Ottawa hasn't put up any cash yet, but the outline of a federal bailout of Bombardier Inc. and its C Series aircraft is already taking shape.
The federal and Quebec governments could wind up controlling the board of a new joint venture created to get the 100-to-150-seat C Series aircraft into full commercial production. The arrangement would apparently relegate Bombardier's founding family members to minority partners.
The more important story is that Ottawa and Quebec would be in the unprecedented and awkward position of jointly controlling the C Series division. It could become a two-headed beast of a state-owned enterprise.
The federal government has acknowledged that it is in talks with Bombardier, but it has not said whether it will agree to the company's request for $1-billion (U.S.) – money the company urgently needs to get over a short-term dearth of big orders.
If Ottawa does get on board, it promises to be a strange and bumpy flight. For starters, who would be the pilot and who would be the co-pilot? Who gets to hand out the pretzels?
Some analysts have suggested that buyers might balk at buying planes from a state-run company.
There are also trade implications if Bombardier uses the cash infusion to cut the price on the C Series. Global aircraft giants Boeing Co. and Airbus Group SE, which have been heavily discounting their own planes to protect their turf, could push the United States and the European Union to challenge the bailout as an unfair subsidy. Ottawa would be wise to carefully assess its trade obligations to avoid being dragged into a messy World Trade Organization case.
But let's be clear: The death of the C Series – a plane that Boeing and Airbus are bent on destroying – would be an epic Canadian tragedy. With echoes of what Nortel Networks Corp.'s messy end did to Canada's technology sector, the failure of the C Series could destroy a flagship company, gut a vital export-oriented industry and put thousands of people out of work. Aerospace talent and know-how would leave the country, perhaps forever.
Bombardier's financial struggles have put Ottawa and Quebec in an impossible bind.
Letting the C Series fail wouldn't just have political fallout, it would have profound and lasting economic consequences for a country already grappling with the aftershocks of the commodities price crash.
One proposal apparently on the table in the Bombardier talks is the creation of a seven-member C Series board – two named by Ottawa, two by Quebec and three representing the Bombardier and Beaudoin families. The presumption is that the distribution of board seats would reflect the two governments' equity stake in the venture. Former Liberal Quebec Premier Daniel Johnson has been pegged as a possible chairman.
Prime Minister Justin Trudeau and Quebec Premier Philippe Couillard are both reasonable men and seem to get along.
But it would be a minor miracle if the two governments see eye to eye on everything about the C Series – now and five years down the road. And without each other's back, the two governments would be tethered to a beast they can't easily control.
The C Series is a long-term commitment that could outlast either leader's political careers. It's worth remembering that Quebec and Ottawa have a long history of political conflict, on a wide range of topics.
Governments in Canada also do not have a glorious track record of running private-sector companies, let alone a major global manufacturer such as Bombardier.
And yet putting up all that money without the ability to control the investment would be foolish. If Ottawa matches Quebec's investment, it should also get the same equity stake, enabling it to later get its money out – as it did in the 2009 bailouts of General Motors Co. and Chrysler Group LLC.
Ottawa also needs a clear exit strategy. The aim should be to help the highly fuel-efficient C Series aircraft get built and gain a solid foothold in the market. The aircraft's economics are hurt in the short term because fuel prices are so low, but that is unlikely to last.
The success of the C Series will hinge on how the two governments manage this tricky relationship.
Canada let Nortel fail. Ottawa will probably reach the conclusion that it can't also lose Bombardier.