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Ottawa could share control of Bombardier C Series board: Quebec

Bombardier's CS300 Aircraft, showing its Pratt & Whitney engine in the foreground, sits in the hangar prior to its test flight in Mirabel, Quebec, in this February 27, 2015, file photo.

CHRISTINNE MUSCHI/REUTERS

Quebec and the federal government could have control over a new board overseeing Bombardier Inc.'s beleaguered C Series jet program if Ottawa becomes a major investor, Quebec's Transport Minister says.

Ottawa is under growing pressure from Quebec's lawmakers and business leaders to follow the province's lead by investing at least $1-billion (U.S.) in the C Series program, which is significantly behind schedule, over budget and struggling with sluggish sales.

One option currently on the table in talks for an investment in the C Series from Ottawa is a proposed seven-member board, with two members representing Quebec, two representing Ottawa and three representing Bombardier, Quebec Transport Minister Jacques Daoust said Thursday in an interview on the Ici RDI TV network.

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Quebec Premier Philippe Couillard said in the legislative assembly on Thursday that he hopes the federal government will join Quebec and directly invest in the C Series program. That would allow the two levels of government to "have a deciding influence on the board of directors."

Mr. Daoust said in the interview that "the new partner and we [Quebec] would control the company [overseeing the C Series]."

The new arrangement would be conditional on Ottawa making a $1-billion investment in the program.

Quebec recently agreed to take a 49.5-per-cent stake in the C Series venture in an agreement that will see the province invest $1-billion.

The currently proposed C Series joint venture between Quebec and Montreal-based Bombardier would have five board members: three for Bombardier and two for Quebec.

If that joint venture is expanded to include Ottawa, then it would be logical for the latter to want representation equal to that of Quebec.

One source close to developments at Bombardier said it would only make sense for Ottawa to get board representation if it invests in the joint venture project.

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Bombardier spokeswoman Isabelle Rondeau said in an e-mailed statement on Thursday that the company is not commenting on the matter.

Other options being looked at by Ottawa include offering financial credits to Bombardier, according to sources.

Minority representation for the company on the C Series board implies a reduced role for the founding Bombardier-Beaudoin family, which currently controls Bombardier through its ownership of supervoting dual-class shares.

Some critics have been calling for major corporate governance changes at Bombardier if there is to be further government money poured into the company, including an end to the dual-class share structure.

Bombardier is preparing modest changes to its existing board structure, according to sources familiar with the plans.

Among the changes being proposed: Long-time director and former Liberal premier of Quebec Daniel Johnson would step down and chair the C Series joint venture with Quebec, according to one source.

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In Quebec City, the opposition parties said government control of the C Series project is a bad idea.

"Just imagine a C Series division presided by Daniel Johnson where control of the company is in the hands of Justin Trudeau and [Quebec Premier] Philippe Couillard," said François Legault, Leader of the Coalition Avenir Québec.

"The idea sends chills down my spine."

Parti Québécois Leader Pierre Karl Péladeau said the proposed structure "makes no sense."

"We know we need to continue to support Bombardier, but the way the government decided to support it is the wrong way," he said, calling on the Liberals to release a copy of their agreement with the company.

U.S. aerospace analyst Richard Aboulafia said the notion of a government-controlled airplane manufacturer in an advanced industrial country such as Canada is comical.

"I would be hard-pressed to think of an airline these days that would cheerfully order a plane from a government-owned entity," said Mr. Aboulafia, vice-president of analysis with Virginia-based Teal Group.

"At this point, [the C Series] is just a ward of the state."

Bombardier chief executive officer Alain Bellemare said last week that a C Series partnership with Ottawa is "very important to us."

Support from Ottawa would represent a "strong endorsement" of the program and "bring additional [financial] flexibility," he said.

Navdeep Bains, federal Minister of Innovation, Science and Economic Development, said on Tuesday that the government is still studying the "business case" for an investment in the C Series.

"The company made an official offer to the government for an investment on December the 11th, and we're making sure that we look into that and make sure we continue to do our homework."

With a file from reporter Nicolas Van Praet in Montreal.

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About the Authors
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

National correspondent

Les Perreaux joined the Montreal bureau of the Globe and Mail in 2008. He previously worked for the Canadian Press covering national and international affairs, including federal and Quebec politics and the war in Afghanistan. More

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