The sight of Bombardier Inc. shrinking before our eyes got me thinking about my conversation last fall with Tony Chahine, founder and chief executive of Myant Inc., which makes state-of-the-art computerized textiles in Toronto.
“I failed. I failed again,” Chahine said on stage with me at a Financial Post event in Edmonton. “When you fail in Canada, you are like a virus. People want to stay away from you, from banking to partners.”
Bombardier is a failure today.
The company late on Feb. 12 announced it was transferring its remaining stake in the A220 jet program to Airbus SE and the Quebec government. It was a humbling moment for one of Canada’s great enterprises, made worse by reports that Bombardier is also on the verge of selling its train business to France’s Alstom SA, and the release of financial results that showed the company lost $1.6 billion in its last fiscal year.
If Montreal-based Bombardier divests the train division, it would simply be a maker of business jets; a profitable business, but too small to allow the company and its leaders to maintain the influence they’ve enjoyed for decades. Some found the opportunity to rub Bombardier’s face in its own downfall too tempting to resist.
“For more than half a century, Canadian governments have been subsidizing Bombardier to the tune of billions of dollars,” Aaron Wudrick, federal director of the Canadian Taxpayers Federation, a self-appointed government accountability watchdog, said in a press release. “At most, it’s only delayed the inevitability of tough decisions like the one today.”
That’s one way to look at it.
Bombardier exploited politicians to the max, just as did Airbus in Europe, Boeing Co. in the United States, and Embraer SA in Brazil. It decided to get into a business in which the research-and-development phase of new products is long and expensive. It did so even though it would be going up against rivals backed by governments with big military budgets, but it probably knew that it could rely on Ottawa and Quebec City for all the support it needed. Aviation is a gross business for any capitalist, and maybe Canada should have stayed out of it.
But perhaps Bombardier deserves better than a reductionist take on its legacy. The company tended to be showered with loans, not gifts, and there’s no suggestion that it’s delinquent. Export Development Canada has put up about US$16 billion over the past decade backing buyers of Bombardier planes and subway cars, and about US$540 million in direct support for the company, according to Amy Minsky, an EDC spokeswoman. “Active” support for the company amounts to about US$19 million, Minsky said.
For some, those totals alone make Bombardier worthy of scorn.
But the starting point for a fairer analysis of Bombardier’s legacy should be whether the governments of Canada and Quebec got a return for their investments. Let’s set aside motives because, ultimately, who cares? For taxpayers, what matters is whether their support of Bombardier improved the overall state of the economy.
When a government is making investments, it is helping the fundamental growth of the economy
Stephen Poloz, governor, Bank of Canada
“Deficits need to be kept in context; it’s about what they’re used for,” Stephen Poloz, the governor said at an event in Australia on Feb. 13. “As a company, you don’t force yourself to save for 20 years to make an investment, you borrow to make an investment because it grows the company,” he added. “When a government is making investments, it is helping the fundamental growth of the economy.”
Poloz was making a general point about fiscal policy, not Bombardier, or even whether business subsidies qualify as investment. Still, the principle that he described applies. Did Bombardier, now a shadow of its former self, help grow the economy? It’s a tough question, and answering it properly may require a more generous understanding of failure than we Canadians tend to apply to those who make costly mistakes.
I’ll let others tally the number of Canadian aerospace jobs (53,266 in November, according to Statistics Canada’s most recent monthly survey of payrolls) and decide if that alone justifies the billions in subsidies that Bombardier has received over the years. The company’s ambition, combined with an elevated tolerance for risk, allowed it to grow big enough to become an “anchor firm,” a source of steady demand around which hundreds of suppliers could build businesses.
Some in Montreal think the city’s new success in artificial intelligence and gaming owes something to Bombardier, the original magnet for engineering talent around which the city’s universities built world-class technical programs.
Your opinion of Bombardier will also depend on how much you value manufacturing as an economic engine.
As many manufacturers bailed on North America, Bombardier took its biggest risk: starting work on a plane that would compete directly with offerings from Airbus and Boeing. The project went way over budget, forcing the company to take on a crippling amount of debt. At the same time, and for whatever reason, it struggled to make the train business work. When the Donald Trump administration applied punishing tariffs on Canadian plane imports at the behest of Boeing, Bombardier was forced to effectively give its CSeries plane to Airbus, which the European company renamed the A220. It looked like a moment of hope, but it was really the end.
Myant CEO Chahine thinks it is nearly impossible to have a truly innovative economy without manufacturing. One of his greatest challenges in building Myant has been acquiring expertise, as the Canadian textile industry has all but vanished. “You lose the unknown,” he said. “You lose the discovery of manufacturing. This innovation is lost.”
Whatever the lessons of Bombardier’s downfall, fear of failure shouldn’t be one of them. Companies die. The economy would be better off if more firms were willing to live large, just as Bombardier did.