Wednesday, September 17, 2003, Page A24
The Globe and Mail
The day Paul Tellier was appointed chief executive of Bombardier Inc., the company's stock rose 7 per cent. The tough-talking former Clerk of the Privy Council, one analyst joked at the time, had generated $1-billion for shareholders simply by walking through the door.
Indeed, the 64-year-old Mr. Tellier has an enviable reputation -- for candour, focus, discipline, and a certain ruthlessness that allows him to succeed where others fail. His turnaround of CN could serve as crown to any business career. In his eight-and-a-half months at Bombardier, Mr. Tellier has rolled up or sold off non-core assets, tapped new sources of capital, and refocused on the trains and planes that made Bombardier a global leader. This is all to the good.
Mr. Tellier stretches credulity, however, when he contends that Bombardier is not and has never been a "corporate welfare bum," as he so bluntly phrased it this week. Since the early 1940s, the company has been inextricably linked to government, from all parties and at all levels, and has amply benefited from those links. In fact, it could not have grown and thrived without them.
In notes for his speech to the Canadian Club in Toronto on Monday, Mr. Tellier suggested that the snowmobile, Bombardier's founding product, was "about a father losing a sick child while trying to get him to hospital on snowy winter country roads." That may be true. But Bombardier's meteoric rise didn't really begin until the early years of the Second World War, when the Canadian government decided it needed covered snowmobiles to patrol the Arctic.
By the early seventies, the snowmobile business had become brutally competitive, and Bombardier's sales were dropping. Along came a $117-million contract from the city of Montreal, to build subway cars in time for the 1976 Olympics. Mayor Jean Drapeau wanted a homegrown firm for the job. Bombardier, though it had zero experience in mass transit, fit the bill.
In 1986 came the notorious CF-18 maintenance contract, which Ottawa awarded to Canadair, a Montreal-based subsidiary of Bombardier, over Bristol Aerospace of Winnipeg, a unit of U.K.-based Rolls Royce. Mr. Tellier said this was just a matter of keeping advanced technology in Canadian hands. He failed to mention that Bristol's bid was both lower and technically superior, or that the $1.3-billion, 20-year contract wasn't announced until after Bombardier acquired Canadair for just $120-million, while Ottawa assumed nearly $1.2-billion in debt.
In 1991, the Rae government in Ontario paid Bombardier $17-million to take over UTDC Inc., the then-defunct maker of Ontario's GO-transit cars. And the following year, as Mr. Tellier has reminded us, Bombardier bought de Havilland from Boeing, preventing the shutdown of its plant in Downsview. He neglected to remind us, though, that Bombardier paid just $51-million for a controlling interest - while the federal and Ontario governments contributed $589-million in combined subsidies and investments.
The list goes on. In 1997, Ottawa granted a Bombardier-led consortium a $2.85-billion NATO pilot-training contract - without calling for competitive bids. In January of 2001, Ottawa provided $1.7-billion in low-interest financing to help Air Wisconsin buy 75 Bombardier regional jets. In July of the same year, Northwest Airlines received similar help, for the same purpose. This past July, Trade Minister Pierre Pettigrew announced $1.2-billion in extraordinary loan facilities for customers of Bombardier. And in a number of statements this week, Mr. Tellier made it clear that he thinks Air Canada should now receive similar inducements to buy Bombardier aircraft.
Should Air Canada get such help? And is Ottawa's devotion to Bombardier justified, given that all its major foreign competitors receive similar support? Possibly, if it can be shown that the whole country benefits, rather than just one region. But that's another argument, and one that Mr. Tellier should meet head-on, rather than trying to rewrite history.