Timing couldn’t be more perfect
Comment It was a near miracle of timing and convergent strategies within Quebec Inc., the faltering government-corporate-union collaborative economic model once portrayed as the solution to the province’s economic development problems.
On Wednesday morning, two major Montreal corporations and the Quebec government popped up to set the stage for a full revival of the idea that business and government are corporate partners in the grand scheme of building the economy of the future. All they need now is the federal government, which appears set to join in to create an all-new version of Quebec Inc.
Out of the blue came Bombardier and Air Canada to announce that the airline had signed letters of intent to buy 45 of Bombardier’s CS300 aircraft with options for another 30.
With that, struggling Bombardier — its shares trading at penny-stock levels — can claim to have finally sold the CS300 to a “mainline international network carrier.”
Next miracle: the Quebec government dropped its four-year-old lawsuit against Air Canada for failing to keep heavy aircraft maintenance operations in Quebec and Canada, allegedly in contravention of federal law. Just last month, Air Canada announced it was taking the case all the way to the Supreme Court. But now, suddenly, the case is settled and the airline has agreed to maintain the CSeries in Quebec for the next 20 years, scoring a victory for Quebec members of the international machinist and aerospace workers union.
No dollar figures were announced, but the news almost overshadowed Bombardier’s announcement that it would be laying off 7,000 workers worldwide. Did I say layoffs? In the corporate biz- speak of the day, Bombardier said it is engaging in “global workforce optimization” that just happens to involve reducing employment by slightly more than 10 per cent of the company’s workforce.
Ironically, almost half of the “optimization” will take place within Bombardier’s transportation division, the rail and train maker, which recently received a $ 1.5- billion cash injection from the Caisse de dépôt et placement, the province’s pension plan, as part of an expanding Quebec Inc. effort to save Bombardier. At the time, the Caisse’s investment was said to be providing a “nice safety net” while guaranteeing a fat 9.5% return to the pension fund. The safety net obviously does not apply to all employees.
The next big government infusion is expected soon from Ottawa. Alain Bellemare, president and CEO of Bombardier, made it clear that the company is counting on t he Trudeau Liberals to follow the Quebec plan. Last October, the province put up $ 1 billion to fund the struggling CSeries.
In a teleconference session Wednesday, an analyst wondered whether Bombar- dier still needed Ottawa’s help since the company is now sitting on $6.5 billion in cash. Bellemare said Ottawa would be providing a useful boost to cash and confidence.
First, Ottawa’s endorsement would help the company and airplane buyers to “regain confidence” in the CSeries. “We are looking forward to seeing the federal government coming into the program as an equity partner.”
Bellemare said discussions with Ottawa are “ongoing” but he wanted to “be careful as to what we’re communicating and saying publicly. But we all think that the federal government would come very close to what Quebec did.” Quebec took an ownership position, he said, and “we hope that the federal government will do something similar.”
When that does happen, the effective equity owners of the C Series project will be Ottawa and Quebec. The analyst then raised the tricky financial accounting question of how Bombardier would account forth eC Series project on its books if the governments essentially owned the company? Belle mare said that little accounting problem had not yet been resolved.
The convergence of Quebec Inc. around Bombardier is now substantial: $ 1 billion from Quebec for airplanes; $1.5 billion from the pension plan; another $ 1 billion from Ottawa; a new airplane order nominally worth $ 3.8 billion from Air Canada.
Air Canada says it was not forced into the CS300 deal by any government. Since the planes are said to be state of the art, that may well be true.
To hear Bellemare talk about Bombardier, one might wonder why the company needs all this government help. “We are turning Bombardier around,” he said, “getting traction” with a “strong footprint” and “building momentum” while “re- sizing our manpower to match future workloads.” As a “global market leader” the company is “driving efficiency in all sectors.”
In other words, it’s all good — especially when the objective is to sell the Trudeau government on the merits of keeping an old economic idea alive.