US embassy cable - 04OTTAWA3407

UNCLAS SECTION 01 OF 02 OTTAWA 003407 
 
SIPDIS 
 
STATE FOR WHA/CAN (BREESE AND HOLST) EB/TPP/BTA/EWH: 
(MATTHEWMAN) 
 
STATE PASS USTR FOR SAGE CHANDLER 
 
USDOC FOR 4320/OFFICE OF NAFTA; 3134/OIO/WESTERN 
HEMISPHERE; ITA/FRED ELLIOTT 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EIND, ETRD, CA, WTO, NAFTA 
SUBJECT: GOC SUBSIDY TO BOMBARDIER LIKELY 
 
REF: State 262292 
 
1. (SBU) Summary:  There is strong political pressure 
on the GoC to find a way to support Bombardier, 
especially given its current financial troubles. 
However, decisions on how or when to come up with money 
are likely to be made at the political level, leaving 
officials scrambling to find a funding mechanism.  End 
Summary. 
 
2.  Post made reftel points to a range of GoC officials 
at Industry Canada and International Trade Canada, as 
well as to the executive director of Technology 
Partnerships Canada (TPC) and parliamentary officials. 
 
3.  (SBU) TPC Executive Director Tom Wright told us 
that Bombardier had not made a formal application for 
TPC funding, and that it was not clear that TPC would 
necessarily be the mechanism to provide launch aid. 
(Comment: TPC is under review in the GoC at the moment 
and has attracted media criticism for a repayment rate 
of less than 3% on $2 billion in disbursements over the 
last eight years.  End comment)  Econ officer also 
eventually reached Ron Watkins, Director General for 
the Aerospace and Automotive branch of Industry Canada. 
Watkins said that no decision was imminent, and that 
the GoC would not decide on its policy on launch aid 
until Bombardier had actually decided whether or not to 
go ahead with the launch of the C-series.  He also 
groused that press reporting on the issue, especially 
about sources and amounts, had been largely inaccurate. 
The press has reported that anywhere from $300-$380 
billion CAD has been earmarked for Bombardier out of a 
proposed aerospace industry aid package.  Almost 
immediately after that conversation, however, Industry 
Minister David Emerson told reporters that he plans to 
seek cabinet authority for financial aid for 
Bombardier, as part of a package of more than $1 
billion in aid for the Canadian aerospace sector. 
 
4. (SBU) A contact in the House of Commons told us 
December 16 that the Cabinet Committee had already 
discussed the issue but had not made any solid 
decision, and that the issue of WTO/NAFTA obligations 
had come up during those discussions. 
 
5. (SBU) One MP commented to us that regional politics 
are likely to increase pressure on the government to 
support Bombardier.  The separatist Bloc Quebecois has 
argued that Ontario has received almost a billion 
dollars in subsidies in the last few years - notably to 
induce Ford to maintain operations and build a new 
plant in the region - while Quebec companies have 
allegedly been left out in the cold.  Quebec regional 
interests explain the prominent role that Transport 
Minister Jean Lapierre has played in public discussion 
of the issue; ordinarily Transport would have no role 
in such a decision.  In the meantime, Bombardier, 
despite its financial troubles, has reportedly hired a 
lobbying firm in Ottawa and is pushing hard for 
funding. 
 
6.  (SBU) Comment:  Bombardier's current quest for 
funds is the latest round in the long history of its 
entanglement in Canadian regional politics.  Ever since 
the Mulroney government handed a $1.4 billion contract 
to service the CF-18 fighter jet to Bombardier in the 
late 1980s (over a British-owned company based in 
Winnipeg), the Montreal-based company has been a symbol 
for Western Canadians of Quebec's "spoiled child" 
status with Ottawa.  Bombardier, one of the flagships 
of Quebec Inc., has also enjoyed and depended on 
subsidies from the provincial government. 
 
7. (SBU) The company has fallen on tough times in 
recent years, letting go thousands of workers in the 
worldwide aerospace and airline downturn since 9/11. 
(The surprise resignation of CEO Paul Tellier last week 
drew attention to its shaky financial condition and 
furthered battered stock prices.) All players -- from 
trade unions, to opposition parties to employers groups 
- have demanded that the Liberal government in Quebec 
find whatever it takes to compete with offers made by 
Northern Ireland or U.S. states, to ensure that final 
assembly of Bombardier's next generation of jets will 
be in Montreal.  On Dec. 3, Quebec Opposition leader 
Bernard Landry argued that the reluctance of the 
Canadian government to help Bombardier compete in 
international markets was a reason to have an 
independent Quebec and that an independent Quebec would 
have no such reticence.  The Province of Quebec 
subsequently announced a package of up to $700 million 
in loan guarantees for Bombardier's current production. 
Support goes beyond Quebec, however; Buzz Hargrove, 
head of the Canadian auto workers' union, has called 
for joint financing by Ottawa and the provinces for the 
C-series, citing the success of European support for 
Airbus and commenting that "we need to learn the same 
lesson." 
 
8. (SBU) Quebec officials have told us that they are 
pushing for the GoC to take on funding for Bombardier 
as a federal issue.  Ontario has reportedly just made 
an offer to support Bombardier production in the 
province, for which the mayor of Toronto has been 
actively lobbying.  Bombardier is rumored to have 
received offers from three U.S. states as well; Quebec 
may be seeking to avoid a bidding war. 
 
(SBU) Post will continue to monitor developments 
closely. Our discussions suggest that federal funding 
of some kind for Bombardier is likely and that the 
decision is essentially out of the hands of Industry 
Canada officials; timing and amounts are likely to be 
decided at the Cabinet level, leaving officials with 
the task of finding the right channel for funding. 
 
Cellucci