Lock­heed Martin wait­ing in wings

Trade dis­pute opens a win­dow for F-35 pro­ducer to pro­vide ‘in­terim’ jets

Windsor Star - - FINANCIAL POST - MARIE-DANIELLE SMITH

OT­TAWA The fed­eral gov­ern­ment’s sug­ges­tion it may trash plans to buy “in­terim” fighter jets from aero­space giant Boe­ing Co. may open up a win­dow for F-35 pro­ducer Lock­heed Martin Corp. to swoop into.

Boe­ing con­vinced the U.S. Com­merce Depart­ment and In­ter­na­tional Trade Com­mis­sion this week to launch an in­ves­ti­ga­tion into much-sub­si­dized Montreal-based Bom­bardier Inc. for “dump­ing” com­mer­cial air­planes into the U.S. mar­ket — a dis­pute over­shad­owed by an im­pend­ing rene­go­ti­a­tion of the North Amer­i­can Free Trade Agree­ment.

For­eign Af­fairs Min­is­ter Chrys­tia Free­land’s sub­se­quent chas­ten­ing and prom­ise Thurs­day to re­view mil­i­tary pro­cure­ment in­volv­ing Boe­ing leaves in limbo Canada’s pur­chase of 18 Su­per Hor­net jets, a deal ex­pected to cost $5 bil­lion to $7 bil­lion.

A spokes­woman for Lock­heed Martin — which, mean­while, is part­ner­ing with Bom­bardier on a U.S. air force pro­cure­ment — re­acted Fri­day, say­ing the com­pany “would openly wel­come dis­cus­sions about in­terim fighter so­lu­tions.”

Still, said Cindy Tessier, “it would be in­ap­pro­pri­ate for Lock­heed Martin to com­ment di­rectly on a mat­ter be­tween the Gov­ern­ment of Canada and an­other com­pany.”

A gov­ern­ment of­fi­cial ar­gued Fri­day that Free­land couldn’t take a busi­ness-as-usual ap­proach with Boe­ing af­ter its attack — es­pe­cially be­cause the same pro­cesses re­cently led to new tar­iffs be­ing im­posed on Cana­dian soft­wood lum­ber. An army of lawyers is work­ing on avoid­ing the same out­come for Cana­dian aero­space.

Prime Min­is­ter Justin Trudeau pub­licly lent his sup­port to Bom­bardier Fri­day. But he avoided spec­u­lat­ing on al­ter­na­tive op­tions for in­terim jets.

In a state­ment Fri­day, Boe­ing spokesman Dan Cur­ran said the com­pany has a “deep re­la­tion­ship” with Canada and “our case is fo­cused on the Bom­bardier com­pany, not the coun­try at large.”

Cur­ran said “sub­stan­tial gov­ern­ment sub­si­dies have en­abled Bom­bardier’s preda­tory pric­ing” in the U.S. In Fe­bru­ary, the fed­eral gov­ern­ment ex­tended a $372.5 mil­lion in­ter­est-free loan to the com­pany, and last year, for a 49.5-per-cent share, Quebec of­fered a US$1 bil­lion in­vest­ment in the CSeries jets with which Boe­ing takes is­sue.

A Bom­bardier state­ment, mean­while, said the giant’s ac­cu­sa­tions are “un­founded” and noted Boe­ing has “never lost a sale” in com­pe­ti­tion with the spe­cific planes be­ing tar­geted.

Free­land pointed out many of Bom­bardier’s sup­pli­ers are based in the U.S. and com­po­nents di­rectly sup­port “high-pay­ing jobs in many U.S. states.”

Reuters re­ported Fri­day Boe­ing ex­ec­u­tives were con­cerned about the fighter jet deal get­ting swept up in the com­mer­cial plane dis­pute. Its de­fence unit was seek­ing meet­ings with Cana­dian of­fi­cials to smooth the wa­ters.

In ad­di­tion to Lock­heed Martin, other po­ten­tial win­ners in­clude ri­val mak­ers of jets Das­sault Avi­a­tion SA, Air­bus SE and Saab AB, an­a­lysts told Reuters.

David Perry, se­nior an­a­lyst with the Cana­dian Global Af­fairs In­sti­tute, said Canada’s pos­tur­ing on a re­view or de­lay to the fighter jet pur­chase is hard to square with its in­sis­tence a ca­pa­bil­ity gap ur­gently needs ad­dress­ing. “It seems more like a ne­go­ti­at­ing ploy, po­ten­tially,” he said.

Re­act­ing to the Boe­ing state­ment, Con­ser­va­tive de­fence critic James Bezan told re­porters, “if the gov­ern­ment is so bla­tantly will­ing to throw away the con­tract, it says to me that there is no ca­pa­bil­ity gap, that they imag­ined it right from the start. … The gov­ern­ment is look­ing for a way to get out of that com­mit­ment.”

Canada had an­nounced the in­ten­tion to ex­plore the pur­chase of Boe­ing air­craft last Novem­ber and De­fence Min­is­ter Har­jit Sa­j­jan locked in that po­si­tion in Fe­bru­ary, say­ing overtly: “we are buy­ing new Su­per Hor­nets.”

The gov­ern­ment said it would launch an open com­pe­ti­tion for a full fleet be­fore the next fed­eral elec­tion. Years of in­de­ci­sion have de­layed the re­place­ment of the cur­rent ag­ing fleet. Lib­er­als backed away from a Harper gov­ern­ment de­ci­sion to pur­chase Lock­heed Martin jets (though ac­knowl­edg­ing the com­pany’s right to bid in a com­pe­ti­tion) de­spite Canada’s con­tin­ued par­tic­i­pa­tion in the Joint Strike Fighter pro­gram along with the U.S.

Perry said he be­lieves the “in­terim pur­chase first, com­pe­ti­tion later” ap­proach will be more costly in the long run. But he noted Lib­er­als have repeatedly dou­bled down on the plan, de­spite crit­i­cisms. “I don’t re­ally see an in­cli­na­tion on the gov­ern­ment’s part, so far, that they’re go­ing to move away from that,” he said.

Although it is early to pre­dict what may come of the aero­space dis­pute — a de­ci­sion from the trade com­mis­sion isn’t ex­pected un­til June 12 — Lib­er­als have po­ten­tially boxed them­selves into a cor­ner.

If the gov­ern­ment is se­ri­ous about re­tal­i­at­ing, should Boe­ing prove suc­cess­ful, and if it is also se­ri­ous about buy­ing fighter jets to fill an im­me­di­ate ca­pa­bil­ity gap, ahead of a com­pe­ti­tion, few easy op­tions re­main that wouldn’t break a Lib­eral elec­tion prom­ise: “we will not buy the F-35.”

U.S. NAVY VIA THE AS­SO­CI­ATED PRESS

With the Cana­dian gov­ern­ment’s pur­chase of 18 Su­per Hor­net jets from Bom­bardier in limbo, F-35 pro­ducer Lock­heed Martin says the com­pany “would openly wel­come dis­cus­sions about in­terim fighter so­lu­tions.”

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