Quebec's Business Protectionism Is Not Healthy

'Investing $1 billion in a company with a market cap of $3.6 billion and $9 billion dollars in debt is not sound 'investing'. It's welfare by other means.' The Commentator.

Meanwhile, go ask how hard it is for small-businesses to get a mere $40 000 loan from a bank or the government. Suddenly all the rules and criteria waived for companies deemed 'too big to fail' become very strict for small players.

All bull shit and don't you forget it.

You know it's bad when protecting 5000 jobs in one industry is more important than one with just 50 but not plugged in with the cronies.


On the heels of Quebec's decision to fork over $1 billion in tax dollars (I never tire of this) and with the Feds considering their own crony package (although I hear they're more skeptical - and for good reason) for Bombardier there's another problematic trend taking place in Quebec. That of the government involving itself to 'protect' Quebec businesses from takeovers over the misguided premise of conflating pride with business no matter how much financial trouble they may be in.

This unhealthy political patriotic posturing was summarized perfectly by Premier Couillard:

“We’ve always been at the side of Bombardier,” he said.

Got that? They could build a failed Mechano plane and still get the support of Quebec.

Problem is, the public may not be so forgiving. Here's the problem - and possible rub in the usual populist promiscuity politicians love to pimp - it's taxpayer dollars from the middle-class - many of whom do not earn the same type of salaries as those earned by Bombardier managers and executives - that covers the 'learning curve' CEO Alain Bellemare described in a recent interview on BNN. 

At some point one wonders why not just nationalize Bombardier because patience is wearing thin?

"Supporting Quebec companies has become an increasingly sensitive issue for governments in recent years after the takeover of aluminum maker Alcan Inc. by Rio Tinto Group in 2007, which highlighted the slow march of head office jobs out of Quebec. Montreal, home to Air Canada and Canadian National Railway Co., has seen the number of top 500 Canadian companies based there drop to 75 in 2011 from 96 in 1990, according to a recent report by the Fraser Institute, a Canadian research organization.

The issue took prominence in 2012 after U.S. home improvement retailer Lowe’s Cos. dropped its plan for an unsolicited takeover of Quebec rival Rona Inc. in 2012. The proposal sparked opposition from provincial politicians and investors such as the Caisse de Depot et Placement du Quebec, the province’s pension fund manager.

After the takeover bid, a panel of experts led by CGI Group Inc. Executive Vice President Claude Seguin was tasked to study the issue and identified 25 Quebec-based companies that were “vulnerable” to hostile takeovers. Bombardier wasn’t on the list, because its dual-class share structure protects the company from hostile takeovers."

Remember this whenever Canadians complain about price gouging and access to limited products.

This is how consumers lose. 

The government should not get involved in business. I understand asking to put an end to corporate welfare is political suicide in North America, but it's this kind of crony capitalism that makes the whole process stink. Why should one type of business be favored over another? And spare me all the nonsense about 'green investments' and for 'pride'. It's all about lobbying and connections. That's how it gets determined. 

Business and patriotism is a recipe for bad ghoulash and should not mix. In the case of Ro-Na and Bombardier the best thing that could ever happen is if they did get sold.

People. History is littered with businesses becoming landmark and iconic brands identifying with a country only to be sold off in order to survive. Italy is a great example of this. For every Ferrari and Berretta that manage to stay in Italian hands, there are Fila, Lamborghini and Ducati who don't.

Circle of life.

And Canada better get used to it.

For more on Bombardier go here and here.

From The National Post:

"Bombardier confirmed Thursday that the Quebec government is set to invest in Bombardier’s C-Series jetliner, a dazzling piece of aerospace technology that, unfortunately, does not yet fly commercially due in part to lack of investor cash on hand to get the massively over-budget plane off the ground. Quebec has agreed to buy 49.5 per cent of the CSeries program for a US$1 billion investment. The company also dropped plans to do an initial public offering of its rail business, saying it will instead aim to sell a minority stake in the unit to unidentified investors, with an announcement due “soon.”

That’s hundreds of millions more in new taxpayer commitment. There’s no mention of the need for backing from the new Liberal government in Ottawa, although former astronaut Marc Garneau, star Liberal MP and possible minister in a Trudeau cabinet, has expressed concern about Canada’s aviation industry."

"It is highly likely that if Bombardier were not a giant of Canadian corporate subsidy-seeking, Toronto would today have new streetcars on the street instead of lumbering through the problematic production line in Thunder Bay.

The objectives of the Bombardier streetcar contract often seemed to be more about local employment in Ontario and less about getting the best deal. Even today, Unifor, the big Canadian union representing Bombardier’s 1,200 Thunder Bay workers (and who took them on strike last year), has urged Toronto officials to go easy on the company because jobs are more important than meeting contract conditions."

If they're so worried about jobs then how about this. How about the company actually engages in sound business management and where it can't do so and finds itself in the unenviable position of having to admit it's bankrupt to just sell the business. This thing of using jobs as a threat in order to get tax dollars has to stop.

"There’s nothing new in Bombardier’s headline-grabbing conflicts with government over subsidies and contracts. The company has many successful operations and products — sales last year exceeded $20 billion — but it has a long history of leaning on governments, local and national, to bring in grants or new business. Each deal is a cost to taxpayers in the name of building and protecting a national champion in aerospace and urban transportation.

Both industries are unfortunately the worst in the world when it comes to dependency on government. Political games, subsidy-seeking, grant-extracting and backroom manoeuvring are all part of the culture. It’s a jungle of taxpayer extortion for subway contracts and aerospace jobs."

But I get to where my Bombardier pride on my sleeve! See here, my Bombardier Ski-Doo t-shirt validates my patriotism!

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