Quebec to Seek Canada Match on $1 Billion CSeries Bailoutby
Federal aid would complete Bombardier funding, Daoust says
Economy minister likens assistance to 2009 automaker rescue
Quebec plans to ask Canada’s federal government to match the province’s $1 billion investment in Bombardier Inc.’s CSeries program to round out the funding for the troubled jet and assuage any lingering customer concerns.
“If the federal government comes in, the notion of risk completely changes,” Economy Minister Jacques Daoust said Friday in a telephone interview from Montreal. “If the federal government also put in $1 billion, that would mean the CSeries financing package would be complete.”
His comments underscored Quebec’s determination to prop up the marquee aircraft model at Montreal-based Bombardier, which has been draining cash amid missed deadlines, cost overruns and scant interest among major airlines. Bombardier said Thursday that the jet will need an additional $2 billion during the next five years.
In specifying a figure, Daoust also made clear Quebec’s expectations about the extent of federal aid as incoming Prime Minister Justin Trudeau’s Liberal Party takes office next week. Bombardier assistance would be studied once the new leadership is in place, party spokesman Dan Lauzon said Thursday.
Trudeau, who represents the Montreal district of Papineau, will name his cabinet Nov. 4, and Daoust said he plans to call Canada’s next federal industry minister right after the swearing-in ceremony.
“In one week we will know exactly who we’re working with in Ottawa,” he said. “I can assure you that in the following half-hour, I’ll get his or her phone number and put in a call.”
Quebec leaders have championed Bombardier because of the company’s central role in the province, and the package also includes a potential equity investment of as much as C$442 million ($336 million). Daoust said the federal government needs to act, too, as it did in helping bail out General Motors and Chrysler as part of their 2009 bankruptcies.
“We are going to ask them to support the aerospace industry in Quebec the same way they backed the auto industry in Ontario when times were difficult,” Daoust said. “This will be a profitable transaction for everybody.”
Investors have been slow to embrace the bailout. Bombardier’s widely traded Class B shares rose 3.6 percent to C$1.42 at the close in Toronto, following a 15 percent plunge on Thursday that dragged the stock to a drop of 67 percent this year.
Rockwell Collins Inc., a CSeries supplier, welcomed the rescue on Friday. Government support for the plane creates “an extraordinarily positive outlook,” Chief Executive Officer Kelly Ortberg said in a telephone interview. Rockwell Collins provides cockpit displays and the primary flight control computer for the plane.
Under the deal announced Thursday, Quebec will receive 49.5 percent of the CSeries program in exchange for its $1 billion investment. The province also is poised to become the largest holder of the Class B stock, with warrants to purchase as many as 200 million shares for C$2.21 each. The warrants are good for five years, Daoust said Friday.
Assuming the shares rise past C$2.21 during the next five years and Quebec exercises its warrants, the government isn’t necessarily committed to keeping its stake for the long term, Daoust said.
“If I exercise the warrants, I can buy the shares and keep them, or sell them into the market,” Daoust said. “My role, as the government, is to give CSeries some oxygen when it needs it. I’m not here to the play the role of the institutional investor. So we’ll have to make a decision.”