Bombardier, Inc. (TSE:BBD.B) is in the midst of a “me first” battle for federal government aid between Quebec and the beleaguered oil provinces. A quick win in that informal competition may help revive its ailing Bombardier stock.
“I don’t think it’s about bargaining right now. It’s about looking at the future and where the future of the country lies,” said Dominique Anglade, Quebec’s economic development, innovation, and trade minister, in an interview with CBC Radio over the weekend. “If it lies in innovation, if it lies in technology, if it lies in sectors that are really growing then that’s where we should be investing our money.” (Source: “Time for action from feds on Bombardier, Quebec minister says,” CBC, February 20, 2016).
Bombardier, a plane and train maker, is headquartered in Montreal, the largest city in the eastern province of Quebec.
On Wednesday, the struggling company, which is more than two years late and about CA$2.0 billion over budget with its “C Series,” announced that it was laying off some 7,000 of its workers, including nearly 3,000 in Canada.
Anglade said that the time has come for Ottawa to come to the table with cash for the “jewel” of the French-speaking province’s economy, as the province’s Economy Minister put it earlier this month.
The company has asked for financial support from Canada’s federal government to address ongoing cash flow issues. The government of Quebec has already provided more than a CA$1.0 billion.
“The reason why we’re saying the federal government has to be at this table is because this is not only a huge [employer], it really is an industry where you have a lot of innovation, you have a lot of research, it really is the future,” Anglade said. (Source: Ibid.)
Analysts are worried that without a bailout, Bombardier could be in trouble.
“If Bombardier doesn’t get the bailout from the Government, then the company could be in serious trouble,” Lombardi Financial analyst Alessandro Bruno wrote in an e-mail. “Canada must make a choice: either it stays and competes on an equal footing or it allows a foreign buyer to come in and take over. Airbus and Boeing would be more than happy to invest in the C Series at the bargain-basement price at which it will sell.”
Several lobbyists and special interest groups are pressuring the Liberals to fulfill their costly campaign pledges, weeks before Finance Minister Bill Morneau releases the upcoming budget.
Anglade said Canada stands to benefit financially from its investment in Bombardier, because it would take an ownership stake in a company that is in the midst of a dramatic turnaround.
“The company is going through a restructuring right now,” Anglade noted. “The new CEO is saying that he’s putting all the elements in place to build the company for the future.”
Last week, the country’s largest airline carrier, Air Canada (TSE:AC), said it would buy up to 45 of the C Series jets.
Shares of Bombardier have lost half their value over the past year, sitting near CA$1.14 per share on Friday.