(Figures in U.S. dollars unless otherwise stated)
By David Ljunggren
OTTAWA, Feb 19 (Reuters) - Canada will likely offer up to $1
billion in aid to ailing plane maker Bombardier Inc BBDb.TO ,
according to senior government sources, though some in the
ruling Liberal Party want to see the company make tough
concessions around control.
The federal government is under enormous pressure from the
province of Quebec, which last year invested $1 billion in the
firm's CSeries passenger jet for a nearly 50 percent stake in
the project.
Bombardier acts as the center of the aerospace industry in
Quebec. Although the CSeries is billions of dollars over budget
and years late, not helping the firm would cost the Liberals
support there.
"It is very, very likely the government will step in but the
details still need to worked out," said one person with
knowledge of the file.
Bombardier wants the federal government to follow the
example of Quebec and take a stake in the CSeries, though it is
not clear how big.
In public, federal cabinet ministers have stressed the
importance of the aerospace sector, with Treasury Board Minister
Scott Brison saying on Friday the Liberals would continue to
invest in the industry.
But sources say Ottawa is concerned about Bombardiers's dual
class share structure, which gives the Bombardier-Beaudoin
family a roughly 54 percent voting stake.
Amid vocal criticism of Bombardier's management some
Liberals have suggested the company could dilute or even scrap
the dual class structure, thereby making it more accountable to
investors. Bombardier has hitherto rejected this idea and there
is no guarantee the firm would change its mind under pressure
from Ottawa, setting up a potential standoff.
"The Quebec government got a bad deal with its investment in
the CSeries," said one senior Liberal, citing the lack of
concessions it obtained.
Quebec's 40-strong Liberal caucus has privately told the
office of Prime Minister Justin Trudeau that it is vitally
important the aerospace sector be protected, according to two
party sources, one of which said he knew the government would
back Bombardier.
But Liberals are also cautious about a backlash elsewhere.
The right-leaning Canadian Taxpayers Federation says
Bombardier and De Havilland - which Bombardier bought in 1992 -
have already received more than C$2.2 billion ($1.60 billion) in
government loans and contributions since 1966, adjusted for
inflation.
Another potential challenge is the energy-producing western
province of Saskatchewan, hard hit by slumping crude prices, and
already unhappy with Quebec over its resistance to a pipeline
that would take oil from the west to the Atlantic.
Bombardier on Wednesday announced it would cut its workforce
by 7,000, including 2,830 positions in Canada.
"If the federal government is considering a $1 billion
bailout to address 2,830 Canadian job losses at Bombardier, what
about the tens of thousands of job losses in Canada's energy
sector?" Saskatchewan Premier Brad Wall said in a Facebook (O:FB) post.
The risk of exacerbating long-standing tensions between the
West and Quebec means Ottawa needs to show it wrung concessions
from Bombardier, said a Liberal legislator from outside Quebec.
"In negotiations like these both sides make compromises,
they offer something up. What is Brad Wall going to say if he
sees we handed over the money and didn't get very much in
return?" said the legislator.
Whether or not to aid Bombardier is formally a decision for
Innovation Minister Navdeep Bains. Bains and other ministers
hailed Air Canada's announcement this week that it is looking at
buying up to 75 CSeries jets.
Despite the breakthrough, orders for the CSeries trail far
behind those for similar-sized airliners produced by Boeing (N:BA) Co
BA.N and Airbus Group SE AIR.PA .
($1 = 1.3767 Canadian dollars)
(Editing by Jeffrey Hodgson and Tom Brown)