BOMBARDIER SLAPPED WITH HEFTY DUTY ON JET SALES

The U.S. Department of Commerce has clobbered Montreal-based aerospace giant Bombardier with a hefty 219-per-cent duty on the sale of its CS100 commercial jets to a U.S. airline following a trade complaint from an American rival.

The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the company’s chances in its ongoing dispute with U.S. rival Boeing.

Boeing had complained that Bombardier inked a deal with Delta Air Lines for up to 125 of the jets by offering the planes at belowmarket price.

The financial penalties aren’t officially due until Bombardier delivers the first CS100 to Delta some time in the spring.

The key will be whether U.S. officials find that the deal between Bombardier and Delta actually hurt Boeing’s business, an issue that’s not expected to yield a finding for at least six months.

And that was not all the bad news for Bombardier. European railway manufacturers Siemens Mobility and Alstom announced a merger Tuesday that leaves Bombardier Transportation facing a new “European champion” and a substantially larger rival.

OTTAWA • The U.S. Department of Commerce has clobbered aerospace giant Bombardier with a hefty 219 per cent duty on the sale of its CS100 commercial jets to a U.S. airline following a trade complaint from an American rival.

The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the Montrealbased company’s chances in its ongoing dispute with U.S. rival Boeing.

Boeing had complained that Bombardier inked a deal with Delta Air Lines for up to 125 of the jets by offering the planes at below-market price.

The financial penalties aren’t officially due until Bombardier delivers the first CS100 to Delta some time in the spring.

The key will be whether U.S. officials find that the deal between Bombardier and Delta actually hurt Boeing’s business, an issue that’s not expected to yield a finding for at least six months.

But Friday’s ruling does give Boeing momentum as the dispute drags on, and more leverage in any future talks between the Trudeau government and Boeing to reach a negotiated settlement.

It came on the same day that European railway manufacturers Siemens Mobility and Alstom announced a merger that leaves Bombardier Transportation facing a new “European champion” and a substantially larger rival.

The memorandum of understanding announced Tuesday is described as a merger of equals with each owning half the shares of the new company to be headquartered in Paris. The Mobility Solutions business will be run out of Berlin.

The combined company to be called Siemens Alstom will have US$18 billion in revenues — about double that of Bombardier Transportation — and US$1.4 billion in adjusted EBIT. Annual cost savings of US$554.2 million are expected four years after closing.

The new European company with 62,300 employees in more than 60 countries will have an order backlog of US$72 billion and an adjusted margin of eight per cent.

“We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long-term,” Siemens CEO Joe Kaeser said in a news release.

He added that the global market has changed with the creation of a dominant competitor in China and digitalization.

Bombardier didn’t immediately respond to the merger of its rivals. It is also believed to have talked to Siemens.

Mergers in China and Europe leave Bombardier “still looking for a dance partner,” said David Tyerman of Cormark Securities.

“They lost out this time but there’s presumably going to be more consolidation,” he said, noting competitors of varying sizes remain around the world.

Bombardier’s shares closed up more than six per cent to C$2.27 in Tuesday trading even though the transportation giant was expected to face bad news affecting both its commercial aircraft and railway businesses.

The shares surged more than 13 per cent after a report out of China said Bombardier is close to signing orders for commercial aircraft.

Walter Spracklin of RBC Capital Markets said he expects Bombardier will remain a key player in a growing transit market.

Under a proposed merger with Siemens, Bombardier would have reportedly ceded control of signalling and maintained only marginal control over a separate rolling stock joint venture.

The industry is undergoing consolidation to compete with the state-backed rival Chinese railway manufacturer CRRC that is growing its global reach.