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Boeing-Bombardier dispute offers mixed omens for new Mobile jet assembly plant

From left to right: Bombardier board chairman Pierre Beaudoin, Airbus CEO Tom Enders, Bombardier President & CEO Alain Bellmare and Airbus CEO/President of Airbus Commercial Aircraft Fabrice Bregier celebrate a proposed partnership between the two companies. (Courtesy of Airbus)

Bombardier would like to build jets in Mobile, but it’s wrapped up in a trade dispute with Boeing that has generated some mixed omens for the company’s Alabama plans.

There’s no firm timetable for the proposed Alabama assembly line. Boeing has gone so far as to say it’ll probably never happen and the jobs it might bring to the Gulf Coast are "pure fiction."

With a ruling expected by early next year, recent court filings have outlined at least one point of agreement – Boeing, Bombardier and Delta all agree that the plan to build a new jet assembly line in Mobile is a separate issue from the current case before the U.S. Department of Commerce’s International Trade Administration (ITA). But that doesn’t mean one won’t affect the other.

The fracas goes back to April 2016, when Delta announced it was ordering 75 of Bombardier’s new C Series jets, a deal reportedly worth up to $5.6 billion. A few months later, Business Insider explained the potentially game-changing significance of the deal: "Although Bombardier has been a global leader in business and regional jets, the C Series is the first product from the Canadian airplane to compete against Boeing and Airbus in the mainline market. The decision to enter the market with the C Series was a major financial gamble for Bombardier, with a program price tag of $5.5 billion. Since its inception more than a decade ago, the aircraft has been beset by a series of development delays and slow sales."

The Delta order was a huge vote of confidence for a brand-new family of aircraft just entering the market. But Boeing alleged that Bombardier, with support from the Canadian government, was selling the jets at unfairly low prices. In April 2017 Boeing asked the Commerce Department to look into the matter.

The probe requested by Boeing was launched. In September the ITA recommended a 220 percent tariff on every imported C-Series jet, and then in early October it recommended tacking another 80 percent on top of that. According to Flight Global, an aviation industry news site, final findings in the probe are expected on Dec. 18, and the International Trade Commission is expected to rule on the tariffs in February.

Against that backdrop, Airbus and Bombardier made an astonishing announcement in mid-October: Airbus was taking a majority stake in the C Series Aircraft Limited Partnership (CSALP), which would build a new assembly line in Mobile, one of four global locations where Airbus builds its A320 family of jets.

Airbus wasn’t buying in with cash. Instead, it was taking on a share based on its manufacturing and marketing prowess. Essentially, Airbus was getting a pair of cutting-edge commuter jets that complemented its lineup — the CS100 and CS300 are smaller than Airbus’ popular A320 and A321 – while Bombardier was getting some muscle to keep its promising new product from dying on the vine.

In recent weeks, various parties in the trade dispute have filed briefs about whether the Airbus-Bombardier plan should be a factor in the Bombardier-Boeing dispute. The good news for Mobile’s ambitions as a rising aerospace hub is that everybody seems to agree the two issues should be kept separate.

"The proposed deal between Bombardier and Airbus has no bearing whatsoever on the Department’s current investigations," said a Nov. 13 Boeing filing. "Quite simply, there is no deal to evaluate at this time — only materials outlining a transaction which, according to Bombardier’s and Airbus’ own optimistic estimates, will not close until well into next year."

The Canadian government argued that because the deal was announced after the current inquiry’s specified period of investigation, "the Department should take no action now and should instead wait until the facts are more certain and can be addressed appropriately in the future."

Bombardier entered two separate filings. One dated Nov. 6 played up the estimated 400 to 500 direct jobs that would be provided by the proposed Mobile assembly line, along with a range of other positive economic impacts. In the other, dated Nov. 13, Bombardier argued that it would be improper to consider a deal that hadn’t yet been finalized, and that if necessary the Airbus-Bombardier alliance could be subjected to administrative review in the future.

The Airbus A320neo, right, and the Bombardier CS300 are similar aircraft in that they’re twin-engine, single-aisle craft designed for medium-range routes. Bombardier’s C Series jets are smaller, however, making them complementary rather than direct competitors. (Rendering courtesy of Airbus)

The bad new for Mobile is that the court filings suggest any new plant is years down the road, and quite likely will face a separate legal challenge. All parties seem to agree that it’ll be well into 2018 before the Airbus-Bombardier partnership even gets regulatory approval.

In its Nov. 13 filing, Boeing portrays the partnership as unimpressive. If and when the deal is closed, it says, "we will not know the nature or extent of the work, if any, that the C Series Aircraft Limited Partnership ("CSALP") and its partners might decide to perform in Mobile. It would take additional time — likely, years – to implement that decision. In other words, it would be many months to years from now before any C Series work could possibly be done in Mobile at all. … Bombardier and Airbus are extremely unlikely ever to actually establish a C Series assembly line in Alabama. Such plans would make no economic sense."

The Boeing brief goes on to argue that the only reason for building the assembly line would be to circumvent tariffs. "But even as a circumvention scheme, this will fail," it says, maintaining that the tariffs should apply to any imported components used in domestic assembly.

Boeing repeatedly challenges the idea that the Mobile plant ever will be built: "Simply put, absent antidumping and countervailing duty orders, the purported plan to assemble the C Series in the United States will never materialize. In its November 6, 2017 factual submission, Bombardier submitted various estimates of the number of U.S. jobs and investment that would result from the proposed transaction with Airbus. 30 These estimates are pure fiction. They are based on a scenario which, again, will never materialize in the absence of antidumping and countervailing duty orders."

In the high-stakes dispute, Boeing hardly has a lock on tart language. The Flight Global report quotes a Delta Airlines brief in the case in which the company wallops Boeing: "In Boeing’s view, any action would be a potential form of ‘evasion.’ … Modify a purchase agreement – evasion. Look at options to acquire a 109-seat aircraft that the US industry does not currently produce – evasion. Support expansion of the US aerospace industry and competition in the service of customers – evasion."

A Business Insider analysis from May suggests a historical motivation for Boeing’s aggressive stance: It simply doesn’t want Bombardier to become another Airbus. Boeing doesn’t want to repeat strategic missteps that made it easier for Airbus to become a heavyweight competitor over the last 40 years.

"It’s a crucial entry market," one Business Insider source said of Boeing’s trade complaint over the C Series. "This is the case Boeing might have brought against Airbus 40 years ago. Not taking action at the start led to consequences."

Not all the recent action has taken place in legal papers: Bombardier has announced at least two significant orders totaling up to 85 jets.

Whether any of them might eventually be built in Alabama is a question that, for now, remains very much open.

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