Globe and Mail columnist Jeffrey Simpson.The Globe and Mail
Bombardier, the Quebec-based manufacturer, used to knock on Ottawa's doors so frequently and successfully that the Members of Parliament could have been called the Honourable Members from Bombardier.
Former Liberal industry minister John Manley once turned down a Bombardier request in a rare and brave show of backbone. Mostly, however, Ottawa caved because, in no particular order: a) Bombardier was part of Quebec Inc. and therefore was deemed economically essential to the province; b) votes in Quebec were at stake; c) the lobbying from Quebec was ferocious and unyielding; d) lots of jobs were at stake, and not just in Quebec because Bombardier employed people elsewhere in Canada; e) airline manufacturers around the world also got government help.
Now Bombardier is knocking again, this time at the door of the Trudeau Liberal government. It seeks a cool $1-billion to match the sum that the Quebec government has already offered the beleaguered manufacturer. At issue is the survival of the company's new C series aircraft.
The aircraft is $2-billion over budget and two years behind schedule. With a record like that, the plane looks like a lemon. Airlines have shied away; analysts of the airline industry are skeptical that the C Series can ever be profitable.
Very few orders or letters of intent have been placed. The letter of intent (not a firm purchase order) from Air Canada on Wednesday for 45 planes looked from the outside like a fire sale from Bombardier. No sale price was announced, but chances are Bombardier knocked down the price hugely in its eagerness for a sale, any sale.
Air Canada has not waved the Canadian flag before. It bought Embraer jets from Brazil instead of Bombardier products the last time the two companies vied for Air Canada's business.
For Air Canada to unfurl the maple leaf and wrap it around a C Series decision would defy everything we know about how the company does business. Air Canada likely got a fire-sale price from a desperate company.
Investors certainly disliked the Air Canada decision, since the company's stock price dove 12 per cent on a day when the entire stock market was shooting up. Investors had other concerns to account for the dive, but thumbs down on dealing with such a fragile company as Bombardier must have been part of it.
And Bombardier is fragile. It is already forecasting lower than expected revenues for 2016. Its stock price, although lifted by the Air Canada decision, remains in the tank. On Wednesday, it announced a staggering 7,000 layoffs, many in its train division. And of course the C Series, the object of the lobbying in Ottawa, has been in trouble – and remains in trouble.
The dream of a new aircraft has been around at Bombardier for years. Back in 2004, the company embarked on a plan to develop a new class of jets called the C-Series. Predictably governments (Ottawa, Quebec and Britain) chipped in $700-million toward the $2.1-billion price tag for developing the plane.
Several years later, after many unmet promises, failed deadlines and executive changes, it abandoned the project. But the dream apparently never died. It has arisen in the form of the CS300 series.
Quebec's Industry Minister has called Bombardier a "jewel" of the Quebec economy. The Montreal Chamber of Commerce, hailing the Air Canada decision, on Wednesday exhorted "the Canadian government to show proof of economic leadership and give financial aid to Bombardier up to $1-billion U.S."
The politics of the pressure from Quebec are clear. We have seen this pressure before, and it has always worked, except for the Manley decision. It will likely work again.
But before it does, the Trudeau government should figure out if indeed Bombardier needs the money. The fact the company has its hand out, and Quebec has already pledged $1-billion, doesn't axiomatically mean the company needs the money.
Also, the government should make it a condition of aid that the dual-share structure of the company ends, so that the Beaudoin family's power is diluted.
And Ottawa should privately (and, if necessary, allude to this argument in public) that in exchange for the Quebec government and Montreal officials getting what they want – federal cash for Bombardier – they in turn should pipe down about the Energy East pipeline and stop making ex gratia attacks on a project that is in the national interest.