I heard something amusing the other day. Bombardier, the Quebec-based manufacturer of plains and trains, cried foul again. The only Canadian company that has managed to milk the federal government out of $700 million of taxpayers’ money now is pleading with the Bank of Canada to keep the rising Canadian dollar in check. Why? Well, the company ran out of excuses for quarterly losses. “The strong Canadian dollar made me do it,” said, of course, in not so many words, the company’s CEO Laurent Beaudoin!
This made me wonder how bad it really is for Canadian companies out there. Granted, since 2003, the Canadian dollar has gained about 40%; and it is also true that Mr. Beaudoin is not the only one complaining about too much confidence in the Canadian economy. But, this is nothing more than the Red Herring, a distraction from the real issue.
The real question is how much of that confidence is earned and deserved. I’d say about a whole lot of it. Canada’s current account is showing a healthy surplus, with exports well exceeding imports. Plus, primary exports’ prices are hitting record highs, particularly energy and metals.
As a result, the economy is pumping out new jobs, therefore reducing the unemployment rate to the lowest level in a generation. Finally, reasonably rising interest rates have kept inflation in check, helping us escape all kinds of bubbles, from the stock market to real estate. In turn, Canadians are enjoying higher standard of living. No wonder there is excess confidence in the Canadian economy.
So, when a company such as Bombardier, the ruler in the la-la land of government handouts, complains about fiscal policy, it is particularly annoying. Especially since even after millions of taxpayers’ dollars have been pumped into the business, Bombardier is still slashing jobs, posting disappointing quarterly results, and delivering meager earnings to its shareholders. It does not take a rocket scientist to figure out that if Bombardier is trying to excuse its lackluster performance with strong Canadian dollar, it should look for it somewhere else.