Bombardier: A 'no brainer' investment or a 'house built on quicksand'?

With the announcement that Bombardier will becutting7,000 jobs over the next two years as it faces declining revenues and a net loss, thespotlight is now firmly on the federal governmentand whether it will heedthe aerospace company's plea for more money.

But where someanalysts see the Montreal-based firm, with its 64,000 global workforce,as a prudent investment in an important Canadian industry, others believe it may be time for Ottawa to turn off the government money tap.

• Bombardier to cut up to 7,000 jobs but signs jet deal with Air Canada for 45CSeries
• Bombardier cuts prompt opposition call for Quebec to renegotiate bailout
• Neil McDonald:Bombardier's strangechokeholdon the public purse
• Bombardier looking for federal help after Quebec's $1B bailout

"My feelingis it comes downtoa question. Do youwant to see Canada involved in theseindustries? And if you do,if you want want to see yourcountry having apresence in these industries,then you're going to have tosupport them,"said TylerChamberlin, an associate professor at University of Ottawa'sTelferSchool of Management.

At a time where there's so much volatility in the resource sector, government contributionsin acapital intensive company like Bombardier "whatever form they may be, loans or grants, are a no-brainer," Chamberlin said.

It is not just the company itself that is at risk, he said, but the network of smaller suppliers that produce parts and bits and pieces.

Along with the layoffs,Bombardier also announced Wednesday that it lost $5.34 billionUS for 2015, including a $677-million US loss in the fourth quarter.

But that newswas somewhattempered by the revelationof aletter of intent from Air Canada to purchase 45 of the company's newCSeriesjets,with options for an additional 30 planes.Bombardier has saidthatorder would be worth about $3.8 billion.

"It does suggest that they're heading in the right direction,"Chamberlinsaid. "Now,that being said, they're still going ahead with layoffs of 7,000 people,which suggests they have very significant problems that aren't solved immediately by these orders."

How much the aerospace company is seeking from the federal government isunclear, but it's believed to be something similar to the $1.3 billion that was recently pledged byQuebec.

Navdeep Bains, Canada's minister of innovation, science and economic development, saidWednesday that "such an important decision will only be made after due diligence, careful consideration and a strong business case."

A decision like that could take months,says David Moloney, the former assistant deputy minister for Industry Canada who worked on the Bombardier file in 2008 when Ottawa gave$350 million inloans forCSeries-relatedresearchand development.

Government officials, Moloney said,will be looking into such factors as whether there isamarketfor the CSeries,who else is in the market, is the companycapableof the construction phase, is there a reliable and capablesupply chain in placeanddoes Bombardierhave the engineering,sales, manufacturing andexecutive leadership to pull this off.

'Latest and greatest'

Karl Moore, associateprofessoratMcGillUniversity'sDesautelsFaculty of Management, praised the CSeries asthe "latest and greatest" in terms of superiortechnology, fuel efficiency and comfort.

"This is a great product where there's a big need in the market place," he said.

He also said that government funding for Bombardiershould not be viewed as a handout, but as the kind of appropriate government support to match what other governments do for their own aerospace industriesaround the world.

"In this industry, when you look at their global competitors,they're all being subsidized," Moore said.

Bombardier has been a "reasonably good investment", he added, and has paid back much of itsgovernment fundingand generatedthousands of jobs andtax revenue from both the company and its employees.

"Bombardier'sbeenaverygood thingfor Canada to have, so it's worth it to us asCanadians giving some of our tax money to them."

On the other hand, AaronWudrick,federal director of the Canadian Taxpayers Federation, says the return on investment has not been worth it, and thatover the last 50 years, Bombardier has received more than $2 billion in government assistance, with only $543 million of it having been repaid.

"Bombardier is a house built on quicksand, demanding taxpayers stand around and hold it up forever. Not sustainable," he tweeted.

For its part,Bombardier CEO Alain Bellemaretold the Canadian Press yesterday that it hasgenerated more than $15 billion ingovernment tax revenuesince the mid-1980s.

'How long do we keep doing this?'

Wudricklater told CBC Newsthe government should be looking at ways of helping peopleaffected by job losses, but that doesn't mean handing money over repeatedly to the same company.

"We've been doing it for 50 years. Quebecjust gave them a billiondollarsand they turnaround and fire 7,000 people. I just don't understandhow people can conclude the next best step is to give them even more."

"Suppose we do give them whateverthey want today, who is to say this won't happen again in five to10years," he said."How long do we keep doing this?"

That other countries subsidize theiraerospace companiesis not justification for Canada to pour money into Bombardier, Wudrick argued, especially since Ottawa alonecan't compete with the U.S. or Europe on this front.

"It comes downto the question of why do we assume we have to be in this business.There are a lot of differentindustries that we're in. And when you bore right down to it,there is no real economic reason why. It's just that some peoplefeel thataerospace is a prestigious industry, or that it's somehowdifferent from other industries.

While the potentialjob losses would be regrettable, Wudrickpointed out that other strugglingcompaniesaren't receiving government aid.

"Alberta just lost 100,000 jobs last year. Ididn'tsee anybody stand up and suggest that the solution wasto find every company and businessthat fired those workers and pay to keep their employees."

Conservative MP Maxime Bernier, critic for innovation, science and economic development, said that direct subsidies to Bombardier is not the real solution.

"Instead of giving subsidies to Bombardier or other businesses I think we must have a policy that will be fair for every business. So stop direct subsidising businesses, and lower taxes to all businesses."