Wednesday, October 18, 2017

Something To Keep In Mind

The Canadian aerospace industry just got shafted -- again. And Donald Trump got what he wanted. Tom Walkom writes:

The latest chapter of this ongoing saga began in April when American aerospace giant Boeing formally complained to the U.S. Commerce Department about Bombardier’s proposed sale of 125 C Series jets to Delta Air Lines.

Charging that the project had been improperly subsidized by the Canadian and Quebec governments, Boeing asked that an 80 per cent tariff be slapped on any C Series plane entering the U.S.

The Trump administration was more than agreeable. It imposed a preliminary tariff of 300 per cent, thereby making the Canadian-manufactured jet virtually unsalable in the lucrative U.S. market.

So Bombardier went to Airbus, which owns a plant in Alabama:

For Airbus, the arrangement is sweet. In return for letting Bombardier use its Alabama plant, it gets just over 50 per cent of the C Series project for free. It doesn’t have to pony up a cent.

Nor does it have to absorb any of Bombardier’s sizable $8.7 billion debt, much of which was incurred developing the C Series.

For Bombardier too, this is a good deal. By moving assembly from Canada to the U.S., it avoids the 300 per cent tariff and keeps the Delta sale alive. As well, it gets to locate its American production in a so-called right-to-work state that promises cheap wages and is vehemently anti-union.

While it no longer controls the C Series, Bombardier does get to keep a 31 per cent stake in the project for at least 7.5 years. And it can take advantage of Airbus’ global reach to market the jet.

And Donald Trump gets the jobs required to assemble the aircraft. Something to keep in mind during the current NAFTA negotiations.



Lorne said...

An egregiously bad deal for Canadian workers and taxpayers, as usual, Owen.

rumleyfips said...

I don't think you and Tom have thought this through. Boeing in its attempt to put Bombardier out of business has made Airbus stronger. Boeing will be hard pressed to sell regional jets ( when it builds them decades from now ) having given Airbus a huge headstart . Alabama may gain a few jobs, but Seattle may lose. Trump trade at its best.
Bombardier gets to sell more planes.

Owen Gray said...

Canadian and Quebec taxpayers aren't going to make money on this deal, Lorne.

Owen Gray said...

True, rumley. And, presumably, workers at the old Canadair plant in Montreal get to keep their jobs. But the new jobs created to manufacture the jets go to a right to work state. The investor class will profit from this deal. But labour will get what it has got four forty years -- the shaft.

Steve said...

Everybody made out like bandits except the Canadian Taxpayer. We had a bad hand and played it as well as possible. The bully wins once again.

In our ridiculous NAFTA discussions the Trump side has some good arguments, well you agreeded to all this in the TPP. Its the old argument, if you accept money for sex, it does not matter what the amount your still a prostitute.

Owen Gray said...

The trouble with Trump's take on trade, Steve, is that there can only be one winner -- him.

Steve said...

He is the ultimate John Owen, the world has seen that.

Steve said...

whats the difference between being a coal miner and a slave?
Slave where black before they went underground.

The Mound of Sound said...

Nobody is sure where this deal will lead. Walkom suggests that Airbus just landed like some vulture to pick at the Bombardier carrion. Apparently he's unaware of the extensive negotiations Bombardier and Airbus had over the C-series back in 2015.

I wish Canada's economy was more integrated with Europe's. Airbus is a consortium of European aviation companies; French, British, German, Italian and Spanish. I would prefer to see Bombardier a member of that consortium than the deal we had to accept thanks to Boeing's and Washington's determination to crush Canada's aerospace industry. Perhaps integration is still possible. I think we should pursue it.

That would begin by turning our backs on Boeing, Lockheed, Raytheon, especially for our military acquisitions. New fighters? We should get involved with the Franco-British next generation fighter programme. Or perhaps joint venture with SAAB for a longer-range, twin engine variant of their Gripen fighter. In the interim we should let natural attrition reduce our CF-18 force. Take it out of operations and use it exclusively for training to maintain a requisite pool of qualified pilots.

Oh yeah. If Trump intends to beat us up on NAFTA, we should exit NORAD. All it's ever been is a northern air defence buffer for the US. During the Cold War, America's nuclear-tipped Nike missiles were deployed to intercept incoming Russian bombers - over Canada. That's right, those nuclear warheads would be detonated over Canada. They weren't even going to charge us for the fallout. And it's time to exit America's PermaWars in the Middle East.

Toby said...

Has Trudeau canceled the Boing Super Hornet fighter jet deal yet? Or was this just an idle threat?

Owen Gray said...

When it comes to fighter jets, Mound, there are a lot more options than those developed and made by American manufacturers -- which are notorious for their cost overuns. Given Boeing's attack on Bombardier, buying from a non American aerospace company might be wise policy.

Joining the European consortium might also give Bombardier more clout. But, as I wrote to rumley, it seems only right that Canadian labour should also benefit from Bombardier's success, given that taxpayers have helped the company over a few humps.

Owen Gray said...

I understand that the Liberals are looking at some Australian fighters, Toby. But I don't know the state of play on that score.

Trailblazer said...

Mound said,
I wish Canada's economy was more integrated with Europe's. Airbus is a consortium of European aviation companies;

The Brit's are panicking over the lack of Typhoon orders; perhaps this is the time to put on the squeeze and get a good deal?

Unless Canada want's a state of the art ( as per today) sneak attack aircraft there are alternatives to the F35 and Super Hornet.

Much of the very high end USA equipment sales depends upon being part of USA foreign policy!!

At the end of the day ; aviation is the loser.
We have an ever decreasing well of competing aircraft producers.
Those that are still producing would seem to spend as much on politics as they do producing what they are capable of!


The Mound of Sound said...

Buying used F-18Es from Australia is still buying Boeing product. It means purchasing Boeing spares and Boeing support and why should we get ourselves into another long-term relationship with Boeing? Canadians haven't got the sand to do it but imagine if the public wouldn't book flights on Air Canada Boeing jets but only on Airbus 320s.

Owen Gray said...

Thanks for the images, TB. What a terrific idea. The fossil fuel industry -- like the asbestos industry -- is headed to the exits.

Owen Gray said...

Boeing is heavily subsidized by public spending from the Pentagon, Mound. If public spending was redirected, the giant could be cut down to size.

Steve said...

The best fighter for Canada is a Q400 drone with nice missiles. Dogfights are not US.

Owen Gray said...

Something tells me you'd get a lot of disagreement about the appropriate aircraft, Steve.