You've got to hand it to the brilliant, Machiavellian minds at Airbus.
In one fell swoop, like an eagle swooping down on a dove, Airbus Group SE has seized the world's most technologically advanced small passenger jet, the Bombardier C Series, for nothing – as in zero, zilch, nada – even though Bombardier Inc., with a little help from its government friends, had sunk about $6-billion (U.S.) into developing the product. In doing so, Airbus has neutered a potentially strong competitor and dealt a blow to archrival Boeing Co., which has no plane that can compete with the C Series.
It gets better. Bombardier, not Airbus, is still on the hook for as much as $700-million in funding for the C Series over the next three years. Airbus doesn't even have to assume any of Bombardier's debt, which has climbed in recent years to almost $9-billion (Canadian), nearly double its market value. For Airbus, the deal is money for nothing, C Series for free.
And by the way, Airbus, which is 11 per cent owned by the French government and touted as a European corporate champion, had the sweet joy of exposing U.S. President Donald Trump as a true chump. When the U.S. administration slapped preliminary import tariffs of 300 per cent on the C Series a couple of weeks ago, the plane was effectively shut out of the world's biggest commercial jet market. Facing catastrophic losses on the slow-selling C Series, poor, hapless Bombardier had no negotiating power. Airbus could write the deal it wanted.
And yet you could argue that Bombardier made the best of an impossible situation and that the Airbus deal actually presents good prospects for Bombardier, for Quebec and for Canada.
The C Series is to be owned 50.01 per cent by Airbus, 31 per cent by Bombardier and 19 per cent by the Quebec government, which in 2016 sunk $1-billion (U.S.) into the project after it was overwhelmed by delays and cost overruns.
The optimistic case says it's better for Bombardier and Quebec to own almost half of a plane that stands a good chance of selling, now that Airbus's formidable global marketing, financing and servicing power is behind it, than 100 per cent of a plane that that was stuck in the hangar. In theory, the C Series could sell a few thousand jets over its life span – the order tally so far is only 350 – allowing Bombardier and Quebec to recoup their investment, perhaps even earn a return on that investment.
The pessimistic case says that Bombardier and the taxpayers of Canada and Quebec, who have propped up Bombardier in general and the C Series in particular for years, got taken to the cleaners. This case is more compelling.
Remember, the C Series is to become an Airbus product owned by a European company with zero allegiance to Bombardier or Canada, even though it will be happy to take Bombardier's $700-million to cover the C Series' losses for the next two years. Might the Canadian or Quebec taxpayer be forced to cover some of these losses? That scenario cannot be ruled out, all in the name of protecting manufacturing jobs in Quebec.
Which leads us to Alabama, of all places. Airbus recently opened a plant in the state to assemble the company's workhorse A320 jet for the North American market. Airbus intends to add a C Series assembly line in Alabama to serve the plane's U.S. customers and circumvent the Commerce Department's murderous tariffs. (Though Boeing, which called for the tariffs, is bound to use every one of its conniving ways to ensure any non-U.S. parts do not enter the country duty-free.)
There is a reason that Airbus chose Alabama for its assembly plant; it's a cheap place to do business, where "right to work" laws discourage unions. You can bet that if Airbus finds it less expensive to pump out the C Series in Alabama than Quebec, it will do everything in its power to transfer production to Alabama, unless, of course, Quebec fights back. And how would it do that? By offering to subsidize production north of the border to keep Bombardier's Quebec jobs from vanishing into the night. Bombardier is Quebec's, and Canada's, premier engineering and technology company. Quebec won't let those jobs go easily.
Two years ago, Bombardier and Airbus spent months negotiating a deal that reportedly would have seen Airbus finance the remaining development costs of the C Series in exchange for a controlling stake in the project. Note the date: It was a year before anyone could imagine that Donald Trump and his "America First" agenda could take over the White House. (The deal went nowhere.)
At the time, Bombardier had some negotiating power. But as soon as the C Series got slammed with the tariffs, it was game over and Airbus was able to negotiate a sweet deal that will see Bombardier – and perhaps the Canadian and Quebec taxpayers – still write the cheques for a product over which it has lost control.
Airbus was brilliant. It owns the finest piece of Canadian aerospace technology on the market, and it got Bombardier to subsidize the deal.