By John Merriam.

Bombardier Corporation, now with 43,000 employees, was founded by snowmobile inventor Armand Bombardier. He was succeeded by his son-in-law, Laurent Beaudoin, who built the company into a modern diverse corporation, which is the only company in the world that builds both trains and aircraft.

We are now in the third generation of the company under Laurent’s son. The family, residing in Montreal’s tony Westmount, owns almost all the Class A preferred shares and seemingly controls the company’s 14 member board of directors.

Unwisely, the company embarked on the ‘C Series of jet aircraft. They essentially bet the farm on this enterprise, which would try to compete with Boeing and Airbus Group SE. Aware of the Bombardier plans, Boeing and Airbus are successfully promoting the 737 and A320, slightly larger than the C Series. Bombardier’s plan is complete folly of course, but unable to secure funding through capital markets, they went to the Quebec Liberal government of Phillipe Couillard, which has taken a 49.5% stake in the development of the C Series and has promised 1 billion dollars to support the company over a number of years.

Said Francois Legault, the leader of the opposition party Coalition Avenir Quebec: “The government was had. It’s come out of this looking like a kid in short pants”.

The same could apply to Bombardier as well.

Almost none of the top brokerages in Toronto is prepared to recommend the company’s stock.

“I really can’t see a reason to own this stock at all.” said Norman Levine, Managing Director of Portfolio Management Corporation: “They basically bet the whole company on this C Series jet and so far it’s been a horrible, horrible bet. I really can’t see a reason to own this stock at all.”

The Quebec government is now badgering the new Trudeau Liberals to put up another billion dollars, after Bombardier belatedly said that the government money will only cover about half of the C Series requirement. And who is the minister of inter-governmental affairs you ask? None other than the Prime Minister himself.

Scotiabank says that Bombardier is walking an equity tightrope and may need another bailout soon. Turan Quettawala said in a note to clients: “Despite the $6 billion in potential available liquidity, we estimate that Bombardier will still walk a tightrope and could need more cash over the next 12 to 18 months. As such, Bailout 2.0 is still very possible.”

Bombardier still owes the feds 757 million dollars from a deal brokered originally by former PM Paul Martin.

It seems likely that Trudeau will advance another billion dollars to Bombardier. If he does, the balanced budget promised in three years time by the PM looks increasingly like a spectral fantasy, and he will be wearing the short pants along with the Beaudoins and Premier Couillard.

This entry was posted in Federal Politics. Bookmark the permalink.


  1. Pingback: WHO WEARS THE SHORT PANTS? | Robbie's Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s