• Government says rescue needed to preserve aerospace jobs
  • Province support shows extent of troubles facing CSeries maker

For Quebec, Bombardier Inc. is too big to fail.

That’s why the Canadian province agreed to a bailout worth as much as $1.3 billion to support the struggling plane and railway car maker, which accounts for almost half of the 41,000 aerospace jobs in the region. It’s the biggest direct government bailout since 2009, when General Motors Co. and Chrysler Group LLC were backed by the Canadian and Ontario governments.

“We have great jobs in Quebec,” Economy Minister Jacques Daoust said Thursday. “Our aerospace industry is on top of the world. If I don’t invest in businesses I think are good, where would I invest?”

Quebec’s bailout and Bombardier’s record quarterly loss of $4.9 billion underscore the depth of the troubles centered on the new CSeries aircraft that has been plagued by overruns, missed deadlines and scant interest from major airlines. Chief Executive Officer Alain Bellemare inherited those issues and more when he was hired in February to turn around Montreal-based Bombardier.

Federal Consideration

The incoming Liberal government in Ottawa will consider federal funding for Bombardier after being sworn in next week.

“We are in the process of being briefed on the file, are following it closely, and a final determination‎ will be made once the government is sworn-in on Nov. 4,” Dan Lauzon, a spokesman for Prime Minister-Designate Justin Trudeau, said in an e-mail.

Quebec Premier Philippe Couillard said in an interview last month his government was prepared to support Bombardier given its importance to the regional economy.  

“We’ve always been at the side of Bombardier,” he said.

Bombardier is the largest publicly traded employer in the province by number of employees and the third-largest Quebec-based company by revenue. It also gives the province a level of prestige in one of the most exclusive industries in the world.

“We think this is the thing to do,” Daoust said. “We are going to invest as partners.”

Double the Average

Quebec’s aerospace industry employs more than 41,000 people, with Bombardier accounting for more than 17,700 of those jobs, according to provincial government figures.

Bombardier spent about C$1.3 billion ($1 billion) in goods and services and C$1.7 billion in wages in its home province last year, government figures show. Average wages at Bombardier are about double the provincial average, Daoust said Thursday.

About 1,700 Bombardier employees now work on the CSeries in Quebec, and the figure will climb to about 2,500 once the jet reaches full production, the minister said.

Sensitive Issue

It’s not the first time that Quebec has stepped up to help the CSeries. In 2013, the province’s Investissement Quebec agency agreed to provide up to $1 billion in export credit financing to buyers of the CSeries. The financing came on top of a C$117 million reimbursable loan made to Bombardier in 2009.

The Bombardier deal comes at a delicate time for the Couillard government, which has pledged to balance the budget in the current fiscal year. Quebec is engaged in a round of negotiations over a new collective bargaining agreement with unions representing more than 400,000 government employees.

Supporting Quebec companies has become an increasingly sensitive issue for governments in recent years after the takeover of aluminum maker Alcan Inc. by Rio Tinto Group in 2007, which highlighted the slow march of head office jobs out of Quebec. Montreal, home to Air Canada and Canadian National Railway Co., has seen the number of top 500 Canadian companies based there drop to 75 in 2011 from 96 in 1990, according to a recent report by the Fraser Institute, a Canadian research organization.

The issue took prominence in 2012 after U.S. home improvement retailer Lowe’s Cos. dropped its plan for an unsolicited takeover of Quebec rival Rona Inc. in 2012. The proposal sparked opposition from provincial politicians and investors such as the Caisse de Depot et Placement du Quebec, the province’s pension fund manager.

After the takeover bid, a panel of experts led by CGI Group Inc. Executive Vice President Claude Seguin was tasked to study the issue and identified 25 Quebec-based companies that were “vulnerable” to hostile takeovers. Bombardier wasn’t on the list, because its dual-class share structure protects the company from hostile takeovers.

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