Bombardier ties with Ottawa run deep

Almost since the time a young Joseph-Armand Bombardier built the world's first snowmobile in his father's garage, the company that bears his name has been fuelled by two parts ingenuity, one part knowing the right people.

When one talks of the success of Bombardier Inc. -- which still makes the snowmobile but is now as well known for rail cars and jets -- talk inevitably turns to its fabled federal government connections.

Those connections, many believe, helped it convince Ottawa to abandon its rules-based trade strategy and get back into the subsidy game this week by providing $2-billion in loans to help Bombardier compete for a contract.

Few companies in any country can claim to have ties as deep and enduring as Bombardier has to the federal government here. Dating back to the Second World War, the company has had a remarkably warm and mutually profitable relationship with Ottawa, whether the party in power be Liberal or Conservative.

The link was initially forged in wartime, when a cash-strapped Canadian government approached a company known as L'Auto-Neige Bombardier about designing covered snowmobiles to patrol the Arctic. The demand was immediate and the required special designs and subcontracting nearly drove the firm into insolvency. The orders got filled, however, and government "owed one" to Bombardier by the time the war ended.

It became over time the company's modus operandi. Identify government needs and position yourself to solve them. Build up political capital, and cash it in when needed most.

"Bombardier established its strategy a long time ago, with the federal government as the milch cow," said one academic, who spoke on condition he not be named because of his ties to people with Bombardier connections.

"It really started during the Mulroney era and has continued through the Chrétien regime."

The classic example was Bombardier's move in 1986 to take flailing jet maker and Crown corporation Canadair Ltd. (now Canadair Aerospace Group) off the federal government's hands. While the purchase left some scratching their heads -- Canadair required a cash infusion of about $500-million -- the company scored another political point with Ottawa.

A month later, the government set off a political firestorm when Brian Mulroney's Conservatives awarded Canadair a $1.4-billion contract to maintain Canada's CF-18 fighters, snubbing a cheaper bid from Winnipeg's Bristol Aerospace Ltd. in the process.

The key, many suggest, is the company's tight and myriad connections to the federal government.

Chairman Laurent Beaudoin is a personal friend of Prime Minister Jean Chrétien's, and an outspoken federalist who rallied to Mr. Chrétien's side in the 1995 Quebec sovereignty referendum. Robert Brown, the current president and chief executive officer of the company, is a former senior assistant deputy minister in the federal Industry department. Pierre Pichette, the company's director of public affairs, previously held a parallel post at the Department of Foreign Affairs. The company is also a major donor to the federal Liberal Party.

"They really go to the trouble of knowing how government works," said Jeff Polowin, senior vice-president at Ottawa-based public relations firm Hill and Knowlton.

But most acknowledge it's more than that. In many ways, the firm also fits with Mr. Chrétien's ideal of how government and industry can work together to promote Canada abroad and create jobs.

The aerospace industry in Canada has exploded to $20.3-billion today from $8.7-billion in sales in 1983. The number of Canadians employed in the industry has jumped to 91,500 over the same period from 53,000. Bombardier is a big part of that.

"There's a perception, in the press and the general public, that they're successful because they're looked at with considerable favour [by Ottawa]" said Peter Smith, president of the Aerospace Industries Association of Canada lobby group. That, he believes, is because Canadians, unlike people in most other countries, excel at "success-bashing" and get riled when the federal government moves to help a firm that made more than $700-million in profits last year.

"I would prefer to think the government is being influenced more by track record than personal connections. . . . If you look at the size of the aerospace industry, you could legitimately suggest the government should do everything in its power to ensure a level playing field" with competitors in other countries, he said.

The company not only turned Canadair around, Mr. Smith pointed out, it rode to the Ontario government's rescue in 1992, saving thousands of union jobs when it bought a controlling share in jet maker de Havilland Inc. from the province after Boeing Co. abandoned the firm.

But while the province of Quebec joined Ottawa this week in helping match the subsidies Brazil offers Bombardier's arch-rival, Embraer SA, the company's federalist credentials play much differently in its home province.

Mr. Beaudoin has paid the price in his native province for his support of federalism over the years. Quebec opted to offer loan guarantees only up to 10 per cent of a proposed $3-billion sale of Bombardier regional jets to Air Wisconsin Airlines Corp. Ottawa would cover up to 73 per cent of the sale value.

"If Bombardier had remained officially neutral, [the Quebec government]would have been far more generous," one source said.

However, Bombardier is not entirely without ties in the sphere of provincial politics.

Former Liberal premier Daniel Johnson sits on Bombardier's board, while Pierre Lortie -- a former chief executive assistant to then-finance minister Raymond Garneau in Robert Bourassa's Liberal government of the early 1970s -- is president and chief operating officer of Bombardier Capital, and next month takes over as head of Bombardier Transportation.

Bombardier Inc. executive vice-president Yvan Allaire -- a key adviser to Mr. Beaudoin -- was one of the three founders of Secor, an influential consultancy firm that has strong links to the provincial Liberals and was also close to Tory prime minister Brian Mulroney.

In an interesting twist, Pierre MacDonald -- a former Bombardier executive and Quebec Liberal cabinet minister -- is currently a director of the Export Development Corporation, the Crown corporation from which the federal loan guarantees would come in the proposed Air Wisconsin deal.