Bombardier gets $372M from Ottawa interest-free
The Canadian government will loan Bombardier Inc. $372.5 million over the next four years to help fund research and development of its new Global 7000 business jet and its CSeries line of aircraft.
The announcement was applauded by the Quebec government, which has already invested heavily in the CSeries, but also spurred criticism as an unfair government subsidy to a private corporation.
The interest-free loan to one firm is a record amount for the federal government, but far less than the US$1 billion the Montreal-based aerospace company had been requesting from Ottawa to help with its troubled CSeries line. Roughly one-third of the $372.5 million will go toward the CSeries, the rest to developing the Global 7000.
Conditions have evolved since Bombardier first requested federal aid in late 2015, said Transport Minister Marc Garneau at the announcement, held before dozens of employees at a Bombardier facility in Dorval Tuesday evening.
“There have been important investments from the province of Quebec and from the Caisse de dépôt, there has been an increase in orders for the CSeries planes from Air Canada and Delta, and the company has restructured in an important way,” Garneau said.
Ottawa loaned Bombardier $350 million in 2005 to aid with the development of its CSeries. Bombardier has a perfect track record when it comes to repaying federal loans, federal ministers noted.
Bombardier CEO Alain Bellemare said the loan was the right amount at the right time to ensure jobs will be created and preserved in the region, and allow the company to compete on a global scale.
“We are in a good position,” Bellemare said. “I look to the future with optimism.”
The company announced 14,500 cuts globally last year, slightly more than 20 per cent of its total workforce, to stabilize its financial situation.
After a rocky start marred by delays and cost overruns, the CSeries is starting to pick up, with 360 firm orders for the jets.
Investments in the new Global 7000 business jet series will create 3,000 jobs, the company said.
Quebec announced a $1-billion U.S. aid package for the CSeries program in late 2015 in exchange for a 49.5-per-cent stake, which allowed Bombardier to secure sales. The company’s fortunes rebounded on news of the sales and government aid, with stock prices increasing by 45 per cent in 2016.
Bombardier also sold a 30-percent stake in its railway division to pension fund manager Caisse de dépôt for $1.5-billion U.S.
In Quebec City, an official in Premier Philippe Couillard’s office welcomed the news.
“The involvement of the federal government in the CSeries and Global 7000 (project) is a step in the right direction,” said Harold Fortin, spokesperson for Couillard.
“Bombardier confirms that the partnership announced with the federal government responds to
its expectations. We expect the federal government to pursue this cooperation with the goal of developing the Quebec aerospace industry.”
Montreal Mayor Denis Coderre and the Montreal Chamber of Commerce applauded the announcement as well.
But the federal support also drew swift condemnation.
“This government started out with some encouraging talk about ‘value for taxpayers,’ but it’s now the same old approach of giving big taxpayer subsidies to powerful corporate interests,” Aaron Wudrick, federal director for the Canadian Taxpayers Federation, said in a statement.
The support for the Montrealbased manufacturer could also have repercussions abroad.
Brazil has said it would launch a trade challenge against Canada before the World Trade Organization over financial support for Bombardier, which competes with Brazilian-based Embraer. Bombardier has said such a move would be without merit.
Brazil has complained about US$2.5 billion in investments in Bombardier, including money to “ensure the viability of the new CSeries aircraft and its placing on the market at artificially reduced prices.”
In December, Prime Minister Justin Trudeau said he was hopeful a deal with Bombardier could be reached before the spring federal budget, adding that all countries, including Brazil, help their aerospace sectors.
Trudeau’s international trade minister, François-Philippe Champagne, had one message for any country considering a trade challenge: bring it on. “I am very much prepared to fight for what we are doing tonight,” he said.
Bellemare added: “This is the best plane in its class, so people are finding ways to come after us. We’ll find ways to compete successfully.”