MONTREAL – Amid fierce criticism from the opposition that the Quebec government unduly risked US$1 billion of taxpayer money on a struggling aircraft, provincial leaders justified their decision on Thursday by saying aerospace giant Bombardier is too important to fail.
Quebec Premier Philippe Couillard and Economy Minister Jacques Daoust tried to reassure citizens that the massive cash injection into Bombardier’s CSeries program is critical to keeping good jobs and tax revenues.
Bombardier (TSX:BBD.B), meanwhile, argued the company represents two per cent of Quebec’s GDP, and the taxpayer money was necessary to reassure markets the company had a future and enough of a cash flow to continue operations.
“In the aerospace industry, we are at the top of the world,” Daoust said in Montreal. “If we don’t invest in businesses that we are good in, where should we invest?”
Couillard said the province’s aerospace industry supports 40,000 jobs and the government’s cash injection is an investment, not a loan.
“We are partners with Bombardier,” Couillard said. “And what I’ll say to Quebecers and to all Canadians is that the aerospace industry to Quebec is what the auto industry is to Ontario.”
The Quebec government will own 49.5% of a new joint company with Bombardier solely responsible for the CSeries aircraft, which is about two years behind schedule.
Parti Quebecois Leader Pierre Karl Peladeau and Francois Legault, who heads the Coalition for Quebec’s Future, said the Liberals don’t understand economics and are poor negotiators.
Peladeau said by investing only in the risky and struggling branch of Bombardier, the government is taking all the risk and should have held out for a stake in the other profitable sectors of the company.
“The problem is that the government has taken all the risks and receives none of the benefits,” Peladeau said in the legislature.
Couillard said under the agreement, Quebec has a direct say in the development of the CSeries plane and a 20-year guarantee Bombardier will keep its headquarters, manufacturing and engineering facilities in the province.
The government also defended the investment in light of ongoing rotating public sector strikes this week and other cuts the Liberals have made since taking office.
Daoust told reporters that the salaries of teachers and other public sector workers are one-time expenses while the government expects a return on its investment with Bombardier.
Aerospace jobs pay double the average Quebec salary and the payroll taxes received from them help pay teachers and other essential services, he added.
“(Teachers) should be celebrating (the deal),” he said.
Professor Karl Moore with McGill’s Desautels Faculty of Management, said he isn’t surprised by the government’s decision given the aerospace industry “is a source of enormous pride.”
“Bombardier is probably Canada’s most global firm,” Moore said. “No Quebec premier could let (the company) really wallow and be in deep trouble because of the pride in the company and the sheer number of employees they have in this province.”