Bombardier vs Boeing Causing Company Sell-Off, Potentially Costing Jobs

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Bombardier Inc (OTCMKTS:BDRBF) is searching out investment partners and looking to potentially sell off assets including its “Q400 turboprop” and “CRJ regional-jet” unit, Bloomberg reports. The company is working to contend with the massive tariffs imposed by the U.S. Commerce Department that may threaten hundreds of jobs in the U.S., the U.K., and Canada as the Bombardier vs Boeing conflict heats up.

The unnamed sources in the Bloomberg piece claimed that Airbus SE (EPA:AIR) is potentially interested in buying up parts of the struggling aerospace company or potentially investing in the company. The two aircraft giants were linked to a business collaboration in 2015, but it fell through.

The tariffs may force more tough decisions from Bombardier. While the tax has yet to be implemented and won’t be until a ruling is tendered—probably sometime in 2017—the company is still having to contend with the fallout from the U.S. Commerce Department’s ruling.

The taxes were slapped on Bombardier after Boeing Co (NYSE:BA) accused the company of receiving hundreds of millions of dollars in investments from the Canadian government, allowing it to bring its “C Series” jets to the U.S. market undervalue. Boeing argues that Bombardier’s sale of at least 75 C Series jets to Delta Air Lines, Inc. (NYSE:DAL) was undervalued at $5.0 billion. Bombardier denies the claims.

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In any case, the row caused tensions to rise between the U.S., the UK, and Canada as Bombardier employs thousands of people across the world. The Canadian government took issue with the Commerce Department’s tariff, and in response delayed the purchase of the Boeing “Super Hornet” fighter jets. The trade scuffle also comes at a time when the massive North American Free Trade Agreement (NAFTA) is in the midst of being renegotiated by the U.S. with Mexico and Canada.

NAFTA was long in the crosshairs of President Donald Trump, who campaigned vigorously against what he characterized as the U.S. “losing” in trade negotiations.

And while all this is happening in the background of Bombardier’s current troubles, its future remains uncertain, with potentially thousands of workers at risk.

The C Series jetliner came to market over two years behind schedule and about $2.0 billion over budget. The company is looking to raise funds in order to not only offset the potentially massive tariffs that can be levied against it should the ruling favor Boeing, but also with its poor financial showing of late.

The company also was unable to close a merger between its rail-equipment business and Siemens AG (ADR)(OTCMKTS:SIEGY) despite months of talks.

As for its regional aircraft business, which is to say aircrafts that carry between 50 and 90 people, the company marked only 119 orders in 2016, down 50%.

As a result of these overruns, failed deals, delayed schedules, and other issues, Bombardier accepted a $1.00 billion investment from Quebec and another $372.5 million from Canada. Between the investments, the flagging sales, and the pending suit from Boeing, Bombardier asset sell-off and investment seeking is intended to help stem the tide of bad news.

 

Source

Bombardier Is Exploring Options for Its Aerospace Businesses,” Bloomberg, October 16, 2017. 

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