(Adds quotes, Boeing reaction, SEATTLE to dateline)
By David Ljunggren and Alwyn Scott
OTTAWA/SEATTLE May 19 Boeing Co on
Friday rushed to fix a gamble that looks to have gone wrong,
with the defense unit of the U.S. plane maker seeking to fend
off a Canadian threat to scrap the purchase of 18 Super Hornet
jets, a source familiar with the matter told Reuters.
That move follows Canada's threat on Thursday that it could
ditch its plans to buy the jets if the United States backed
Boeing's claims that Canadian plane maker Bombardier Inc
dumped jetliners in the U.S. market.
Political insiders say the Liberal government of Prime
Minister Justin Trudeau is furious about Boeing's allegations,
which comes at a time when trade relations between the United
States and Canada are at a low.
"Boeing made the calculation that taking this action was
worth the risk," the source said, requesting anonymity due to
the sensitivity of the situation. "However, Boeing military
sales division is concerned and is seeking to communicate with
Canadian government decision-makers to mitigate the possible
impact to their Super Hornet sale."
Boeing said the firm hoped there would be no impact on the
proposed Super Hornet sale but made clear it had no regrets
about challenging Bombardier.
"This action is being taken against Bombardier's pricing
practices which are illegal and aggressive. It is a very clear
case of dumping," said spokesman Charlie Miller.
One industry source said a senior Boeing official tried to
arrange a meeting with Trudeau recently but had been turned
A Trudeau spokesman declined to comment but said government
ministers had not met with Boeing since it launched the
Bombardier challenge. Boeing did not immediately reply to a
request for comment.
Richard Aboulafia, aerospace analyst at Teal Group, said
that although Boeing's complaint appears valid, "the secondary
effects are disastrous."
He said Boeing could lose $10 billion to $20 billion in
military sales to Canada, encompassing order for jets,
helicopters and maritime surveillance planes.
Potential winners include rival makers of jets, such as
Lockheed Martin Corp, Dassault Aviation SA,
Airbus SE and Saab AB, analysts said.
The U.S. Commerce Department on Thursday launched an
investigation into Boeing's claims.
"This is a strong shot across the bow to the United States
to say 'Shut this thing down pretty damn quickly,'" said a
Canadian defense industry source.
Trudeau twice side-stepped questions about the threat when
speaking to reporters on Friday in British Columbia.
The Boeing saga further increases tensions between Canada
and the United States in the run-up to talks on renewing the
North American Free Trade Agreement (NAFTA), with the Trump
administration on Thursday setting the clock ticking toward a
mid-August start of renegotiations..
Last month Washington slapped anti-dumping duties on
Canadian timber, prompting Canada to threaten retaliation.
Bombardier is based in the electoral important province of
Quebec, where the ruling Liberals say they need to pick up
support to be sure of winning federal election in October 2019.
Canada unveiled plans to buy the Super Hornets last November
as a stop-gap measure while it prepared an open five-year
competition to replace its aging fleet of 77 Boeing CF-18
Defense analyst David Perry of the Canadian Global Affairs
Institute said one option for Ottawa would be to scrap the idea
of a stopgap force and go straight to the permanent competition.
The threat against Boeing only complicates a Canadian
military procurement system which many analysts say is broken.
The previous Conservative government announced in 2010 it
would buy 65 Lockheed Martin F-35 fighters in a sole-source
contract but after protests, scrapped the decision and announced
an open competition that was never held.
In the run-up to the November 2015 election that brought the
Liberals to power, Trudeau said he would not buy the F-35s on
the grounds they were too expensive. His government has since
softened its opposition.
Military procurement in Canada is handled by both the
ministers of defense and public works, neither of whom were
immediately available for comment.
Boeing's defense unit is called Defense, Space & Security.
(Additional reporting by Allison Lampert in Montreal and Tim
Hepher in Paris; Editing by Bernard Orr and Lisa Shumaker)