Federal Support of Bombardier...Good or Bad Idea?

[erinmore3775]

Currently Bombardier is seeking just about $1B in support from the federal government. The Quebec government has offered approximately $1B in aid.

"As part of the deal, Quebec takes a 49.5 per cent interest in a joint venture for the CSeries, and Bombardier has committed to keep CSeries-related work, including manufacturing in Quebec.

Bombardier, which makes both planes and trains, has 17,750 employees in Quebec and 6,350 in Ontario."

http://www.thestar.com/business/2015/10/30/quebec-to-ask-ottawa-to-match-1b-bombardier-bailout.html

"Reports suggest the company approached the federal government for at least $350 million in assistance; the Globe and Mail and Toronto Star reported that the Quebec government asked the incoming federal government to match its investment..."

http://www.cbc.ca/news/canada/montreal/bombardier-restructuring-cost-cutting-1.3298950

The interesting thing is that Bombardier has not offered the federal government any shares or other sureties to back and guarantee the federal investment. This is totally unlike the federal government's bailout investment of GM. They were given shares equal to their "investment." However, the government of the time sold the shares at a loss to aid in balancing their budget.

A cloud on the request for federal bailout money is the fact that Bombardier has announced that it would be cutting its worldwide work force by 7000 jobs. Most of those jobs are located in Canada either in its aerospace division or its railcar/transportation division. Most of the jobs are located in Quebec and Ontario.

There is a bright side. Bombardier is currently Bombardier is firming up significant orders for its C Series jet from both Delta Airlines and Air Canada.

http://www.cbc.ca/news/business/bombardier-delta-1.3556661

http://www.theglobeandmail.com/report-on-business/bombardiers-big-delta-order-piques-interest-of-british-airways-owner/article29796438/

My feeling is that the federal government should give Bombardier bailout/support to the tune of $1B BUT only if it receives stocks or sureties (similar in scope to the GM bailout) and ONLY if Bombardier guarantees to significantly reduce the layoffs currently assigned to its aerospace and railcar/transport divisions.

[GordonH]

Private enterprise should sink or swim on their own dime & not on taxpayers dollars, if they need to raise money then get investors from private sector.

[The Green Barbarian]

My feeling is that the federal government should give Bombardier bailout/support to the tune of $1B BUT only if it receives stocks or sureties (similar in scope to the GM bailout) and ONLY if Bombardier guarantees to significantly reduce the layoffs currently assigned to its aerospace and railcar/transport divisions.

In a previous thread on this subject I believe I posted an article whereby the author said that the government should not advance a dime until the Bombardier family gives up its control of the company. Currently they control a large voting block even though their equity stake isn't that big. That's because they have a special class of share that gives them special voting rights. That's not fair to the average shareholder. It's the same structure that allows Magna, Shaw and Rogers to continue to control their companies while issuing different classes of shares. It's time for these dinosaur share structures to go, especially when they have their hands out for corporate welfare. But we all know that Justin will do whatever his Laurentian Elite puppet-masters tell him to do.

[occasional thoughts]

I don't know how De Haviland became Bombardier or what exactly happened, but wasn't the historical antecedent of the company a public enterprise (for a while at least)? I think it is quasi-private at best, but maybe we shouldn't tolerate that. David Lewis had the great campaign slogan in, what, the 1970s or 1980s: Corporate Welfare Bums. I guess Bombardier is part of that tradition.

[erinmore3775]

GB wrote:

In a previous thread on this subject I believe I posted an article whereby the author said that the government should not advance a dime until the Bombardier family gives up its control of the company. Currently they control a large voting block even though their equity stake isn't that big. That's because they have a special class of share that gives them special voting rights. That's not fair to the average shareholder.

Excellent point GB. It would be important that in exchange for bailout /investment money that the federal government receive "voting" shares and that the agreement signed support the Quebec agreement. This would parallel the bailout investments given GM. However, what I would also like to see is some stipulation to taxpayers that the shares would not be sold off quickly, but held as a long term investment. It would appear that Bombardier with the C Series jet, may be returning to profitability long before their 2020 prediction.

[hobbyguy]

The C series commercial jet project project was inevitably going to become a subsidy hog. It puts Bombardier squarely into the Airbus versus Boeing subsides battle.

There is zero possibility of Bombardier making any money competing with Airbus and Boeing. Both Boeing and Airbus use the "too big to fail" ploy to draw in huge subsidies (direct and/or indirect). One by one their competitors have been turned to dust.

IF we are prepared to pay large sums of money for the jobs there might be some justification provided the multiplier effect is large.

The whole project started with subsidized "loans" of $650 million - half of which came from the Brits. Another billion from the Quebec government, and now about the same requested from the federal government. And there will be tax cuts and other subsidies. There is no indication that the C series project will do anything but require ongoing subsidies.

On a simplistic basis, there is no way that Canada can afford to match subsidies with the US or European governments. Thinking that Bombardier could compete in the wheelhouse of Airbus and Boeing, and in the midst of a subsidized price war? No so bright - right from the get go.

Cancelling the project now will cause a bit of "pain", but if it is allowed to go into full production, the mostly likely scenario is that this project will "subsidy" us to death, and then will have to be cancelled with significant "pain". The brass at Bombardier know this project is a turkey - they tried to sell it to Airbus (with no success).

It is a hard choice, but I think it ought to be abandoned now. It is better not to hire folks on a false promise than it is to hire them and then lay them off after they have made a lot of commitments based on that job.

$2 billion in subsidies (after $650 million) (plus who knows how much more down the road). Seems to me that would be better spent on developing other forms of economic diversity where we, Canadians, can be competitive.

It is worth noting that China is going after this commercial jet market as well. China will crush competition with subsidies.

And the Russians haven't given up on it - yet.

http://www.forbes.com/sites/pierrjohnson/2015/12/17/competition-for-boeing-as-comacs-c919-is-the-new-kid-on-the-block/#7a666d216c1ahttps://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeinghttp://www.forbes.com/sites/lorenthompson/2012/07/16/european-lies-about-airbus-subsidies-set-stage-for-major-u-s-retaliation/#5a232dcd6ac5

[maryjane48]

bad idea.

[lesliepaul]

I say give it to them...........$1 billion from Quebec and possibly the same from the Federal government PALES in comparison to what Boeing has received from the state of Washington and the U.S.Feds. Airbus in France the same and also add Embraer in Brazil. It is the nature of the business world wide.

The taxes paid to the Quebec and Federal government by Bombardier and employees YEARLY is OVER $700 MILLION. Since 1986 Bombardier has paid OVER $17 BILLION in taxes to the Quebec and Federal government. This does not include taxes from "spinoff" companies that supply parts and materials to Bombardier. It appears that only the negative is HIGHLIGHTED by the "so-called expert" financial analyst's. Bombardier is a better company than most naysayers want to believe and is worth backing when required.

[GordonH]

Bumped

Private enterprise should sink or swim on their own dime & not on taxpayers dollars, if they need to raise money then get investors from private sector.

http://www.castanet.net/news/Canada/188 ... Bombardier

[noc_sgt_rock]

http://www.castanet.net/edition/news-st ... htm#188232

WTG Trudeau,

Bash Alberta's economy but give Quebec a great boost, things that make you go Hmmmmm.

When the hell is your lying *bleep* going to do something about bill C51?

Yet another LIEbral.

KO FTW!

[Veovis]

It's Quebec. This is a drop in a very large bucket of money JT will try to funnel to interests there.

[GordonH]

Older thread here:

*Thanks GordonH, I've merged them. :)

[GordonH]

Just knowing how many times Bombardier has asked for financial help over the last 20 years. Sends warning alerts to my spidey sense not a wise investment, for any level of Government/taxpayer.

[bob vernon]

Even though Bombardier has paid back all the other loans, giving them another loan is a bad idea. Why? Because they're a Quebec based corporation. If they were from western Canada it would be okay.

[motokelowna1]

They cannot even build trains let alone planes, 2 years behind contracts for rail supplies. Sack management and how about filling those back orders. Worst run company I have ever seen.