Ottawa still talking to Bombardier on subsidy

ALSO TO CARMAKERS

KRISTINE OWRAM OTTAWA • One year after Bombardier Inc. first asked Ottawa for US$1 billion in financial assistance, the government is still in “constant conversations” with the company, but it appears that Bombardier’s recently announced jobs cuts haven’t helped matters along.

“A lot of our conversation is around jobs and job security,” Navdeep Bains, minister of innovation, science and economic development, said in an interview Wednesday on the sidelines of the Canadian Aerospace Summit in Ottawa.

When asked whether Bombardier’s announcement last month that it will eliminate 7,500 jobs, including 2,000 in Canada, had made matters more difficult, Bains replied, “Hence, the conversation we’re having with them.”

“They clearly had a restructuring plan that’s been in place for quite some time and we understand that, but we’re trying to say, ‘How do we create the conditions to create more good-quality jobs here in Canada and does that require more money and investments in R&D?’ ”

Friday will mark one year since Bombardier officially asked the federal government for financial assistance, following a pledge by the Quebec government to invest US$1 billion in the CSeries commercial aircraft program, which was struggling to overcome delays, cost overruns and slow sales.

Since then, Bombardier has received two instalments of US$500 million from Quebec, but appears to have made little progress with Ottawa.

Besides jobs and research and development, Bains reiterated that he wants to make sure the company keeps its head office in Canada.

Although there has been no public indication that Bombardier intends to do otherwise, Bains said he doesn’t “take it for granted” that they will.

Still, Bains has said repeatedly that the government will eventually invest in Bombardier.

“We take their request very seriously and I’ve been in constant conversations with (CEO Alain Bellemare) and his team,” he said. “I spoke to him yesterday, actually, and we made it very clear that it’s not a matter of if, but how.”

As part of its five-year turnaround plan, Bombardier has announced a total of 14,500 job cuts worldwide, including 4,800 in Canada, since February.

“While restructuring is always difficult, the actions announced today are necessary to ensure Bombardier’s long-term competitiveness and position the company to continue to invest in its industry-leading portfolio while also deleveraging its balance sheet,” Bellemare said when the second round of cuts was announced in October.

Bains is also talking to the Detroit Three automakers — General Motors of Canada Co., FCA Canada Inc. and Ford Motor Co. of Canada Ltd. — about what the government can do to support them, he said.

The three companies recently reached new labour contracts that include nearly $1.6 billion of investment in their Canadian operations and Unifor president Jerry Dias has repeatedly called on both the federal and provincial governments to invest in the sector.

“We have an open-door policy, we’re constantly in dialogue with them,” Bains said.

One of the key issues raised by the companies and Unifor is the government’s Automotive Innovation Fund, which offers taxable loans.

The government is reportedly looking at offering tax-free grants instead, but Bains would only say they’re still in conversation and the outcome “really depends on their proposals and what they bring forward.” and that’s what created the problem,” he said.

Since 2004, the report noted, successive Albertan governments have increased per-capita spending by 49 per cent and moved the province from a net asset to a net debt position.

Texas, by comparison, increased per-capita spending by 37.3 per cent but has maintained a steady level of debt and is not projected to dramatically increase its debt load as the oil-price collapse drags on.

“Alberta and Texas are now on very different fiscal trajectories, as Texas’ financial position is comparatively strong while Alberta faces a potentially costly and economically damaging run-up in debt,” the study noted.

The study noted oil and gas activity contributes 27.4 per cent of Alberta’s total GDP compared to 12.3 per cent of Texas’s GDP.

But Eisen said the difference between Alberta’s economy and Texas’s economy shows the province should be more prudent.

“If you budget as though oil prices are never going to drop in a place like Alberta, then when they do drop you’re going to get a lot of fiscal pain,” he said.