts, including 17 from strategic purchasers and five from liquidators, but none that wanted to keep the business together. The Aveos airframe business employed about 1,500 of the company's 2,600 workers before it closed operations in March and obtained protection from creditors under the Companies' Creditors Arrangement Act. Monitor FTI Consulting said the sales process for the engine business has been extended to a July 26 court hearing. The delay will give prospective buyers additional time to " address and resolve various issues, including exhausting all options to determine if there is the possibility of a going concern or modified going concern solution." Air Canada ( TSX: AC. B) and Aveos have signed a new exclusive engine repair contract through 2017, provided the purchaser of the business is one of five deemed acceptable by the airline in terms of operational requirements. Canada's largest carrier also agreed to conduct a request for proposals for work on about 1,000 component parts serviced by Aveos. Work on the fiveto 10- year contract must be done at Aveos's facility. The sale of the landing gear assets have also been deferred. " There are multiple suitors for the Component Maintenance business who are engaged in meaningful discussions with the company, the union and other stakeholders," the monitor said. - The Canadian Press T HE union representing Via Rail employees in Winnipeg said they were " blindsided" by cuts announced by the government- owned passenger rail service on Wednesday. " The union was totally blindsided on this. We were given no notice," said Dave Kissack, Canadian Auto Workers' union representative in Winnipeg, adding federal government cuts backed Via into a financial corner. Via Rail expects to cut 200 unionized jobs or about nine per cent of its workforce, and will reduce services across the country, Via Rail CEO Marc Laliberte said in the city. Thirty- eight jobs will be cut in Winnipeg, but Kissack said more than 600 jobs in Western Canada could be affected. " It's going to have an impact on over 600 people in Western Canada one way or another due to displacements and bumping, so we have to do what we can to mitigate the impact of that," said Kissack, adding protecting employees' seniority so they aren't moved to lower- level jobs is a priority. Although the move comes in the wake of the federal government's March budget, which cut $ 41 million in subsidies to Via over three years, Via insists the trip reductions and job losses are driven by weak offseason demand. But Jennifer Brown, president of CAW Local 4005, said demand is up 7.8 per cent since last year and nearly 25 per cent in the peak season. " So where they're getting their numbers , we don't know. I work on board and from January my trains have been sold out," she said. Kissack said Winnipeggers will see an impact as Via tries to restructure. " Ninety per cent of ( Via employees) in Western Canada work out of Winnipeg and there's going to be a significant financial impact on the people of this city," he said. Via workers said they are worried about the ripple effects of the cuts, regardless of whether they keep their jobs. " Why does it seem that the people who always pay the price are the people who are holding this company together?" said a Winnipeg Via Rail employee, who didn't want to be named to protect his job. Another Winnipeg employee, who's worked for Via for over two decades, said while he is not concerned he will be laid off, he's worried he'll be moved to a much lower position. " It's very discouraging to take those steps forward and then be thrown back five steps," he said. He added if his job was moved to a different city, he would have no option but to quit to keep his family in Winnipeg. Via said it will not cut any whole routes and it is working to expand track capacity on the busy Montreal- Toronto corridor. The service adjustments will be rolled out between July and the end of October. Trip frequencies are being cut on some of the big routes. In the west, The Canadian - a Toronto to Vancouver route - will be reduced from three to two round trips a week in the offseason ( October to April). Service during peak season will remain at three trips a week. There will also be reductions in southwestern Ontario, where GO Transit and other services are available to commuters. London, Aldershot, Kitchener, Niagara Falls and other cities will see reduced Via service. " In growing markets, we are adding more frequencies to meet customer demand," said Laliberte. " In addition, mandatory services in regions where there are limited transportation alternatives will remain. " We are not eliminating rail service on any routes where we operate today and we are maintaining the flexibility to adjust service levels in the future, as customer needs evolve." Via notes it has reduced it management workforce by 15 per cent since 2009. The Harper government's recent budget reduced subsidies to the passenger rail service by $ 6.5 million this year, $ 15.1 million in 2013- 14 and $ 19.6 million in 2014- 15. jenny. ford@ freepress. mb. ca Cash scarce for Manitoba entrepreneurs MARTIN CASH Via cuts 200 jobs in wake of budget 38 lost in Winnipeg with potential for more damage By Steve Lambert and Jenny Ford Aveos Fleet Performance seeks approval to be sliced up and sold By Ross Marowits BORIS MINKEVICH / WINNIPEG FREE PRESS Marc Laliberte, president and chief executive officer of Via Rail Canada, announces job losses and service cuts Wednesday. B_ 04_ Jun- 28- 12_ FP_ 01. indd B4 6/ 27/ 12 11: 35: 14 PM ;