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Quebec, UK outraged by Bombardier tariffs, threaten retaliation
September 27, 2017 / 3:55 PM / 3 months ago

Quebec, UK outraged by Bombardier tariffs, threaten retaliation

MONTREAL (Reuters) - Britain and the Canadian province of Quebec reacted with outrage on Wednesday to stiff U.S. tariffs imposed on Bombardier Inc’s (BBDb.TO) CSeries jet and raised the prospect of retaliation as the company’s shares and bond prices fell.

The U.S. Commerce Department on Tuesday slapped preliminary anti-subsidy duties on the jets after rival Boeing Co (BA.N) launched a trade challenge accusing Canada of unfairly subsidizing the aircraft.

Bombardier shares fell 14 percent at the open in Toronto before regaining ground to trade down 6.6 percent at midday. Many of its junk-rated bonds were sharply lower, extending losses earlier in the week, according to MarketAxess data.

The company also lost a critical rail deal with Siemens AG (SIEGn.DE) on Tuesday.

“Boeing may have won a battle but, let me tell you, the war is far from over. And we will win,” Quebec Premier Philippe Couillard told reporters, describing the duties as an attack.

Bombardier is a major employer in Quebec, where Prime Minister Justin Trudeau’s Liberals say they need to win extra seats in an election set for October 2019.

Couillard called on Ottawa to ensure that “not a bolt, not a part, not a plane from Boeing” be allowed into Canada until the dispute had been resolved.

Trudeau says he will not go ahead with plans to buy 18 Boeing F-18 Super Hornet jets unless the challenge is dropped.

Bombardier is also a major employer in Northern Ireland, where a handful of legislators is keeping British Prime Minister Theresa May’s minority Conservative government in power.

Britain told Boeing on Wednesday that it could lose out on British defense contracts because of the dispute. May said in a tweet that she was “bitterly disappointed” by the ruling.

Boeing said it was committed to Britain.

The dispute could spill into talks between Canada, the United States and Mexico to update the NAFTA trade pact. Negotiators are meeting in Ottawa.

Canadian Foreign Minister Chrystia Freeland, who denounced the duties on Tuesday, will meet U.S. Trade Representative Robert Lighthizer on Wednesday and then speak to reporters.

Boeing launched its challenge in April, alleging Bombardier had dumped airliners on the U.S. market when it struck a deal for 75 CSeries planes with Delta Air Lines Inc (DAL.N).

Delta’s CEO said Boeing’s challenge was “absurd” and predicted the duties would not be made permanent when Commerce reaches a final decision next year.

The government of Quebec has taken a $1 billion stake in Bombardier’s CSeries jet. But Couillard said on Wednesday that the company had received “not a cent” in government subsidies.

Trudeau is also under pressure from Canada’s powerful labor movement. Jerry Dias, head of the Unifor private-sector union, told the Canadian Broadcasting Corp that Ottawa had to tell the United States “enough is enough”.

“Ultimately, we have to retaliate and retaliate in a meaningful way,” he said.

Bombardier, which considered bankruptcy in 2015 and is undertaking a five-year plan to improve its performance and margins, is still grappling with nearly $9 billion in debt.

Bombardier may need to raise more equity to support a capital-intensive business, according to Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc in Montreal.

Writing by Davud Ljunggren; Additional reporting by Anna Mehler Paperny in Toronto; Editing by Meredith Mazzilli and Matthew Lewis

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