Bomber raid

Great news today from Bombardier, Canada's transportation equipment giant: Air Canada, the country's largest airline, has placed a firm order for 45 of the company's C-Series passenger jets, with a provisional order for thirty more.

Distressing news today from Bombardier: the company will be reducing its workforce by about 7000, or 10 percent of the total, with more than a third of the job losses in Canada.

Even worse news, at least if you're Prime Minister Justin Trudeau: Bombardier has its hand out for bailout funds from the Federal government, mere weeks after securing a $ 2 billion-plus assistance package from the government of Quebec and its pension fund.  It's hard to overstate what a tricky decision this is for Trudeau and his new Cabinet: let's list some of the ways.

• The Federal fiscal position is shaky. Former PM Stephen Harper misled voters about the situation before last fall's election. A deficit is certain this year even before the Liberals start to implement their program. Trudeau is already backing away from his pledge to run deficits of no more than $10 billion in each of the next three years.

• Bombardier is perpetually seeking to attach itself to the public teat. If management is chronically unable to run the company properly, should the Federal government step in yet again?  

• In addition to the 7000 job losses the company is announcing even as it asks for public help, it continues to outsource production to cheaper locations, notably Mexico. This being the case, how exactly does a bailout serve Canada's economic priorities?

• Much of Canada will cry favouritism if the Liberals come to the aid of a major Quebec company.  Quebec voted heavily for the Liberals, and so any such decision would be portrayed as payback. At the same time, two of Bombardier's major factories are in Ontario (aircraft assembly in Toronto, streetcars in Thunder Bay); rejecting the company's request would cost votes in that Province, which also supported the Liberals back in October.

• Can a deal even be put together in a way that protects the taxpayer's interests? There are suggestions that any cash injection should be in return for an equity stake, as was successfully done with GM and Chrysler after the financial crisis. However, Quebec's bailout funds have already made the provincial government a major stakeholder in Bombardier's aerospace division (49.5 percent), and the Quebec pension plan now owns 30 percent of the rail division.  The company's market value has fallen so precipitously that a Federal stake might almost amount to nationalizing the company. This could well violate international trade rules, imperiling some of Bombardier's existing deals.

The Minister of Transport, into whose lap this file has fallen, is a former astronaut, Marc Garneau. At the end of the day it seems likely that he will come forward with a recommendation to help Bombardier, but it may well be for less  money and on much harsher terms than the company has received from governments in the past.