Financial life in a big town

HAMILTON–Gianluigi Botton fires up a computer and a mysterious image pops up on the screen. It doesn’t look like much. A bunch of blurry white dots tightly packed together on a black background. Kind of like looking through a screen door on a blindingly sunny day.

"Those would be silicon atoms," he says casually, like someone who works at the atomic level every day and is not easily impressed.

Behind the computer is an awkwardly shaped, vaulted room. Soundproofed and strictly climate controlled, the room is almost a building within a building. It rests on its own foundation, undisturbed by the vibrations around it. Inside sits a machine called Titan – a $14 million electron microscope, and one of only a handful in the world capable of zeroing in on the nearly invisible fabric of our existence.

"The world’s most powerful microscope," says Botton, director of McMaster University’s Centre for Electron Microscopy.

Like satellites that can seek out new planets and submarines that can venture into the undiscovered depths of the ocean, Titan can peek into the miraculous world where protons and electrons dance. We’re talking smaller than viruses, molecules, DNA and even "nano" particles. Titan can zoom in on objects slightly less than one angstrom in size, or a million times thinner than a sheet of photocopy paper.

It’s part of the reason why McMaster is fast becoming a global leader in material sciences and, under that umbrella, at the leading edge of innovation in the red-hot market for solar technologies.

Flexible Solar Cell, Cleanfield Energy and Arise Technologies are just three companies hoping to launch commercial products based on innovations coming out of the Hamilton university.

Researchers here say solar could fill the vacuum left behind by the collapse of the telecommunications industry, from which once proud giants such as Nortel Networks and JDS Uniphase have never fully recovered.

Engineering professors Ray LaPierre, who is working with Cleanfield on solar cells made from a dense turf of nanowires, and Adrian Kitai, who co-founded Flexible Solar to make bendable solar panels that are less costly to manufacture, are showing how skills typically prized in the telecom sector can be repurposed to build better solar technologies.

Similar efforts are also being made at the University of Toronto’s Institute for Optical Sciences, where a new spin-off called The Solar Venture aims to improve the economics of solar.

"Ontario was a global leader in telecom, but now that has slowed down," says Rafael Kleiman, professor of engineering physics and director of McMaster’s Centre for Emerging Device Technologies.

"All the people, all this research (in telecom), is finding a new home. I really believe Ontario can make itself a global hub in solar photovoltaic technologies."

Semiconductor research has long been at the heart of Canada’s telecom industry, earning Ottawa the reputation as Silicon Valley North. Apply electricity to a semiconductor and it can create light, allowing for the development of lasers and detectors used in high-speed telecom switches and fibre-optic networks.

But the materials used to make semiconductors, silicon as well as so-called Group III-V elements such as gallium, indium, phosphorus and arsenic, can operate in reverse http://abc-cashadvance.com. Shine light on them and they can absorb the energy and turn it into electricity. In other words, semiconductors are solar cells that operate in reverse.

"A solar cell is just a big specialized chip, so everything we’ve learned about making chips applies," Paul Saffo, an engineering professor at Stanford University, recently told the New York Times.

There’s a reason why California’s Silicon Valley, the headquarters of data-networking king Cisco Systems and semiconductor goliath Intel, is positioning itself as Solar Valley. Companies such as SunPower, Miasole, Nanosolar and Optisolar are all aiming to create cheaper and more efficient solar cells. They hope to hit their target by applying lessons learned from telecom and computing, where Moore’s Law has led to a dramatic reduction in the cost of cellphones, laptops and all the networking in between.

Some say the solar industry is where the computing industry was in the mainframe-era of the 1970s, before the personal computer and Microsoft.

Last month, Waterloo-based solar-cell manufacturer Arise Technologies and the Ontario Centres of Excellence awarded Kleiman and his research team $4.1 million to help commercialize a new way of making more efficient solar cells.

Conventional solar cells are essentially made from thin wafers of silicon, capturing between 12 and 21 per cent the energy in sunlight. When the sun hits the silicon, it excites the electrons in the material, knocking them free. That flow of free-moving electrons is harvested as electricity.

Kleiman and colleague John Preston, also a professor of engineering physics at McMaster, have come up with a way to grow an extremely thin layer of Group III-V materials, such as gallium-arsenide, on top of a silicon wafer.

Silicon absorbs energy from the invisible part of light spectrum, such as ultraviolet light, while gallium-arsenide can capture energy from the visible light. By capturing more of the energy across the light spectrum, Kleiman says the new "double-junction" cells can theoretically achieve 43 per cent efficiency.

The trick is in properly aligning the top layer with the bottom layer in a way that’s consistent enough for mass production. It’s a process that the McMaster team believes it has figured out, with help from the Titan microscope.

"We figure we could get this to market in three years," says Kleiman.

He admits that Canada is behind in the solar market when compared to Japan, Germany and now Silicon Valley. But at a time when other sectors are hurting and the world demand for renewable energy technologies such as solar is booming, Kleiman suggests there’s still an opening in a race that’s far from over.

"We have the ability to play catch up, and to succeed," he says.

Mark Romoff, president of the Ontario Centres of Excellence, says there’s no reason technology from Ontario automotive manufacturing, telecommunications and microelectronics couldn’t be modified and applied to solar-energy innovation.

"One of Ontario’s strengths is its ability to transfer technology, knowledge and expertise from one sector to another," he says.

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Do Canadians need another tax break in order to save for their children’s post-secondary education?

Liberal MP Dan McTeague thinks so. His bill, passed by the House of Commons last week, will provide an up-front tax deduction if you contribute to a registered education savings plan.

Right now, you get an up-front tax deduction only if you contribute to a registered retirement savings plan.

Parents might welcome a tax refund to use for spending or paying off debt. But would they save more if they received more tax breaks?

It’s debatable, since education saving is already subsidized in several ways:

• The RESP, introduced in 1974, allows contributions to grow tax-free until the children go to college or university.
• Withdrawals are added to students’ income once they attend college or university. But most don’t earn enough from part-time jobs to pay tax.
• The Canada Education Savings Grant, launched in 1998, gives a 20 per cent rebate (up to $400 a year) on the first $2,000 contributed to an RESP.
• An enhanced grant for low-income families – a rebate of 30 to 40 per cent on the first $500 contributed to an RESP – was introduced in 2004.
• The Canada Learning Bond, also introduced in 2004, is a $500 gift – increased by $100 a year for 15 years – to babies born into low-income families.
• Parents get another tax break since they can claim tuition, education and textbook credits that post-secondary students can’t use because their income is too low.

RESPs exploded in popularity a decade ago when Ottawa came up with matching grants. Parents can get up to $7,200 in free money if they contribute at least $2,000 for 17 years. Nowhere else can you get a risk-free 20 per cent return on your money. RESPs are irresistible to rational parents.

It’s no coincidence that the Liberal private member’s bill was passed right after the Conservative government brought down its last budget.

The budget proposed a tax break for those contributing up to $5,000 a year to a tax-free savings account – actually the reverse of an RRSP payday loans. You put in money that has already been taxed and you face no tax bite when you take it out.

Naturally, the Conservatives are angry that the Liberals managed to get an expensive new tax measure passed in Parliament.

On Friday, finance parliamentary secretary Ted Menzies said he was confident the government could persuade the Liberal-dominated Senate to reject the bill that would cost the government $900 million a year.

"It’s tax policy nonsense," says Finn Poschman, director of research at the C.D. Howe Institute, about the idea of sweetening tax breaks for education saving.

Here’s why he thinks RESPs don’t need to be beefed up:

• Middle-income parents already use the grants available for RESP contributions.
• Low-income parents won’t save any more in RESPs because of up-front tax deductions.
• There’s no evidence of an affordability issue in Canada for post-secondary education or a failure that needs reform.

In 2002, the C.D. Howe Institute published a paper that said the RESP added needless complexity to Canada’s tax system.

Author Kevin Milligan said the matching grants ended up disproportionately in high-income households and were "a poorly targeted use of public money."

I agree that another tax break for education savings would be too rich – and I hope the Senate blocks the bill for further study.

Ellen Roseman’s column appears Wednesday, Saturday and Sunday. You can reach her by writing Business c/o Toronto Star, 1 Yonge St., Toronto M5E 1E6; by phone at 416-945-8687; by fax at 416-865-3630; or at eroseman@thestar.ca by email.

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TOKYO–Japan’s top automaker Toyota said Wednesday it has been asked to invest in a project to build the first "made in Japan" passenger aircraft in three decades.

The Asahi newspaper reported Wednesday that Toyota Motor Corp. plans to invest about 10 billion yen (US$96.7 million) in the project by Mitsubishi Heavy Industries. Toyota spokesman Paul Nolasco said a decision has not yet been made.

Mitsubishi, based in Tokyo, said it was in talks with various companies but declined to give their names. It said a company to run the project’s business would be set up this spring.

The Asahi said Mitsubishi will take a 60 per cent stake in the company, capitalized at about 100 billion yen ($966.7 million).

Toyota rival Honda Motor Co. has already entered the jet business, making small jets for up to eight passengers. Tokyo-based Honda began sales of its jet in 2006 and has orders for more than 100, with first deliveries set for 2010.

The Mitsubishi Regional Jet is to be a twin-engine aircraft seating about 70 to 90 people. The lightweight carbon-fibre composite jet is designed to consume about 20 per cent less fuel than comparable standard jets.

Demand for smaller jets is expected to rise over the next 20 years in regional markets. Mitsubishi’s main target markets are North America, Europe and Japan.

The jet would likely compete against midsize jet makers Montreal-based Bombardier Inc credit reports. (TSX: BBD.B) and Brazil’s Embraer SA, as well as companies in China and Russia that are developing regional jets.

Mitsubishi – part of a major Japanese conglomerate that includes an automaker, electronics maker and trading company – has chosen Pratt & Whitney, a unit of United Technologies Corp., as the MRJ’s engine supplier.

Last month, Mitsubishi said it has picked three U.S. businesses and two companies from Japan to supply other major parts.

Parker Aerospace, based in Irvine, Calif., will be developing the hydraulic system; Hamilton Sundstrand Corp., another unit of Hartford, Conn.-based United Technologies, will supply electrical power and air management systems, an auxiliary power unit and other key systems; and Rockwell Collins Inc., based in Cedar Rapids, Iowa, will produce a flight control system.

Tokyo-based Nabtesco Corp. will work with Rockwell Collins on the flight control system, and Sumitomo Precision Products Co. will produce landing gear, according to Mitsubishi.

Mitsubishi, long a major supplier for Boeing Co. of the U.S., has already begun marketing the MRJ worldwide. First deliveries are set for 2012.

Bombardier shares were trading up two cents on Tuesday on the Toronto Stock Exchange at $5.50.

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new york — Most stocks gained Monday as record oil and gold prices spurred a rally in commodity producers, outweighing declines in technology and financial shares.

Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. helped the Standard & Poor’s 500 index recover from a decline of 0.8 percent and rise for the first time in four days. Goldman Sachs Group Inc. and Apple Inc. fell after analysts lowered profit estimates.

The S&P 500 swung between gains and losses at least 37 times as a smaller-than-forecast drop in manufacturing offset a decline in construction spending. The S&P 500 added 0.71 point to 1,331.34. The Dow Jones industrial average slid 7.49 to 12,258.9. The Nasdaq composite index lost 12.88 to 2,258.6.

Commodity producers rose as oil climbed to $102.45 a barrel and gold advanced to as high as $992 an ounce.
Exxon added 74 cents to $87.75. ConocoPhillips increased 73 cents to $83.44.

Freeport-McMoRan, the world’s second-largest copper producer, climbed $2.59 to $103.45. Copper futures closed at the highest price ever as global inventories declined and China, the world’s biggest user of the metal, boosted imports. Newmont Mining Corp. rose $1.21 to $52.38.

General Electric Co., Honeywell International Inc. and Danaher Corp. climbed after Deutsche Bank AG analysts said U.S. industrial companies that generate more than half their revenue from abroad may boost earnings by 5 percent during the first quarter as the dollar weakens free credit report without a credit card. The U.S. currency on Monday touched a record low of $1.5275 per euro.

GE added 26 cents to $33.40. Honeywell increased $1.01 to $58.55. Danaher added 11 cents to $74.26.

Northrop Grumman Corp. rose the most since July 2003 after the third-largest U.S. defense contractor and European Aeronautic, Defence & Space Co. beat Boeing Co. for an Air Force tanker order. Northrop added $3.96 to $82.57. Boeing lost $2.12 to $80.67.

Exelon Corp., the largest U.S. owner of nuclear power plants, added $2.70 to $77.55. Entergy Corp., the second-biggest, increased $2.71 to $105.45.

Supervalu Inc. rose $1.84, or 7 percent, to $28.09 for the top gain in the S&P 500. The second-biggest U.S. supermarket chain forecast profit for next year that exceeded analysts’ estimates.

Goldman dropped $4.55 to $165.08. Bear Stearns lost $2.54 to $77.32. Lehman fell $2.38 to $48.61. Citigroup Inc. retreated 62 cents to $23.09.

Berkshire Hathaway Inc. said fourth-quarter profit declined 18 percent on falling insurance rates. Berkshire’s Class A shares lost $3,500, or 2.5 percent, to $136,500.

Apple declined $3.29 to $121.73.

Google dropped $14.16 to $457.02, the lowest in almost a year. EBay slumped 51 cents to $25.85.

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With a 25-year history in the music business, Cliff Hunt was quick to spot an opportunity when the concept of downloading digital music files over the Internet began to take off.

Eight years ago, he and a partner acquired the rights to a Vancouver firm’s keystroke recognition technology – the software uses biometric identifiers to determine who is typing in a password on a computer – and set about figuring out a way to apply the feature to music sales.

Then file-sharing site Napster came along and turned the recording industry on its head.

"Music files were everywhere and rights didn’t matter anymore," says Hunt, 59, the chief operating officer of Toronto-based Yangaroo Inc. "We had to rethink our whole strategy."

He ultimately decided to focus on the longstanding relationship between record labels and radio stations – an area with which he was intimately familiar. A trumpet player who played his last gig in 1973 at St. Lawrence Market, Hunt has also worked as a band manager, with a record production company and as a music publisher.

Hunt saw a way to streamline the way labels promoted and distributed their product to radio stations, which has traditionally required printing thousands of CDs, packaging them with promotional material and ferrying them across the country.

In addition to being expensive and wasteful – most promos end up in the garbage can – the approach made it easy for highly anticipated releases to be leaked on to file-sharing websites well before they were played on the radio, let alone available for purchase in stores.

Says Hunt: "The kid that delivered the tape from the recording studio to the record company would be burning it in his car on the way. The next thing you know it’s up on Napster or Grokster or whatever the file-sharing system of the day was."

Enter Yangaroo. Co-founded in 1999 by Hunt, the company gives the labels a way to distribute their music securely over the Internet using the firm’s encryption technology and digital watermarks, which allow the file to be tracked if it ends up being leaked.

The firm, which completed an initial public offering in 2003, already has Canadian distribution agreements with EMI, BMG Canada, Universal Music Canada and Warner Music Canada and has signed exclusive deals with Canadian radio heavyweights, Astral Media Inc., Corus Entertainment Inc. and Rogers Communications Inc.

"Virtual every single that goes to radio in Canada today goes through DMDS," says Hunt, referring to Yangaroo’s Digital Media Distribution System.

But the key U.S. market has so far been more difficult to crack. While Yangaroo did 1.3 million deliveries in the U.S pay day loans. last year and has deals representing 1,900 individual radio stations, the company continues to rack up losses as it tries to establish itself in the industry. In 2006, Yangaroo posted a loss of $2.1 million, or 7 cents a share, on revenues of just over $430,000 – most of which came from the Canadian market, according to Hunt.

"What you’re doing is changing a culture of people that have been used to handling discs for the past 50 years," Hunt explains.

He says the strategy is to initially offer its services for free and then gradually introduce pay-per-use charges.

Investors, however, appear to be running out of patience. Shares of Yangaroo, meanwhile, have fallen from a high of $1.40 in mid-2003 to around 25 cents.

Inside the company’s development centre, located in Toronto’s Liberty Village neighbourhood, about 20 employees work at desks scattered beneath the exposed beams and ductwork of a converted industrial space. Music posters cover the walls, toys cluster around computer monitors and the sounds of indie rock filter through the air. The look is jeans, hooded sweatshirts and pierced ears.

Almost as if on cue, a shaggy-haired employee with a beard picks up the telephone to field a call from a curious radio station that wants to be added to the distribution list. Hunt smiles.

In some ways, the file-sharing phenomenon that’s decimated the recording industry has created a unique opportunity for Yangaroo. Big labels are desperate to cut costs and protect what little control they have left over the music they distribute. Small independent labels, meanwhile, are a promising growth area as more artists seek to take control of how their work is distributed in a rapidly changing industry.

Hunt is also keen on pushing the company as a more environmental solution since its technology not only eliminates the need for CDs and their jewel cases, but also the myriad of promotional material that gets shipped along with them.

But an even more lucrative opportunity may come from exclusive ownership of the DMDS technology. Yangaroo is currently waiting for a U.S. patent approval (it owns the patent in Canada, although it is being challenged by another company) that Hunt says would be a "ground-breaking" development for the company.

"It’s a barrier to entry by any competitors," he says, adding the technology also has potentially lucrative applications in other fields such as medicine and law, where the security of data transfers is paramount.

"It would make us an acquisition target by larger companies that want to own that space."

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General Motors Corp. says it will stop output at its truck plant in Oshawa on Monday if a strike at a parts maker in the United States doesn’t end soon.

The auto giant said yesterday one U.S. truck assembly operation is already down and three similar operations, including one in Oshawa, would be idle after a shift last night because of the strike at American Axle & Manufacturing south of the border. The strike has stopped production of critical axle parts. Most GM assembly plants have only small inventories to maintain vehicle output.

A senior union official said the walkout at the parts maker wouldn’t affect production of Chevrolet Silverado and GMC Sierra pickups in Oshawa until early Monday because the Oshawa truck plant doesn’t operate during weekends. The plant employs about 2,300 workers.

"It wouldn’t really have an effect until then here," said Keith Osborne, plant chair for the Canadian Auto Workers in Oshawa.

GM said the other affected truck plants would be in Flint, Mich., and Fort Wayne, Ind. They employ several thousand workers.

Earlier this week, GM idled its truck plant in Pontiac, Mich., because it had run out of parts.

Other GM assembly plants at risk due to their reliance on American Axle parts include operations in Arlington, Tex.; Janesville, Wisc.; and Silao, Mexico faxless payday advances. They make sport-utility vehicles.

GM’s moves follow the temporary closing of the big Chrysler minivan plant in Windsor because of a shortage of parts from TRW Automotive Holdings Corp.

Members of the Canadian Auto Workers walked off the job at TRW in a contract dispute earlier.

Analysts have said a short work stoppage could allow GM to reduce high inventories of trucks and sport-utility vehicles, but have cautioned that a longer disruption could be costly.

About 3,600 members of the United Auto Workers union in Michigan and New York walked off the job on Tuesday against American Axle in a dispute over wages. Talks between the two sides had not resumed yesterday.

American Axle had stockpiled parts for GM in advance of the strike, and most analysts had projected that it would take a week or so before shortages began to slow GM down.

With files from the Star’s wire services

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A Washington-based advocacy group has threatened to sue St. Louis-based Anheuser-Busch Cos. for marketing caffeinated drinks that contain alcohol. The Center for Science in the Public Interest claims A-B’s Bud Extra and Tilt drinks deliberately appeal to young consumers and that Web and magazine marketing imply that consuming alcohol and caffeine together allows people to drink more alcohol.

It is threatening similar lawsuits against Miller Brewing Co.

The center said A-B could avoid potential lawsuits in state courts if it agrees to stop selling alcoholic beverages that contain caffeine, guarana or ginseng and give up profits from the sale of Tilt and Bud Extra payday advance.

A-B said the formulation and labeling for Bud Extra and Tilt have been approved by federal authorities, and that the products are lawful in states where available.
The brewer said it will "vigorously defend (its) legal right" to compete within the category.

— JEREMIAH MCWILLIAMS

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