Brazil opens WTO case against Bombardier financial aid

One day after Bombardier received a $282 million cash injection from the Canadian government, Brazilian trade officials, with the support of Embraer, formally requested consultations with their Canadian counterparts in the World Trade Organization over alleged subsidies supporting the CSeries aircraft programme.

The formal request for consultations comes nearly two months after Brazil announced it would challenge what it considers $4 billion in illegal subsidies provided by the Canadian government to Bombardier’s flagship CSeries airliner.

Sao Jose dos Campos-based Embraer competes in the same market segment as the CSeries aircraft family with E195 and next-generation E195-E2.

“The subsidies that the Canadian company has already obtained and continues receiving from the Canadian government have not only been fundamental in the development and survival of the CSeries program, but have also allowed Bombardier to offer its aircraft at artificially low prices," says Paulo Cesar Silva, Embraer's chief executive.

Bombardier launched the CSeries programme in 2005 with a commitment from the Canadian government to provide $350 million in repayable contributions.

The CSeries programme was supposed to enter service by the end of 2013, but Bombardier encountered technical setbacks in flight test that delayed the programme by 2.5 years. The company also suffered unexpected financial costs after the Learjet 85 business jet was cancelled, forcing Bombardier to write off more than $2.6 billion in development costs.

By the end of 2015, Bombardier faced what chief executive Alain Bellemare described as an existential crisis. That’s when the provincial government of Quebec shored up the company’s depleted balance sheet with $2.5 billion in cash injections, including $1.5 billion by a pension fund into the rail division and $1 billion into a new joint venture with Bombardier to manage the CSeries programme.

Bombardier sought an additional $1 billion investment in the CSeries joint venture from the federal government, but the Trudeau administration ultimately committed to a CAD$372.5 million ($282 million) pledge for repayable contributions, with most of that cash devoted to research and development costs for the Global 7000 business jet. The minority of Ottawa’s cash will be provided for the CSeries programme.

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