Requires several long-term promises from Airbus before signing off.
October 18, 2017
by Lee Berthiaume
OTTAWA — The federal Liberals have promised to build in safeguards to make sure this week’s stunning deal between Bombardier and European rival Airbus helps – and doesn’t hurt – Canada’s aerospace industry.
Airbus wants to buy a majority stake in Bombardier’s CSeries commercial planes, whose future has been in question after US officials proposed a hefty 300% import duty on the jet program.
The two plane makers hope that by working together, they can skirt the duties by building CSeries planes for US customers in Alabama instead of outside the US.
But the proposal, which still needs federal approval, has raised questions about whether it will result in job losses in Quebec, where Bombardier is based, and weaken Canada’s aerospace industry.
Economic Development Minister Navdeep Bains promised the Trudeau government would require several long-term promises from Airbus before signing off on the deal.
Sources say those undertakings were negotiated in advance by the government and Airbus, and include keeping 100% of those employed at Bombardier’s main CSeries assembly plant in Mirabel, Que.
Airbus would also keep and even expand production at the Mirabel plant, which is currently running under capacity, while also adding an assembly line in Alabama to meet demand from US customers.
Canada will also become the company’s fifth “home base,” and first outside Europe, to allow Canadian industry to tap into the company’s supply chain, while the CSeries headquarters will remain in Quebec.
The European company will also take over repayment of the federal government’s $372-million loan to Bombardier for research and development of the 100- to 150-seat commercial planes.
“I oversee this process,” Bains said outside the House of Commons, “and I will make sure we get the maximum economic benefit for Canadians.”
But one question remains: how long Airbus will be required to maintain employment and production levels under the agreement, and whether Canada will continue to benefit after that period has expired.
Bains said the government was looking for “long-term production guarantees in Canada” that would run “at least a minimum of 20 to 25 years,” though an official said that was still to be negotiated.
The minister was more guarded about employment levels, though he hoped the deal result in thousands of CSeries planes being ordered and built in Montreal.
“We think the potential sales opportunity in this segment is up to 6,000 over the next 20 to 25 years,” he said.
“So that means there’ll be stable, predictable production opportunities in the Mirabel facility … and that means more jobs, up to 5,000 jobs in that facility.”
Peter Glossop, a foreign investment lawyer with Osler, Hoskin and Harcourt, said most government-imposed undertakings run for three years when a foreign company takes over a Canadian entity.
That means the foreign company can basically do whatever it wants once the time period expires, including cut jobs in Canada.
But shutting down or slashing production at the Mirabel plant could be difficult given its expertise with the CSeries, he said, which could ensure its sustainability over the long run.
“There’s lots of embedded know-how in Canada, so just shutting all that down would be quite difficult,” Glossop said. “These people know how to build them.”
But Quebec workers with Bombardier’s CSeries plane program have mixed feelings about the deal with Airbus giving the European aerospace giant a controlling stake in the aircraft, a union representative said.
David Chartrand, Quebec co-ordinator for the International Association of Machinists and Aerospace Workers, said the deal means access to a massive market and possibly more jobs.
The agreement, however, also secures a new, final assembly line in Alabama for the CSeries – employing non-unionized workers serving 30 per cent of the global market for the aircraft.
“It is better to build (a plane) for 70% of the market and sell thousands of planes, than build 100% of an aircraft for 100% of the market and we sell no planes at all,” Chartrand said.
Bombardier says the deal with Airbus – and the new Alabama assembly line – means the CSeries will be able to be sold in the United States duty-free.
“It becomes a domestic product and, therefore, a domestic product would not have the import tariff apply to this,” Bombardier CEO Alain Bellemare said.
Quebec invested US$1 billion in 2016 for a 49.5 per cent stake in the commercial jet program.
The new deal with Airbus gives Quebec a 19% stake in the plane and Bombardier 31%.
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