Bombardier has just announced that they received a 1.3 billion$ injection,investment,loan,handout from the Quebec provincial government. Call it what you may but I prefer to recognize it for what it truly is, extortion. This is the Quebec goverment being held hostage with the threat of job losses.
Numerous analysts have suggested that Bombardier should spin off their aeronautical division and concentrate on railway and recreational vehicles. But why do that when you have the Quebec government acting as your own personal investment bank. By the way, Quebec had to borrow this 1 billion$ from the US which comes out to 1.3 billion$ CAD.
So where is this 1 billion$ going ? All we know is that it will go directly to help the troubled CSeries. Beyond that it’s anyones guess where the money will be allocated. This project has been plagued with endless delays and budget issues. These planes would supposedly save Bombardier and would compete against the Airbus A320neo and the Boeing 737 MAX. The problem with that is that the A320neo was launched in 2010 and the 737 MAX in 2011. To make matters worse is that both these planes are being sold with deep discounts and have had tremendous success.
The fact of the matter is that the aeronautical division of Bombardier is not and nor will it ever be able to compete on an international level. Economies of scale will never allow this to be possible. The bigger companies are able to produce planes more cheaply than their smaller rivals, so if there’s a price war, we all know who will win in the end. But yet the Quebec government still thinks that this is a great investment ? If it were, don’t you think the Bombardier family would invest their own money (which they have plenty of) into the C Series ?
The most preposterous thing in all this is that one has lost their job. The directors and managment that oversaw this disastrous project are all still in place. So let me get this straight, I manage a company, I nearly bankrupt the company, the product is more than 4 years late, we’re nowhere near seeing a final product, I can’t budget my costs to save my life, but yet I get to keep my job. Ok, where do I apply ?
Is Bombardier too big to fail ? I say no, we all thought Nortel was too big to fail and we all know how that ended up. Give them this money today and they’ll come back crying poor to mommy and daddy when the well runs dry. Let’s cut the cord before we’re in too deep. We managed to recover from Nortel and we’ll be able to do the same again.