Bombardier: 9 Reasons Why Taxpayers Shouldn’t Bail Out Bombardier Inc

BombardierShould Canadians Bail Out Bombardier, Inc.?

Shareholders have lost 95% of their money in Bombardier, Inc. (TSX:BBD.B). Now taxpayers could be next.

According to The Canadian Press, the federal government spent almost CDN$500,000 for a financial assessment of the Montreal-based company. Officials won’t reveal why the report was commissioned. The government also will not provide any details from the study, citing clauses under the Access to Information Act. (Source: “Federal Government’s Bombardier Study Cost Taxpayers Almost $500,000,” The Canadian Press, April 5, 2016.)

Half-a-million smackaroos isn’t pocket change. The cost, though, is peanuts compared to how much taxpayers could soon be forking over. Bombardier is asking the government for $1.0 billion to bail the company out of its current financial difficulty.

In Ottawa, the deal seems inevitable. A Bombardier bailout, proponents say, will create jobs, spark a wave of innovation, and keep Canada in the aerospace game. Quebec Premier Philippe Couillard called the deal a “no-brainer.” (Source: “Time for action from feds on Bombardier, Quebec minister says,” CBC, February 20, 2016.)

Easy call?

Hardly. You don’t need an MBA to see Bombardier is a money pit. Any government bailout would be a waste of taxpayer cash.

Here’re nine reasons the government should keep its nose out of Bombardier’s business.

1. A Bailout Won’t Save Jobs

We need more jobs. Good ones. No more waitresses. No more baristas.

A Bombardier bailout, proponents argue, will create thousands of high-paying gigs for Canadians. But is that really true? The evidence suggests otherwise.

Last year, the company cut 1,700 workers in Downsview and Montreal. Earlier this year, management laid off 2,830 Canadian workers. And as I’ve written about here before, Bombardier plans to use bailout money to outsource jobs to China and Mexico. (Source: “Ottawa can’t afford to bail out Bombardier: Goar,” Toronto Star, February 26, 2016.)

2. A Bailout is a Middle Finger to the West

Last month Toronto hosted the Prospectors & Developers Association of Canada, one of the largest mining conferences in the world,

Where was the Prime Minister? Justin Trudeau was visiting pandas at the Toronto Zoo. (Source: “Baby pandas named, meet Trudeau at Toronto Zoo,” Toronto Star, March 7, 2016.)

Western Canada is trapped under the weight of low commodity prices. Yet Ottawa has no plans to bail out oil and mining companies. Instead, politicians are stepping on the industry’s neck by bringing in new carbon taxes and blocking pipelines.

If Trudeau bails out Bombardier, he isn’t just lending a hand to Quebec. He’s flipping Western Canadians the finger.

3. A Bailout is Bad for the Environment

According to the left, oil executives rank just above lawyers and slightly below ax murders. Everyone in the energy patch is a villainous figure, drunk on their own greed. The whole industry, for the sake of the planet, must be shut down.

An odd view, considering every plane is a flying fossil fuel oven. For some reason, emissions from products that run on oil and gas doesn’t count. But unless we start fueling our aircraft with fairy dust, subsidizing aerospace is bad news for the environment.

4. A Bailout Makes No Business Sense

The Feds have insisted that Bombardier won’t receive a single nickel of taxpayer money unless management presents a clear “business case.”

The message: this government isn’t throwing money at a loser. No, Canadians have the opportunity to become a partner in a winner.

As an investor myself, I find this reasoning a little fishy. Heck, it smells like the salmon crate was been left out for three days. If BBD.B stock had a real business case, private investors would be lining up to fund the company? With stock market returns in the dumps, Bay Street should be throwing themselves at any opportunity that smells like money.

5. A Bailout is a Money Sinkhole

Are Canadians partnering with a “winner?”

That claim seems dubious after a string of recent issues. The launch of the C-Series jet is now two years behind schedule. Over in England, London mayor Boris Johnson is livid over the company’s handling of a London rail contract. (Source: “Bombardier Inc slammed by London for ‘shameful’ Tube project: ‘Nothing short of a disaster’,” National Post, March 14, 2016.)

The Toronto Transit Commission is now even considering suing Bombardier. The company has failed to deliver on a CDN$1.0 billion contract for new streetcars. To date, only 10 have arrived out of 60 promised. (Source: “TTC to sue Bombardier over delayed streetcars,” CBC, October 15, 2015.)

6. A Bailout is Bad for Canadians

The common refrain from bailout advocates is “Everyone is doing it!” We’re not subsidizing the aerospace industry, they’ll claim. We’re trying to level the playing field.

Other governments do subsidize their industries. The question is: why does this matter? If foreign taxpayers want to sell aircraft at a loss, Canadians are the real winners.

Canuck taxpayers can also flip this question around. Do Canadians really want to subsidize an industry so the country can sell airplanes to other countries at a loss? Foreign airlines and business travelers are the biggest winners with this policy.

7. A Bailout Isn’t Needed

One company has a plan to save BBD.B stock without a nickel of taxpayer money, but the Liberal government is standing in the way.

Four years ago, Porter Airlines announced expansion plans for its downtown Toronto Island hub. The move would add thousands of permanent jobs, contribute millions to the local economy, and lower ticket prices for Canadians. An expansion would also require a big order of C-Series jets, keeping Bombardier viable.

How much will the plan cost Ottawa coffers? Zip. Nadda. Zero.

The enlightened Liberal government squashed those plans. Lefties are worried the seagulls will get stressed and only rich people will be able to use the service for New York getaways. Infrastructure spending, I suppose, isn’t a priority unless a politician is there for the photo-op.

8. A Bailout Makes No Economic Sense

Proponents like to talk up the spin-offs from a bailout, but they never talk about the costs.

The CDN$1.0 billion invested in Bombardier isn’t going to fall out of the sky. It’s going to come from Canadian workers, Canadian businesses, and Canadian shoppers. Successful industries, presumably, which don’t require taxpayer subsidies.

Every dollar you tax out profitable industries discourages their development. Every dollar you put into unprofitable businesses allows them to grow larger. That doesn’t sound like a recipe for a prosperous economy.

9. A Bailout is a Subsidy for the Rich

Imagine a world without lasers, insulin, or the Internet.

All of these efforts were the result of public research. Society, left-leaning pundits argue, earns a huge return on every dollar invested into R&D. Governments must subsidize primary research.

Sounds like a slam dunk argument. That is, in the case of Bombardier, until you consider that the results are privately owned. The fruits of such research will not be made available to society.

If such research is truly for the good of the public, why should we bankroll private businesses that reap all of the benefits? Such science should be funded through public institutions like universities, where society can reap the rewards. Should public funds be used to enrich BBD.B stockholders and the Beaudoin family?

The Bottom Line on Bombardier

By Bombardier’s own admission, the company doesn’t need federal funding. If Bombardier doesn’t need the money, why continue these discussions? If the firm actually needed the more funds, why pour more money into a bad investment at all?

Governments should not be in the investment business, least of all backing perennial losers like Bombardier. Any bailout is bad for taxpayers, bad for the environment, and bad for all Canadians.