THE BOMBARDIER FILES
OTTAWA HAS INVESTED MORE THAN $1 BILLION IN THE COMPANY OVER THE PAST 50 YEARS, AND NOW THE AEROSPACE GIANT WANTS A BILLION MORE. BUT WHEN IT COMES TO WHAT’S BEEN DONE WITH THE MONEY AND HOW MUCH OF IT HAS BEEN PAID BACK, BOMBARDIER WOULD RATHER TAXPAYERS
Bombardier Inc. has gone to great lengths to suppress the release of information about the government funding it receives, heading to court 10 times in nine years, often citing competitive concerns.
Court records and access-to- information documents obtained by the Financial Post show how difficult it is to glean the outcome of previous government support for the Montreal-based aerospace giant, even as Ottawa considers its request for another US$1 billion (about $1.3 billion) in aid.
These records are often redacted at Bombardier’s request, or appear incomplete, even in cases where the company’s industry peers allowed the same information to be released.
Last October, Quebec agreed to invest US$1 billion in Bombardier’s C Series commercial jet program, which has been struggling to generate sales amid delays and cost overruns. The company now says it needs additional federal funding to help carry it through until the C Series starts generating positive cash flow in 2020. That funding could be included in the Liberal government’s budget, set to be delivered on March 22.
A contribution of $1.3 billion would equal all the repayable funding Bombardier has received over the past 50 years, according to Industry Canada’s calculations.
But how that money was spent, and how or even if it was paid back is difficult to discern from the documents released. While Bombardier says the information must be withheld for competitive reasons, the company has made this argument far more frequently than its industry peers. With the government considering a historically large investment in the company, some are arguing that transparency should be a condition of any new cash injection.
“If you’re going to get the money, surely the price of admission is that you have to be transparent about how and when you’re paying it back,” said Aaron Wudrick, federal director of the Canadian Taxpayers Foundation.
The aerospace sector is no stranger to government largesse. Starting with the De- fence Industry Productivity Program in 1959, Ottawa has frequently doled out grants and loans meant to support Canada’s aerospace champions, most of which are based in Quebec.
In a June 2014 analysis by the free-market-oriented Fraser Institute, a list of the top 10 recipients of financial assistance from Industry Canada includes eight companies that generate at least a portion of their revenue from aerospace. ( The list doesn’t include the 2009 bailout of General Motors Canada and Chrysler Canada, which was done through the Department of Finance.)
Pratt & Whitney Canada Corp. is first on the list with $ 3.3 billion in inflation- adjusted contributions between 1961 and 2013. Bombardier received $1.15 billion and De Havilland Inc., which was acquired by Bombardier in 1992, is third with $1.09 billion.
Industry Canada provides slightly different numbers, saying Bombardier has received $ 1.3 billion in repayable contributions since 1966, of which it has repaid $584.6 million to date.
Most of t his t axpayer funding is in the form of repayable or conditionally repayable loans, which are triggered when, for example, the recipient’s gross revenues are higher than a base amount laid out in the contract.
However, because of Bombardier’s efforts to block the release of information, it’s virtually impossible to determine whether the individual contributions — and repayment of those contributions — met the objectives and forecasts of the government. It’s also very difficult to discover whether government contributions have created the jobs that were promised when the funding was announced.
Bombardier is by no means the only aerospace company that seeks to restrict disclosure of its repayments to government, but it does appear to be the most aggressive. It has gone to court 10 times to block the release of information, while Pratt & Whitney Canada has gone to court twice.
The company said it is simply protecting its legal right to withhold information on competitive grounds.
“Bombardier and Industry Canada are in agreement that information relating to government contributions is proprietary and can validly remain confidential for competitive reasons,” company spokeswoman Isabelle Rondeau said in an email. “Through a legal process, we were able to confirm that we ought to preserve Bombardier’s confidential information.”
The Access to Information Act allows the government to refuse to disclose any record that “could reasonably be expected to prejudice the competitive position of a third party.”
The onus is on the third party to prove that disclosure would hurt its competitiveness. If a dispute over the release of information makes it as far as the Federal Court, the company is asked to justify why disclosure would put it at risk.
“The courts have been quite good about insisting that a certain evidentiary threshold be met to justify the withholding of the information,” said Teresa Scassa, who holds the Canada Research Chair in Information Law at the University of Ottawa.
However, she pointed to one case where Bombardier argued that “the extreme competitive nature” of the aerospace industry meant that it shouldn’t have to disclose information — a justification that could arguably be used in any request for company data. “I think that could become a j ustification for pretty broad withholding of information,” Scassa said.
Bombardier’s legal strategy appears to be working, as it has successfully challenged several requests for information in the courts.
The result of these challenges means we get a fragmented picture of government support, particularly when it comes to the repayment of loans. Here are just a few examples:
In response to a request for all Industry Canada contributions of $ 5 million or more since April 1996, the released documents include a list of dozens of recipients ranging from Research In Motion Ltd. ( now Black Berry Ltd.) to Toyota Canada, but not a single mention of Bombardier.
However, other documents show the company received at least five contributions ranging from $35 million to $ 190 million between 1996 and 2009, plus another $350 million through a special program set up to support development of the C Series.
In releasing the data, Industry Canada said two ap- plications had been filed with the Federal Court to block some information from being released, but didn’t say which company had filed them.
Court records indicate that Bombardier filed two access-to-information-related applications to the Federal Court in the summer of 2014. Those cases are ongoing.
❚ Bombardier also successfully challenged a 2010 request for all conditionally repayable government contributions it had received since 1982. After reaching an out-of-court settlement with the information commissioner, Bombardier agreed to release some information on how much assistance it had received, but continued to withhold repayment details. ( The request also included four other companies, all of which disclosed their repayment information.)
By the time that information was released in June 2014, the numbers were four years out of date.
❚ It’s not just Bombardier asking to suppress information, of course. A request for information on jobs created or maintained through In- dustry Canada contributions since 1982 was almost entirely redacted even though the government will often make claims about jobs when it announces funding.
For example, a 1996 press r el ease announcing an $87-million contribution for Bombardier’s regional jet claimed the project “has the potential to maintain and create 1,000 high-quality, longterm jobs.” It is not possible to verify this through the information released.
The lack of disclosure appears to be getting worse. A 2002 request for repayment data on all contributions made under the Technology Partnerships Canada program was disclosed in full. But an identical request made in 2011 saw approximately threequarters of the repayment information withheld.
This may have something to do with the overlapping interests of Bombardier and the government, said Ken Rubin, an Ottawa-based investigative researcher who’s considered one of Canada’s foremost access-to-information activists.
Often, disputes over access to information are settled out of court through an agreement between the company in question and the government, which can create a potential conflict of interest.
“Therein lies the real prob- lem, because particularly in cases like Bombardier and its relationship with the government … the government is party to the efforts to block information about Bombardier,” said Rubin.
“It certainly has never been in the Government of Canada’s interests to release such information.”
Scassa, the information law expert, said openness remains “a very challenging issue” despite oversight from both the Information Commissioner and the courts.
“I do think that is a genuine transparency challenge, that the government may be just as happy not releasing that information as the company is,” he said.
Industry Canada (since rebranded Innovation, Science and Economic Development Canada under the Liberals) said it releases all information that isn’ t subject to exemptions under the Access to Information Act.
“Depending on the terms of each contribution program, repayment information, particularly when it concerns a specific recipient and/or pro- ject, cannot be provided publicly when the information may be commercially sensitive, could result in financial loss or gain to a third party, or could prejudice the competitive position of a third party,” department spokesman Hans Parmar said in an email.
“In determining what can be released under the ATI legislation, ISED considers the type of program and, depending on the type of information being requested, consults with third parties who may or may not agree to the release of their repayment information.”
In 2009, Industry Canada began releasing twice-yearly repayment status reports for the Technology Partnerships Canada ( TPC) funding program, which ran from 1996 to 2006, and its successor, the Strategic Aerospace and Defence Initiative (SADI).
According to the most recent updates, released Nov. 1, 2015, TPC has disbursed $3.16 billion to date and collected $ 1.13 billion in repayments. SADI has disbursed $935 million and collected $35 million in repayments.
However, these reports are incomplete. The SADI report said $935 million has been disbursed, but if you add up the net expenditures listed for individual companies (there are none listed for Bombardier), it only comes to $696 million. According to the fine print, “Amounts are not provided until completion of the ( project’s) R& D phase to protect commercial confidentiality.”
This may explain why there are no Bombardier contributions listed — the C Series technically hasn’t finished its R&D phase.
Another hole in the government’s disclosures is how actual repayments stack up against estimates. The TPC report said repayments are “in line with forecasts” and the SADI report says they’re “on track,” but those forecasts aren’t released. A recent access- to- information request for repayment forecasts withheld all estimates beyond the 2016-17 fiscal year.
It also appears that the government tends to dramatically overestimate repayments, according to a 2005 report on the value of TPC that was prepared for Industry Canada by consultants Hickling Arthurs Low. The report found that current repayment estimates for the TPC program were 45-per-cent lower than they were at the time the contracts were signed — a difference of nearly $2 billion.
The lack of transparency around previous government contributions to the aerospace industry in general, and Bombardier in particular, should concern taxpayers and encourage stronger legislation, said Rubin, the access-to-information activist.
“Part of the problem is that the ( Access to Information) Act allows them to get away with too much,” he said. “You need much stronger legislation if these terms are going to come about.”
Scassa argues that a balance needs to be struck between the rights of corporations to protect sensitive information and the need for transparency.
“It’s really challenging because in principle you can certainly understand why companies should not be asked to sacrifice their competitiveness in the name of disclosure,” she said.
“Maybe there needs to be some kind of oversight mechanism that can ensure that the public funds are being spent appropriately and that there’s appropriate accountability for them. That might be the solution.”