The recent ruling by the U.S. Department of Commerce slapping a 219% duty on all airplanes sold by Bombardier, Inc. (TSX:BBD.B) into the U.S. market is likely to send shockwaves on the TSX on Wednesday.
After market close on Tuesday, the announcement by Commerce Secretary Wilbur Ross that "the U.S. values its relationship with Canada, but even our closest allies must play by the rules" was a harsh condemnation of the illegal subsidies the Canadian and U.K. Federal and regional governments have provided Bombardier over the years.
After losing a WTO ruling to Brazilian aerospace manufacturer Embraer SA in which the Canadian government was forced to pay nearly $250 million to Brazil in sanctions, the Brazilian firm had decided that taking a hard line with the Canadian manufacturer was likely the only way to go in a world where governments appear ready to step in and keep its “poster children” industries alive; the company again filed yet another WTO dispute with Bombardier following its most recent infusions of cash from the Canadian Federal and Quebec governments. The case is ongoing.
The dispute with Boeing Co. (NYSE:BA), however, appears to have resulted in a much more stern slap on the proverbial wrist of Bombardier, effectively tripling the price of a Bombardier plane sold in the U.S. market, all but excluding the Canadian plane maker from the most profitable market globally to operate in.
Besides being ousted from the U.S. market, a number of analysts have pointed to the fact that it will now become much more expensive for Bombardier to sell its planes worldwide, as its bargaining position is severely reduced. Other national airlines will know Bombardier is struggling to survive, and as such, will demand massive discounts on its CSeries planes, lest they choose Embraer, or Airbus, or, God forbid, Boeing, for their narrow-body plane requirements.
Friends, it looks as though we are nearing the end-game with the political charade which has been the Bombardier subsidy fiasco, despite calls from the Canadian government that "this is just the beginning of the fight." The real fight between the Canadian taxpayer and the Bombardier and Beaudoin families, however, should not be overshadowed by Prime Minister Justin Trudeau’s show of strength in calling for a halt of the country’s F-18 deal with Boeing.
After all, the fact that the Trudeau government would put the Bombardier and Beaudoin families ahead of its own national security interests is very worrying – perhaps taxpayers may finally stand up for what is right, and decide to do away with the corruption and cronyism which is plaguing Ottawa right now.
I guess we’ll wait to see. I just wouldn’t suggest holding onto those Bombardier shares too long, as they may begin to feel the wrath of the Canadian taxpayer.
Invest wisely, my friends.
