Bombardier blackmail?

One of our champion corporate welfare bums has raised a spectre:

Bombardier may move C Series work to U.S.

As Bombardier Inc. gets set to launch its new C Series airliner, the company is once again sparring with governments over financial aid.

The Montreal-based company is considering shifting major assembly work related to the new jet from Canada - and perhaps Northern Ireland - to the U.S., Pierre Beaudoin, the president of Bombardier Aerospace, said yesterday [Feb. 22].

The U.S. option - intended to counter higher currency costs in Canada and Britain - throws into question the financial commitments made two years ago by Canada, Quebec and Britain. Under terms of those agreements, up to 2,500 jobs were to be linked to C Series work in the Montreal area, and another 2,000 in Belfast, Northern Ireland...

Globe and Mail business columnist Konrad Yakabuski is not amused:

Who's more miffed that we're not going to the polls after all?

[...]

Trick question. The person most disappointed doesn't give a whit about politics even though he plays it well. Pierre Beaudoin, chief executive officer-designate atBombardier, would have loved to have watched the pols on the campaign trail outdo each other with promises of additional subsidies for the Bomber's resuscitated C Series project.

Industry Minister Jim Prentice can relax and evaluate Mr. Beaudoin's newest threat – to move final assembly of the proposed 110- to 130-seat family of aircraft to the United States – for what it is. There is no electoral knife at his throat requiring him to respond tout de suite to cries from unions, Quebec, Liberals or the Bloc to increase the $350-million in C Series aid Ottawa offered the last time around in 2005.

Back then, Paul Martin's Liberal government was faced with a similar ultimatum when Bombardier suggested the new plane might be built in New Mexico. Mr. Beaudoin even staged a photo op with Governor Bill Richardson to prove he was serious.

Mr. Martin's minority government was at the same time faced with a crucial confidence vote set for May 19, the loss of which would have forced an election. So it was that on May 13 came Ottawa's C Series package, which, coupled with the $118-million promised by the Quebec government, amounted to a record Canadian aerospace subsidy.

Alas, the election never came...

More after the jump.

Mark C.

Now, Bombardier wants an even bigger one or else – here we go again – as many as 2,500 Quebec assembly jobs could go south.

The price tag to develop the C Series has risen by $1-billion (U.S.) since 2005 to $3.2-billion. Bombardier says it needs governments to contribute a third of the total, so the combined aid previously offered by Ottawa, Quebec and the British government (£180-million, or $350-million Canadian) isn't enough.

Of course, that $350-million is today equivalent to 350 million George Washingtons, instead of $263-million (U.S.) in 2005. That should help, right?

...If the C Series was so risky back in 2005, it's not any less so in 2008. For every variable that's moved in Bombardier's favour since, others have moved the other way. Flying into Boeing and Airbus skies looks as kamikaze as it always has. Perhaps more so.

Under the original plan, Bombardier said the C Series would enter service in 2010, well ahead of a new generation of single-aisle planes from Boeing and Airbus. Back in 2005, the two behemoths were preoccupied with their B787 and A380 mega-planes. Under the new plan, the C Series won't be available until 2013. That doesn't give much of a lead over expected new 737s or A318s. And Boeing and Airbus aren't apt to concede any price war to Bombardier.

The C Series will need all the advantages it can get. Does Mr. Beaudoin need reminding that it's only by assembling the plane here that U.S. airlines – Bombardier desperately needs a big order from Northwest – can qualify for Export Development Canada financing? We didn't think so.

Like Mr. Richardson's presidential bid, it's hard to take Mr. Beaudoin's latest threat very seriously.

It should be noted that Bombardier's existing RJ series of planes has made quite a sales surge:

Bombardier RJ Business Charges Back

Posted by markc at February 28, 2008 09:20 PM