General Dynamics warns Canada: Cancelling Saudi deal would cost billions

General Dynamics on Monday put pressure on Ottawa over the sale of armoured vehicles to Saudi Arabia, warning that the Liberal government would incur "billions of dollars of liability" by unilaterally scrapping the deal.

The remarks by the Canadian unit of U.S. company General Dynamics — which one defence expert called unusual — reflect increasing tensions over a $13-billion agreement that is becoming politically awkward for the Liberal government.

Canadian Prime Minister Justin Trudeau, speaking in an interview aired on Sunday, said for the first time that he was looking for a way out of the deal.

Political opponents, citing the killing of journalist Jamal Khashoggi and Saudi Arabia's involvement in the war in Yemen, insist Trudeau should scrap a pact that was negotiated by the previous Conservative government.

"Were Canada to unilaterally terminate the contract, Canada would incur billions of dollars of liability to General Dynamics Land Systems-Canada," the company said in a statement.

Terminating the contract would have a significant negative impact on our highly skilled employees, our supply chain across Canada, and the Canadian defence sector broadly.- General Dynamics statement

"Terminating the contract would have a significant negative impact on our highly skilled employees, our supply chain across Canada and the Canadian defence sector broadly," the statement added.

Canadian allies such as Germany have already halted weapons sales to Saudi Arabia.

Ottawa is reviewing arms exports to Saudi Arabia, but Adam Austen, a spokesperson for Canadian Foreign Affairs Minister Chrystia Freeland, said no final decisions had been taken.

Trudeau previously said there would be huge penalties for walking away from the deal. Last month, he said Canada could freeze the relevant export permits if it concluded the weapons had been misused.

David Perry, defence analyst at the Canadian Global Affairs Institute, said General Dynamics Land Systems-Canada normally kept a low profile.

"I can't imagine they are anything other than extremely worried," he said in a phone interview.

Would be blow to struggling London, Ont.

Doug Wilson-Hodge, manager of corporate affairs at the firm's Canadian unit, declined to elaborate when asked why it had issued the warning.

Trudeau often stresses the importance of human rights, and continuing to sell arms to the Saudis could leave him open to accusations of double standards.

But abandoning the deal could kill thousands of jobs in the struggling city of London, Ont., where his Liberals will need to do well in the federal election in October.

"We are in constant contact with the company, and are committed to the workers at the London facility as well as the suppliers in London and across Canada," Austen said.