U.S. policies that force governments to buy certain products from American factories are harming Bombardier Inc.’s railcar factories in Canada, the company says.
“Buy America” rules are part of what jeopardizes the long-term viability of the company’s Thunder Bay plant, where Bombardier said Wednesday it will cut 550 of the 1,100 jobs because contracts from its two major customers, Metrolinx and the Toronto Transit Commission, are coming to an end.
Pressed as to whether Wednesday’s announcement was a warning that the plant may ultimately close if it fails to get new orders, Bombardier Transportation spokesman Eric Prud’Homme said the company is “focusing on ensuring we fill our Thunder Bay plant’s order pipeline and bring new work. … Since last fall, in every [stakeholder] meeting, we have been very transparent about the reality and challenges that our Thunder Bay plant is experiencing and we will continue to do so with every stakeholder we meet.”
But the U.S. policies serve to encourage Bombardier to shift production southward – raising the likelihood that the company will eventually serve the Canadian rail market primarily from factories in the United States.
They are not new; the country passed its Buy American Act in 1933. Over time, the United States has carved out exceptions, including one for Canada, and the complex web of state, local and federal policies means there’s no blanket ban on using foreign suppliers for infrastructure and other goods procured by U.S. governments.
The trade policy that’s troubling Bombardier is the similarly named “Buy America” policy that specifically governs the procurement of transportation assets (planes, trains, et cetera) and covers projects that use iron, steel and manufactured products. The minimum amount of U.S.-sourced content required in these projects has been inching up, from 60 per cent, to 65 per cent, to 70 per cent. And there are no exceptions for countries that have trade agreements with the U.S., says Matt Koehl, a Washington-based partner of law firm Womble Bond Dickinson.
“A company like Bombardier has no choice but to have an American manufacturing footprint and supply chain,” the company said in its Wednesday announcement. “Therefore, we cannot fully leverage our Canadian manufacturing footprint and expertise.”
Bombardier is adding jobs in the U.S. In June, the company opened a manufacturing plant in the San Francisco metro area to serve its customer, Bay Area Rapid Transit. It joins a plant in Plattsburgh, N.Y., near the Canadian border, and one in the Pittsburgh area. The three combine to employ 1,240 people. After the Thunder Bay job cuts, Bombardier Transportation will employ about 1,340 in that facility and in plants in Kingston and La Pocatière, Que.
Meanwhile, Canada is party to the Canada-European Union Comprehensive Economic and Trade Agreement, which says a Canadian content requirement in railcars must be no higher than 25 per cent. It applies to companies from countries in the EU, which includes Alstom and Siemens, two major Bombardier competitors.
Alstom and Siemens, as it happens, are currently making cars for Montreal’s REM project in India, and Via Rail in California, respectively.
In Thunder Bay on Thursday, Bombardier began issuing termination notices and letting employees know where they stood in the seniority list.
“If we’re paying for our own products, shouldn’t the work be in Canada?" asked Keith Rojick, a material expediter in the parts department who is the second of three generations of his family to work at the plant. "The same as any other organized country? It’s work, employment, economy stimulation, all those things. That would certainly help with the bidding process.”
Andy Wilson, who paints GO trains at the plant, said the U.S. “has always had their ‘Buy American’ percentages, which have always been pretty high. [U.S. President Donald] Trump’s really pushed that of late. A lot of companies are buying into it. What you saw on the news today is that Bombardier has just bought space in the States. And I think that’s our way of getting around the content rules that they have.”
Bombardier’s announcement on Wednesday came as Canada’s premiers gathered in Saskatchewan and called on the federal government to “work to ensure Canadian exporters are exempt from these policies.” And it prompted calls for Canada to consider similar policies, within the bounds of the international-trade treaties it has signed.
Véronique Simard, a spokeswoman for the federal Office of the Minister of Employment, Workforce Development and Labour, said Thursday: “Our government has repeatedly advocated for continued access to the U.S. procurement market for Canadian businesses and proactively engaged U.S. officials on this issue. … We will continue to defend our national interests and to advocate against any new proposals that would negatively affect Canadian jobs and our cross-border supply chains."
Bombardier’s Mr. Prud’Homme said: “After months of educating decision makers about the issue, we were happy to see it was taken to another level, by all provinces united. We feel we’ve been heard, and we feel this is being taken seriously.”
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