Experts say governments need to support Bombardier in order to diversify economy

MONTREAL – Continued government support for global firms such as Bombardier Inc. is critical if Canada wants to diversify its economy beyond natural resources, say two business experts.

Bombardier (TSX:BBD.B) announced Wednesday it’s cutting 7,000 jobs over two years, including roughly 3,000 in Canada, months after the Quebec government pledged US$1 billion of public money for the firm.

The federal Liberals say they are studying Bombardier’s request for more funding, which reports say is also $1 billion.

Prof. Tyler Adam Chamberlin of the University of Ottawa’s Telfer School of Management says more government cash for Bombardier is essential because the country doesn’t have many firms like it.

Canada’s giant telecoms don’t compete internationally and the country’s big banks are insulated from foreign competition, he said.

“When you really dig into it and ask how many companies in Canada are really engaged in global, competitive industries, the number dwindles quickly,” Chamberlin said.

Bombardier employs more than 70,000 people around the world and exports roughly 95 per cent of its products.

“There is no one at the size of a truly global competitor with a global footprint as Bombardier,” said Karl Moore, professor at the Desautels faculty of management at McGill University.

Chamberlin said Bombardier’s competitors such as Boeing in the United States and the European-based Airbus receive state support that “dwarfs” Canada’s subsidies.

“This is the nature of the industry,” Chamberlin said. “We have to be prepared to ask ourselves that if we really want to be in this industry, this is what we have to do.”

Chamberlin added that if Canada wants to get out of the boom-and-bust cycle of oil and to have an economy that relies less on extracting resources from the ground, supporting global industries such as Bombardier is essential.

In Quebec City, Premier Premier Philippe Couillard defended his government’s decision to inject the money into Bombardier’s CSeries commercial aircraft unit without taking an ownership percentage in the company’s rail sector.

Couillard said the move was the right one as 3,200 of the job cuts are set for the rail department with none planned on the CSeries side. Moreover, he pointed to Air Canada’s announcement Wednesday it had signed a letter of intent for 45 CSeries planes, with an option to buy 30 more.

The CSeries is Bombardier’s new generation of aircraft for commercial airlines and has been in development for more than a decade as an alternative to smaller models of passenger jets built by rivals Boeing and Airbus. The aircraft is about two years behind schedule and at least US$2 billion over budget.

Parti Quebecois Leader Pierre Karl Peladeau took Couillard to task, saying the government needs to renegotiate its deal with Bombardier.

“It’s incredible,” he said. “The government is putting $1.3 billion (Canadian) in a company that is going to reduce its workforce here in Quebec.”

One area of agreement between the political rivals was their respective calls on Ottawa to come through with financial help.

“It’s clear the federal government has to support the CSeries,” Couillard said. “If we’re talking about innovation in aeronautics it’s in Quebec that it’s happening and when we’re talking about innovation of aeronautics it’s the CSeries.”

Peladeau urged Couillard to call Prime Minister Justin Trudeau and tell him to get cracking on releasing funds for Bombardier.

“The aerospace business and the industry in Quebec is so important,” Peladeau said. “We need to make sure we take the proper measures to protect it.”

Moore said he believes Trudeau will come through for a few reasons.

“Given how many MPs are from Quebec, and the fact the prime minister and the transport minister both have their ridings in Montreal,” he said. “(Plus), Bombardier is Canada’s top global firm.”