
Airbus’s tie-up with Bombardier is damaging for Boeing - rbanffy
https://www.economist.com/news/business/21730466-american-aerospace-giants-campaign-tariffs-against-c-series-aircraft-has
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jacquesm
Typical. If US can't compete on merits then they typically come up with some
contrived reason to levy tariffs in order to cripple anything Canadian that
just might be successful. Same thing happened to lumber, dairy, poultry,
livestock and anything else that gets made north of the border. In the
meantime all those industries are pretty happy to take the pork when and where
it is available, Boeing probably more than any other company _in the world_.
So this complaint is about as disingenuous as it gets.

Not that any other country cares one bit about Canada. Even the UK, which has
a pretty big stake in this whole thing has kept mum, presumably because they
don't want to upset their own future trade deal with the US.

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liotier
Let's invite Canada to join the EU - they would be a great fit !

~~~
sigmaprimus
Canada has already made a free trade deal with the EU called CETA, all the
more reason to play hard ball with the US during the new NAFTA negotiations.

[https://www.google.ca/url?sa=t&source=web&rct=j&url=http://w...](https://www.google.ca/url?sa=t&source=web&rct=j&url=http://www.international.gc.ca/ceta&ved=0ahUKEwibzdjgxv_WAhXlqlQKHbgiDs8QFghGMAI&usg=AOvVaw0w3uaCIqbHbRZQgPE1MTA5)

~~~
kps
Which — from my point of view as a Canadian consumer — is neutered by
protectionism, as the one EU product I'd really want (decent affordable
cheese) is excluded by the powerful Ontario/Québec dairy lobby.

~~~
OldSchoolJohnny
I bet there are a _lot_ of us that want cheap European cheese. It's basically
the only thing I check in the news about trade deals these days! :)

~~~
jacquesm
Come and live here. There are some other fringe benefits beyond the cheese.

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jaytaylor
I'm unclear on why / how a 300% tariff on the Bombardier jets would be
considered fair or good in any way, for anyone other than Boeing. Is this just
classic corrupt lobbying or is there more to it?

~~~
tfe
Their complaint is that the Canadian government subsidized development costs
(which it arguably did), so it's unfair competition.

[https://en.wikipedia.org/wiki/Countervailing_duties](https://en.wikipedia.org/wiki/Countervailing_duties)

However Boeing is also quite subsidized, just more indirectly through defense
contracts. And what's more, Boeing doesn't even offer a competitive product.
They don't sell any aircraft in this size range.

~~~
ams6110
It's not like the defense department would not be developing and buying jets
if Boeing didn't exist. I don't really think of defense business as a subsidy.
Though admittedly I'm sure there's plenty of grease money being spread around.

~~~
skgoa
Defense spending isn't supposed to be a direct subsidy, but the DoD does
sometimes blatantly choose one product instead of better competing products
based on industrial concerns. E.g. that tanker buy where Airbus won the
competition, but the DoD reversed it and leaked emails showed that it was done
purely to benifit Boeing. Or that the US Army refused to allow the widespread
introduction of a modern infantry rifle that isn't made by Colt, forcing the
US Marines to designating their new rifle as a "light machine gun".

Every country does this, since having your own defense industry is a massive
strategic boon and keeping those high-tech jobs are good for the economy. But
it's definitely anti-competitive behavior and the respective defense companies
do get a lot more taxpayer money for the capabilities the country gets than
would be optimal.

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bipson
The title seems to suggest that mergers and co-operations are good if it
revolves around US companies, but bad if done by Canadians or (shock!) EU
companies?

As if Boing never, ever received subsidies, just to drive out competition out
of US and worldwide markets? Do people realize that Airbus is still incredibly
small and financially fragile compared to the almost to-big-to-fail Boing?

~~~
jsemrau
Market Cap Boeing : 153.11B Market Cap Airbus : 62.41B \---------------- As of
20.10.2017

For reference

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dmix
> In this case, Bombardier’s response will serve only to consolidate further
> an already oligopolistic market

So basically like every other government intervention in markets in the name
of helping the 'working class'...

A small group will get jobs and make more money in the short term in exchange
for long term growth, competition, and innovation.

The biggest factor never fully considered in these protectionist policies and
campaign trail rhetoric is always the fact these companies operate in a global
marketplace. It's easy to shift operations or capital to foreign markets with
more business friendly policies. So domestic restrictions rarely hurt the
large companies, it only restricts local jobs and the smaller companies who
can't afford to compete in this fashion.

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adventured
I keep seeing arguments that Boeing made a mistake in pushing on the tariffs,
or that this deal with Airbus is bad for Boeing.

They're wrong. In Boeing's ideal world, they're the only airplane manufacturer
in the world. The next best thing, is to only have Airbus as competition.
Boeing's interests are served tremendously by keeping the global market as
consolidated as possible down to just Boeing and Airbus. They have one main
target to focus on when it comes to competition and politics. Airbus eating
Bombardier is the next best thing to Bombardier going out of business. Simply
put, Boeing would rather Airbus own / control Bombardier, than have Bombardier
exist as a successful independent airplane manufacturer.

~~~
UnoriginalGuy
I get your argument; but one of Boeing's objectives has been to try and keep
Airbus out of the US (both defense and commercial). This deal with Delta will
showcase, within the US, the CSeries. That could result in other US airlines
following suit (particularly smaller regional airlines). Airbus is already
fairly successful within the US with regional aircraft sales, this will only
further cement that.

Plus keep an eye on China's Comac. They're only ten years old (2008) but due
to massive state investment are becoming pretty competitive, they may be
eating both Boeing and Airbus's lunch by 2030 if this level of investment
continues.

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jquery
If by state investment you mean the well-tread path of Chinese corporate
espionage -
[http://www.chicagobusiness.com/article/20120317/ISSUE01/3031...](http://www.chicagobusiness.com/article/20120317/ISSUE01/303179980/china-
leans-on-boeing)

Fortunately for Boeing, a plane is not so easy to copy as many of their other
successful corporate thefts.

~~~
kuschku
You do realize that the Snowden papers show that Boeing did exactly the same
corporate espionage, aided by the NSA steaking data from Airbus and directly
giving it to Boeing?

The US is just as problematic as China in these things, and has the same
levels of subsidies for industries deemed important to national security.

~~~
adventured
> The US is just as problematic as China in these things, and has the same
> levels of subsidies for industries deemed important to national security.

Let's talk about government subsidies:

(July 2015)

"China's Global 500 companies are bigger than ever—and mostly state-owned"

"the top 12 Chinese companies are all state-owned. They include massive banks
and oil companies that the central government controls through the State-Owned
Assets Supervision and Administration Commission of the ruling State Council
(SASAC), which appoints CEOs and makes decisions on large investments. Of the
98 Chinese companies on the list, only 22 are private."

[http://fortune.com/2015/07/22/china-global-500-government-
ow...](http://fortune.com/2015/07/22/china-global-500-government-owned/)

Using one example to proclaim that the US is committing as much intellectual
theft as China, is comical. The US has dramatically more to lose than China
does, given its general technological superiority (whether at the university
lab level or the corporate R&D level).

The second point is even more absurd, and very easily demonstrated to be false
(as I did above). Most of China's largest corporations are State controlled
entities. Most of their largest industries, such as steel, are directly
controlled by the government. A very large share of the Chinese economy is
operated by fully nationalized, or partially nationalized fake corporate
entities. So called State corporations.

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pjc50
"News of the tie-up was greeted warmly not only in Canada but also in Northern
Ireland, where the C-Series’ wings are made. The Democratic Unionist Party,
the province’s largest party, which supports the government of Theresa May,
the British prime minister, said it was “thrilled” with the deal."

This is quite important too. If the UK had a functioning Foreign Office they
would have been wading in on behalf of Bombardier. The DUP have an extremely
disproportionate influence at the moment, but at least they're using it to
preserve jobs in a deprived area this time.

~~~
drpgq
Has it been greeted warmly in Canada? I certainly don't get that sense.

~~~
Harvey-Specter
The sense I've gotten is that there was a lot of concern from potential
customers about the ability of Bombardier to continue the C-series program
without being able to sell to the US market. This deal assuages those
concerns, which helps with making sales to customers outside the US as well.
So it's a good thing, but its disappointing that it came to this.

~~~
dmix
It also means a small group of factory jobs are moving to the US, so publicly
it can appear as a win to the US administration. In reality there was quite a
significant cost for very little gain (costs to the global economy, US
diplomacy with CA/UK, domestic US competition, etc), and the profits are still
ultimately going to Canadian and UK companies.

This just isn't a productive use of state resources.

They'd do more for the economy and working class by getting out of the way of
business instead of generating even more convoluted backroom deals with
megacorps like Boeing.

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alexasmyths
Boeing saw an ally in the Trump admin and NAFTA renegotiation and tried to
play a curve ball.

Because some of these planes may actually be made in the US, it's possible
Airbus+Bombardier may have completely outmanoeuvred Boeing, rendering the
recent rulings irrelevant.

Canada, a small open country with an open culture, is really in a tight spot
next to the USA.

Ironically, I'm not sure how much open borders benefits Canada - it benefits
_Canadians_ because they can move to the US ... but almost everyone I know who
is talented moved to the US long ago - that's where the HQ of everything in.

One could say the same of midwestern states: sans a 'core' economic sector to
drive them, the rest of the more powerful states will eat their lunch.

~~~
drpgq
Yeah I've wondered for a while about the crowing over students from Waterloo
moving to the US. Would Canada be better off if there was no TN visa and
companies would have to employ them in Canada? Also good point about Canada
and the midwestern states being in the same boat. I'm sure Nebraska loses a
decent number of software engineers to California every year.

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emilecantin
As a Québécois, I haven't seen much discussion about the effects of diluting
Québec's shares in the plane. The article says our new stake is 19%, down from
49%. I feel we got kind of shafted in the deal, given we bought these shares
at a valuation of ~5.5B (for 2.8B) and now Airbus gets a bigger share for
free. I don't think this means good news for our investment.

~~~
Patrick_Devine
Having a 19% stake in selling 6000 planes (as the article mentions), is worth
a lot more than a 49% share in selling 300 planes. Also, Bombardier had to
constantly discount the plane and take lower margins just to get airlines to
buy, which with Airbus's sales and support network will no longer happen. Plus
a lot of the uncertainty of the project has magically gone away.

This is a great deal for Québec.

~~~
Joe8Bit
Very valid point, but I'm wondering if 'assembly' does more to the US to avoid
the tariffs on the C-series; does that mean there will be less economic
benefit for Quebec? For example, by assembly jobs moving to the US.

They may gain in value of their acquired shares but they may also lose in
terms of wider economic output for their province.

~~~
skgoa
Only final assembly of the planes that are sold to US airlines will be done in
Mobile. In the Airbus world, final assembly tends to mean bolting together a
relatively low number of finished sections that were produced somewhere else.
So a lot of the labor will stay in Canada.

~~~
dingaling
> In the Airbus world, final assembly tends to mean bolting together a
> relatively low number of finished sections that were produced somewhere
> else.

Pretty much the same as modern Boeing. Something like 70% of the 787 structure
is made abroad but glued together in the USA:

[http://static1.uk.businessinsider.com/image/58a768badd0895f0...](http://static1.uk.businessinsider.com/image/58a768badd0895f0288b4818-800-/chart-889.jpg)

Australia, Canada, France, Italy, Japan, Korea, Sweden and ( if RR engines
chosen ) UK all send their assemblies to Seattle and Charleston. That's
without considering avionics and internal systems.

Hence the wording 'Country of final assembly' on the onboard safety cards,
carefully chosen to obscure origins.

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avar
A related summary of Boeing's dispute with Airbus being mediated by the WTO
for the last decade:
[https://en.wikipedia.org/wiki/Competition_between_Airbus_and...](https://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing#World_Trade_Organization_litigation)

~~~
_Codemonkeyism
Quote from the link

"The tax incentives given by the state of Washington and believed to be the
largest in US history surpassing the previous record of $5.6bn over 30 years
awarded by the state of New York to the aluminum producer Alcoa in 2007. The
$8.7bn over 40 years incentive to Boeing to manufacture the 777X in the state
includes $4.2bn from a 40% reduction in business taxes, £3.5bn in tax credits
for the firm, a $562m tax credit on property and buildings belonging to
Boeing, a $242m sales tax exemption for buying computers and $8m to train 1000
workers,

Airbus alleges this is larger than the budgeted cost of Boeing's 777X
development program and the EU argues amounts to an entire publicly funded
free aircraft program for Boeing"

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neves
How bad is this for Embraer?

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akhatri_aus
Its not, there are less players in the market and therefore good for them.

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Costrak
I sure hope it works out for Bombadier, retains some diversity in passanger
jets

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agumonkey
GE buys Alstom, Airbus gets Bombardier.. it's a mess

