Icons over education: QC government bails out Bombardier

October 29, 2015 4:27 PM

Floundering company thrown a $1 billion dollar lifeline. With teachers and other public worker on strike for better pay, the message seemed to be money for a beloved corporation and austerity for everyone else. Bombardier has lost over $4.9 billion dollars in delayed C Series passenger jet program but the Quebec government is investing taxpayer money in the company. But really, it's less a bailout, QC Premier Phillippe Couillard says, and more an investment. An investment that the taxpayers of La Belle Province are footing the bill for even as taxpayers in other provinces are angry for services not rendered. In the wake of this news, Bombardier stock has taken a tumble.
posted by Kitteh (51 comments total)

Canada might be the only country where you can have a family-run state-owned enterprise.
posted by Nevin at 4:32 PM on October 29, 2015 [1 favorite]

But...but...Bombardier® is a part of our heritage™!
posted by Sys Rq at 4:38 PM on October 29, 2015 [2 favorites]

A decade ago Bombardier made a gamble on the C Series and lost. But can they be allowed to fail? Bombardier directly employs 18,000 people and supports 40,000 in Quebec's aerospace industry. It's crazy that Quebec now has a 49.5% stake in the company.

The dumb thing is Bombardier's regional jets and turboprops, plus its rail business (until recently) have been doing well.

However, the blue sky thinking of the C Series project requires massive amounts of cash, and often state backing. And the world is flooded with used 777's at the moment...
posted by Nevin at 4:40 PM on October 29, 2015 [2 favorites]

Do we have a Bombardier Heritage Minute yet? I can't recall. If not, it should get one as part of this deal.
posted by nubs at 4:41 PM on October 29, 2015

Here, nubs.
posted by Sys Rq at 4:45 PM on October 29, 2015 [3 favorites]

That's "public money", not "taxpaper money", and "the people of Quebec" not "the taxpayers". Thank you. Carry on.

Also, does this mean I'm finally going to get my streetcars? If so, the people of Toronto extend their thanks to the people of Quebec.
posted by If only I had a penguin... at 4:48 PM on October 29, 2015 [18 favorites]

The Quebec government has a 49.5% stake in the CSeries program, not the whole company, however the accountants have that figured out. Considering several billion dollars have already been put into the program by Bombardier, the Quebec government is getting its equity for a song. Of course Bombardier has to sell it for a song because of the risk of Bombardier not ever making its money back on CSeries.
posted by cardboard at 4:58 PM on October 29, 2015 [1 favorite]

This is not unusual in recent Canadian history, by the way. The Ontario government has spent about a billion dollars in compensation after cancelling those gas plants. BC squandered billions and billions of dollars on the Olympics leading up to 2010, and also bailed out Pavco for a new roof for an old stadium. It's how we roll in Canada.
posted by Nevin at 4:59 PM on October 29, 2015

I'm unhappy with the fact that the aerospace industry is more important than teachers and other public workers, who have been offered a 3% raise over five years instead of the (IIRC) 13.5% pay hike over three years.
posted by Kitteh at 5:10 PM on October 29, 2015 [2 favorites]

It's how we roll in Canada the capitalist west.

Don't forget to run your governments like businesses! Had Quebec done so, they would now be receiving a large sum of cash!
posted by maxwelton at 5:15 PM on October 29, 2015 [4 favorites]

That's "public money", not "taxpaper money", and "the people of Quebec" not "the taxpayers".

What does this mean?
posted by ZenMasterThis at 5:30 PM on October 29, 2015 [1 favorite]

Bombardier directly employs 18,000 people

It would be far cheaper to just give each of them $25,000 and tell them to go work somewhere else.

Total cost to the Canadian Government: $450 million, instead of $1 billion.
posted by Hatashran at 5:30 PM on October 29, 2015 [6 favorites]

My husband said the same. He'd have rather the money go towards the employees than propping up this terrible idea. (And we have a good friend who works for Bombardier too.)
posted by Kitteh at 5:42 PM on October 29, 2015

It would be far cheaper to just give each of them $25,000 and tell them to go work somewhere else.

Not a lot of money.

That was about the size of my settlement when I got laid off in 2009 (it was a little less than that, and they paid me at the end of the calendar year so even though I managed to save some of it in an RRSP I still lost a chunk due to taxes and fees).

It lasted for about 6 months.

It's a bad situation though. In one of the announcements someone from Bombardier's top brass said they have to be "aggressive" to somehow sell the C Series. They have I think C$5B now to play with, but the world has completely changes since 2004 when they first launched the project. The emerging BRIC economies that were supposed to buy the planes have stagnated. Japan has also just debuted its first-ever jet passenger plane...
posted by Nevin at 5:52 PM on October 29, 2015 [2 favorites]

The emerging BRIC economies that were supposed to buy the planes

Maybe not BRIC, given that Embraer is based in the "B". RIC? No, doesn't quite have the same ring to it...
posted by indubitable at 6:01 PM on October 29, 2015

The Toronto Transit Commission board has voted to sue Bombardier over the new streetcars it has been unable to deliver.
posted by Multicellular Exothermic at 6:09 PM on October 29, 2015 [1 favorite]

That's "public money", not "taxpaper money", and "the people of Quebec" not "the taxpayers".
What does this mean?

That means that you shouldn't use 'taxpayer' it's a dog whistle. It's Mitt Romney speak.
posted by srboisvert at 6:13 PM on October 29, 2015 [10 favorites]

Maybe not BRIC, given that Embraer is based in the "B". RIC?

The C-Series is about 30% bigger (in terms of seats) than the E-Jet, and presumably with newer technology will be cheaper to run.

Still, it's a good point: Canada as a rule is now competing with more and more countries. Brazil and Korea are our peers now, and it's not just Bombardier that has to compete with companies from BRIC countries.

That's something that has also changed since 2004 with the C Series was launched.
posted by Nevin at 6:16 PM on October 29, 2015

What does this mean?

It means that once you pay your taxes, the money doesn't belong to you as taxpayer anymore, it belongs to you as citizen. The government doesn't spend "taxpayer money" anymore than people blow are blowing their employer's money on booze when they hit the LCBO with their pay cheques.

The "taxpayer money" framing is insidious if you think about what ownership IS. Ownership is a bundle of rights over something. In the case of money that includes the right to determine how something is spent. If the money belongs to people as taxpayers, then the people who pay more taxes own a greater share of it and the people who pay less a lesser share, which if the money were owned by people as taxpayers would mean that people who pay more taxes somehow should have more say. Trump's "rich people should get more votes" is crazy, but it's a conclusion that can be directly drawn from the idea of "taxpayer money."

But the truth is, the money isn't owned by us as taxpayers, it's owned by us a citizens. Which means that people who pay taxes but are not citizens, have no particular legal entitlement to a say in how it is spent and we all own it to the extent that we are citizens, not to the extent that we pay taxes. In other words, since we're all equally citizens, we all get an equal say, whether we're the CEO of Bombradier or a homeless person on the street, we all get an equal say.

Don't get me started on "taxpayer rights." The Charter gives rights to persons, residents, and citizens. There are no rights that you get by virtue of paying taxes. Paying taxes is a duty, not a rights-conferring act.

This languge is insidious and it gets my goat that even progressive writers and policticians have bought into it.
posted by If only I had a penguin... at 6:18 PM on October 29, 2015 [101 favorites]

The Toronto Transit Commission board has voted to sue Bombardier over the new streetcars it has been unable to deliver.

It is my only-briefly-considered-opinion, lawyers and lawsuits that aren't going to get us our streetcars any faster, and might actually slow the whole thing down, are a waste of the people's money.
posted by If only I had a penguin... at 6:19 PM on October 29, 2015 [2 favorites]

At least it's only the Quebec government, unlike in Ontario where the Federal government lost billions propping up GM and Chrysler.

All big aerospace companies are more-or-less government-dependant; look at Airbus or at Boeing and its huge Defence contracts.
posted by Monday, stony Monday at 6:31 PM on October 29, 2015

Maybe not BRIC, given that Embraer is based in the "B". RIC? No, doesn't quite have the same ring to it..

Indonesia, Mexico, Turkey, Thailand, Myanmar, South Africa. TIM-TAMS
posted by the man of twists and turns at 6:37 PM on October 29, 2015 [6 favorites]

For more on taxpayer vs. citizen see this article.
posted by Midnight Rambler at 6:47 PM on October 29, 2015 [3 favorites]

...and tell them to go work somewhere else.

Aye, there's the rub. It's not like there's 18,000 high quality, long-term full-time jobs with years of accumulated benefits waiting for these people to jump into.
posted by GhostintheMachine at 6:49 PM on October 29, 2015 [2 favorites]

Another factor is that the 40,000 supporting jobs support other manufacturers too, like Pratt&Whitney Canada or Bell Helicopter. Bombardier/Canadair is really important to the Montreal aerospace sector.
posted by Monday, stony Monday at 7:06 PM on October 29, 2015 [1 favorite]

Oi, people. If we're going to bark about this, can we at least get our facts straight:

However, the blue sky thinking of the C Series project requires massive amounts of cash, and often state backing. And the world is flooded with used 777's at the moment...

Irrelevant. The C Series is a small, short-haul plane, the 777 is a long-range wide-body. They serve entirely different purposes and markets.

Total cost to the Canadian Government: $450 million, instead of $1 billion.

Quebec Government. It's plastered all over the FPP.

The Toronto Transit Commission board has voted to sue Bombardier over the new streetcars it has been unable to deliver.

Hey, fellow Torontonians, for once let's try not to make everything about us, k?

Okay, now that my pedantry is over, this is a clustercuss for the provincial government. They need to look up the Sunk Cost Fallacy and move on. But hey, when it comes to governments bailing out big corporations, why should today be any different?
posted by dry white toast at 7:40 PM on October 29, 2015 [2 favorites]

"Taxpayer," "citizen," meh, I like "subject".
posted by save alive nothing that breatheth at 7:51 PM on October 29, 2015 [1 favorite]

It's pretty sad to see the Quebec government taking such a big stake in more planes that it doesn't really seem like there is much desire for (let alone need for) while Bombardier sells off part of their railway division. I know the rationale is jobs, jobs, jobs and pride, but going all in on jets with their horrible climate impacts while getting out of the much more sustainable railway business seems like Quebec putting themselves on the wrong side of history in a pretty big way. High speed rail and light urban rail are a growth industry on a global scale. Sad to see.
posted by ssg at 8:05 PM on October 29, 2015 [2 favorites]

Irrelevant. The C Series is a small, short-haul plane, the 777 is a long-range wide-body.

Well, my point is that market conditions have changed since 2004.

Please explain why you seem to think the C Series will sell in 2016/17. If your argument is that there is no real business case then you will probably find that you agreed with me all along :)
posted by Nevin at 8:38 PM on October 29, 2015

I'm unhappy with the fact that the aerospace industry is more important than teachers and other public workers

Teachers and public workers do not contribute to the economy. It is sales of things such as airplanes that allow the teachers and public workers to exist.

However, that aside, what I have heard about Bombardier is that some parts are extremely dysfunctional due to poor management. Will cleaning up the internal problems and setting a high level of rigor be one of the requirements to maintain these cash injections?
posted by niccolo at 9:26 PM on October 29, 2015 [1 favorite]

Teachers and public workers do not contribute to the economy.

*boggles*
posted by Wolof at 9:57 PM on October 29, 2015 [18 favorites]

Teachers and public workers do not contribute to the economy.

Until they spend the money they earn, of course. Or until the outputs of their labour yield people who also contribute to the economy, or create the conditions that allow economic activity (planning, building and maintaining roads and sewers, for instance). I'd suggest a course in basic economics for further detail on this topic.
posted by mandolin conspiracy at 9:59 PM on October 29, 2015 [11 favorites]

Having edited an extensive equity analyst report on Bombardier a few years back, it's an odd company to evaluate.

Parts of their operation are based in Northern Ireland. There are differing opinions about how to value its stock, since there are currency risks at play owing to that.

Because of when and how Bombardier delivers and gets paid for rolling stock or planes (often on an installment basis, or not until delivery, or whatever), and because of things like subsidies, its cash flow is really weird. Add to that currency fluctuations (owing to international operations and delivery domestically and overseas) and their impact on its bottom line quarter in and quarter out - it's a messy company to assign a snapshot valuation to at any given point.

Typically, when a company scores a big contract for billions in product delivery, you'd see a big jump in its stock price. But with BBD, they'll sometimes announce a huge deal for rail or aerospace, and the stock barely responds. All of which is to say that people who watch it very closely scratch their heads about the future or present value of any product sale they make because the company is a weird one to analyze.

So why is this a problem for Quebec? To pull one detail from the first link in the FPP:

The company has committed to maintain CSeries operations in Quebec for 20 years. The deal includes warrants that allow Quebec to purchase up to 200 million Class B shares representing about 8.9 per cent of outstanding shares.

If these warrants expire "out of the money," then this is an empty gesture on Bombardier's part but a meaningful one for Quebec taxpayers. The warrants are what they are - a sunk cost, at this point, for Quebec - but Bombardier's "commitment" means they can fold up shop whenever they want to... ¯\_(ツ)_/¯

Nice deal, if you can get it. Bombardier did.
posted by mandolin conspiracy at 10:28 PM on October 29, 2015 [4 favorites]

Teachers and public workers do not contribute to the economy.

*boggles*

They don't directly bring cash into the province from elsewhere. Industry does. I mean school teachers have value, but you can't run your economy on school teachers.
posted by indubitable at 4:19 AM on October 30, 2015

News — you can't run your economy without them.
posted by Wolof at 4:44 AM on October 30, 2015 [5 favorites]

In America we call these football stadiums. Except we don't get a percent ownership in exchange for the money we funnel into them.
posted by dances_with_sneetches at 5:42 AM on October 30, 2015

All other considerations aside, the money teachers and public sectors employees earn (and the money they spend) is taken into account when GDP is calculated, so even by the most narrow definition they "contribute" to the economy - to say they do not "contribute" is demonstrably false.

However, if the discussion is about the way in which primary industries butress an economy, that's totally fair.
posted by mandolin conspiracy at 7:06 AM on October 30, 2015

Meanwhile, the Québec government want to privatize two of it's profitable businesses, Hydro-Québec and the SAQ...
posted by CitoyenK at 8:13 AM on October 30, 2015 [1 favorite]

Teachers and public workers do not contribute to the economy. It is sales of things such as airplanes that allow the teachers and public workers to exist.

Teachers and public workers allow airplanes to be built.

you can't run your economy on school teachers.

What are you talking about? We DO run the economy on teachers and public workers. It's public workers who drive the streetcars bombardier builds. Without them, there would be no streetcar orders. It's public workers who operate the air traffic control that makes it possible for bombardier plans to fly. It's public employees who build and maintain the roads on which Bombardier brings in supplies and ships their products. It's public employees who build the system of utilities that Bombardier uses to power its factories and offices. It's public employees (funded by public funds like NSERC) who do the basic research behind many of the product Bombardier builds. It's also public employees and people paid through public funds that keep all those Bombardier employees healthy so they can do their jobs, through research, regulation, and healthcare.

AND it's teachers who taught both the Bombardier employees and all those public employees the basic skills without which they'd be unable to do their jobs. And it's teachers who watch the kids of those Bombardier employees and public workers all day long for free, making it possible for them to go to work.

If you really think the economy can't run on teachers and public workers, ask yourself this: Which of the following would shut the economy down faster and harder:

1. Bombardier disappears into thin air leaving all their employees/suppliers/buyers stranded.

2. The government disappears into thin air leaving all the citizens, residents, people, and people who interact with the state in any way stranded?
posted by If only I had a penguin... at 8:21 AM on October 30, 2015 [7 favorites]

Meanwhile, the Québec government want to privatize two of it's profitable businesses, Hydro-Québec and the SAQ...

Presumably prospective purchasers of Hydro-Québec would prefer to leave its $44 billion debt in the hands of the public while taking the assets and future revenues from electricity sales off their hands.
posted by mandolin conspiracy at 8:34 AM on October 30, 2015 [1 favorite]

They don't directly bring cash into the province from elsewhere. Industry does. I mean school teachers have value, but you can't run your economy on school teachers.

This is such a weird and pervasive attitude these days, especially in Canada. It makes no sense on a fundamental level.

There are two things here: economic activity in general and trade. Trade is when your economic activity crosses borders. Just because an economic activity does not cross borders does not mean it is not real. Otherwise we'd have to conclude that the planet as a whole has no economy because we don't trade beyond the planet.

Of course, we've seen that putting your entire economy in the public sector doesn't tend to work out so well, but it is clearly not true that it is impossible.

Economic activity is when people create something of value (be it a product or a service) and then sell it to someone. That's what teachers do (provide a service, sell it). That's what Bombardier plans to do (create a product, sell it). Obviously, trade is positive in that it allows flows of goods and services in as well. That's great. However, there are other goods and services (like education) that are much better suited to being provided locally. Both of these are economic activity.
posted by ssg at 9:06 AM on October 30, 2015

If you'd like to watch what happens when a government stand by as an industry fails, the fate of steelworkers in the West Midlands is unfolding in real time. Last I heard, the UK government wasn't spending any more money on teachers (or any other social programs either).
posted by Nevin at 9:18 AM on October 30, 2015

We DO run the economy on teachers and public workers.

Exactly. It's pretty amazing that Alberta of all places is choosing to recognize this at the moment.
posted by Nevin at 9:19 AM on October 30, 2015

Well they had a sea change in government recently.
posted by Mitheral at 10:21 AM on October 30, 2015 [1 favorite]

I just think it's a little unsophisticated to say "we bailed out Bombardier, why not the teachers"?

It sounds dumb but a billion dollars is not a huge amount of money for a province the size of Quebec. What is the size of the Quebec education budget? In BC, which has about half the population of Quebec, our education budget is about $5 billion a year.

But like everything else, education is political. A billion dollars of input does not equal a billion dollars of results because at a local level dollars are spent differently.

That doesn't mean that more money should not be invested in education, it just means that education is a different issue than Bombardier, which others have pointed out basically powers Quebec's aerospace sector - Canada's last old-skool tech cluster, now that Nortel is gone, Blackberry is going soon and the auto sector is also going to wither away if TPP is passed.

Just because they're not putting money into education (I have no idea what the issues are with Quebec K-12 education; I thought it was Ontario that was having the negotiations with teachers - can the OP please clarify what the connection is?) doesn't mean they shouldn't try to save jobs for just a little while longer.

But like the oil sands in an era of cheap oil it seems that Bombardier's days are numbered.
posted by Nevin at 11:33 AM on October 30, 2015

What, the connection between the striking teachers and Bombardier? The public workers and teachers were outside Bombardier in Montreal protesting the billion dollars going to the aerospace sector instead of going either to education or the government even meeting their demands for a raise in a timely fashion or hell, even meeting what they are asking for a raise at all. I just moved to Ontario and don't really know what the teachers in this province are striking about, but I lived in Quebec for five years and my husband for twenty, so we are more familiar with how politics work there than here.
posted by Kitteh at 12:03 PM on October 30, 2015

The issue with the auto bailout ($9B) was that the federal government sold its shares earlier this year for a loss, although presumably they used the cash to balance the budget before the election.

What they chould have done was used their position as shareholders to help transform the industry... whatever that means.
posted by Nevin at 12:04 PM on October 30, 2015

The sale is so typical of the Harper government and modern conservative-big business government in general. Short term thinking coupled with privatizing profits and a little get government out of business mixed in with a chance to show bad effects of government intervention.
posted by Mitheral at 12:07 PM on October 30, 2015 [2 favorites]

Essentially, what we need is to get those jackasses out of office; helping Bombardier is fine, but nickel and diming teachers and selling off assets isn't.

The problem, of course, is that PKP is exactly the kind of jackass who would support these types of policies. So thanks, matante Pauline.
posted by Monday, stony Monday at 4:19 PM on October 30, 2015 [2 favorites]

Meanwhile, the Québec government want to privatize two of it's profitable businesses, Hydro-Québec and the SAQ...

The SAQ, maybe, and they'd probably get away with it. A year or two later and I expect nobody would miss it. It's the sort of thing private industry can do at least as well as government, provided they don't do something stupid like in Ontario.

Hydro, no they certainly do not. Some idiot comes along and suggests it once every few years, but I have faith that as usual nobody will take them seriously.
posted by sfenders at 4:36 PM on October 30, 2015

With respect to the teachers in Quebec vs Bombardier, it looks like the government is trying a utilitarian approach. If they don't bailout Bombardier, there will be tens of thousands of job losses. On the other hand if they don't give teachers raises, teachers will still have jobs albeit at their current salary level. Bombardier has already laid off close to five thousand workers in the past fifteen years, it's not like they've been mollycoddled. But really it comes down to a dysfunctional situation when a family-run enterprise is holding the government hostage while refusing to relinquish control.
posted by storybored at 9:00 PM on October 30, 2015