With Boeing giving signals that it intends to stand its ground, the trade dispute between Boeing and Canadian rival Bombardier is heating up.
“This commercial trade dispute is very important to us. We’re not going to back down from it,” said Leanne Caret, CEO of Boeing’s defense, space and security business, in a television interview. “I hope that it doesn’t impact our defense sale, but we’re willing to deal with whatever the outcome is.”
About $5 billion is the worth of that potential defense sale. In a deal that’s been cooking since last year, the U.S. State Department notified Congress of its intent to sell 18 F/A-18 Super Hornets to Canada last week.
But that deal may be put on hold by the trade rift between Boeing and Canada’s own aerospace manufacturer. Earlier this week, Canada Prime Minister Justin Trudeau asserted his country “won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business”
siding with Bombardier, which is a top employer in Northern Ireland, U.K. Prime Minister Theresa May also engaged in the dispute.
It is alleged that in its sale of 75 of its new C-Series planes to Delta Air Lines Bombardier had taken advantage of subsidies and unfair pricing and in April, Boeing asked the U.S. Commerce Department to investigate the issue. $19.6 million apiece was the sell price of the Canadian planes in the U.S., Boeing alleged and said that the sale was done at “absurdly low prices, in violation of U.S. and global trade laws.”
Bombardier refutes the allegations as “pure hypocrisy” since, according to a statement, “Delta ordered the C Series because Boeing stopped making an aircraft of the size Delta needed years ago.”
Boeing still aims to get a deal done.
“We have continued to reach out to the Canadian government. We believe national defense discussions are separate from commercial trade disputes,” added Caret, who’s led Boeing’s defense, space and security unit for 18 months. “I think here is an opportunity for us to continue to offer the [Super Hornet] aircraft, but I also think they’re going to need to make their decision.”
Meantime, the fighter business of the company is once again taking flight which highlights a big reversal for Boeing. Renewed interest under Trump administration are welcoming for Boeing and for its legacy F-18 and F-15 production lines even if Canada does scrap its $5 billion deal.
“We’re honored and thrilled that not only the Navy but others have seen benefits of the F/A-18 and continue to see strong demand for it. We have continued international pull on our F-15s,” said Caret. “But I have to share, when I was the CFO [of Boeing Defense, Space & Security] I was in middle of making disclosures that we may be looking at a line shutdown at some point in the future, so it was really nice to be involved in being able to strike that statement going forward.”
The defense and space business is big with nearly $30 billion in annual revenue. But because more is potentially riding on the lawsuit, the company would be willing to sacrifice a potential $5 billion defense deal which indicates that its commercial business is bigger.
(Adapted from CNBC)