Will Boeing Give a Damn?

[Guest]

Strong words but will Boeing even care if they lose our business?  I guess in return they could close their Canadian Operations.

BOEING IN CANADA

 

BOEING WINNIPEG Boeing Winnipeg is one of the largest aerospace composite manufacturers in Canada. The company employs over 1,400 people in 800,000 square feet of space in two locations in the city.

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Canada won't do business with Boeing while it's 'busy trying to sue us': PM

 

 

CTV News Channel: Boeing's actions 'harmful'

PM Trudeau and British PM Theresa May say they will defend Canadian company Bombardier and the jobs it creates for both countries.

 

 

The Canadian Press
Published Monday, September 18, 2017 1:39PM EDT
Last Updated Monday, September 18, 2017 2:41PM EDT

OTTAWA -- Prime Minister Justin Trudeau is dropping the gloves in his fight with Boeing, saying his government won't do business with a company that he's accusing of attacking Canadian industry and trying to put aerospace employees out of work.

The comments represent the strongest yet against the U.S. aerospace giant since Boeing launched a trade dispute with Montreal-based rival Bombardier earlier this year.

And they leave little doubt Trudeau's Liberal government is serious about walking away from a controversial plan to purchase 18 interim Super Hornet fighter jets from Boeing if the company doesn't stand down.

Related Stories

• British PM, Trudeau say Canada-EU trade deal a 'basis' for new bilateral talks
• U.K. gov't backs Bombardier in fight with Boeing

 

View taken of the Boeing logo on the fuselage of a Boeing 787-10 Dreamliner test plane presented on the Tarmac of Le Bourget on June 18, 2017 on the eve of the opening of the International Paris Air Show. (ERIC PIERMONT / AFP)

"We have obviously been looking at the Super Hornet aircraft from Boeing as a potential significant procurement of our new fighter jets," Trudeau said.

"But we won't do business with a company that's busy trying to sue us and trying to put our aerospace workers out of business."

Beyond the interim plans, the prime minister also appears to have left open the door to excluding Super Hornets entirely from any future competition to replace more broadly Canada's aging fleet of CF-18 jets.

Trudeau made the comments during an appearance with British Prime Minister Theresa May, who says Canada and the U.K. will work together to defend Bombardier, which has a factory in Northern Ireland.

Boeing has accused of Bombardier of selling its CSeries passenger jets to a U.S. airline at an unfairly low price with help from government subsidies, and says the case affects its long-term economic health.

"We will continue to stand up for jobs and stand up for the excellent airplane that is the Bombardier CSeries aircraft," Trudeau said.

"The action that Boeing has taken is very much in their narrow economic interests, to harm a potential competitor, and quite frankly is not in keeping with the kind of openness to trade that we know benefits citizens in all countries around the world."

The U.S. Commerce Department is currently investigating the complaint, and is expected to release its preliminary findings next week.

May said she has already made her feelings clear in a phone call with U.S. President Donald Trump, someone Trudeau also said would be hearing from Canada on the matter of Boeing vs. Bombardier.

"I will raise the issue of Bombardier when I meet with him again later this week," said May.

"I will be impressing upon him the importance of Bombardier to the United Kingdom., and particularly, obviously, to jobs in Northern Ireland."

In a statement released Monday, Boeing accused Bombardier of a "classic case of dumping" by offering the CSeries for sale in the U.S. "at absurdly low prices" after it "sold poorly in the marketplace."

"No one is saying Bombardier cannot sell its aircraft anywhere in the world. But sales must be according to globally accepted trade law, not violating those rules seeking to boost flatlining business artificially," the statement said.

"We all have a shared interest in a level playing field. That is what this dispute is about."

[Super 80]

I'm more baffled by their ostensible indifferent to alienating Delta.

[Guest]

I wonder if he even know that the RCAF does business with Boeing and I doubt that will cease.

Royal Canadian Air Force Acquires Boeing Technology to Boost C-17 Performance

 

• Central Maintenance Computers use C-17 aircraft data to enhance maintenance and maximize availability

 

OTTAWA, Ontario,  June 13, 2016  - Boeing [NYSE: BA] innovation using data analytics will enable the Royal Canadian Air Force (RCAF) to enhance the readiness of its five-aircraft C-17 Globemaster III fleet while also reducing maintenance expenses. The technology, known as Central Maintenance Computers (CMCs), enables collection, monitoring and in-depth analysis of C-17 performance data.

“Data analytics is the heart of CMC,” said Brian Hansen, Boeing CMC program manager. “With this information, the RCAF can minimize unscheduled maintenance and off-station repairs, reducing overall lifecycle costs while maximizing the value they get from the fleet.”

Boeing will examine trends and conduct diagnostic evaluations based on information from the CMCs, providing recommendations to the RCAF when preventive work and repairs are advised. RCAF pilots, engineers and maintenance crew will be able to access the same data – including mission playbacks – for their own analysis and training purposes.

“429 Squadron looks forward to the benefits CMCs should be able to provide in regards to preventive aircraft maintenance,” commented Major Michael Wells 429 Squadron Aircraft Maintenance Engineering Officer for the Royal Canadian Air Force. “We expect CMCs to minimize unscheduled maintenance actions and thereby increase mission effectiveness.”

CMCs are currently installed on C-17 fleets in Australia, the United Kingdom and the United States.

Boeing provides after-delivery support of the worldwide C-17 fleet as part of the C-17 Program’s Globemaster III Integrated Sustainment Program (GISP) Performance-Based Logistics agreement. The GISP "virtual fleet" arrangement provides the highest airlift mission-capable rate at one of the lowest costs per flying hour.

Canada has been a Boeing customer, supplier and partner since 1919. Today the company employs approximately 2,000 highly skilled Canadian workers at facilities across the country, contributing $1.3 billion to Canada’s economy in 2015 alone. Canada is home to one of the largest international supplier bases for Boeing – including more than 560 suppliers spanning every region of the country, and has worked with Canadian companies under the government’s Industrial and Regional Benefits, and its Industrial and Technological Benefits program to perform business worth more than $6.7 billion in Canada, with another $2.9 billion in high-value programs currently under way.

In 2016 Boeing celebrates 100 years of pioneering aviation accomplishments and launches its second century as an innovative, customer-focused aerospace technology and capabilities provider, community partner and preferred employer. Through its Defense, Space & Security unit, Boeing is a global leader in this marketplace and is the world's largest and most versatile manufacturer of military aircraft. Headquartered in St. Louis, Defense, Space & Security is a $30 billion business with about 50,000 employees worldwide. Follow us on Twitter: @BoeingDefense.

[DEFCON]

Boeing and its 737 series fell way behind technologically when the 320 series was first introduced. Now, both Boeing and Airbus are scrambling to catch up to newcomer Bombardier. For its part, Boeing had snubbed the CS project and instead of being able to compete with a clean sheet design today they continue to push the tired old 737 airframe. It'll probably be a decade, or more before either of the two big guys will be in a position to field a competitive offering.

It's all up to Bombardier now.

 

 

 

[Maverick]

Boeing will not "Give a Damn". 

Eighteen F-18E/F's sold to Canada means nothing. A true leap of technology, which the "C" series is, will obsolete the 737.

This is a serious, possibly lethal threat to their narrowbody market, especially if the CS500 gets launched.

I expect this to get much nastier. 

[J.O.]

Here's an idea for the brain trusts at Boeing - stop your whinging and try innovating for yourself. They call Bombardier a black pot when there's no bigger charred kettle on the planet than Boeing.

[Guest]

Andrew Coyne: The odd merger of Bombardier and the Canadian government 

http://nationalpost.com/opinion/andrew-coyne-the-odd-merger-of-bombardier-and-the-canadian-government?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NP_Top_Stories+(National+Post+-+Top+Stories)

It is increasingly clear amid the current Bombardier- Boeing dispute that the federal government, at least, views itself and Bombardier as being one and the 
Perhaps I have been wrong about Bombardier.
Until this week I had been patiently explaining to readers that the company was not, as its annual reports might suggest, in the aerospace and mass transit business. It is, I suggested, in the subsidy business. Governments, federal and provincial, periodically offer it subsidies worth hundreds of millions of dollars, in return for which Bombardier agrees to take them.
That is to say, it supplies governments with the incalculable benefits that come from “rescuing” Bombardier, and thus saving jobs, advancing high-tech, defending Canada, defending Quebec, and other things politicians like to be seen doing.
Mind you, Bombardier is not always such an easy sell. In the most recent such episode, the company publicly disavowed any need for the $375-million “repayable loan” the federal government was pressing upon it, only relenting after the feds agreed not to attach any conditions to the money. (This was on top of the US$1 billion Bombardier had earlier secured from the government of Quebec. Which was on top of a US$1.5-billion payment from the province’s pension plan, the Caisse de Dépôt, in return for a one-third stake in Bombardier’s train business. Which was on top of a $350-million “loan” a previous federal government had granted the company in 2008. Which was on top of a total of more than $2 billion in assistance in the decades before that.)
But all of this presupposes some sort of ordinary business relationship, as between two parties at arms’ length. Whereas it is increasingly clear the federal government, at least, views itself and Bombardier as being one and the same.
This was perhaps most explicit in the prime minister’s announcement earlier this week that the government would refuse to buy military jets from Boeing, though it had earlier said it would, on the grounds that “we don’t do business with a company that’s busy trying to sue us.”
Boeing, of course, is doing no such thing. The suit it has brought before the U.S. International Trade Commission is not against the government of Canada, but Bombardier. It was not Boeing that mistook the interests of the citizens of Canada for those of a private company, or that subordinated a critical military procurement decision to the outcome of a private trade dispute. It was the government of Canada that did that.
That the original decision — to purchase 18 Super Hornet jet fighters from Boeing as an “interim” replacement for the air force’s aging fleet of CF-18s, rather than proceed straight to a permanent replacement — is almost universally regarded as folly is beside the point. It was the Liberal government that insisted the purchase could not wait, having discovered a critical “capability gap” unknown to every independent military expert. It is therefore by its own account placing the security of the country and the safety of its military personnel at risk, in the service of a crude effort to blackmail Boeing into dropping its suit against Bombardier.
That Boeing has a perfect right to seek the protection of its own country’s trade laws; that Canada would be the first to cry foul if the situations were reversed; that Boeing, a global company with annual revenues nearly six times the Canadian defence budget, shows no signs of caving to this amateurish extortion attempt: all these are of secondary importance.
So is the indisputable fact that Bombardier has benefited from massive amounts in government subsidy, not only with regard to the sale of 75 CSeries passenger jets to Delta Air Lines that is the subject of Boeing’s complaint, but on many occasions — as Boeing has done.
Governments offer it subsidies worth hundreds of millions of dollars, in return for which Bombardier agrees to take them
No, what is most striking about the current dispute is how completely the government of Canada has come to identify with a single, family-controlled business. Either it is unaware of how odd this looks, or it does not care.
Of course, this was always true to an extent, if not so bluntly stated. The decision to subsidize Bombardier in the first place meant elevating the interests of a single firm above those of the taxpayer, first, and of the economy, second, via the diversion of capital and labour into a money-losing aerospace manufacturer that might otherwise have been put to more efficient use.
But the goings-on in recent days, with a preliminary decision from the U.S. Commerce Department expected next week, have exceeded all prior standards of corporatism.
Not content with threatening Boeing directly, the prime minister also publicly enlisted Bombardier’s stablemates in the Canadian aerospace sector, no less dependent on government’s goodwill, to put pressure on it. Then there was the even odder spectacle of Bombardier’s union, headed by the Liberals’ new best friend, Jerry Dias, downing tools for a day — though how this was supposed to hurt Boeing’s interests, or advance Bombardier’s, eludes understanding.
There is a strange fever in the air, a hint of the inexplicable, as if not all were quite what it seemed: as if Bombardier were not merely a failing plane-maker and the government not really the government. We must conclude there has been some sort of merger behind the scenes, or perhaps a takeover.
Two possibilities present themselves. Either Bombardier is no longer a private company but an arm of the government. Or — as seems equally plausible — the government of Canada at some point became a wholly-owned subsidiary of Bombardier.
If the latter, this would put those periodic government payments to Bombardier in a whole new light: not so much a subsidy, it seems, as a dividend.

[dagger]

https://leehamnews.com/2017/09/25/pontifications-revisionist-history/#more-24794

Pontifications: Revisionist history

leehamnews.com/2017/09/25/pontifications-revisionist-history/

2017-09-25

By Scott Hamilton

Sept. 25, 2017, © Leeham Co.: The US Department of Commerce today is scheduled to release its decision on whether to impose tariffs on each Bombardier CS100 delivered to Delta Air Lines, starting this year. (The public announcement is tomorrow.)

The tariffs will be in two forms: one for dumping the aircraft at prices below that sold in the home market (Canada) and one for “injury” to Boeing.

LNC understands the total could be in the range of $32m per plane. We don’t know if this a correct figure.

Boeing told its investors conference last week it’s pursuing this complaint about Bombardier subsidies to avoid another Airbus emerging and destroying Boeing and the US aerospace industry—an idea included in Boeing’s filings with the US government.

In those filings, Boeing claimed Airbus led to the demise of Lockheed’s commercial aviation business and of McDonnell Douglas.

I think this is a bit of revisionist history.

 

Icing on the cake

There’s no doubt Airbus’ rise made life miserable for MDC’s commercial business. Lockheed, as the fourth teat in the business, suffered as well. But if anything, Airbus was only icing on the cake of the downfall of these two companies.

Lockheed and McDonnell Douglas failed largely due to their own business decisions and factors unrelated to the entry of Airbus into the market.

The first problem was that the companies designed nearly identical airplanes: 250-300 passenger tri-jets. At the time, the aerospace analysts worried that the companies would divide the market and neither one would make money.

This is exactly what happened.

Each also had external factors that contributed to their demise.

Lockheed

Lockheed wanted to reenter commercial aviation, having exited following the development of the Electra propjet. The Electra was Lockheed’s choice to follow the successful Constellation series while avoiding competing in the emerging jet market in competition with Douglas, new entrant Boeing and Convair with the DC-8, 707 and CV-880 respectively.

The Electra was a superb aircraft, with good passenger comfort, over-powered and flexible in operation. It also had a fatal flaw that caused wings to separate from two aircraft in flight, killing all aboard. The aircraft were put under severe speed restrictions until modifications were made.

With propjets of the Electra’s size and design of limited demand with the pending designs of the small twin- and tri-jets, and the program loss due to the design defects, Lockheed exited commercial aviation once the program wound down. The last Electra was delivered in 1961.

A few years later, the company decided to reenter the airliner market with the airline requirement for a jumbo jet smaller than the Boeing 747, which could economically serve the domestic US market and short- to medium-range routes worldwide.

Production began in 1968.

McDonnell Douglas announced plans for a nearly identical DC-10. The program was launched in 1968.

Simultaneously, Lockheed was awarded a defense contract for the C-5A, the giant military transport.

The C-5A was afflicted with massive cost overruns and delays. The L-1011 program had its own issues, tracing to the Rolls-Royce engines selected for the airliner. RR went into receivership in England and for a time, it was unclear if Britain would bail out RR and proceed with the engines. Lockheed was faced with an airplane and no powerplant.

The C-5A program and the RR issue brought Lockheed to the brink of bankruptcy. In a controversial move, the US government provided loan guarantees for Lockheed (one might call this government subsidies by another name). Lockheed was saved. England reorganized RR, which produced the L-1011’s engines. But Lockheed suffered a two-year program delay in the process.

The L-1011 program problems meant Lockheed was unable to immediately produce a long-range version against the MDC DC-10-30/40. The L-1011-500 wouldn’t enter service until 1979, long after the competitor. This suppressed sales.

None of this had anything to do with Airbus, which was in formation concurrently with development of the L-1011 and DC-10. The first A300, a 250-passenger twin-engine wide-body designed for short- and medium-haul routes, entered service in 1974, two years after the L-1011 and three years after the DC-10.

Lockheed needed to sell 500 aircraft to break even. Sales failed to meet targets. The company announced in 1981 it would cease production after the 250^th L-1011. Production shut down in 1985.

Lockheed collapsed under the weight of the C-5A, the Rolls-Royce bankruptcy, splitting the market with McDonnell Douglas and for too long an orphan airplane. Airbus was just icing on the cake.

McDonnell Douglas

MDC’s decline in commercial aviation started with the DC-10 as early as 1974—though the first danger sign emerged in 1972, just a year after the aircraft entered service.

In June 1972, an American Airlines DC-10-10 cargo door blew off the airplane shortly after take-off from Detroit. The low altitude—11,750 ft—meant the pressure differential between the cabin and outside was not great. Still, the floor partially collapsed on to control cables. The pilots were able to land the plane safely.

The issue was traced to a poor design of the latch for the cargo door.

Despite this event and the warning it provided, the fix wasn’t performed on a timely basis on the fleet then in service. Two years later, a Turkish Airlines DC-10-10 taking off from Paris with a full load of 346 passengers and crew. The cargo door blew off, collapsing the floor. This time, the pilots couldn’t save the airplane. It crashed, killing all aboard. It was the worst air disaster up to that time.

Given that the cargo door was an issue revealed two years previously, the safety of the DC-10 came under scrutiny.

Five years later, another deadly accident led to the grounding of the airplane, once again over safety concerns.

In May 1979, an American DC-10 took off from Chicago. Before lift-off but after the plane was committed to take-off, the left engine separated from the aircraft. As designed, it flew up and over the wing. During this maneuver, the leading edge of the wing was hit and a hydraulic line was severed. The left wing leading edge slats, held in place by hydraulic pressure only, retracted. The left wing stalled.

The pilots, as it turned out, followed the one-engine out manual to the letter. Unable to see the wing and engine, all they knew was the engine power failed; they didn’t know the engine separated from the aircraft. The manual called for power reduction. With the left wing stalling, the reduction worsened the situation. The plane went perpendicular to the ground, nosed over and crashing into a trailer park. Everyone on board plus a few on the ground was killed.

Investigators examined the engine, which was on the runway at O’Hare, and discovered a severed flange, one of two that attached the engine to the wing, had failed due to fatigue. The FAA grounded all DC-10s for inspection and repair.

The investigation revealed that a procedure used by American and approved by McDonnell Douglas and the FAA to short-cut engine/pylon removal cracked the flange. It wasn’t a defect in the airplane but a defective maintenance procedure.

But the lack of a locking device for the wing slats was a design flaw. This and the grounding further blackened the eye of the DC-10 to such an extent that American removed the name of the airplane from its livery.

These incidents and the safety concerns hurt sales.

None of this had anything to do with Airbus.

MDC’s management also refused to invest in new airplane products. The MD-80 was a derivative of the DC-9. There was a big product gap between the MD-80 and DC-10. An upgrade of the MD-80 to the MD-90 wasn’t sufficient to attract customers.

When American signed an exclusive supplier agreement with Boeing in the mid-1990s, then-CEO Robert Crandall called the MD-90 “old technology” in explaining why he switched from McDonnell Douglas to Boeing.

MDC looked at developing a new aircraft with Fokker and South Korea. Neither happened. MDC conceived a twin-engine DC-10, but this went nowhere. MDC developed an MD-12 concept, an airplane that was similar to the later A380. No go.

By 1997, MDC was down to a 7% market share in commercial aviation, behind Boeing and Airbus. Faced with a need to invest $15bn to become a viable competitor again, then-president of MDC Harry Stonecipher said no. A merger with Boeing was agreed.

McDonnell Douglas’ demise in commercial aviation had more to do with the DC-10 experience and refusal to develop new airplanes than it was about Airbus.

The DC-10 experience occurred during the early years of Airbus, when only the A300 and A310 were produced. The A320 didn’t enter service until 1988, by which time MDC relied only on MD-80 derivatives.

Lack of commitment to commercial aviation, the DC-10, failure to invest in new airplanes and new technology is what killed MDC. Airbus benefited and may have helped it along, but MDC’s death was self-inflicted.

Speaking of government support

Boeing’s revisionist history overlooks its early days of relying on government money that benefited commercial airliners. The 307 Stratoliner, the industry’s first pressurized aircraft, used the wings, tail and engines from the B-17 bomber. The 377 Stratocruiser was a straight-forward conversion of the wartime C-97.

Even the 707, with the myth that Boeing bet the company on this airplane, came after a USAF commitment for the KC-135 tanker.

The 747 benefitted from R&D spent on the C-5A competition that Lockheed won.

And, while Boeing continues to deny it (see the last sentence of the second paragraph here, which is just not true), the World Trade Organization found Boeing received illegal subsidies from federal and state governments in the US (though far less than those received by Airbus).

Boeing is pursuing the complaint against Bombardier to avoid creating another Airbus.

In a twisted way, Bombardier really should take this as a compliment. Boeing in effect concedes that the CSeries is better than the 737 MAX.

Not bad for a company one sixth the size of Boeing in terms of revenues.

[dagger]

https://www.forbes.com/sites/danikenson/2017/09/14/boeing-takes-trade-law-abuse-to-a-whole-new-level/#4860747e10a5

Deep within the bowels of the U.S. Commerce Department’s mammoth headquarters in Washington, D.C., in a cloistered parcel of nondescript offices, toil a couple dozen analysts, accountants, and lawyers, who consider themselves the last line of defense for U.S. industries facing the “ravages of unfair trade.” In case there was any doubt about their commitment to mission, these guardian angels recently changed their agency’s name from the relatively innocuous “Import Administration” to the baton-wielding "Enforcement and Compliance." With its flimsy allegations of unfair trade on the part of Canadian aircraft manufacturer Bombardier, the Boeing Company hopes to exploit Enforcement and Compliance’s singularity of purpose to protect its monopolist’s perch.

The antidumping law is purported to exist to protect American companies and their workers from the effects of foreign competitors selling their products in the United States at “unfairly low” prices. Why competition—encouraged as it is in all forms of domestic commerce—suddenly becomes a scourge when foreigners are offering the lower prices is a question without a coherent answer. Under the law, “relief” in the form of antidumping duties is available if the domestic industry can demonstrate that it is materially injured or threatened with material injury by reason of those unfairly low-priced imports.

Contrary to the myth that antidumping is about leveling the playing field and protecting U.S. companies and workers from predatory foreign firms, the law has become a commercial weapon used by U.S. companies against other U.S. companies. Antidumping has become a convenient channel through which domestic firms can saddle their competition (both foreign and domestic) with higher costs and their customers with fewer alternative sources, while giving themselves room to raise their own prices, reap higher profits, and—in the case of Boeing—reinforce their market power.

In a year that has featured a record number of U.S. trade remedy case initiations (43 antidumping cases and 20 countervailing duty cases through September 5), Boeing’s dumping complaint against Bombardier is far and away the most audacious. It takes misappropriation of the antidumping law to a whole new level.

Boeing—never one to abstain from taxpayer largesse—claims that it is threatened with material injury because of sales of 109-seat aircraft by Bombardier to Delta Airlines, which have not happened and will not happen until mid-2018 at the earliest. Moreover, the aircraft in question are of a class that Boeing not only doesn’t produce, but is technically incapable of producing for several years because all of its production capacity is committed to a backlog of orders for its larger aircraft.  In fact, Boeing voluntarily withdrew from this market in 2006 in order to shift its focus to producing larger aircraft—the 126-seat 737-700 and the 138-seat 737 MAX 7—which has been keeping Boeing in the black.

Delta (and other carriers) requires aircraft of different sizes and seating capacities so that it can serve both high demand and low demand routes cost-efficiently. Boeing’s larger planes are not economically viable substitutes for Delta because using them risks flying with empty seats, which means higher costs per seat, lower returns for shareholders, and increased ticket prices.

By filing these cases, Boeing is effectively asking the government to misappropriate the antidumping law by finding that it is threatened with material injury by reason of sales that have never taken place, of a product that Boeing stopped producing more than a decade ago, all because Boeing might decide someday that it wants to reenter that market. Otherwise, Boeing is simply asking the government to enhance its monopoly power by forcing the airlines to buy aircraft that are uneconomical to fly. Neither explanation helps Boeing’s image.

Dumping is defined as the sale of a product in a foreign market at a lower price than the price obtained by the same producer in his home market. Dumping is measured by comparing a foreign producer’s U.S. and home market prices over a specific period of time. For each comparison (sometimes there are thousands or tens of thousands of sales, other times just a few), the difference between the net U.S. price and the net home market price is considered the unit margin of dumping. A positive dumping margin results when the U.S. price is lower than the home market price and a negative dumping margin results when the U.S. price exceeds the home market price. The antidumping duty ultimately imposed is, in theory, equal to the weighted average dumping margin calculated for all U.S. sales expressed as a percentage of U.S. sales value.

But that straightforward-sounding exercise of comparing prices and calculating dumping margins is rife with subjective interference and methodological sleights of hand. The administering agency maintains considerable discretion when it comes to determining the existence of dumping, and estimating its magnitude. Which sales should be included in calculating average prices? What product models should be collapsed together and treated as a single product for purposes of calculating average prices? What expenses should be subtracted from gross prices before net prices are compared between markets? What constitutes the date of sale? How should company-wide costs be allocated to the subject merchandise?

When the purpose of the antidumping law’s administering agency is to “safeguard and enhance the competitive strength of U.S. industries against unfair trade through the enforcement of U.S. antidumping duty (AD) and countervailing duty (CVD) trade laws,” one cannot be faulted for raising questions about objectivity. But when fulfilling that mission requires (1) “conduct[ing] AD/CVD investigations and administrative reviews to determine if imports are being sold at less than fair value or benefitting from unfair subsidization” and, AT THE SAME TIME (2) “counseling U.S. industries on how to petition the U.S. government to seek relief from injurious and unfairly traded imports,” it is no longer in dispute that the process lacks objectivity.

That conclusion is supported by the hundreds of U.S. court rulings that have found the Commerce Department (Enforcement and Compliance) acting illegally or otherwise beyond it authority.  Citing findings from an older Cato study, in the 18-month period between January 2004 and June 2005, the U.S. Court of International Trade (CIT) remanded 19 cases to the Commerce Department with instructions to revisit its decisions or recalculate figures. In 14 of those 19 cases, the resulting dumping margins were lower after the remand instructions were followed, suggesting a higher incidence of exercising discretion to the detriment of the importing interests.

If the Commerce Department finds dumping in the Boeing case, the lawyers representing Bombardier, Canada, Delta Airlines, and the other carriers would likely appeal the case to the CIT, which will have a field day identifying administrative abuses.  For starters, there are no U.S. sales to assess. Bombardier and Delta entered into a purchase agreement last year, with no fixed dates of sale. Historically, the Commerce Department has rejected purchase agreement date as the date of sale because in many cases—as would be expected in this case as it involves sales of big ticket items—the terms of sale (quantity, price, product modifications, delivery terms, after-sale services) can change significantly after the purchase agreement date. Offering a set price for a delivery in 2 or 3 years of a product that costs tens of millions of dollars to produce, occasions mid-production design changes, and contains components whose costs fluctuate with commodity prices is a highly risky proposition.  Accordingly, Bombardier (and Boeing, for that matter) doesn’t do it.  Bombardier doesn’t register sales in its accounting records until the aircraft is delivered and an invoice is cut.

Nevertheless, Enforcement and Compliance appears to be going forward with a dumping analysis based on sales made between April 1, 2016 and March 31, 2017. An objective observer would conclude that since there were no sales of subject merchandise in the United States during that period, there was obviously no dumping during that period. But Enforcement and Compliance appears to be planning to treat the purchase agreement date as the date of sale, and the preliminary terms established there—price, quantity, etc.—as the actual sales terms.

To complicate matters further, there are no production costs recorded on Bombardier’s books during the period of investigation for any of the aircraft in the Delta purchase agreement. Many of the aircraft won’t be produced for several years, so it will be years before the costs are accurately recorded in the company’s books.  Enforcement and Compliance hasn’t provided any guidance as to how Bombardier should attempt to conform with its reporting requirements, but seems to be suggesting that it will consider the costs incurred during the one-year period of investigation to produce those airplanes on the purchase agreement that have been produced.

Of course, as Boeing’s lawyers and the cost accountants at Enforcement and Compliance know full well, unit production costs of high-fixed-cost products and other products that benefit from learning curve effects, are always higher-than-average in the early production phases, and decrease as output rises. The unit costs that Bombardier would report for the first few of the 75 aircraft on the purchase agreement would be much higher than the average unit cost of the 75^th. Boeing’s CEO, in a statement to shareholders, even boasted about unit cost reductions of 30 percent on the 80^th Boeing 787 produced and 40 percent on the 240^th.

In order to account for these learning curve effects and to avoid skewing profit reporting and projections, companies are permitted, under Generally Accepted Accounting Principles, to adjust these costs by incurring them at stages that match them more realistically to revenues.  Indeed, Boeing spreads it costs out across the life of its aircraft programs so as not to mislead investors or potential investors.  Yet, Boeing seems to be okay with Enforcement and Compliance’s decision to disallow this approach so that it can generate high dumping margins for Bombardier.

Production costs, of course, are relevant to antidumping determinations because if there are no sales in the home market made in the ordinary course of trade, the U.S. price is compared to a cost-based estimate of what the price should be in the home market. When a company reports higher costs, it is more likely that its home market sales will be made at prices below the cost of production and eliminated for being outside the ordinary course of trade.  As a result, that higher cost, increased by an estimate of what the profit should be, acts as the benchmark to which the U.S. price is compared when calculating the dumping margin.

Keep your eye on developments in this case, the preliminary results of which are due from Commerce in the next couple of weeks.  It provides an excellent example of how subjectively and capriciously the antidumping law is administered and it could be the next most explosive issue threatening U.S.-Canada trade relations.

  

 

[Super 80]

I heard this past weekend there is growing executive dissent inside Boeing on this issue.

They were blindsided by the push-back from the UK and are worried about the same from US politicians from states where the C Series components are built. They're uncomfortable they're marrying themselves to Trump's agenda and they're worried AC and WS will blame Boeing if Ottawa puts them in an uncomfortable position.

They also aren't convinced this will do significant harm to the C Series sales campaigns in the US. If Boeing finds themselves winning the war at the expense of toppling a British government and being hated by every Conservative leader for decades to come, adding to the ranks of congressmen, senators and governors hostile to Boeing and by way of cuddling with Trump adding every Democrat to that list they won't have a very successful outcome.

[dagger]

5 hours ago, Super 80 said:

I heard this past weekend there is growing executive dissent inside Boeing on this issue.

They were blindsided by the push-back from the UK and are worried about the same from US politicians from states where the C Series components are built. They're uncomfortable they're marrying themselves to Trump's agenda and they're worried AC and WS will blame Boeing if Ottawa puts them in an uncomfortable position.

They also aren't convinced this will do significant harm to the C Series sales campaigns in the US. If Boeing finds themselves winning the war at the expense of toppling a British government and being hated by every Conservative leader for decades to come, adding to the ranks of congressmen, senators and governors hostile to Boeing and by way of cuddling with Trump adding every Democrat to that list they won't have a very successful outcome.

I haven't read a single US commentator, either in the trade or aviation fields, who has sided with Boeing. Ultimately, even if it takes years, they expect Bombardier to prevail. Likely in a NAFATA appeal or at the WTO, which has a lot of expertise in adjudicating complaints and appeals by Boeing and Airbus about subsidies. I expect this to become wrapped up in the NAFTA talks, and cause more discomfort for Boeing because it makes the case for some of Canada's demands on retaining viable appeal mechanisms against unfair anti-dumping measures.

[Maverick]

U.S. imposing 220% duty on Bombardier CSeries planes

Rival Boeing was seeking an 80% duty on the CSeries

The Canadian Press Posted: Sep 26, 2017 6:56 PM ET Last Updated: Sep 26, 2017 7:16 PM ET

The Bombardier CS 300 performs its demonstration flight during the Paris Air Show, at Le Bourget airport, north of Paris on June 15, 2015. The U.S. Department of Commerce has clobbered aerospace giant Bombardier with a hefty 220 per cent duty on the sale of its C Series jets to Delta Air Lines. (Francois Mori/Canadian Press)

The U.S. Department of Commerce has clobbered aerospace giant Bombardier with a hefty 220 per cent countervailing duty on the sale of its CS100 commercial jets to a U.S. airline following a trade complaint from an American rival.

The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the Montreal-based company's chances in its ongoing dispute with U.S. rival Boeing.

Boeing, which had complained that Bombardier inked a deal with Delta Air Lines for up to 125 of the jets by offering the planes at below-market price, wasted no time Tuesday in declaring victory.

"Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing's global supply chain," the company said in a statement.

The dispute is not about limiting innovation or competition, it continued, but rather "has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements."

The financial penalties aren't officially due until Bombardier delivers the first CS100 to Delta some time in the spring.

Final ruling expected in March

The key will be whether U.S. officials find that the deal between Bombardier and Delta actually hurt Boeing's business, an issue that's not expected to yield a finding for at least six months.

But today's ruling does give Boeing momentum as the dispute drags on, and more leverage in any future talks between the Trudeau government and Boeing to reach a negotiated settlement.

Tuesday's ruling was a stunning turn in the dispute, as Boeing had been asking for an 80 per cent duty.

The list price for the planes is around $6 billion. But the actual amount of money involved in the deal has not been made public, and Boeing has alleged that it is much less.

The case has major implications for Bombardier as it could not only endanger its deal with Delta but also hinder future sales in the U.S. and hurt Canadian aerospace companies that work with Bombardier.

Speaking before the ruling, Prime Minister Justin Trudeau promised to continue to stand with Bombardier and Canada's aerospace industry. He also once again threatened to cut government ties with Boeing.

"Certainly we won't deal with a company that's attacking us and attacking thousands of Canadian jobs," Trudeau said outside the House of Commons.

With one preliminary ruling out of the way, the Commerce Department will now turn its attention to whether Bombardier "dumped" its CS100s into the U.S. market by selling them below cost.

That finding is scheduled for Oct. 4, but could be delayed.

Did Bombardier-Delta deal hurt Boeing?

The question of whether the Bombardier-Delta deal hurt Boeing is being tackled by the U.S. International Trade Commission, whose ruling likely won't come out until spring.

The commission's ruling will be the key to whether any duties slapped on the CS100s become permanent, or whether the case is dismissed, all duties paid are refunded and the Bombardier-Delta deal can go ahead as planned.

Even then, however, either side can appeal the entire case to the U.S. Court of International Trade, bring it before NAFTA dispute bodies or even take the matter to the World Trade Organization.

That could not only drag the case out but also leave a cloud of uncertainty hovering over Bombardier, and affect its ability to sell more planes into the U.S. market or overseas.

Quebec Finance Minister Carlos Leitao, whose government invested $1 billion US for a 49.5 per cent stake in the CSeries commercial jet program last year, said he was confident Bombardier would beat Boeing.

But he tempered his optimism by noting that it could take a long time to resolve the case, which Leitao said could hurt Bombardier — and which is why Quebec will continue to support the company.

"At the end of the day, as often happens in this type of dispute, the Canadian side will win," he told The Canadian Press in New York. "Now, that day could be a very long day, so that's where the risks come from."

It was the second bit of bad news for Bombardier on Tuesday, after two European railway manufacturers announced they were merging and would present a united front against the Montreal-based company.

But there was also a glimmer of good news, after a senior Bombardier official said the firm was hoping to close several deals with Chinese airlines.

 

http://www.cbc.ca/news/business/bombardier-cseries-duty-1.4308590

[Super 80]

I will laugh my ass off if Air Canada's 737 MAX order is investigated for dumping.

[blues deville]

"The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the Montreal-based company's chances in its ongoing dispute with U.S. rival Boeing."

A long time fan of Boeing aircraft but this is an aircraft manufacturer who has benefited for years due to endless government and military contracts. Their recent US Airforce tanker bid scandal opened the process again for both Boeing and Airbus. And surprise, Boeing got the award. 

[Super 80]

And their project performance on the re-bid tanker contract has been abysmal.

[J.O.]

Bombardier's lawyers will only have one question for Boeing during the discovery phase of the inevitable lawsuit that will fall from this. Show us all documents relating to your proposal for aircraft that met the criteria in the Delta RFP.

[Super 80]

Here is Delta's statement to the Atlanta Journal Constitution:

Quote

“We are confident the USITC will conclude that no U.S. manufacturer is at risk because neither Boeing nor any other U.S. manufacturer makes any 100-110 seat aircraft that competes with the CS100,” Delta said.

“Boeing had the chance to compete with Bombardier for Delta's purchase of aircraft in this size range, but Boeing's only proposed alternative to the CS100 was to offer Delta used Brazilian-made regional jets,” Delta said. “Boeing has no American-made product to offer because it cancelled production of its only aircraft in this size range - the 717 - more than 10 years ago.”

http://www.myajc.com/business/after-delta-jet-order-proposes-tariffs-bombardier/MwF8gUmpq11qMPCbHrT9GO/

Edit: If you hit a pay-wall just hit the reader button in your browser.

I understand the message delivered privately to Boeing when they began this circus was simply "we expect better from our partners."

[Kip Powick]

OTTAWA—Bombardier’s hopes for breaking into the U.S. commercial aviation market took a massive blow on Tuesday, as the U.S. Department of Commerce proposed a hefty 219 per cent duty on its CSeries jets.

The department ruled in a preliminary decision that Bombardier benefited from improper government subsidies, which gave the Montreal-based company an unfair advantage when selling south of the border.

The investigation was sparked by a complaint from U.S. aerospace giant Boeing, after Bombardier secured a deal for up to 125 of its CS100s with Delta Air Lines in April 2016.

The list price for the planes is around $6 billion, but the actual amount of money involved in the deal has not been made public and Boeing alleges Bombardier offered them for much less.

The financial penalties aren’t officially due until Bombardier delivers the first CS100 to Delta, which is expected in the spring. They could also still be dropped or refunded.

The key will be whether the U.S. International Trade Commissions finds that Bombardier-Delta deal actually hurt Boeing’s business, a decision that’s not expected until the spring.

But the ruling gives Boeing momentum as the dispute drags on, and more leverage in any future talks between the Trudeau government and the Chicago-based company to reach a negotiated settlement.

Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain,” the company said in a statement.

Boeing wasted no time in declaring victory on Tuesday.

The dispute is not about limiting innovation or competition, it continued. “Rather, it has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements.”

U.S. Secretary of Commerce Wilbur Ross said in his own statement that while the United States values its relationship with Canada, “even our closest allies must play by the rules.”

Meanwhile, Bombardier and the Trudeau government appeared to be reeling. Most had expected the Commerce Department to rule against Bombardier, but the size of the proposed duty was surprising.

Boeing had been asking for an 80 per cent duty.

“The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programs,” Bombardier said in a statement.

“Boeing is seeking to use a skewed process to stifle competition and prevent U.S. airlines and their passengers from benefiting from the CSeries.”

In Europe, meanwhile, Bombardier’s rail business, Bombardier Transportation, faces a substantially larger rival after railway manufacturers Siemens Mobility and Alstom announced a merger.

The memorandum of understanding announced Tuesday is described as a merger of equals with each owning half the shares of the new company, to be headquartered in Paris. The Mobility Solutions business will be run out of Berlin.

[mrlupin]

11 hours ago, Super 80 said:

I will laugh my ass off if Air Canada's 737 MAX order is investigated for dumping.

Think big.... bigger...

Instead of investigating the B737 order, think a counter duty of 220% on Boeing products...

The Canadian carriers would then be forced to put pressure on Boeing to drop the complaint. It would of course be disastrous for Air Canada and Westjet.

 

[mrlupin]

Another idea that was heard on the radio...

Delta can circumvent the entire duties by adding an intermediary. Ie an international leaser takes the order and leases the airplanes to Delta for equivalent costs. The duties would not apply since no American company purchased the aircraft.

It doesn't solve all the problems but it is a temp solution.

[dagger]

29 minutes ago, mrlupin said:

Think big.... bigger...

Instead of investigating the B737 order, think a counter duty of 220% on Boeing products...

The Canadian carriers would then be forced to put pressure on Boeing to drop the complaint. It would of course be disastrous for Air Canada and Westjet.

 

I see no possibility of that. Bombardier has a pretty good chance of upending the duties in their entirety if this goes to the US courts, which are actually more favourable to foreign claims against anti-dumping duties than the NAFTA tribunals. The question is bridging a couple of years to get to that point.

[dagger]

https://twitter.com/daily_politics/status/912995430761246720

 

[Zan Vetter]

AC 787 options expire before the end of this year. Most serious people think that this BBD tariff won't stand, but there is in the interim a risk of a retaliation of duty on Boeing. So, AC was maybe weeks, but certainly not more than a couple months away from exercising (or not) their remaining 787 options. Can they reasonably assume that if they do that, there will be no tariff? There is a non-zero chance of tariffs now, to be sure. 

Pivot to the A350, wiggle out of the MAX to the extent possible. And go with Airbus...I can't believe we never saw this plot twist coming. Fleet simplification ha!

[dagger]

23 minutes ago, Zan Vetter said:

AC 787 options expire before the end of this year. Most serious people think that this BBD tariff won't stand, but there is in the interim a risk of a retaliation of duty on Boeing. So, AC was maybe weeks, but certainly not more than a couple months away from exercising (or not) their remaining 787 options. Can they reasonably assume that if they do that, there will be no tariff? There is a non-zero chance of tariffs now, to be sure. 

Pivot to the A350, wiggle out of the MAX to the extent possible. And go with Airbus...I can't believe we never saw this plot twist coming. Fleet simplification ha!

I didn't see much of an indication from Calin et al in their investor day talk to exercise more 787 options. And I suspect Boeing would offer to roll them over to later dates if it looked like AC might be mad over BBD. However, this is an excellent moment for Airbus to undermine Boeing on AC in particular, since the 350s are in the marketplace and the wide body market is slowing. Boeing can't make any 777 sales these days either and the 777X isn't selling at all. (Airbus would have no trouble placing those well-maintain, not particularly old A330-300s of AC, nudge, nudge, and replacing them with A350s would send Boeing a signal. From a fleet simplification standpoint, that would mean no change since the A330-300s aren't leaving any time soon.) If I were in Calin's shoes, I'd be playing off all the parties here. If DL cancels its CSeries order, take up some of those CS100s and boot out Georgian (a truly crappy operator) and the E-175s. Yes, that would mean CS100s for mainline, but at the price DL likely paid, possibly even lower than AC paid in relative terms for its CS300s. I'd play off the feds for YYZ concessions, I'd play off Boeing to remain a Boeing customer, I'd play off Airbus by flirting openly with it like a slut in front of Boeing.

And in the world of military aircraft, if I were Lockheed Martin, I'd be tarting up a package of industrial offsets to give the Liberals a face saving excuse to proceed with an F-35 buy. LM just got a US contract to go find cost savings in the F-35 program, and that could give it leverage to go to Canada and say that the price and operational reliability are different today, so you're not breaking a promise which was based on previous pricing. Call the plane the CF-35G or something, and say it's not really the plane Canada was expecting to take. Maybe drop a frill or two.

[Zan Vetter]

The 787 options are obviously a contentious topic within the upper reaches of AC. Lots of talk in prior years made them sound almost a foregone conclusion, but you're right, lately, silence. Waiting to make the final decision in this latest context has made them look very, very smart here and has now provided some great leverage as you describe. 

Another factor, politically, is maybe an investigation into MAX dumping. Which could perhaps even be supported (or rather not opposed) by AC given they have a ready scapegoat: Klaus G. He certainly left quickly didn't he? 

So, allow BBD to punch back at Boeing by remaining silent on a MAX dumping charge. Dangle the unexercised and now possibly less desirable 787 options in front of the Airbus sales rep; hey maybe the A350 could provide that 787 option lift (if that plan goes forward), even replace a few of the older 777s when time comes, and certainly the A330 as you said? Look good politically in front of Libs, subtlely punch Trump and "buy American" in the gut, support BBD. Look to placing the 787 at rouge in due course, as has already been stated in the past to be the plan when the 767 leaves.

More fun than fantasy sports, it's fantasy business/politics!