Canadian Prime Minster Justin Trudeau has declared that Canada will not do business with Boeing, threatening to look elsewhere to supply Canada’s next generation of fighter jets.
Speaking at a joint press conference with British Prime Minister Theresa May, Trudeau stated—
We have obviously been looking at the Super Hornet aircraft from Boeing as a potential significant procurement of our new fighter jets…But we won’t do business with a company that’s busy trying to sue us and trying to put our aerospace workers out of business.
Boeing vs. Bombardier
The issue centers on a trade dispute between Boeing and Canadian aircraft manufacturer Bombardier.
Bombardier is the producer of the CSeries aircraft, a narrow-body, twin-engine, medium-range jetliner that offers a compelling alternative to Airbus, Boeing, and Embraer jets. The C300 will compete directly with the Boeing 737 MAX 7. The C100 does not directly compete with any Boeing jet and is at the center of the controversy.
Boeing accuses Bombardier of illegally “dumping” aircraft backed by government subsidies in the U.S. market, distorting demand and pricing. Earlier this year, Delta signed an order for 75 of the CS100 aircraft.
Boeing is not suing the Canadian government directly, but has alleged that Bombardier sold each aircraft at $13.8 million less than it cost to produce. Boeing is seeking redressing via the World Trade Organization and the U.S. Commerce Department has launched its own investigation. Bombarider was bailed out by the Quebec government last year and has also been granted $300 million in loans from the Canadian federal government.
Should the investigation reveal dumping occur, U.S. Customs / Border Control will begin collecting cash from Delta (representing the difference between the actual price and paid price).
This short clip from CNBC breaks down the dispute nicely–
And you can learn more details here.
CONCLUSION
Prime Minster May has been tasked with trying to broker peace and will bring up the issue in a meeting with U.S. President Donald Trump this week. As is often the case, disputes between two “private” aircraft manufacturers are inextricably linked to the state itself. While Trudeau’s tough talk may simply be a bluff, this matter could easily harm diplomatic relations between the Canada and the USA…and has perhaps already done so.
Boeing should stop whining. It’s not like they screwed over other entities/organizations for their own benefit.
If Boeing doesn’t believe in subsidies, it should stop taking them from Washington state taxpayers.
What about South Carolina taxpayers as well?
Saber rattling at its finest. Looks and smells like a classic ploy by Trudeau to squeeze as much as he can out of a compromise. But Josh is right. If Boeing really wants to play this game, I’m sure the Canadians will be more than happy to itemize the millions/billions in “economic development incentives” that have been handed out to BA over the years.
Boeing doesn’t even make a comparable aircraft to the CS100. Boeing is probably doing this to remove competition in the aircraft market. More competition forces the companies to be more competitive and customer-friendly. Less competition leads to bigger profits and more opportunities to take advantage of customers. There’s less accountability to the companies when there’s less competition. My understanding is United was considering the C-Series, but Boeing undercut the price and won the order for more 737s. Boeing seems to really want the C-Series to fail. If they can’t do it through price, they’ll try through the government. I’m glad Delta went with the C-Series, and it sounds like it’ll be a nice aircraft for their fleet.
The fact he says “sue us” and not “sue a Canadian company” tells me that Boeing has a point. His response seems like a bigger trade violation than the original complaint.
of course Boeing wants C-Series to fail. CS100 isn’t much of a plane but if it’s proven to be reliable, CS300 and a hypothetical CS500 could easily eat into the 737 space.
People love to spew crap about how airlines globally only care to upgauge to A321 and what not but forgot that once you’ve max’ed out all upgauging in both the regional space and the NB space, you’re still left with a gap between 76-seats and 190-seats.
Not said already is that the Canadian government is willing to purchase inferior military equipment over a trade dispute. Wonderful.
Lol. Typical US corporation style. Crying over unfair competition in the face of competitor. Just like US3 crying over ME3.
Oh well, they have plenty success in tobacco industry, protecting them against clive cigarettes. Why shouldn’t aircraft industry gain the same? Lol.
Crybaby democracy….
As a Canadian, while I am pleased he is standing up against Boeing, I’m also somewhat embarrassed by his Trumpesque statement (albeit delivered politely).
I’m curious why you applaud his standing up to Boeing when it seems clear that Bombardier received illegal subsidies? The charge is like the pot calling the kettle black for Boeing, which receives so many undue subsidies…but it still appears Bombardier received improper aid and price dumped the C100 (great aircraft) to Delta.
What does ‘improper’ means?
Government support in contravention of WTO rules.
Since you refer to wto, why then boeing/usa not filing official complaint like embraer/brazil did?
Usitc is hardly a ‘neutral’ party whereby two legal bodies (established and govern by different laws) are having a legal-commercial dispute.
Precisely because of the pot/kettle argument. Boeing shouldn’t be able to bully Bombardier when they are in a similar position. Also I don’t think that Bombardier is currently as direct a competitor as Airbus, and along the lines of Joe C.’s comment above, Boeing is trying to shut down the C Series before it grows and becomes more of a competitive threat.
Yes, what I was referring to is that the CS300 is basically a direct competitor to the 737-700. Boeing doesn’t have a product to directly compete with the CS100, so if it gained more traction in the future, Boeing would need to put money into a new product to compete. If Bombardier launches a CS500, it would definitely be a direct competitor to Boeing and Airbus. That is something that both companies wouldn’t want, because they would have more work to distinguish their products to be more competitive. It could also drive prices down and reduce margins. I would say that the real reason Boeing is doing this is to prevent the C-Series from gaining traction, thus leading to more direct competition.
Do you work for Boeing or something? You seem to know WTO rules but for some reason have so conveniently forgotten that Boeing gets more in tax rebates than Bombardier EVER got in subsidies.
Guess what, a tax rebate and a subsidy are the SAME THING.
You’re nothing but an honourless liar and probably not even Canadian. If you are Canadian, you’re a traitor.
Just to be clear, nobody seems to have looked into the so-called “subsidies” received by BBD and been prompt to call it a free lunch, Matthew included.
The loans received by Ottawa (~C$372MM) are made at market rates and earmarked for R&D. To get those, they’ll have to provide a source and uses of funds to make sure the funds are allocated to the programs they were intended for (here, 1/3 to CSeries, 2/3 to Global 7000).
As for the provincial help, they had to sell at a discount to the provincial pension plan (nothing different than what a Calpers or any other private equity funds in the US would do) 30% of their railway division (which actually is the only consistent cash flow generator at the holding level) and 50% of the CSeries to the government but without the debt that comes associated with it (ie. debt incurred for the development ~C$5B).
So basically, the “subsidies” can be summarized as C$372MM of debt allocated mainly for the business jet division, and C$2.5B which basically reduce the cash flow of the firm by 30% while the debt of the company is higher than before.
I acknowledge that the governments and pension plan wrote a check, however, more debt to be repaid and a loss of 30% of your sustainable free cash flow for a fire sale of your trophy assets don’t look like a free lunch to me.
On the other end, land tax holidays and military contracts at inflated margins negotiated without tendering to competitors sure look a little different doesn’t it?
I could be wrong but I don’t see Airbus suing, they will work to make sure they have the right product in place or design a new one, if necessary and will remain competitive.
There are other planes that will do what we need. Buy 35 f35 and then tip up with 20 used a10 for ground support and add another 45 to 55 utility fighters like Saab or firefighter.
Call it a day and try and avoid boeing whenever possible moving forward.
And Canadian commercial airlines shop canada first when possible.