By Brian Orlotti
As outlined in the May 11th, 2017 CBC post, "Bombardier's Pierre Beaudoin to quit executive role," just hours before the company’s annual meeting in Dorval, QC, it was announced that Pierre Beaudoin, scion of the Bombardier family, was stepping down as Executive Chairman as of June 30th.
The news came amid a wave of public and shareholder outrage over board-proposed executive pay hikes of nearly 50%, despite massive employee layoffs, billions in debt still on its books and hefty bailouts from both the Quebec and Federal governments. Beaudoin later renounced the pay hikes and executives postponed their compensation plan to 2020.
The US government’s investigation of Bombardier is the latest shot in the US’s escalating trade disputes with Canada and an ill portent for the NAFTA renegotiation triggered by US President Trump on May 18th and expected this summer.
Over the past few weeks, tottering plane and train maker Bombardier has faced a series of upheavals that have put its already shaky future on even even more unstable ground. Those upheavals, reminiscent of an earlier age of confusion and cancelled Canadian built planes, suggest lessons for both the Canadian aviation and space industries.
 |
| A Bombardier C100 in Delta Airlines livery. As outlined in the May 23rd, 2017 Leeham News and Comment post, "Delta shoots down Boeing’s CSeries dumping claim," not all US corporations are onside with the Boeing claim that Bombardier is "dumping" aircraft into international markets. Photo c/o Bombardier. |
As outlined in the May 11th, 2017 CBC post, "Bombardier's Pierre Beaudoin to quit executive role," just hours before the company’s annual meeting in Dorval, QC, it was announced that Pierre Beaudoin, scion of the Bombardier family, was stepping down as Executive Chairman as of June 30th.
The news came amid a wave of public and shareholder outrage over board-proposed executive pay hikes of nearly 50%, despite massive employee layoffs, billions in debt still on its books and hefty bailouts from both the Quebec and Federal governments. Beaudoin later renounced the pay hikes and executives postponed their compensation plan to 2020.
Prior to the annual meeting, five of Canada's largest pension fund managers along with several large American institutional investors had stated that they no longer supported Beaudoin’s re-election as Executive Chairman, opposed Bombardier's executive compensation plan and withdrew support for several director nominees. Beaudoin remains non-executive chairman of the company’s board of directors while Alain Bellemare, who replaced Beaudoin as CEO in 2015, remains in place as Chief Executive Officer.
 |
| Beaudin in the National Post. As outlined in the May 10th, 2017 Canadian Press article, "Canada’s largest pension fund manager and Alberta fund oppose Bombardier pay policy," the Canada Pension Plan Investment Board and Alberta Investment Management Corp. "joined several large institutional investors in withholding support for the re-election of Bombardier’s executive chairman and opposing the company’s executive compensation plan." Two days later, and as outlined in the May 11th, 2017 National Post article, "Bombardier chairman re-elected to the board amid public uproar over pay, steps back from executive role," Beaudin was re-elected as Bombardier chairman but promised to reduce his role in the company. Photo c/o National Post. |
In an effort to bolster its dwindling cash reserves, and as outlined in the May 18th, 2017 Financial Post article, "Bombardier in talks with Chinese aircraft manufacturer for potential investment: report," Bombardier is allegedly in talks with the Commercial Aircraft Corporation of China, Ltd. (Comac), a state-owned aircraft maker considering either an investment in Bombardier’s aerospace division or the taking a stake in the CSeries aircraft program itself.
Comac and Bombardier’s relationship goes back some years. In 2012, the two firms signed an agreement to find commonalities between the Comac C919 and Bombardier Cseries jets to reduce training and maintenance costs. Bombardier has also advised Comac on its ARJ-21 regional jet, which went into commercial operation in 2016 after years of delays. The two companies have also considered joining forces to compete against aerospace behemoths Boeing and Airbus.
Comac and Bombardier’s relationship goes back some years. In 2012, the two firms signed an agreement to find commonalities between the Comac C919 and Bombardier Cseries jets to reduce training and maintenance costs. Bombardier has also advised Comac on its ARJ-21 regional jet, which went into commercial operation in 2016 after years of delays. The two companies have also considered joining forces to compete against aerospace behemoths Boeing and Airbus.
Perhaps by no coincidence, on May 18th, Boeing petitioned the US Commerce Department and the US International Trade Commission (ITC) to investigate subsidies (such as the $ 3Bln CDN bailout money from the Quebec and Federal governments) of Bombardier's CSeries aircraft that it says have allowed the company to export planes at well below cost.
As outlined in the May 18th, 2017 CBC News post, "Cross-border aircraft rivals Bombardier, Boeing clash in trade hearing," preliminary meetings on the issue are ongoing and a determination on the petition is expected by June 12th.
As outlined in the May 18th, 2017 CBC News post, "Cross-border aircraft rivals Bombardier, Boeing clash in trade hearing," preliminary meetings on the issue are ongoing and a determination on the petition is expected by June 12th.
 |
| Bombardier also builds trains, and as outlined in the May 13th, 2017 Toronto Star post, "How do Toronto's light rail vehicles compare? It's Bombardier versus Alstom," Bombardier is also having difficulties in this area as well. As outlined in the post, "after a protracted dispute with Bombardier about delays to its light rail vehicle order for the Eglinton Crosstown LRT, Metrolinx has taken the drastic step of placing an order for cars with another company." Photo c/o Randy Risling/ Toronto Star File Photo. |
If the ITC determines there is a threat of injury to the US industry, preliminary countervailing duties could be announced in July, followed in October by preliminary anti-dumping duties, unless the deadlines are extended. Final determinations are scheduled for October and December. Boeing is calling for countervailing duties of 79.41% and anti-dumping charges of 79.82%.
 |
| Quebec Premier Couillard gesturing. Photo c/o Clement Allard / CP. |
In retaliation, and as discussed in the May 19th, 2017 St. Louis Post Dispatch post, "Boeing scrambles to save deal to sell St. Louis-made F/A-18s to Canada," the Canadian Government has announced that it will review its planned $2Bln CDN purchase of 18 Boeing Super Hornet fighters as a stop-gap measure before running a full competition to replace Canada’s aging fleet of CF-18s.
Amidst the frustration and anxiety over Bombardier’s present and future came a counterpoint from Quebec’s premier.
As outlined in the May 22nd, 2017 Presse Canadienne post, "Québec needs to take care of Bombardier, says Couillard," after visiting a Bombardier plant in Haifa, Israel, Premier Philippe Couillard stated that Quebec needs to take care of Bombardier because of its unique importance to the province.
But Boeing, as outlined in the May 23rd, 2017 post BNN post, "In Bombardier fight, Boeing sees ghost of Airbus ascent," remembers the growth of another direct competitor and is not likely to give up this time without a fight.
As outlined in the May 22nd, 2017 Presse Canadienne post, "Québec needs to take care of Bombardier, says Couillard," after visiting a Bombardier plant in Haifa, Israel, Premier Philippe Couillard stated that Quebec needs to take care of Bombardier because of its unique importance to the province.
But Boeing, as outlined in the May 23rd, 2017 post BNN post, "In Bombardier fight, Boeing sees ghost of Airbus ascent," remembers the growth of another direct competitor and is not likely to give up this time without a fight.
Will Bombardier suffer the same fate as Nortel and RIM or, like the auto industry, be deemed "to big to fail?" Stay tuned.
 |
| Brian Orlotti. |
______________________________________________________________
Brian Orlotti is a regular contributor to the Commercial Space blog.
No comments:
Post a Comment