Here’s an idea for Bombardier: Let it fail

There’s little to suggest Bombardier’s collapse would be the economic crisis its supporters suggest, and it may even be good for Quebec



If Quebec’s economy minister Jacques Daoust followed through on his promise (and there’s no reason to think he didn’t), within minutes of Prime Minister Justin Trudeau announcing his new cabinet on Wednesday, Daoust commenced the latest shakedown of federal taxpayers on behalf of Bombardier. Quebec has already gambled $1 billion of its own money on a partnership with Bombardier to develop its struggling CSeries jet. Now both the province and the company expect the new gang in Ottawa to match that “investment.” It’s an important early test of Trudeau’s economic policies: Resist the bailout request, and he’ll go a long way to silencing critics who’ve claimed he can’t be trusted with the nation’s finances; cave to Bombardier’s demands, and his new government will be born into the original sin of corporate welfare.

It’s fitting Trudeau is being tested by Bombardier. No company has been so adept at extracting taxpayer cash as it stumbled from one era of mismanagement to another. Over the years, Bombardier has received roughly $1 billion in federal support, from governments of all political stripes, including the last Conservative one. So here’s some advice for the new PM. How about trying something entirely new: let Bombardier face failure.

But wait, what about all the terrible, awful things we’ve been told would happen if Bombardier collapsed? The funny thing is, we’ve heard the threats so often, we simply take them for granted without putting them to the test.

Counterpoint: Why Quebec’s billion-dollar loan isn’t so risky

Let’s start with the main reason given for propping up this failing business: jobs. In Quebec alone, Bombardier directly employs 18,000 workers. Those aren’t just any old jobs either, the line goes, but “high paying” jobs that would disappear were it not for public aid. That’s a big and scary number, no question. And nobody relishes the idea of people being laid off. But there’s little to suggest it would be the economic crisis Bombardier’s supporters suggest.

For one thing Alberta, a province with a population half that of Quebec, has seen 35,000 oil patch jobs disappear so far this year. Those too are high paying jobs, among the highest paying in the country. Yet far from facing economic Armageddon, Alberta’s economy has remained surprisingly resilient. Yes, it is in recession, and yes, the government is now going into debt. But where jobs have been slashed in oil and gas, they’ve been made up for in other sectors. Alberta has actually outpaced the rest of the country in employment growth since oil prices collapsed in 2014.

It helps that Alberta’s labour market is far more diversified by industry than most people believe, meaning it is able to adapt more quickly to shocks like the oil crash. In fact, University of Calgary economist Trevor Tombe has shown that Alberta has the least concentrated job market of any province. Quebec is at the other end of the spectrum—only Newfoundland is more concentrated—and, not surprisingly, aerospace manufacturing is one of the key sectors where the province’s job market is overly exposed. Propping up Bombardier with more government money only serves to reinforce the province’s dependence on the industry for jobs, hindering its ability to adjust to structural changes in the economy.

It’s also worth remembering that when other big and important companies have failed, the economy has bounced back. At its peak, the tech giant Nortel employed 18,000 people in Ottawa alone. When it collapsed, it hammered the city. Some former workers were forced to move away for work. Others stayed, however, and either found work at new tech upstarts or launched businesses of their own, ushering in a tech revival in the city. In the same way a forest fire clears away the old, tangled brush to allow for new growth, Bombardier’s demise could be exactly what’s needed to spark a much-needed spirit of entrepreneurialism in Quebec.

That is, if it dies. Those desperate to keep shovelling more taxpayer money into Bombardier might also be surprised by what would happen were it left to fend for itself. If the CSeries is as cutting-edge as the company and analysts say, Bombardier should have no trouble finding a ready partner on its own. Indeed, last month it was revealed that its French rival, Airbus, had been in talks to take a stake in the project. Those talks ended, however, for the same reason Bombardier always has trouble raising private capital—the company’s dual class share structure, which cements control firmly in the hands of descendants of company founder Joseph-Armand Bombardier.

In other words, Quebec and federal taxpayers are being asked to pony up to protect the financial well-being of the family, which, incidentally, received approximately $150 million in dividend payments from Bombardier over the last decade, even as the company has yet to repay all the money its borrowed from the federal government in the past. There’s an obvious economic incentive for Bombardier’s controlling shareholders to do what it takes to ensure its survival. 

Without government support, Bombardier may not survive. Or cut loose, it might survive and, with a different ownership structure, thrive. But we’re long past the point when this company’s fate—and this family’s fortunes—should be dependent on the generosity of taxpayers. Trudeau would be doing both taxpayers and Bombardier a favour by saying “No.”


Here’s an idea for Bombardier: Let it fail

  1. Let’s cut off the Macleans subsidy, and see how well YOU do

  2. Kirby- You do realize you’ve just published heresy and high blasphemy, don’t you? Well done, though. Just keep an eye out for the thought police to come a-knockin’. A man who’d print this kind of blasphemy about one of Canada’s sacred cows, well there’s no tellin’ what kind of stuff he’ll be printin’ next ‘n’
    gettin’ the common folk all riled ‘n’ such.

    • The election is over

      You lost

      Give it a rest

  3. Agreed. No more money; let them figure it out. Restructure; maybe sell off some sectors to raise the necessary cash. From the sound of things, maybe it’s time to push the family out.

  4. Bombardier has been like another have not province for too long! Time to move on Canada!

  5. I have no problem giving them funding, for a NEW NEXT GENERATION STEALTH FIGHTER BUILT IN CANADA!! Why not offer them a chance to become our home grown supplier of military vehicles? Forget about the commercial jet segment, China just entered that arena and have a labour force they pay in peanuts! Think OUTSIDE the box!!

    • Wait…aren’t Canadians and especially those who hail from Quebec out of the war business? Why do they want to prop up a company that is very much into the war business. Do they not know that Bombardier is a corporate partner with NATO and provides HAWK planes to train fighter pilots from foreign countries at military bases in Moose Jaw and Cold Lake? Quebec is against a trans Canada oil pipeline but they want to subsidize the building of planes that use the bi-products of the oil and spew all kinds of emissions?

  6. “Those talks ended, however, for the same reason Bombardier always has trouble raising private capital—the company’s dual class share structure, which cements control firmly in the hands of descendants of company founder Joseph-Armand Bombardier. ”

    If the federal government does decide to throw money at Bombardier, one of the (non-negotiable) conditions should be an end to dual class shares. One might be able to accept a dual class share structure if the people running the show were doing an exemplary job, however, that is clearly not the case with Bombardier.

  7. All these types of bail-outs do is perpetuate the economic conditions that lead to the bail-outs in the first place. The Bombardier heirs know that they will never have to restructure if there’s always a helping hand of government. If they don’t restructure, they’ll always need that helping hand of government. Because that dog is always chasing its own tail, it can’t hunt.
    Look, if Bombardier was located in Calgary or Saskatoon, we wouldn’t be having this conversation. But, because it’s largely a Quebec company, the reflexive reaction of the Libranos will always be to funnel money into the memory hole of the day. Today, it’s Bombardier, and tomorrow it’s someone else.
    Meanwhile, those parts of the country that have pursued lower tax strategies in order to bring better economic health, find their successes eroded by the weak economic conditions of the regions that have pursued high-tax strategies. Healthy companies in low tax (i.e healthy) regions are continually forced to pay extra taxes to prop up unhealthy companies in high tax regions.
    That kind of thinking is morally, ethically, and intellectually bankrupt.

  8. So it seems to me that yanks are so scared of c series they will print any type of dribble to sway negative news?Always telling others what to do yet they are falling behind by the day.F 35 wasted piece of junk who needs a steath plane in a world full of missles and drones dumb? who needs a plane with low pollution noise and airborne pollutants we do?

  9. Here’s an idea for Macleans…no subscription renewals. See if it survives.

  10. Those who forget history are bound to repeat it. Anyone remember Prime Minister Diefenbaker and the Avro Arrow? Let Bombardier fail and all the people who can build airplanes will head south again(or now to Europe) and build airplanes for someone else. It’s called Brain Drain and it takes generations to recover from it. For better or for worse, Bombardier is the only major producer of airplanes we have, and to deliberately allow it to fail would be a terrible technological loss to Canada.

    By all means insist on a change of the ownership arrangement of the company as a condition of financial assistance, something the Quebec government should have done, but don’t let it fail in a fit of pique.

    For those who have not heard about the Arrow, when Diefenbaker shut down the Arrow project, (a fighter aircraft so far in advance of anything anyone, even the Americans, had), reasoning it was too expensive, Avro collapsed and most of the engineers and technicians who worked on the project headed south to help the Americans develop better airplanes and help NASA get a man into space. If the Arrow project had advanced, we wouldn’t be looking at the F35, because an updated Arrow would probably be still flying. It was designed by Canadians for Canadian needs, using Canadian know-how and ingenuity. At the time, it would have been an easy sell to many other countries.

    Let’s not make the same shortsighted mistake again

  11. Sure, bail it out, under the conditions of restructuring, starting from the top down. Unproductive managers will be axed and those under them will be raised in their positions. Or, if Bombardier is so irreplaceable, how about we nationalize it… It seems like the government has already spent a pretty penny to prop Bombardier up a few times, might a well just buy it out…

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