…and hope turns to despair at de Havilland

 - January 18, 2008, 8:25 AM

Union officials representing some 1,200 assembly workers at Bombardier’s de Havilland plant in suburban Toronto last month characterized the company’s latest layoff announcement as “a cannon, and not a gun, at our heads.” After talks broke down between the union and Bombardier at the end of January, the company began preparations to move Global Express and Learjet 45 wing production from the Downsview plant to Montreal, where the machinist union representing workers there has pushed for the job transfer.

Since talks resumed February 17, however, the union had expressed guarded optimism over “some progress” toward a settlement. But when the company announced its decision to eliminate another 3,000 jobs companywide within the next 12 months, the glint of hope had turned to renewed resentment among the workers at de Havilland, most of whom had returned to work in February after a six-week temporary plant closure suspended Q200, Q300 and Q400 production late last year.

In late February the company permanently laid off 136 workers at Downsview, while another 240 remained on temporary layoff. Now in the process of negotiating a new contract featuring various work-rule and wage concessions, the Canadian Autoworkers union (CAW) has asked the city of Toronto to beseech the provincial and federal governments to “secure the long-term future of the Downsview facility.” Although the government has categorically refused to involve itself in negotiations, the union hopes this crisis will convince the province of Ontario to pursue more vigorously financial incentive programs designed to prevent Bombardier from ultimately closing its Downsview plant, an option to which the company has alluded.

Although the CAW contract does not expire until this June, the union sees a much more urgent need for a relatively quick settlement since Bombardier CEO Paul Tellier announced the latest round of layoffs last month. “They’re telling us basically that if they can’t get a restructuring agreement in a very short period of time, they will move work on the Global Express and Learjet 45 to Montreal,” CAW local 112 representative Roland Kiehne told AIN. Such a transfer would shed another 1,000 jobs from Downsview, said Kiehne, leaving only a few hundred assembly positions for a withering Dash 8 market.

The announcement came a day after Bombardier slashed earnings expectations in half for its 2002 fiscal year amid weak sales of business jets and de Havilland turboprops. Coincidentally, reports have surfaced that the employment condition attached to the province of Ontario’s sale of de Havilland to Bombardier is approaching its expiration date, further fueling anxiety among workers in Downsview.

Kiehne told AIN that Bombardier has chosen to withhold the details of the agreement it reached with the provincial government, a right it enjoys under Canadian confidentiality laws. “We are attempting to get that information, but because it is business sensitive, we have to go through the process of applying for it through the Freedom of Information Act,” said Kiehne. Referring to himself as a research specialist, Kiehne leads the union’s attempt to “level the playing field” in the provincial competition between Ontario and Quebec for the preservation of aerospace jobs.

“They’ve got some wonderful advantages in Quebec that we currently do not enjoy in Ontario,” said Kiehne. “For example, they have the Montreal Foreign Trade Zone at Mirabel, which gives aerospace companies that set up shop in the area certain advantages, such as 25-percent tax relief on construction of a new building. They even provide subsidies for wages through Investment Quebec, in some cases up to 40 percent. That certainly is incentive to move work up there.”

Another advantage involves Quebec’s stated willingness to offer foreign loan guarantees separate from those available from the federal government’s controversial Export Development Canada (EDC) program. “Just recently [Quebec premier] Bernard Landry announced that he’s prepared to provide loan guarantees worth $3 billion to foreign buyers of regional jets,” said Kiehne. Ontario, for its part, recently pledged $625 million to fund research and development for its auto industry. Bombardier and the workers at de Havilland hope Ontario shows a similar willingness to sustain the province’s aerospace industry.

“All we’re doing is asking the province to co-sign our loans because we understand that there are customers looking at buying our products who can’t get financing,” said the union rep. “When you look at EDC at the national level, over the last five years that program has provided over $10 billion in loan guarantees, $8 billion of which went directly to CRJ customers. Not once has the EDC had to reach into its pocket to cover any of those loans. So, to us, this is a no-brainer.”

Now primarily in competition with the Franco-Italian consortium ATR for new turboprop sales, Bombardier last year sold a total of 10 Dash 8-series turboprops–four Q400s and two 50-seat Q300s to Japan’s All Nippon Airways, three Q300s to Qantas Airways and a single Q300 to Petroleum Air Service. At the start of calendar year 2002, the division’s Dash 8 backlog stood at 48; by the end of the year it delivered 29 turboprops, shrinking its backlog by 19 airplanes to 29.

For the coming quarter, production plans call for one Q400, a single Q300, two Learjet 45 wingsets and three rear fuselages and vertical stabilizers for the Global Express/ Global 5000 line.

The stake the union places in a Toronto holding company’s aspirations to fly 15 Q400s from Toronto City Centre Airport might best illustrate the desperate state of de Havilland and the market for new turboprops in general. The plan hinges on an amendment to a 1983 tripartite agreement among the federal government, the city of Toronto and the Toronto Harbor Commission to a allow construction of a bridge to the island and expansion of the airport terminal. Although the city recently approved the expansion, opponents continue to rail about the plan’s environmental effects and the proposed airline’s refusal to publicize the details of its business plan.

ATR, meanwhile, fared only slightly better last year, and only because it completed sales of six examples of its 66-seat ATR 72-500 during the last few days of December. In all, the company sold 16 airplanes, including three ATR 72s to Bangkok Airways and Alitalia Express, respectively, two to Air New Zealand, one to Air Tahiti and five to an undisclosed customer. It also sold two 48-seat ATR 42s, one each to Eurolot of Poland and the French Polynesian government. The company delivered a total of 19 new airplanes to 11 airlines.