Despite previous sales of assets and subsidiaries operated by the company, we all knew that Bombardier had not been able to pay off its large debts, which amounted to $12.3 billion at the beginning of this year. Clearly, the liquidations were not complete. To make matters worse, despite a fragile financial situation, the company’s senior management had the nerve to pay itself generous bonuses.
On February 13, Bombardier announced that it was putting an end to its presence in commercial aviation by selling its remaining interest in the ex-CSeries program (now called A220) to Airbus and the Quebec government. This transaction would allow Bombardier to receive US$591 million, including US$531 million immediately. The company would also be released from the obligation to inject US$700 million into Airbus Canada Limited Partnership (ACLP), which would have put it further in debt. With this transaction, Airbus will own 75% of the A220 family of aircraft, while the proportion held by the Québec government will increase from approximately 16% to 25%. Airbus will also be able to buy back the Québec government’s stake – which had injected US$1 billion into the program in 2016 – in 2026, three years later than planned.
The following week, we learned that Alstom will get its hands on Bombardier Transport as part of a transaction valued at $10.7 billion Canadian dollars (excluding transferred debts, Alstom will actually pay out $8.5 billion). Also, the Caisse de dépôt et placement du Québec will help Alstom finance its acquisition by purchasing $4 billion in new shares issued by the company. The Québec institution will thus become Alstom’s largest shareholder with an 18% interest.
After these transactions, Bombardier’s debt will be only $3 billion, but the company will only be left with business jet production as a sector of activity. Some of Québec’s bourgeoisie and economic commentators see these announcements as a setback for Québec control in the aeronautics and railway rolling stock sectors. In reality, given the Caisse de dépôt et de placement’s involvement in these transactions, there is a good chance that the Québec bourgeoisie as a whole will emerge strengthened. In fact, we can believe that Bombardier, and particularly the Beaudoin-Bombardier family, had become a nuisance and had to be pushed aside. The bourgeoisie is capable of class discipline when necessary (i.e. it can easily put its general interests before the particular interests of some of its members), and that is probably what we are witnessing now.
The Bombardier model and its limitations
Bombardier has long been presented as an example of the dynamism and innovative capacity of Québec Inc. For a long time, the Quebec bourgeoisie celebrated the achievements of the company’s founder, Joseph-Armand Bombardier, and the members of his family who subsequently took control of the company. Over the years, the small company that produced Ski-Doo had come to compete with the big names in aviation (e.g. Boeing, Airbus and Embraer) and rail transport (e.g. Alstom, Hitachi and the Chinese giant CRRC), and the Quebec bourgeoisie was particularly proud of this. What capitalists often forget to say is how important was the support of the Canadian and Quebec governments in this success story.
Bombardier’s rise to prominence began in 1974 when the company won a contract to supply cars for the Montreal metro. Its expertise in the field of public transit came from the purchase, in 1970, of a struggling Austrian firm (Rotax) that produced rail cars. The plant where the cars for the Montreal metro were built, located in La Pocatière, was acquired shortly afterwards with the purchase of Moto-Ski, a snowmobile production company also in difficulty. This model of buying companies that are in difficulty but have growth potential has continued for nearly three decades in the United States (Alco, MLW), Belgium, France, Germany and Mexico. At the same time, in the rail sector, alliances with other major players have been formed, notably with Alstom for concrete projects in Europe (Euro Tunnel) and China.
If this model was good in the rail sector, it could be good elsewhere. It was the purchase of Canadair, a struggling Canadian state-owned company, that allowed Bombardier to invest in the aerospace sector. Bombardier then took advantage of the financial difficulties of Short Brothers in Northern Ireland to buy it at a low price in 1989. Finally, using the same tactics, Bombardier also acquired Learjet in the United States and De Havilland in Ontario in the early 1990s.
Bombardier Inc, in addition to its subsidiaries Bombardier Transportation and Bombardier Aerospace, set up a subsidiary Bombardier Capital in the 1990s to finance the purchase of its aircraft and rail products. However, this subsidiary ventured to finance insecure and high-risk activities, which, following the attacks of 11 September 2001 and the decline in activity in aircraft production, resulted in substantial financial losses and the obligation to sell its assets to a competitor in the financing field. Bombardier’s ability to generate capital for subsequent investment was then undermined.
Bombardier Aerospace’s production activities were also disrupted by the same attacks. In addition, given that there was a limit to the buyout of companies in difficulty – most of which had already been bought out – as well as to privatizations, and given its failure in financing activities, Bombardier chose to develop a technologically “revolutionary” regional jet, the Cseries, from its own limited capital and relying on potential government subsidies. While other aircraft production companies benefit from government purchases of military aircraft, Bombardier became dependent on hypothetical purchases of its regional jets and uncertain government subsidies. Despite the fact that the product was innovative, initial capital accumulation was too low and other sources of financing for the project were too hypothetical.
The aeronautics sector
For a long time, Bombardier’s aerospace activities have played a structuring role for this industrial sector in Québec. For a long time, many companies in this sector needed Bombardier to develop. In fact, these companies were Bombardier subcontractors. But, over time, they managed to develop products that could be sold to other companies. Bombardier’s strength in this sector gradually faded, especially since its financial instability and opaque governance caused a great deal of concern. Among other things, people criticized Bombardier’s shareholder structure, which gave the Beaudoin-Bombardier family a strong hand in voting and decision making. The choice to invest in the CSeries program was blamed on this governance structure. At the same time, this structure was tolerated because it prevented U.S. investment funds specializing in the buyout of distressed companies from taking over Bombardier, the “Quebec flagship”.
Today, despite appearances, the fact that Bombardier had to divest its activities in the CSeries program and its stake in Airbus is not bad news for the Quebec aerospace bourgeoisie. In fact, the Caisse de dépôt et placement, the financial arm of the Quebec government, has holdings in Airbus, a company that has a much stronger backbone than Bombardier and is able to produce and sell aircraft (and therefore obtain and honour orders). The advantage that Airbus finds in maintaining its operations in the Montreal area is the existence of a trained labour pool and the ability to train the workforce.
The government’s intervention in this matter has nothing to do with any concern for safeguarding jobs. Nor does it have anything to do with the desire to maintain a “Quebec flagship”. Rather, it was a matter of safeguarding the interests of the Quebec bourgeoisie as a whole, and more specifically those of its aerospace sector. Moreover, Aéro Montréal, the organization that brings together companies working in this field, is pleased with the recent intervention of the Quebec government. Pierre Fitzgibbon, Minister of the Economy and Innovation, also expressed the same view. It should be remembered that, until recently, Fitzgibbon worked for Héroux-Devtek, a company active in the sector in question.
When the bourgeoisie praises the freedom of the market, it mainly praises the freedom to make profit by any means. If the state has to intervene, it does so. However, the aeronautics and rail transport sectors depend heavily on the intervention of the bourgeois state. In the case of the railway sector, businesses depend on the purchase of public transportation equipment by the various levels of government. In the aviation sector, it is much the same thing, particularly in the case of military aviation. That said, the capitalist class needs these sectors to be maintained. Indeed, to ensure the fluidity of transportation (especially that of the labour force) in large cities, public transportation is necessary. Also, at a time when the economy is globalized, air transport is also indispensable. And if, in addition, government intervention allows manufacturers of aircraft and public transit equipment to make lucrative profits, it kills two birds with one stone.
In Canada, there is no government demand for civilian or military aircraft, which has hurt Bombardier. The only thing that has been safeguarded is the production of business aircraft. This sector of activity does not require state aid, since there are still a lot of bourgeois who will buy these planes. That said, a strong development of the Bombardier Transport division through a massive state purchase of train carriages, tram cars, etc., would not necessarily have solved the problem of the present indebtedness of the company, which had no borrowing capacity to increase its production capacity. In this context, the bourgeois State, through the Caisse de dépôt et placement, found partners in Europe instead.
An absurdity linked to capitalism in its imperialist phase is that the activity of high-tech enterprises is subordinated to the military needs of the great imperialist powers. Under socialism, it is the needs of the proletariat that will determine the financing of economic activities and not the needs of devastating and murderous inter-imperialist competition.
Under capitalism, the bourgeois scoundrels always do well and the workers always lose out
Given its weak capacity to generate capital, its dependence on government subsidies, its questionable direction, and the trend towards mergers or international commercial and industrial alliances, the break-up of Bombardier was in order. The Quebec bourgeoisie, its aerospace sector and its government are doing well. Bombardier executives who contributed to the disaster are also doing very well and their incompetence is even being rewarded.
For Bombardier workers, it is quite the opposite. They now have to live with the fear of layoffs. Although their chances of finding new jobs are relatively good if that were to happen, these workers could lose some of their acquired rights. More importantly, the rising cost of housing and the cost of living in general could, in the current economic situation, have catastrophic consequences for working families affected by potential layoffs. Indeed, a few months of unemployment between jobs could mean delays in the payment of mortgages and other debts, or even bankruptcies. Workers have an obligation of results in the payment of their debts. Unlike Bombardier executives, they do not have the right to be incompetent and will not receive bonuses to reward them for their deficit management of their assets. Bombardier workers are therefore currently going through a period of great insecurity.
This situation must make the workers aware of the need to put an end to private ownership of the means of production and must strengthen their will to fight for a planned economy based on their needs, that is, for socialism. Indeed, factories and the infrastructure necessary for social life should not be the object of useless and often destructive transactions, transactions carried out by parasites who do nothing but accumulate wealth and wallow in luxury. Rather, the means of production should be collectively owned by the workers and should be used to satisfy the needs of the people. The working class must fight not for the preservation of the “jewels” of the Quebec bourgeoisie, but to take control of the factories and infrastructures belonging to the capitalists, in order to make them work in the interest of the majority of the population.