Monday, February 22, 2016

One Way Or Another


Justin Trudeau is under pressure to bail out Bombardier. Tom Walkom writes that, unless Trudeau breaks with precedent -- like John Diefenbaker -- Bombardier will get its money:

If Trudeau follows the usual pattern, he will comply. Diefenbaker, the only prime minister to withdraw government support from the aerospace industry, is still vilified for his actions.
The standard justification for government support of this particular industry is that every other country does the same. In fact, that’s true.
The Americans subsidize their aircraft manufacturers through defence spending. Brazil does it more directly. Europe’s Airbus Group SE is intimately connected to key governments throughout the continent.

When we bought our CF-18s, we were subsidizing the American aircraft industry. If we buy another American fighter to replace our aging fighters, we'll continue to subsidize the American aircraft industry. So why not subsidize our own?  

Some argue that, if we're going to support the industry, we should nationalize it. But we tried that, and it didn't work out well:

The history of the modern aerospace industry in Canada can be traced back to 1974 and the attempt of then prime minister Pierre Trudeau’s Liberal government to fashion a high-tech industrial strategy.
To that end, Ottawa bought Toronto aircraft manufacturer de Havilland. It purchased Montreal’s Canadair the next year.

But governments have short attention spans. By 1982, the Trudeau government had reversed course. It now wanted to rid itself of these money-draining enterprises.

In 1985, Brian Mulroney’s Conservative government sold de Havilland to the U.S. company Boeing Corp. A year later it sold Canadair to snowmobile maker Bombardier.

Both went at bargain basement prices. In both cases, governments assumed much of the companies’ debt.

But private enterprise does not guarantee success. By 1992, de Havilland was on the block again. Eventually it was purchased by Bombardier and the Ontario government. True to the new orthodoxy, Bob Rae’s New Democratic Party government put up most of the money in return for a minority of the shares.
A few years later, Queen’s Park quietly sold its remaining stake in de Havilland to Bombardier.

One way or another, Bombardier will get its money. 


Steve said...

Owen the Dash 8 would make the perfect drone for counter insurgency and costal patrol.

Anonymous said...

Whether of not Bombardier has its way will depend partly on what the Prime Minister is made of. While it's true that Prime Minister Deifenbaker was vilified over his cancellation of the Arrow project for several decades, he did it for good reasons. It was becoming increasingly expensive to build a plane which likely was not going to sell(because it was so expensive). Rather than throwing more money into what looked like a bottomless pit, he backed away. I'm sure "The Chief" must have known he would pay a political price for it.

Owen Gray said...

The Dash 8 has been a very useful aircraft, Steve. It would not have come into existence without government support.

Owen Gray said...

One way or another, Trudeau will pay a political price, Anon -- in Quebec if he doesn't support Bombardier; and in the West, which feels its oil industry needs a government lifeline.

The Mound of Sound said...

Naturally the debate comes down to the Avro Arrow. Both sides of that argument are buried under so many lies and rumours that quickly make rational discussion impossible. Diefenbaker saw to that by his Avro Kristallnacht. Imagine ordering everything put to the cutting torch. That's beyond irrational if you only want to cancel a programme. He gave the Vandals who sacked Rome a bad name. If Diefenbaker did it 'for good reasons' as Anon 8:48 claims, all the Sturm und Drang was worse than unnecessary. Diefenbaker was a smart man. He knew he was precipitating the controversy that would ruin his reputation. He obviously thought that was the lesser of two evils and so he richly deserves what he still gets.

Owen Gray said...

Throwing the parts into Lake Ontario was Diefenbaker's version of sowing salt into what was left of Carthage, Mound. We're still living with that baggage.

Toby said...

As I see it, a common practice of bailouts is that executives, directors and select owners often take very big bonuses at taxpayer expense. I can understand bailing out a company but I do not want to see the Bombardier family profit in the deal; it is, after all, their failure that has put the company at risk.

Pamela Mac Neil said...

There's still alot of questions around the demise of Avro Arrow Owen. Diefenbakers order to destroy the planes left alot of people questioning why.As Mound said "That's beyond irrational if you only want to cancel a program." I hate sounding like a conspiracy theorist, but many believe the US government had much to do with the closing of Avro and more specifically the destruction of the planes. Why would the Canadian PM destroy the most advanced planes of the day?

Owen Gray said...

That suspicion has always been there, Pam. And it's clear that the military-industrial complex does not respect national borders.

Owen Gray said...

Wall Street set the model in 2008, Toby. Let's hope the model will be broken.