(The Canadian Press circulated the following story on October 6.)
MONTREAL — The chief executive of transportation giant Bombardier Inc. warned Monday the company and its suppliers will have to lay off more workers if there isn’t more government support to help finance the company’s aircraft sales.
This includes support for Bombardier’s bid on a large expected order for regional jets to be placed by Montreal-based Air Canada, Paul Tellier said in a speech to aerospace executives, including many subcontractors on Bombardier programs. The CEO of the country’s biggest aircraft maker said financing is currently the No. 1 challenge facing airline customers for Bombardier regional jets.
Tellier said that while the federal government provides financing to Bombardier’s international customers through the Export Development Corp., he said there is frequent criticism the EDC financing is a subsidy to his company.
This is the perception the industry has to fight, he said, calling on his audience, at the annual meeting of the Aerospace Industries Association of Canada, to lobby politicians on behalf of a key domestic industry that employs about 80,000 people.
“There’s no way we can be competitive if there is an uproar every time the EDC helps finance one of our airplanes,” complained Tellier, who was Canada’s top civil servant in the Conservative government of former prime minister Brian Mulroney before taking over as CEO of Canadian National Railway Co. in the early 1990s.
After streamlining and rebuilding CN into a North American railway, Tellier was hired in January to restructure Bombardier.
Although the aviation industry is still in the doldrums, there is still demand for regional jets, generally described as those carrying between 50 and 100 passengers.
“It’s very difficult to look at any restructuring plan of any significant airline without seeing the word regional,” Tellier said.
“However, if the financing is not in place we can’t make those sales and we’ll have to reduce the rate of production,” he warned, leading to more job cuts at Bombardier and its suppliers.
“When we cut back our production by 100 aircraft (a year), it’s 8,000 jobs. So I try to avoid this type of decision we might have to take. And these are decisions we’ll have to take over the next few months.”
Bombardier Aerospace, the third-largest commercial aircraft maker in the world, after Boeing and Airbus, announced 3,000 job cuts last March.
Last July the federal cabinet made available an additional $1.2 billion of financing for customers of Canadian-made aircraft.
Walter Robinson, federal director of the Canadian Taxpayers Federation, is one of the critics of the government-support system.
“We’re not blind to the fact that every other government does export-import financing,” Robinson said in an interview.
“But the only way Bombardier and these other companies are going to be able to survive in the long run is with a better rules-based trading system so they can compelte on quality and win, not on the basis of subsidies.”
Air Canada, Lufthansa, Austrian Airlines and Scandinavian Airline System, all members of the Star Alliance, are pursuing a joint purchase of up to 200 jets in the 75- to 125-passenger range.
Tellier said that if Bombardier is selected for the Air Canada fleet, the company will approach Ottawa to help finance the sale, even though the EDC is set up to support only export sales.
“I don’t exclude EDC,” Tellier said following his speech.
“I am sure that financing is going to be a major factor in the decision that Air Canada will take on the renewal of their fleet. We’re approaching various stakeholders in Ottawa; When we will have a more precise time frame, we will approach Ottawa formally.”
Bombardier, the world leader in regional aircraft, delivered 220 regional jets last year, as well as 78 business jets and turboprop aircraft.
Tellier said he expects about the same number of deliveries this year.
He said it will be a least a year before Bombardier decides whether to start a program for a larger jet. Its largest, the CRJ900, has 86 seats.