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Bombardier aid: More corporate welfare or a slap in the face to Quebec?

There are two Bombardiers, and which of them is getting another $372-million from the federal government depends very much on where you live.

There is the Bombardier whose very name makes federal politicians break out in hives. It is the spoiled child that has sown bitter regional divisions ever since Ottawa privatized Canadair in 1986 and awarded it a lucrative CF-18 maintenance contract over a Winnipeg competitor.

This Bombardier is a poster company for crony capitalism whose controlling shareholders, the Bombardier-Beaudoin family, have gotten fabulously rich intimidating politicians while putting little of their own skin in the game. Were it not based in a Quebec still mad about the 1965 auto pact, this Bombardier might have been left to fend for itself instead of being endlessly coddled by governments.

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The other Bombardier is a shining example of Canadian entrepreneurship that went from inventing the Ski-Doo to developing an entirely new class of aircraft, the regional jet, in the process becoming the world's third-biggest civil aircraft manufacturer behind Boeing and Airbus. This Bombardier never stops innovating and performs more research and development in Canada than any other company.

It also employs thousands of domestic engineers and well-paid aircraft-assembly workers. It's Canada's entry into the global advanced manufacturing sweepstakes. Though it is based in Quebec, it has massive operations in Ontario and major suppliers across the country.

Depending on which version of Bombardier hews closest to your own viewpoint, the $372-million "repayable contribution" Ottawa awarded the company, after more than a year of hesitation and haggling, is either just more of the same corporate welfare or a slap in the face to Quebec.

The Trudeau government found itself, politically speaking, in a no-win situation when the Quebec government demanded that Ottawa match the province's $1-billion (U.S.) investment in Bombardier's C Series program. The company's bid to directly challenge Boeing and Airbus in the 100-seat-plus jet market always had elements of a kamikaze mission. So, Ottawa risked being accused of throwing good money after bad or abandoning a Quebec-based national champion.

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By late 2015, Bombardier was, as its own chief executive later admitted, "on the brink of bankruptcy." That made Quebec's equity injection look more like a desperate bailout than a sound investment. The province got a 49 per cent stake in the C Series program, but no concessions from Bombardier regarding the dual-class share structure that enabled the family to call the shots while taxpayers and minority shareholders supported most of the C Series risk.

Still, the Quebec aid reassured potential buyers of the C Series that Bombardier would be around to make good on deliveries. Without it, the company would never have received the game-changing C Series orders from Delta Airlines and Air Canada that saved its bacon.

The Trudeau government had two principal demands of Bombardier in exchange for providing additional federal aid on top of the $350-million the former Conservative government had put up for the C Series. It wanted a dilution of the company's dual-class share structure. It also sought to insulate Canada from illegal subsidy charges brought by its trading partners, a particular worry in the age of Donald Trump.

The Bombardier-Beaudoin family was unbending with regard to the dual-class share structure, making its $1-billion (U.S.) ask a non-starter with Ottawa. By structuring the aid as a loan for R&D, two-thirds of which is for the development of the company's Global 7000 luxury business jet, Ottawa has likely avoided the crosshairs of the World Trade Organization – though Quebec's aid leaves Canada more vulnerable to trade litigation.

However, Ottawa's loan amounts to barely a quarter of Bombardier's original ask and only $120-million or so of the $372-million will go toward the C Series, the problem child in the company's aircraft portfolio. While no aid package to Bombardier ever plays well in Winnipeg or points west, Ottawa can credibly argue it drove a hard bargain and resisted the political pressure to throw money Bombardier's way. But that's precisely why its decision is being panned in Quebec.

Coalition Avenir Québec Leader François Legault noted that the $120-million Ottawa is providing is less than one-tenth the amount Quebec has put up to save the C Series. Parti Québécois Leader Jean-François Lisée said the total federal package is about 1/38th of what Ottawa (he left out Ontario) put up in 2009 to save General Motors and Chrysler operations here.

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Such is Canada's tale of two Bombardiers.

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About the Author

Columnist Konrad Yakabuski writes on politics, policy and business for The Globe and Mail’s Comment section and Report on Business. More


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