U.S. Dept of Commerce backs Boeing in dispute with Bombardier

aerolimani · Tue Oct 03, 2017 7:15 pm

PPVRA wrote:
aerolimani wrote:
The aviation industry is subsidized globally. Welcome to 21st century global business.

Over the last 100 years, industry has grown to be less subsidized, not more. If you truly cared about free trade you'd be arguing against subsidies, for subsidies are not compatible with free trade. Subsidy wars create all kinds of problems and most especially, discontent, disagreements among trade partners and ultimately the taxpayer of all countries involved pay the cost. Worse yet, it can lead to boondoggle projects that end up distracting industry and diverting resources away from real, worthwhile and sustainable projects.

I don't disagree with you, actually. And, it's good that things are better than they once were. Unfortunately, we're not yet in a world where everyone is willing to play "fairly." Unless we can get all countries at a table, get them to agree to provide no incentives or subsidies in any form, to force the corporations to pay their employees the same wages (regardless of local economy), and to structure their corporate taxes in an identical manner, then we are always going to have a situation where subsidies are necessary.

In some hypothetical, perfect future world, I will argue against subsidies. Unfortunately, this world is not there yet. Everybody is subsidized in some manner, and the excuse is always that it's because the other guy is subsidized. In this world, change comes slowly.

While we may have had improvements in the industry becoming less subsidized over time, we've also had a deteriorating situation in terms of competition. Above 130 seats (or thereabouts), we've had only two manufacturers for quite some years now. If some subsidization is what it takes to get a third competitor, then yes, I'm in favour. I'd also rather have that competition come from a country such as Canada; a top 10 country on the World Corruption Perception Index. As a point of interest Canada is at #9, and the USA is at #18.

Amiga500 · Tue Oct 03, 2017 7:15 pm

MSPNWA wrote:
Uh, Boeing since they've played by the rules? Or do laws not matter anymore...

MSPNWA · Tue Oct 03, 2017 7:17 pm

northstardc4m wrote:
Did you seriously just say Boeing plays by the rules?

Yep, because that's what the evidence tells us. Where are the obvious trade violations? Where are the illegal subsidies? And let's say Boeing has done the same thing as Bombardier, which it has not come close to. Does that make Bombardier's actions any more right? No. All the pro-Bombardier crowd has given is smoke and mirrors. Facts and reason don't matter. This isn't about who's clean and who isn't. No corporation is perfectly clean. It's about who clearly violated trade laws.

aerolimani · Tue Oct 03, 2017 7:45 pm

MSPNWA wrote:
northstardc4m wrote:
Did you seriously just say Boeing plays by the rules?

Yep, because that's what the evidence tells us. Where are the obvious trade violations? Where are the illegal subsidies? And let's say Boeing has done the same thing as Bombardier, which it has not come close to. Does that make Bombardier's actions any more right? No. All the pro-Bombardier crowd has given is smoke and mirrors. Facts and reason don't matter. This isn't about who's clean and who isn't. No corporation is perfectly clean. It's about who clearly violated trade laws.

I guess you could say there's a difference between playing by the rules and playing fair. A good corporate lawyer is expensive because they've become very good at playing unfairly, but within the rules.

At the end of the day, when it comes to matters of international trade, there are no rules. Countries get together, have a meeting, agree to enforce a set of rules within their own countries, and then everybody goes home and finds ways to get around the rules. The amount of rule-bending seems to run parallel to the size of a country's economy and military.

northstardc4m · Tue Oct 03, 2017 7:57 pm

MSPNWA wrote:
northstardc4m wrote:
Did you seriously just say Boeing plays by the rules?

Yep, because that's what the evidence tells us. Where are the obvious trade violations? Where are the illegal subsidies? And let's say Boeing has done the same thing as Bombardier, which it has not come close to. Does that make Bombardier's actions any more right? No. All the pro-Bombardier crowd has given is smoke and mirrors. Facts and reason don't matter. This isn't about who's clean and who isn't. No corporation is perfectly clean. It's about who clearly violated trade laws.

you can cherry pick which rules all you want... but in the end they don't play by the rules, they have plenty of convictions and fines... Criminal convictions no less. Don't see those at Bombardier and Canada's rules on that stuff are more strict than the US. Ask SNC Lavalin...

You can call Bombardier badly run (they are no argument). You can call the issue of the subsidies questionable and I won't disagree but i will dispute that it's an all or nothing, only the WTO can really say and that will be years away. But if you try to say anyone in this is Ethical and full above board and "playing by the rules, all the rules and nothing but the rules" I'll assume it's a joke.

Trade is smoke and mirrors. Aerospace is as corrupt an industry as you will find. If you think otherwise I'd start digging a hole under a rock if i were you...

iamlucky13 · Tue Oct 03, 2017 8:33 pm

washingtonflyer wrote:
northstardc4m wrote:
washingtonflyer wrote:
(quote trimmed)
But for the presence of subsidized imports, Boeing would not have had to take that lost revenue sale.

Well if you accept the assumptions that:

Bombardier was at the time taking a loss as well

That there are in fact subsidies that are illegal (not proven)

Commerce has already said in its initial determination that the equity infusion into BBD was a subsidy because BBD was not creditworthy and was not equityworthy. BBD lost 1.26 billion in 2014 and over 5.3 million in 2015. The infusion took place in 2015 in "a deal with the Quebec government to invest in the struggling CSeries jet program." Almost everyone here agrees that this infusion represents a direct injection of capital into a company.

Articles elsewhere show BBD absolutely took a loss on the sale. "Bombardier’s task is not made easier by an outbreak of transparency in the secretive jet market after it was forced by Canadian accounting rules to take a $500 million charge for the Delta deal and two others covering a total of 127 planes."

I expect one angle BBD will challenge here is whether they were completely non-creditworthy and completely non-equityworthy, or if they had access to either or both at worse terms that those offered by Quebec. In such case, I presume they have a case to argue the subsidy value was only a portion of the total investment value.

And then there's the matter of the difference between the $3.9 million per plane write down that constitutes part of the evidence against them, and the apparently ~$65 million penalty (2.19 x rough guess of $30 million actual value).

Of course, the sum of all of the disputed subsidies are significantly larger than the $500 million write down, but the useful life of the subsidies is also significantly larger than 127 planes.

MSPNWA wrote:
YULexpat wrote:
I meant to post this link earlier. I do not believe it has been mentioned here earlier. I read this article when it was published shortly before the Department of Commerce decision. It seems prescient.

https://www.forbes.com/sites/danikenson ... f8788c10a5
(quote trimmed)

I expect a lot better from a publication such as Forbes. The writer lacks even elementary economic sense and understanding of the Boeing and Bombardier products. For example, he states that ticket prices would go up if Delta were forced to buy a larger aircraft and fly around "empty seats". Uh, no, increasing supply doesn't force, or more importantly enable, a price increase. The trend will be in the opposite direction. And he also says that per seat costs would be "higher" with the larger plane. Again not true as larger airplanes have roughly equal to lower per seat costs than the CSeries. Trip costs go down with the CSeries, but not per seat cost.

CASM is not RASM. Adding empty seats does not automatically generate revenue, and lowering prices to try to induce demand at some point cross a line in cases like this where RASM falls faster than CASM, which is a negative net outcome from upgauging.

If a smaller aircraft is not experiencing regularly high load factors, or to put it in terms of "elementary economic sense," the supply already exceeds the demand, and substituting a larger aircraft with higher block operating costs does not help.

There are other errors in the Forbes article, but you are on the wrong trail.

mffoda · Tue Oct 03, 2017 9:51 pm

A little crack in the armor of the UK/Canada team...

Form bloomberg:

"The U.K. is said to see Canada as primarily responsible for the trade dispute between Boeing Co. and Bombardier Inc. because of the level of its state aid to the aerospace company. Publicly, the British government has said that the U.S. imposition of punitive duties on Bombardier is disproportionate, and Prime Minister Theresa May even lobbied U.S. President Donald Trump unsuccessfully to try to prevent it. Privately, it believes that Canada has overstepped the mark in aid to Bombardier, according to two officials who declined to be named while talking about an ongoing dispute."

https://www.bloomberg.com/news/articles ... oeing-spat

iamlucky13 · Tue Oct 03, 2017 10:13 pm

mffoda wrote:
A little crack in the armor of the UK/Canada team...

Form bloomberg:

"The U.K. is said to see Canada as primarily responsible for the trade dispute between Boeing Co. and Bombardier Inc. because of the level of its state aid to the aerospace company. Publicly, the British government has said that the U.S. imposition of punitive duties on Bombardier is disproportionate, and Prime Minister Theresa May even lobbied U.S. President Donald Trump unsuccessfully to try to prevent it. Privately, it believes that Canada has overstepped the mark in aid to Bombardier, according to two officials who declined to be named while talking about an ongoing dispute."

https://www.bloomberg.com/news/articles ... oeing-spat

The bolded statements do not contradict each other.

I would not call it a crack in the armor. I think it's facing up to the challenge of protecting their interests. They're going to have a very difficult time convincing the various layers of authority involved that none of the government funds received constitute illicit subsidies, but individual elements of the case against them being upheld does not mean the all the other elements will, like the size of the penalties.

washingtonflyer · Tue Oct 03, 2017 10:43 pm

Having worked on many of these, my guess is that Bombardier is on auto-pilot at this point. No pun intended.

Its all going to be a matter for the USITC....

SomebodyInTLS · Tue Oct 03, 2017 11:06 pm

northstardc4m wrote:
MSPNWA wrote:
northstardc4m wrote:
And which party ISN'T Hypocritical in this debate?

Uh, Boeing since they've played by the rules? Or do laws not matter anymore...

Did you seriously just say Boeing plays by the rules?

http://blog.seattlepi.com/aerospace/200 ... t-go-away/

https://www.c-span.org/video/?193687-1/ ... department

https://www.corp-research.org/boeing

Yea... by the rules... that's a good one...

The irony that he claims the biggest hypocrite is the only one not being hypocritical is... beyond words.

par13del · Tue Oct 03, 2017 11:32 pm

I think the biggest hypocrites are in the developed world, they used public funds (subsidies) to set up their industries in the national interest, and after they got established and developing countries started looking to develop their own industries, suddenly realized that subsidies were bad and should be abolished.
Brazil has done very well, one has to wonder why Canada is in this mess and they are not.....and no, it's not Boeing fault, after all, they sat by while Europe protected their national interest, maybe its because there was no WTO...hhmmmm...

northstardc4m · Wed Oct 04, 2017 12:35 am

par13del wrote:
I think the biggest hypocrites are in the developed world, they used public funds (subsidies) to set up their industries in the national interest, and after they got established and developing countries started looking to develop their own industries, suddenly realized that subsidies were bad and should be abolished.
Brazil has done very well, one has to wonder why Canada is in this mess and they are not.....and no, it's not Boeing fault, after all, they sat by while Europe protected their national interest, maybe its because there was no WTO...hhmmmm...

http://www.reuters.com/article/us-brazi ... SKBN13Q5R2

http://www.bbc.com/news/world-latin-america-35810578

https://www.ft.com/content/3490dbb8-405 ... f963e998b2

I wouldn't boast about Brazil not being in a mess... it simply has the mess elsewhere. If we are talking about Hypocrites, people in glass houses and all... not to forget ProEx either.

DDR · Wed Oct 04, 2017 12:39 am

Hopefully, DL will never order another Boeing aircraft.

Waterbomber · Wed Oct 04, 2017 12:47 am

mffoda wrote:
A little crack in the armor of the UK/Canada team...

Form bloomberg:

"The U.K. is said to see Canada as primarily responsible for the trade dispute between Boeing Co. and Bombardier Inc. because of the level of its state aid to the aerospace company. Publicly, the British government has said that the U.S. imposition of punitive duties on Bombardier is disproportionate, and Prime Minister Theresa May even lobbied U.S. President Donald Trump unsuccessfully to try to prevent it. Privately, it believes that Canada has overstepped the mark in aid to Bombardier, according to two officials who declined to be named while talking about an ongoing dispute."

https://www.bloomberg.com/news/articles ... oeing-spat

Rolls Royce, BAe Systems, Airbus UK have never received subsidies, have they?

Talking about Embraer... they never received subsidies?

In 1999, WTO ruled that Brazil ran an illegal subsidy program ProEx, benefiting its national aviation industry and providing loans to Embraer clients. As a result, Brazil presented a modified program that satisfied the WTO. A while after, the WTO panel also ruled that Canada had illegally subsidized its indigenous regional airline industry. The ruling concluded that several low-interest loans from the Canadian government had to be treated as illegal subsidies designed to aid Bombardier in gaining market share. The WTO eventually ruled in 2002 that both countries had broken trade rules.

https://www.aerotime.aero/en/civil/1226 ... ane-making

In addition, there were the corruption cases too:

Washington D.C., Oct. 24, 2016—
The Securities and Exchange Commission today announced a global settlement along with the U.S. Department of Justice and Brazilian authorities that requires aircraft manufacturer Embraer S.A. to pay more than $205 million to resolve alleged violations of the Foreign Corrupt Practices Act (FCPA).

The SEC’s complaint alleges that Embraer made more than $83 million in profits as a result of bribe payments from its U.S.-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique. Embraer allegedly created false books and records to conceal the illicit payments, and also engaged in an alleged accounting scheme in India.

https://www.sec.gov/news/pressrelease/2016-224.html

How about the Comac 919 and the MC-21?
The B787's investments from Japan?
The B737's procurement through the P-8 program?
The A330 through the MRTT program?
The cheap loans for the A380?
The 5 billions for the A350XWB?

If everybody's doing it, might as well all agree to freedom in subsidies.

Siddar · Wed Oct 04, 2017 2:41 am

Waterbomber wrote:
The B737's procurement through the P-8 program?

I think complaining about supposed subsidies on military sales is going to get no where. All trade agreements exempt military sales for a reason. That why France was able to buy Airbus tankers without opening the bidding to Boeing. There is no way countries will give up their ability to buy locally on military contracts if they can produce a competing product locally. So your bringing up topic of military sales is just posturing for the ill informed.

KarelXWB · Wed Oct 04, 2017 6:56 am

MSPNWA wrote:
KarelXWB wrote:
Delta's own words for the record:

That's what DL says now, as one would expect them to say no matter the facts. Go look up what they were saying before the order came in.

Thanks. It's pretty confusion when even the DL fleet strategy guy is lying publicly :liar:

Waterbomber · Wed Oct 04, 2017 9:25 am

Siddar wrote:
Waterbomber wrote:
The B737's procurement through the P-8 program?

I think complaining about supposed subsidies on military sales is going to get no where. All trade agreements exempt military sales for a reason. That why France was able to buy Airbus tankers without opening the bidding to Boeing. There is no way countries will give up their ability to buy locally on military contracts if they can produce a competing product locally. So your bringing up topic of military sales is just posturing for the ill informed.

I think that when a company producing commercial aircraft can get billions in defense spending funelled into the same bank account as the one that they take money from to fund a commercial aircraft program, we can conclude that the taxpayer is funding said commercial program. One could make the case that without the earnings of the military programs, the commercial programs could not be funded. Did Brazil really need to build a new military cargo aircrafr?

Amiga500 · Wed Oct 04, 2017 11:29 am

Waterbomber wrote:
I think that when a company producing commercial aircraft can get billions in defense spending funelled into the same bank account as the one that they take money from to fund a commercial aircraft program, we can conclude that the taxpayer is funding said commercial program. One could make the case that without the earnings of the military programs, the commercial programs could not be funded. Did Brazil really need to build a new military cargo aircrafr?

Ah... if you said part funding.

A few case in points.
Boeing: X-32 composite wing structure --- went on to form the foundations of the knowledgebase that built the 787 wing.
Airbus: A400M composite wing structure --- knowledge went into the A350 wing.
Embraer: KC390 fly by wire software --- knowledge has went into the E2 jets FBW.
Bombardier: ... screwed as Canada don't develop any military aircraft since Avro went under.

https://books.google.co.uk/books?id=cft ... og&f=false

SheikhDjibouti · Wed Oct 04, 2017 11:51 am

Waterbomber wrote:
I think that when a company producing commercial aircraft can get billions in defense spending funelled into the same bank account as the one that they take money from to fund a commercial aircraft program, we can conclude that the taxpayer is funding said commercial program. One could make the case that without the earnings of the military programs, the commercial programs could not be funded. Did Brazil really need to build a new military cargo aircrafr?

Amiga500 wrote:
Ah... if you said part funding.

A few case in points.
Boeing: .
Airbus: .
Embraer:
Bombardier: ... screwed as Canada don't develop any military aircraft since Avro went under.

And don't forget this has been going on for years.... right back to the second jet to enter airline service - the Tupolev Tu-104
"Tupolev based their new airliner on its Tu-16 'Badger' strategic bomber. The wings, engines, and tail surfaces of the Tu-16 were retained with the airliner"

Plus ça change, plus ça même chose...

Amiga500 · Wed Oct 04, 2017 12:07 pm

SheikhDjibouti wrote:
And don't forget this has been going on for years.... right back to the second jet to enter airline service - the Tupolev Tu-104
"Tupolev based their new airliner on its Tu-16 'Badger' strategic bomber. The wings, engines, and tail surfaces of the Tu-16 were retained with the airliner"

Plus ça change, plus ça même chose...

Or the 707 that Boeing "bet the company on".... with just the USAF ordering (eventually over 800) KC-135s to back them up. Real high risk stuff. :rolleyes:

Siddar · Wed Oct 04, 2017 12:13 pm

Waterbomber wrote:
Siddar wrote:
Waterbomber wrote:
The B737's procurement through the P-8 program?

I think complaining about supposed subsidies on military sales is going to get no where. All trade agreements exempt military sales for a reason. That why France was able to buy Airbus tankers without opening the bidding to Boeing. There is no way countries will give up their ability to buy locally on military contracts if they can produce a competing product locally. So your bringing up topic of military sales is just posturing for the ill informed.

I think that when a company producing commercial aircraft can get billions in defense spending funelled into the same bank account as the one that they take money from to fund a commercial aircraft program, we can conclude that the taxpayer is funding said commercial program. One could make the case that without the earnings of the military programs, the commercial programs could not be funded. Did Brazil really need to build a new military cargo aircrafr?

The world will laugh at Canada if it tried to make that argument. It's a pointless argument it was dumb when Europeans made it and they destroyed that argument going forward when they set up airbus with massive military contracts. If Canada want to play the same game as the rest of the world their free to do so. But to expect the rest of world to suddenly stop doing things the way they have always done is ridiculous. There is also no way to legally enforce the notion that doing so violates free trade agreements. Because all of them have exemptions for military contracts. So the argument is a deadend.

JoeCanuck · Wed Oct 04, 2017 12:52 pm

MSPNWA wrote:
northstardc4m wrote:
Did you seriously just say Boeing plays by the rules?

Yep, because that's what the evidence tells us. Where are the obvious trade violations? Where are the illegal subsidies? And let's say Boeing has done the same thing as Bombardier, which it has not come close to. Does that make Bombardier's actions any more right? No. All the pro-Bombardier crowd has given is smoke and mirrors. Facts and reason don't matter. This isn't about who's clean and who isn't. No corporation is perfectly clean. It's about who clearly violated trade laws.

Where is the harm to American industry? After all, that's what trade rules are designed to protect; domestic industry. Boeing's laughable, absurd claims about BBD putting the entire company, and the American aerospace industry in jeopardy are cartoonishly outlandish, yet somehow, they are the basis for its victory in the US system thus far, making the process a laughing stock around the world.

As it is, this ruling actually DOES hurt US jobs and industry. Delta may be forced to buy more expensive to operate aircraft, (and from their recent history, they won't be Boeings), and Americans may lose their jobs since so much of the CSeries is made and supported by the US and US companies.

Boeing, on the other hand, wasn't hurt in the least by any part of the deal since all they had to offer was used aircraft that they never did actually build in the first place. In a small way, they are correct that BBD could become another Airbus. BBD is bringing to market an aircraft that is significantly more advanced and efficient than anything Boeing has to offer...which is really how Boeing dropped the ball with Airbus. Remember...when the 320 came out, Boeing had to scramble to stay even partly relevant by slapping CFM-56's on to the -200 and offering the Jurassic at fire sale prices.

If Airbus hadn't had some very public accidents with the 320 early on, the 737 would have been in even more trouble.

Doing nothing in the past, while the competition innovated, is what hurt Boeing...not subsidies...and that same attitude continues today.

frmrCapCadet · Wed Oct 04, 2017 2:10 pm

For what its worth: No reporter for a reputable news outfit has written a story in defense of this decision. There must be a few out there, just haven't seen them. And this includes the Seattle media.

washingtonflyer · Wed Oct 04, 2017 2:36 pm

I didn't think reporters are supposed to write "in defense of" articles. I thought they are supposed to be writing facts.

aerolimani · Wed Oct 04, 2017 2:39 pm

washingtonflyer wrote:
I didn't think reporters are supposed to write "in defense of" articles. I thought they are supposed to be writing facts.

Have you never heard of opinion pieces and editorials? :roll:

washingtonflyer · Wed Oct 04, 2017 2:49 pm

Those are called "opinion pieces"...

Amiga500 · Wed Oct 04, 2017 2:52 pm

washingtonflyer wrote:
I didn't think reporters are supposed to write "in defense of" articles. I thought they are supposed to be writing facts.

Yeah, well, fact is, the rationale behind this decision is a load of bull.

washingtonflyer · Wed Oct 04, 2017 2:58 pm

You've made that opinion numerous times. As they say opinions are like ***holes - every one has one.

ExMilitaryEng · Wed Oct 04, 2017 3:05 pm

If Quebec sells its 49.5% stake in the CSeries program at MARKET VALUE (like to COMAC), then the ITC assumption that the $1B investment was a 100% "subsidy" should logically disappear/become irrelevant.

Since the time Quebec invested $1B (then only paying like 35 cents on the dollar), both the CS100/300s got certified - while meeting / exceeding all promised specifications.

Then, after a successfully service entry, experience showed an even lower fuel consumption (which in turn extended the range further).

So it’s more than likely Quebec will make a profit when it sells its 49.50% stake in the program. Would not that be ironic when we know the ITC considered this investment as a 100% subsidy?

It’s further ironic that the only way out of this blackmail is to sell the program to a country that won’t be subject to US bullying. Can you imagine COMAC producing WBs with super efficient Belfast made composite wing. Now we're talking about damage to Boeing, big time...

washingtonflyer · Wed Oct 04, 2017 3:06 pm

FWIW, today is the signature date on the dumping case. Don't expect the press release until tomorrow.

SheikhDjibouti · Wed Oct 04, 2017 3:11 pm

Siddar wrote:
The world will laugh at Canada if it tried to make that argument. It's a pointless argument it was dumb when Europeans made it and they destroyed that argument going forward when they set up airbus with massive military contracts.

"set up Airbus with massive military contracts"?

Please enlighten me. I'm not saying you are wrong; I am genuinely asking you to identify these massive contracts. Or even not so massive contracts. In fact anything that placed military money into Airbus coffers.

Really, I am. genuinely asking.

Please.

washingtonflyer · Wed Oct 04, 2017 3:14 pm

ExMilitaryEng wrote:
If Quebec sells its 49.5% stake in the CSeries program at MARKET VALUE (like to COMAC), then the ITC assumption that the $1B investment was a 100% "subsidy" should logically disappear/become irrelevant.

Since the time Quebec $1B invested (then only paying like 35 cents on the dollar), both the CS100/300s got certified - while meeting / exceeding all promised specifications.

Then, after a successfully service entry, experience showed an even lower fuel consumption (which in turn extended the range further).

So it’s more than likely Quebec will make a profit when it sells its 49.50% stake in the program. Would not that be ironic when we know the ITC considered this investment as a 100% subsidy?

It’s further ironic that the only way out of this mess is to sell the program to a country that won’t be subject to US bullying (which will actually cause damage to Boeing big time; COMAC producing WBs with super efficient Belfast made composite wing...).

As a Quebec taxpayer, I'm looking forward to this event

That's a call for Commerce, not the USITC. The Commission has no role in the calculation of the subsidy. And any decision like that wouldn't happen for at least two years from now.

thewizbizman · Wed Oct 04, 2017 3:26 pm

Uh-Oh for US carriers especially Delta

northstardc4m · Wed Oct 04, 2017 3:28 pm

ExMilitaryEng wrote:
If Quebec sells its 49.5% stake in the CSeries program at MARKET VALUE (like to COMAC), then the ITC assumption that the $1B investment was a 100% "subsidy" should logically disappear/become irrelevant.

Since the time Quebec invested $1B (then only paying like 35 cents on the dollar), both the CS100/300s got certified - while meeting / exceeding all promised specifications.

Then, after a successfully service entry, experience showed an even lower fuel consumption (which in turn extended the range further).

So it’s more than likely Quebec will make a profit when it sells its 49.50% stake in the program. Would not that be ironic when we know the ITC considered this investment as a 100% subsidy?

It’s further ironic that the only way out of this mess is to sell the program to a country that won’t be subject to US bullying (which will actually cause damage to Boeing big time; COMAC producing WBs with super efficient Belfast made composite wing...).

As a Quebec taxpayer, I'm looking forward to this event

The Quebec stake is only part of the problem. I don't see the sale of it causing too many ripples at this point unless BBD buys it back at market price which is unlikely. Unless there is something in background I'm not seeing US actions are pretty much set and this will go to appeal/tribunal/WTO.

Quite frankly until you get rid of the Beaudoins... BBD is screwed financially. Even if they get rid of the Beaudoins it's going to take years of success to rebuild the Bombardier credit rating enough to pay off the "subsidies" in quesiton. However it would be good for Quebec to sell the shares for a ~140% profit right now plus the 65% discount... so slightly over twice a much in "profit"for the coffers... if im reading all the prices correct.

PPVRA · Wed Oct 04, 2017 3:35 pm

ExMilitaryEng wrote:
If Quebec sells its 49.5% stake in the CSeries program at MARKET VALUE (like to COMAC), then the ITC assumption that the $1B investment was a 100% "subsidy" should logically disappear/become irrelevant.

Since the time Quebec $1B invested (then only paying like 35 cents on the dollar), both the CS100/300s got certified - while meeting / exceeding all promised specifications.

Then, after a successfully service entry, experience showed an even lower fuel consumption (which in turn extended the range further).

So it’s more than likely Quebec will make a profit when it sells its 49.50% stake in the program. Would not that be ironic when we know the ITC considered this investment as a 100% subsidy?

It’s further ironic that the only way out of this mess is to sell the program to a country that won’t be subject to US bullying (which will actually cause damage to Boeing big time; COMAC producing WBs with super efficient Belfast made composite wing...).

As a Quebec taxpayer, I'm looking forward to this event

It makes no difference if a profit is eventually made, because a subsidy isn't defined by whether it makes a loss to the government. If Quebec over-paid for that stake, then that's just another way to hide a cash infusion. I'd go after your elected politician's head if they gifted cash to a large company like BBD, with no expectations of it being re-paid. To emphasize, this is an IF.

FYI that equity purchase wasn't the only dubious "investment".

LockheedBBD · Wed Oct 04, 2017 4:10 pm

washingtonflyer wrote:
FWIW, today is the signature date on the dumping case. Don't expect the press release until tomorrow.

Thanks for the heads up, I was thinking that there would be a press release today! I'm expecting an additional 50%-200% tomorrow.

ExMilitaryEng · Wed Oct 04, 2017 4:20 pm

PPVRA wrote:
It makes no difference if a profit is eventually made, because a subsidy isn't defined by whether it makes a loss to the government. If Quebec over-paid for that stake, then that's just another way to hide a cash infusion. I'd go after your elected politician's head if they gifted cash to a large company like BBD, with no expectations of it being re-paid

I'm questioning your "no expectations of being repaid" argument.

Canada provided Bombardier $586 M in repayable subsidies/loans for past completed BBD aerospace programs (mainly for the "Global Express" in Toronto, and the CRJs in Mirabel).

So far, the Feds got repaid 740 M$ (2016 stats) via royalties from each plane sold.

Both programs are still providing royalties as we speak.

Believe me, when the CRJ program was launched, everybody thought BBD was insane... The Beaudoins family were actually brilliant here; over 1900 CRJs were sold. Same goes for the Global program.

I have even more fait in the CSeries program - for both its related repayable loans AND Quebec's equity investment!

PPVRA · Wed Oct 04, 2017 4:32 pm

ExMilitaryEng wrote:
PPVRA wrote:
It makes no difference if a profit is eventually made, because a subsidy isn't defined by whether it makes a loss to the government. If Quebec over-paid for that stake, then that's just another way to hide a cash infusion. I'd go after your elected politician's head if they gifted cash to a large company like BBD, with no expectations of it being re-paid

I'm questioning your "no expectations of being repaid" argument.

Canada provided Bombardier $586 M in repayable subsidies/loans for past completed BBD aerospace programs (mainly for the "Global Express" in Toronto, and the CRJs in Mirabel). So far, the Feds got repaid 740 M$ (2016 stats) via royalties from each plane sold. Both programs are still providing royalties as we speak.

Believe me, when the CRJ program was launched, everybody thought BBD was insane... The Beaudoins family were actually brilliant here; over 1900 CRJs were sold. Same goes for the Global program.

I have even more fait in the CSeries program - for both its related repayable loans AND Quebec's equity investment!

I was referring only to the equity portion of the subsidy, which is what your post was referring to. Not the other subsidies much less other programs.

Siddar · Wed Oct 04, 2017 4:42 pm

SheikhDjibouti wrote:
Siddar wrote:
The world will laugh at Canada if it tried to make that argument. It's a pointless argument it was dumb when Europeans made it and they destroyed that argument going forward when they set up airbus with massive military contracts.

"set up Airbus with massive military contracts"?

Please enlighten me. I'm not saying you are wrong; I am genuinely asking you to identify these massive contracts. Or even not so massive contracts. In fact anything that placed military money into Airbus coffers.

Really, I am. genuinely asking.

Please.

http://www.airbus.com/company.html

Notice all the defense work done by airbus and it parent company.

I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

ExMilitaryEng · Wed Oct 04, 2017 4:49 pm

PPVRA wrote:
I was referring only to the equity portion of the subsidy, which is what your post was referring to. Not the other subsidies much less other programs.

The $1B equity investment (for a 49.5% stake) is calculated as the elephant in the room for the US. (FWIW, the Airbus talks that occurred a few weeks earlier was valuing the program similarly)

The US assumed this investment as a 100% subsidy - which is absurd. The MAJOR PART of this 220% duties results from this absurd 100% subsidy assumption.

So the only way to prove this investment was not a 100% subsidy is to sell the whole program at market value. So let's do it, at the earliest possible moment. (and to anyone BUT Boeing).

Believe me, it will sell at more than $1B...(Not at ZERO dollar as the ITC is implying)

astuteman · Wed Oct 04, 2017 5:09 pm

Siddar wrote:
SheikhDjibouti wrote:
Siddar wrote:
The world will laugh at Canada if it tried to make that argument. It's a pointless argument it was dumb when Europeans made it and they destroyed that argument going forward when they set up airbus with massive military contracts.

"set up Airbus with massive military contracts"?

Please enlighten me. I'm not saying you are wrong; I am genuinely asking you to identify these massive contracts. Or even not so massive contracts. In fact anything that placed military money into Airbus coffers.

Really, I am. genuinely asking.

Please.

http://www.airbus.com/company.html

Notice all the defense work done by airbus and it parent company.

I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

Airbus's defence business is about half that of Boeing, and there is at least one other defence contractor in-between Airbus and LM/Boeing in terms of size.

Rgds

northstardc4m · Wed Oct 04, 2017 5:32 pm

astuteman wrote:
Siddar wrote:
SheikhDjibouti wrote:

"set up Airbus with massive military contracts"?

Please enlighten me. I'm not saying you are wrong; I am genuinely asking you to identify these massive contracts. Or even not so massive contracts. In fact anything that placed military money into Airbus coffers.

Really, I am. genuinely asking.

Please.

http://www.airbus.com/company.html

Notice all the defense work done by airbus and it parent company.

I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

Airbus's defence business is about half that of Boeing, and there is at least one other defence contractor in-between Airbus and LM/Boeing in terms of size.

Rgds

Just to do the math...

Airbus Space and Defense revenues in at 14.2 billion EUR for 2015. Airbus Helicopter (pka Eurocopter) doesn't break out military cleanly but seems to be around 2.5 billion EUR for 2015 on military platforms... but might be more for military buys and support revenue of "civilian" designs.

16.7B EUR. approx 19.65B USD

Boeing defense approx 32B USD

so about 61.5% the size.

scbriml · Wed Oct 04, 2017 5:45 pm

Siddar wrote:
Notice all the defense work done by airbus and it parent company.

I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

Airbus trails in 7th in the list of top defence contractors, behind Lockheed Martin, Boeing, BAE, Raytheon, Northrop and General Dynamics. Airbus's 2016 defence revenue was 40% of that of Boeing's.

Source: http://people.defensenews.com/top-100/

SheikhDjibouti · Wed Oct 04, 2017 6:27 pm

Siddar wrote:
"....it was dumb when Europeans ... set up airbus with massive military contracts.

SheikhDjibouti wrote:
"set up Airbus with massive military contracts"?

Siddar wrote:
http://www.airbus.com/company.html
Notice all the defense work done by airbus and it parent company.
I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

Whilst I am truly grateful for your reply (and the other comments too), this is only referencing the current Airbus situation.
As Wikipedia sees it, "Today's company is the product of international consolidation in the European aerospace industry"

AFAIK Airbus was not "set up ... with massive military contracts"? This is not me being picky; my hazy memory is of their first 30 years as a purely civilian aircraft manufacturer, from the A300, through to the A340. This civilian operation was already profitable before any amalgamation with EADS and Eurocopter, which I can only trace back to 1999. The A320 series, A330 and A340 were all up and running (and selling well) by this time, and the A380 well under development, all without military "subsidy".
This does not equate to your statement that Airbus was set up with military contracts.

Am I still missing something?

PW100 · Wed Oct 04, 2017 7:00 pm

PPVRA wrote:

It makes no difference if a profit is eventually made, because a subsidy isn't defined by whether it makes a loss to the government. If Quebec over-paid for that stake, then that's just another way to hide a cash infusion.

If a profit is made, then it would be hard to argue they overpaid . . .

Siddar · Wed Oct 04, 2017 7:31 pm

SheikhDjibouti wrote:
Siddar wrote:
"....it was dumb when Europeans ... set up airbus with massive military contracts.

SheikhDjibouti wrote:
"set up Airbus with massive military contracts"?

Siddar wrote:
http://www.airbus.com/company.html
Notice all the defense work done by airbus and it parent company.
I believe it is third largest defense contractor after LM and Boeing its defense work is roughly equal to Boeings.

Whilst I am truly grateful for your reply (and the other comments too), this is only referencing the current Airbus situation.
As Wikipedia sees it, "Today's company is the product of international consolidation in the European aerospace industry"

AFAIK Airbus was not "set up ... with massive military contracts"? This is not me being picky; my hazy memory is of their first 30 years as a purely civilian aircraft manufacturer, from the A300, through to the A340. This civilian operation was already profitable before any amalgamation with EADS and Eurocopter, which I can only trace back to 1999. The A320 series, A330 and A340 were all up and running (and selling well) by this time, and the A380 well under development, all without military "subsidy".
This does not equate to your statement that Airbus was set up with military contracts.

Am I still missing something?

I wasn't referring to them being given military contracts before are at start of their existence. I used a confusing term to describe how airbus has grown to be encumbered by massive military contract as it evolved. The relative size of defense work I was going off memory it appears by comments provided by other that this memory is incorrect.

bigjku · Wed Oct 04, 2017 8:45 pm

iamlucky13 wrote:
Subsidies or not, the 219% tariff is bogus. That should be obvious from a few simple napkin calculations like CS500 did, but a few posters are struggling to understand that.

Now that I've had time to review the memo here, it provides the information necessary to concretely understand why, but it's a bit complicated:
viewtopic.php?f=3&t=1361667&start=850#p19845243

And because it got my attention and led me to look back in the thread for the memo, I'm going to flesh this out in contrast to the following comment:

bigjku wrote:
CS500 wrote:
Additionally, the 219% duty on the list price is also obviously absurd. Assuming a $25 mil sales price and only considering the 75 plane order (not the 50 options), that is $4.1 billion. This is almost as much as the entire CSERIES program, which obviously sells to different markets than just the USA.

Did you read how it was calculated? The whole report was linked. Seems pretty straightforward to me.

Did you read it? Between this and a couple of your later posts, I get the strong impression you have not.

I don't have time to discuss the full 34 pages, but just to focus on some of the most critical parts, if you think it is straight forward, perhaps you'd like to explain the formula:
A(k) = (y/n + (y - (y/n) * (k - 1))/d) / (1 + d)
...from 19 CFR 351.524 that you would have had to review in order to comprehend section VI, subsection A of the memo well enough to call it "straightforward."

Looking in particular at the Quebec investment, they conclude the $1 billion invested is a 147% subsidy. I've been pondering for the last several days, supposing we treat all the government involvement as subsidies at 100% value, what math says things like $1 billion equals 147% of $5.4 billion, even if we spread that value over several years and inflate it? Now I know.

It uses your "straightfoward" formula above, and a few other factors that for companies with consistent sales levels and an established product line makes sense, but in an highly cyclical industry like aerospace and with an in-development product is not much different from numerology.

Your discussion in later posts of the S&P, or Boeing's or Tesla's returns is irrelevant, especially since you're discussing the market price returns, not actual operating financial returns. Had you actually read and understood the memo, you would have gone to the the federal regulation it cited for determining the discount or return rate, and known to use a value somewhere in the range of 5.5% (Canada long term corporate bond average) to 7.5% (recently issued Bombardier 10 year bond rate according to Morningstar).

Assuming the higher rate, it seems the DOC determined to numerator in the subsidy ratio to be about US $163 million (per my Excel calc) - how much of the subsidy applies in the first year out of the 10 year subsidy "use" period. The denominator was the 2016 CSeries sales. I can't seem to find the document where they determined that value, nor can I corroborate the figure they use from other sources like Bombardier's 2016 financial results, which don't show that level of detail, but there's enough information to get very close regardless. Commerce Department's figure for 2016 CSeries sales was roughly US $111 million.

Basically, Commerce department's analysis assumes the subsidies are proportionate to Bombardier earning $111 million per year for the next decade.

It's not a number of any coherence in terms of evaluating the actual subsidy value. It's actually rather like calculating a personal budget on payday, and assuming you get that much money every day even though you're payed biweekly.

If we use more realistic long-term program numbers (eg: 10 frames/month, $30 million per frame), the result is that $1 billion works out to something like a 4.5% subsidy. A proper analysis would be more complicated, and I think yield something in the really rough ballpark of a 6% subsidy.

Been away, sorry for delayed reply. Yes I did read it. I didn’t attempt to replicate their formula. I was simply checking it against what I would say is a common sense way (in my view) to determine if the result they got made sense to me and had some basis in the real world.

CDNAvation · Thu Oct 05, 2017 1:47 am

This might be interesting to have a read though guys!

https://www.wto.org/english/docs_e/legal_e/air-79_e.htm

CDNAvation

Andre3K · Thu Oct 05, 2017 3:15 am

DDR wrote:
Hopefully, DL will never order another Boeing aircraft.

Hopefully Emirates will take over KATL and fly mostly Boeing aircraft while doing so.

NickLAX · Thu Oct 05, 2017 4:58 am

Can Delta have a NON US leasing org acquire the aircraft where Delta then leases these?

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