CANADA ECONOMICS

BOMBARDIER

Bombardier Inc.,  Commercial Aircraft. October 16, 2017. Airbus and Bombardier Announce C Series Partnership

• Airbus to acquire majority stake in the C Series Aircraft Limited Partnership
• Partnership brings together two complementary product lines, with 100-150 seat market segment expected to represent more than 6,000 new aircraft over the next 20 years
• Combination of Airbus’ global reach and scale with Bombardier’s newest aircraft family to create significant value for customers, suppliers, employees and shareholders
• Significant C Series production costs savings anticipated by leveraging Airbus’ supply chain expertise
• Commitment to Québec: C Series Aircraft Limited Partnership headquarters and primary assembly to remain in Québec, with the support of both companies’ global supply chains
• Airbus’ global industrial footprint expands with the C Series Final Assembly Line in Canada, resulting in a positive impact on operations in Québec and across the country
• Growing market for C Series results in second Final Assembly Line in Mobile, Alabama, serving U.S. customers

Airbus SE (EPA: AIR) and Bombardier Inc. (TSX: BBD.B) are to become partners on the C Series aircraft programme. A corresponding agreement was signed today.  The agreement brings together Airbus’ global reach and scale with Bombardier’s newest, state-of-the-art jet aircraft family, positioning both partners to fully unlock the value of the C Series platform and create significant new value for customers, suppliers, employees and shareholders.

Under the agreement, Airbus will provide procurement, sales and marketing, and customer support expertise to the C Series Aircraft Limited Partnership (CSALP), the entity that manufactures and sells the C Series. At closing, Airbus will acquire a 50.01% interest in CSALP. Bombardier and Investissement Québec (IQ) will own approximately 31% and 19% respectively.

CSALP’s headquarters and primary assembly line and related functions will remain in Québec, with the support of Airbus’ global reach and scale. Airbus’ global industrial footprint will expand with the Final Assembly Line in Canada and additional C Series production at Airbus’ manufacturing site in Alabama, U.S. This strengthening of the programme and global cooperation will have positive effects on Québec and Canadian aerospace operations.

The single aisle market is a key growth driver, representing 70% of the expected global future demand for aircraft. Ranging from 100 to 150 seats, the C Series is highly complementary to Airbus’ existing single aisle aircraft portfolio, which focuses on the higher end of the single-aisle business (150-240 seats). The world class sales, marketing and support networks that Airbus brings into the venture are expected to strengthen and accelerate the C Series’ commercial momentum.  Additionally, Airbus’ supply chain expertise is expected to generate significant C Series production cost savings.

Airbus is strongly committed to Canada and its aerospace sector with Canadian suppliers extending their access to Airbus’ global supply chain. This new C Series partnership is set to secure jobs in Canada for many years to come.

"This is a win-win for everybody! The C Series, with its state-of-the-art design and great economics, is a great fit with our existing single-aisle aircraft family and rapidly extends our product offering into a fast growing market sector. I have no doubt that our partnership with Bombardier will boost sales and the value of this programme tremendously,” said Airbus Chief Executive Officer Tom Enders. "Not only will this partnership secure the C Series and its industrial operations in Canada, the U.K. and China, but we also bring new jobs to the U.S. Airbus will benefit from strengthening its product portfolio in the high-volume single-aisle market, offering superior value to our airline customers worldwide."

“We are very pleased to welcome Airbus to the C Series programme,” said Alain Bellemare, President and Chief Executive Officer of Bombardier Inc.  “Airbus is the perfect partner for us, Québec and Canada. Their global scale, strong customer relationships and operational expertise are key ingredients for unleashing the full value of the C Series. This partnership should more than double the value of the C Series programme and ensures our remarkable game-changing aircraft realizes its full potential.”

“The arrival of Airbus as a strategic partner today will ensure the sustainability and growth of the C Series programme, as well as consolidating the entire Québec aerospace cluster. In the current context, the partnership with Airbus is, for us, the best solution to ensure the maintenance and creation of jobs in this strategic sector of the Québec economy," said Québec’s Deputy Prime Minister, Minister of Economy, Science and Innovation and Minister responsible for Digital Strategy, Dominique Anglade.

Ownership Structure and Agreement Highlights

The C Series programme is operated by CSALP in respect of which Bombardier and IQ respectively hold approximately a 62% and a 38% interest.  The Investment Agreement contemplates Airbus acquiring a 50.01% interest in CSALP. Airbus will enter into commercial agreements relating to (i) sales and marketing support services for the C Series, (ii) management of procurement, which will include leading negotiations to improve CSALP level supplier agreements, and (iii) customer support. At closing, there will be no cash contribution by any of the partners, nor will CSALP assume any financial debt. It also contemplates that Bombardier will continue with its current funding plan of CSALP and will fund, if required, the cash shortfalls of CSALP during the first year following the closing up to a maximum amount of US$350 million, and during the second and third years following the closing up to a maximum aggregate amount of US$350 million over both years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%, with any excess shortfall during such periods to be shared proportionately amongst Class A shareholders.

Airbus will benefit from call rights in respect of all of Bombardier’s interest in CSALP at fair market value, with the amount for non-voting participating shares used by Bombardier capped at the invested amount plus accrued but unpaid dividends, including a call right exercisable no earlier than 7.5 years following the closing, except in the event of certain changes in the control of Bombardier, in which case the right is accelerated. Bombardier will benefit from a corresponding put right whereby it could require that Airbus acquire its interest at fair market value after the expiry of the same period. IQ’s interest is redeemable at fair market value by CSALP, under certain conditions, starting in 2023. IQ will also benefit from tag along rights in connection with a sale by Bombardier of its interest in the partnership.

The Board of Directors of CSALP will initially consist of seven directors, four of whom will be proposed by Airbus, two of whom will be proposed by Bombardier, and one of whom will be proposed by IQ.  Airbus will be entitled to name the Chairman of CSALP.

Subject to obtaining the required approval from the Toronto Stock Exchange, the transaction also provides for the issuance to Airbus, upon closing, of warrants exercisable to acquire up to 100,000,000 Class B Shares (subordinate voting) of Bombardier (representing approximately 5% of the aggregate issued and outstanding Class A Shares (multiple voting) and Class B Shares of Bombardier on a fully-diluted basis, and approximately 5% of the aggregate issued and outstanding Class A Shares and Class B Shares on a non-diluted basis), at an exercise price per share equal to the US$ equivalent of C$2.29, which represents the volume-weighted average price of the Class B Shares over the five trading days ending Friday, 13 October 2017. The warrants will have a five-year term from the date of issue, will not be listed and will provide for market standard adjustment provisions, including in the event of corporate changes, stock splits, non-cash dividends, distributions of rights, options or warrants to all or substantially all shareholders or consolidations.

The issuance of the warrants and their terms were negotiated between Bombardier and Airbus at arm’s length and will not materially affect control of Bombardier. Security holder approval will be required under Toronto Stock Exchange rules due to the fact that the warrants will be issued later than 45 days from the date upon which the exercise price was established. Such approval is expected to be obtained by way of written consent of shareholders holding more than 50% of the voting rights attached to all of Bombardier’s issued and outstanding shares.

The transaction has been approved by the Boards of Directors of both Airbus and Bombardier, as well as the Cabinet of the Government of Québec. The transaction remains subject to regulatory approvals, as well as other conditions usual in this type of transaction. There are no guarantees that the transaction will be completed and that the conditions to which it is subject would be met. Completion of the transaction is currently expected for the second half of 2018.

Bombardier

Bombardier is the world’s leading manufacturer of both planes and trains. Looking far ahead while delivering today, Bombardier is evolving mobility worldwide by answering the call for more efficient, sustainable and enjoyable transportation everywhere. Our vehicles, services and, most of all, our employees are what make us a global leader in transportation.

Bombardier is headquartered in Montréal, Canada and our shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2016, we posted revenues of $16.3 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.

 Airbus

Airbus is a global leader in aeronautics, space and related services. In 2016 it generated revenues of €67 billion and employed a workforce of around 134,000. Airbus offers the most comprehensive range of passenger airliners from 100 to more than 600 seats and business aviation products. Airbus is also a European leader providing tanker, combat, transport and mission aircraft, as well as one of the world’s leading space companies. In helicopters, Airbus provides the most efficient civil and military rotorcraft solutions worldwide.

Bombardier to Hold a Press Conference and Conference Call

October 16, 2017. Montréal. Bombardier Inc.,  Commercial Aircraft

Bombardier (TSX: BBD.B) and Airbus announced today that they are partnering on the C Series aircraft program. Bombardier will hold a press conference intended for media at 7:15 p.m. Eastern Time (ET) followed by a live webcast/conference call intended for investors and analysts at 8:15 p.m. Eastern Time (ET).

Alain Bellemare, President and Chief Executive Officer, Bombardier Inc.; Romain Trapp, President Canada & Chief Operating Officer North America, Airbus Helicopters; Dominique Anglade, Deputy Prime Minister, Minister of Economy, Science and Innovation and Minister responsible for Digital Strategy; and Dave Chartrand, Québec coordinator of the International Association of Machinists and Aerospace Workers will make a brief allocution and answer questions from the media.

Innovation, Science and Economic Development Canada. October 16, 2017. Minister Bains comments on Airbus/Bombardier strategic partnership. Statements

Ottawa — The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, made the following statement in regard to the announcement by Bombardier and Airbus on a new strategic partnership in the C Series program.

“The C Series leads the industry in design, efficiency and environmental standards. It is the benchmark for excellence in narrow-body aircraft and a cutting-edge Canadian innovation. It is no surprise that the C Series is attracting interest from all corners.

“Proposed investments of this kind require the government to consider whether they are in the national interest. The Airbus deal, like all significant proposed investments in Canada by non-Canadians, is subject to the Investment Canada Act—an act which I oversee.

“In my review, I’ll be looking to see how this deal will benefit Canadians, support our aerospace sector and create good jobs.

“The C Series is the largest plane assembled in Canada, and it provides work to 238 suppliers located in every region of Canada.

“On the surface, Bombardier’s new proposed partnership with Airbus on this aircraft would help position the C Series for success by combining excellence in innovation with increased market access and an unrivalled global salesforce.

“Canada has a highly skilled workforce and a climate that fosters innovation. That’s why our aerospace sector is strong, diverse and well-positioned to take advantage of the opportunities that could arise from this deal, including new pathways into global supply chains across all of the company’s business lines and products.

“With this proposed partnership, Airbus would commit to making Canada its fifth home country and the first outside Europe. Airbus already employs a Canadian workforce of 1,900 people across seven provinces and generates $1.2 billion of Canadian supply chain spending. This presents further opportunity to grow our aerospace industry and create well-paying middle-class jobs across the country.”

The Globe and Mail. 17 Oct 2017. Bombardier hands control of C Series airliner to Airbus. Quebec calls sale of majority stake of program best solution to protect, create jobs in province
NICOLAS VAN PRAET

Bombardier Inc. has struck an agreement to sell control of its marquee C Series airliner program to Europe’s Airbus Group SE, a bet that handing the keys to a better-financed global giant will ensure the Canadian plane maker’s future in the face of relentless competition and punishingly high tariffs imposed by the United States.
The C Series program, Bombardier’s big venture to drive commercial aerospace revenue over the next two decades, has been at the centre of major political and investor drama in Canada since its inception. The single-aisle airliner’s development at a cost of $6-billion (U.S.) drove Bombardier to the brink of bankruptcy in 2015 before Quebec handed the company a lifeline by investing $1-billion in the plane.
Quebec supports the transaction with Airbus, calling it the best solution to protect and create jobs in a sector vital to the province’s economy. Caisse de dépôt et placement du Québec, a major Bombardier shareholder, backs the tie-up. Ottawa has also offered a preliminary endorsement of the transaction, saying it would require review under federal investment law.
“[This deal] brings certainty to the future of the program,” Bombardier chief executive Alain Bellemare told reporters on a conference call Monday after the announcement. “It increases the level of confidence that the aircraft is here to stay.”
Although Bombardier itself has not been sold, the deal is an acknowledgment that the company could not go it alone on the global market for passenger airlines. Boeing Co. is suing Bombardier, saying it benefited from unfair government subsidies that allowed it to sell the C Series at “absurdly low” prices in the United States. The trade challenge is widely seen as a cynical bid to kill the aircraft’s prospects in the United States and threaten jobs in Britain, where Bombardier builds C Series wings. The U.S. Department of Commerce has slapped preliminary duties of nearly 300 per cent on Bombardier C Series planes. Brazilian rival Embraer SA has also launched a trade challenge against the Canadian plane maker.
In 2015, Bombardier turned to Airbus as a potential partner to keep the C Series alive amid a major cash crunch, but talks fell apart after they were leaked to the media. The Canadian plane maker is turning to Airbus again now for financial and institutional heft as the battles with Boeing and Embraer grow more intense.
“The stars were all aligned this time,” Airbus chief executive Tom Enders said. “I have no doubt that our partnership with Bombardier will boost sales and the value of this program tremendously.”
Under the agreement, Airbus said it will take a 50.01-per-cent interest in the C Series limited partnership for no cash consideration as the C Series becomes part of Airbus’s aircraft product lineup. In exchange, it will offer Bombardier’s 100- to 150-seat plane its global procurement, sales and marketing and customer support expertise. Bombardier’s stake will be 31 per cent and Quebec will own about 19 per cent when the deal is finalized.
Bombardier will continue to fund the plane’s early production through the limited partnership as well as any cash shortfalls up to $700-million over the first three years of the deal. Airbus also obtains warrants for 100 million subordinate voting shares in C Series parent Bombardier Inc. and the right to buy Bombardier’s stake in the partnership at a later date.
No cash is changing hands in the deal and the C Series partnership assumes no debt as part of the transaction, the partners said. All of Bombardier’s current C Series final assembly in Mirabel, Que., will remain and Airbus has pledged to set up additional factory space for the C Series at an existing Airbus facility in Mobile, Ala.
The partnership should more than double the value of the C Series program and ensure the airliner realizes its full potential, Mr. Bellemare said. There were customers wanting to place C Series orders who remained unsure about the plane’s viability in the long term, Mr. Enders said. That uncertainty has now been lifted, he said.
The plane had garnered 360 firm orders as of the end of 2016, but no significant new orders in more than a year.
The decision by Boeing to attack Bombardier through a trade war has now backfired on the U.S. giant as a result of the deal between the Canadian plane maker and Airbus, said Jerry Dias, president of Unifor, which represents workers who make Bombardier’s Q400 turboprop plane in Toronto. The combination of Airbus and Bombardier creates a “bigger monster” for Boeing to face, he said.
Chad Bown, a former Obama administration and World Bank economic official, said the deal appears to allow assembly to be moved to Alabama, something that would give Bombardier and Airbus the ability to “tariff-jump” if necessary in the event the U.S. International Trade Commission upholds the preliminary Commerce decisions and penalizes the C Series.
“Even if the Trump administration imposed final anti-dumping and countervailing duties on imports of the C Series, those jets that would be ‘built’ in Alabama would presumably not be hit with the tariffs,” Mr. Bown, now a senior fellow at the Peterson Institute for International Economics in Washington, wrote in an e-mail.
Bombardier’s founding family made some courageous moves to get the C Series to market and another by doing this deal with Airbus, said Karl Moore, a management specialist at McGill University. “I guess their view is they’d rather have this as part of their heritage and own a chunk of it than own 100 per cent of something that isn’t flying.”
It will also raise questions in Quebec’s national assembly and the House of Commons about what exactly Quebec got for its $1-billion investment in the C Series and whether Airbus’s ownership of Bombardier’s premier aircraft program is the best answer for Canada. The airliner is the first all-new single-aisle aircraft to come to market worldwide in nearly 30 years.
“On the surface, Bombardier’s new proposed partnership with Airbus on this aircraft would help position the C Series for success by combining excellence in innovation with increased market access and an unrivalled global sales force,” said Navdeep Bains, federal Minister of Innovation, Science and Economic Development.
“Bombardier’s management, under Alain Bellemare’s leadership, has made a very good business decision to address the challenges the company has been facing,” said the Caisse de dépôt. “This agreement with Airbus strengthens the company, improves its prospects for growth, and makes the company more robust over the long term.”

BOMBARDIER. THE GLOBE AND MAIL. REUTERS. OCTOBER 17, 2017. Bombardier CEO confident Airbus deal will resolve Boeing trade row
PAUL WALDIE, EUROPEAN CORRESPONDENT

Bombardier Inc.'s chief executive has expressed confidence that the deal to sell control of the C Series aircraft division to Airbus Group SE will resolve the trade dispute with Boeing Co.

The agreement with Airbus could see some C Series aircraft assembled at its plant in Alabama. That would skirt duties of nearly 300 per cent that the United States government is threatening to impose on C Series imports because of a complaint by Chicago-based Boeing that Bombardier has received substantial government assistance and is selling the planes at "absurdly low" prices.

"Assembly in the U.S. can resolve the issue," Bombardier's CEO Alain Bellemare told reporters on Tuesday during a press conference in Toulouse, France, where Airbus is based. "Airbus is the perfect partner for us."

In the deal announced late Monday, Airbus will acquire a 50.01-per-cent stake in the C Series division for no cash and incorporate the plane into its product lineup.

The arrangement has won wide backing in the U.K. where Bombardier employs roughly 4,500 people mainly at a plant in Belfast, which makes wings for the aircraft. Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy, called the deal a "very big step forward" and said the U.K. government would continue to fight moves in the U.S. to apply the duties.

"Not only has Airbus committed to Belfast being the home of the wing manufacturer for the C Series, but they are pointing to the possibility of expanding the output and the order book," Mr. Clark said Tuesday. He added that the U.K. government would continue to work with the Canadian government "to ensure the unjustified case brought by Boeing is brought to a swift resolution."

Labour leaders also praised the deal but some expressed caution that the new agreement could also face legal challenges.

"It's obviously a good deal, and we welcome it in terms of C Series," said Davy Thompson, a local organizer for Unite, the labour union which represents most of the Bombardier workers in Northern Ireland. "We believe C Series is there for the long-term, but we do work on a number of legacy contracts at the Belfast site and hopefully what's happened today will allow C Series to increase and people to move from the legacy contracts across [to the C Series] as they start to dwindle down. They are really coming to the end of their lifespan."

Mr. Thompson added that while the Airbus deal might allow Bombardier to get around the U.S. tariffs, that battle is far from over. "The reality for us is this was an attack on aerospace by Boeing. It doesn't stop anybody from using the ITC to go in with what is really a spurious claim, get the right decision for their own company and then you have tariffs imposed and no one can actually appeal it or do anything against until further down the line."

Ross Murdoch, national officer for the union GMB, which also represents some Bombardier workers, said he was concerned that the deal might raise more legal challenges. "It sounds potentially positive," Mr. Murdoch said. "But there's already rumblings coming out of America about two companies coming together to try and circumvent tariffs. We hope that both companies have actually taken pretty sound, cast-iron, legal advice to make sure they don't get rid of one legal challenge only to replace it with another."

Stephen Kelly, the chief executive of Manufacturing NI, said the Airbus deal is "very good news" as it will allow Bombardier to tap into the Airbus sales, marketing and supply chain. But he said it doesn't end the battle with Boeing. "The deal doesn't immediately change the challenges in the U.S. market brought about by Boeing's absurd claim to the U.S. Department of Commerce, nor indeed their ridiculous response, but the world aviation market is a big place and there are lots of customers needing an aircraft like this," he said. "Belfast workers were preparing to ramp up their production of C Series wings, so whilst nothing in this world is ever permanent, this looks like good news for the short and medium term."

Boeing officials have already challenged the Airbus-Bombardier arrangement.

"This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government. Our position remains that everyone should play by the same rules for free and fair trade to work," Boeing spokesman Dan Curran said in a statement.

Phil Musser, Boeing's senior vice-president of communications, added on Twitter: "If @Airbus and @Bombardier think this deal will get them around the rules...#thinkagain"

For British Prime Minister Theresa May, the Airbus-Bombardier deal could ease a political headache. Ms. May's Conservatives lost seats in the June election and failed to win a majority in the House of Commons. As a result, Ms. May has been relying on support from Northern Ireland's Democratic Unionist Party, which won 10 seats, to prop up her minority government. The Bombardier plant is located in a DUP stronghold, and the party has been pushing the government to work to resolve the C Series dispute.

On Tuesday, DUP leader Arlene Foster welcomed the deal and said she hoped it would safeguard jobs in the province. "I'm thrilled there is a bright future ahead following what has been a dark time for staff and management," she said.

Bombardier has faced a host of challenges over the C Series, which has cost around $6-billion (U.S.) to develop and involved subsidies from the Canadian, Quebec and British governments. Boeing has called the government assistance unfair and alleged Bombardier is selling C Series planes in the U.S. at low prices. The U.S. Department of Commerce agreed and has imposed preliminary duties of nearly 300 per cent on C Series imports. A final decision on the duties is expected early next year.

THE GLOBE AND MAIL. OCTOBER 16, 2017. OPINION. Bombardier deal kills dream of a new all-Canadian major commercial jet maker
JEFFREY JONES

Bombardier may have just saved the life of its C Series passenger jet program, but the dream of a new all-Canadian major commercial jet maker has died.

The sale of a majority interest in Bombardier Inc.'s C Series partnership to Airbus Group SE shows that, even after hundreds of millions of dollars in support from taxpayers, it will take the financial and marketing muscle of Europe's plane-making giant to do battle against both Boeing Co. and Donald Trump's Washington.

The companies announced the deal late Monday, and it came after recent reports that Bombardier, the plane and train maker, was seeking buyers for other assets, namely its regional jet and Q400 turboprop segments that have generated cash as the C Series program stumbled along.

It's not the first time the two had broached the idea of teaming up. Bombardier had tried to woo Airbus into the program in 2015, but the talks came to nothing. After they ended, an executive with the world's largest plane maker criticized Bombardier's 100-to-150-seat, single-aisle aircraft as an "orphan" threatened by new offerings from the major manufacturers. Now, Airbus says it's a terrific fit with its own jets in that segment.

There's no question it's a sweet deal for Airbus, as rescuer. It gets 50.01 per cent of the partnership behind the C Series, and has agreed to take on procurement, sales and marketing of the aircraft that is now the target of a nasty trade dispute in the United States, triggered by Chicago-based Boeing. Bombardier will have 30 per cent and Quebec will have 19 per cent.

Neither gets any cash in exchange for their interests, and Bombardier agreed to fund shortfalls to a maximum of $700-million (U.S.) over the first three years after the deal closes. That essentially puts a badly needed limit on the cash the company has been burning through. Airbus will also end up with as much as 5 per cent of Bombardier's class A and B shares.

The C Series has been in equal measures the centrepiece of Bombardier's future in aerospace and its biggest millstone, a mainline aircraft coming to market years late and $2-billion (Canadian) over budget. When it looked like the turbulence was subsiding after nearly a decade of hurdles, the plane was slapped with crippling duties in the United States, where Boeing complained it was massively subsidized by Quebec, Canadian and British taxpayers.

Boeing demanded an 80-per-cent duty. It got more than its wish from the U.S. Department of Commerce, winning tariffs of almost 300 per cent, eliciting shock among political leaders in Canada and in Britain.

Delta Air Lines had said it planned to proceed with its own 75-plane order, and had no intention to pay the tariffs, but suggested the deliveries could be delayed, raising more uncertainty for Bombardier.

The deal with Airbus takes aim at two big problems for Bombardier – taking on Boeing and manoeuvring in a U.S. market where "America first" is the rallying cry. The main assembly operations will remain in Quebec and facilities for final assembly will also be in Canada. But Airbus plans to operate an additional final assembly line in Mobile, Ala., to serve U.S. customers, it said.

Pledging job creation in the United States will surely bolster its case as North American free-trade agreement talks are hitting numerous sticking points and with the U.S. International Trade Commission expected to make a final ruling on the tariffs early next year.

Bombardier was running out of options as it faced attacks on its marquee aerospace offering, and business opportunities for the C Series appear to have widened in a big way with the program coming under the wing of Airbus.

It will come as a disappointment to Canadians, however, that a home-grown company that they helped support needed a European backer to turn the jet into a competitive threat.

THE GLOBE AND MAIL. OCTOBER 17, 2017. Bombardier stock soars 20% as analysts applaud C Series deal with Airbus
MICHAEL BABAD, Columnist

It’s better to have a 30-per-cent share of a very successful program than to struggle with a highly risky program

ANALYST RICHARD ABOULAFIA, TEAL GROUP

Bombardier Inc. shares are surging on its deal to sell Airbus Group SE control of its hallmark C Series program, which analysts say gives the Canadian plane maker the heft it needs in a highly competitive market and a hostile U.S. trade regime.

The stock was up by more than 22 per cent soon after markets opened.

"Bombardier no longer has control of this jet, but then again, it's better to have a 30-per-cent share of a very successful program than to struggle with a highly risky program that was perhaps too big for them from the start," aerospace analyst Richard Aboulafia of Teal Group told Reuters.

As The Globe and Mail's Nicolas Van Praet reports, Bombardier and Airbus announced late Monday that the European company will take a 50.01-per-cent stake in the C Series program. There's no cash involved.

Bombardier will hold 31 per cent, and Quebec about 19 per cent.

Key to the agreement is that, while current assembly of the plane will remain in Quebec, Airbus has pledged plant space in Alabama.

Bombardier has been hit with massive preliminary duties in the U.S. in a trade dispute with Boeing Co. over a big C Series sales to Delta Air Lines.

While many analysts believed Boeing's claim was unjustified, it came during a new trade era in the U.S., where the Trump administration has taken off the gloves.

"This is a program that has been waiting for a deus ex machina, and wow, it really got one," Mr. Aboulafia told Bloomberg.

While Airbus now looks like a global company, Boeing appears "a bit shortsighted and protectionist. It makes Boeing look like they've been playing tic tac toe against a chess master," Bloomberg reported.

Bank of Montreal analyst Fadi Chamoun was equally upbeat, saying he expects the deal to be "well received."

"From the perspective of BBD shareholders, the deal reduces risk while providing the potential for a significant upside scenario to valuation that would not have been contemplated otherwise," Mr. Chamoun said in a research note.

"From the perspective of Airbus, the C Series represents a complementary product to the company's existing narrow body aircraft offering," he added.

"For [Bombardier], the deal redusces risk and opens up the opportunity for the program to achieve commercial success that would have been nearly impossible to contemplate otherwise. While the company's share in the program is lowered to 31 per cent, the value associated with the reduced stake is likely much higher."

Boeing described the marriage as a "questionable deal between two heavily state-subsidized competitors" to get around the Trump administration.

But while Quebec remains the home, Airbus "anticipates growing demand for C Series would result in a second assembly line in Mobile, Ala.," Mr. Chamoun noted.

"With over 50 per cent of C Series content already sourced in the U.S., assembling in the U.S. also would likely neutralize the impact of trade tariffs on the C Series."

Desjardins analyst Benoit Poirier also heralded the deal

"Over all, we view the announcement as positive for Bombardier as the partnership represents a strong endorsement that is expected to create shareholder value in the long term," he said.

"We maintain our buy rating and $3.25 target price."

Here's what other analysts are saying:

"We are adding Bombardier to the Raymond James Ltd. analyst current favourite list based upon recent news that the firm has struck an agreement to sell a majority stake in its C Series platform to Airbus, a transformational deal that is expected to: 1) accelerate the program's commercialization momentum; 2) reduce unit production costs; and, 3) bolster confidence in the company's goal to reach cash flow breakeven by the end of 2018." Steve Hansen, Raymond James

"Both Airbus and Bombardier management indicated that the recent U.S. trade decision was not the primary factor in the transaction occurring, but rather a product of a continued derisking at both Airbus and with the C Series over the past two years from when an agreement was first envisioned. While we see Airbus as being opportunistic in its timing, we believe this announcement should be positively received by shareholders and bondholders." Chris Murray, AltaCorp Capital

"The main risk would appear to be only that Airbus gets distracted," Sandy Morris, Jeffries

"There are a lot of unserved markets in the U.S. but my guess is the biggest new market potential is in Asia. Boeing will not have a response and that's going to make it tougher for them to compete. This sharpens the battle lines." Torbjorn Karlsson, Korn Ferry International, to Bloomberg

"Interest in the CSeries has been low in this region and having Airbus supporting the program could be a big boost," Brendan Sobie, CAPA Centre for Aviation, to Reuters

"Potential buyers of the CSeries are now given comfort with Airbus becoming a major shareholder thus ensuring stability in the program." Shukor Yusof, Endau Analytics, to Reuters

REUTERS. OCTOBER 17, 2017. TSX advances as Bombardier leaps on Airbus deal, financials rise
Reuters Staff

TORONTO (Reuters) - Canada’s main stock index rose on Tuesday, led by a more than 20 percent surge in Bombardier Inc (BBDb.TO) shares and higher financial stocks.

The Toronto Stock Exchange sign is seen in Toronto, Ontario, Canada July 6, 2017. REUTERS/Chris Helgren
Bombardier was up 19.5 percent to C$2.82 after soaring as much as 26.4 percent following a major deal with Airbus SE (AIR.PA).

The Canadian plane and train maker said it would sell a majority stake in its CSeries jetliner program to the European company, a move that helps secure the CSeries’ future and solves a number of issues for Bombardier, including a dispute with Boeing Co (BA.N).

The overall industrials group rose 0.5 percent.

Financial stocks, which make up about a third of the index’s weight, gained 0.3 percent. Royal Bank of Canada (RY.TO) was the second biggest driver of the index’s gains and was up 0.5 percent to C$99.81. Thomson Reuters was another top gainer, rallying 2.4 percent to C$60.61.

At 10:48 a.m. EDT (1448 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE rose 15.34 points, or 0.1 percent, to 15,818.04. Six out of the index’s 10 main groups advanced.

Oil and gas companies retreated 0.1 percent alongside crude prices.

Capping gains was a 0.5 percent loss by the materials group, home to mining and other resource firms, as base and precious metal prices fell on a stronger U.S. dollar.

Teck Resources TECKb.TO fell 1.7 percent to C$28.33 while First Quantum Minerals Ltd (FM.TO) slid 2.8 percent to C$15.41. Potash Corp (POT.TO) was down 1.2 percent to C$24.02.

Aphria Inc shares (APH.TO) tumbled 11.1 percent to C$7.04 after the operator of the Toronto Stock Exchange said that cannabis companies with U.S. interests would come under heightened scrutiny and could be delisted.

Declining issues outnumbered advancing ones on the TSX by 138 to 99, for a 1.39-to-1 ratio on the downside.

Reporting by Solarina Ho; Editing by Paul Simao

REUTERS. OCTOBER 16, 2017. Airbus takes control of Bombardier CSeries in rebuff to U.S. threat
Allison Lampert, Tim Hepher

MONTREAL/TOULOUSE, France (Reuters) - Airbus has agreed to take a majority stake in Bombardier’s troubled CSeries jetliner program, securing the plane’s future and giving the Canadian firm a possible way out of a damaging trade dispute with Boeing.

An Airbus A320neo aircraft and a Bombardier CSeries aircraft are pictured during a news conference to announce a partnership between Airbus and Bombardier on the C Series aircraft programme, in Colomiers near Toulouse, France, October 17, 2017. REUTERS/Regis Duvignau
Shares in Bombardier leapt more than 20 percent on Tuesday after news of the deal with Europe’s biggest aerospace group.

Airbus will get a 50.01 percent stake in an entity recently carved out of Bombardier to produce and market the CSeries, four years after it first flew with a goal to enter the $125 billion a year market for large jets.

But in a move emblematic of the huge risks of aerospace competition, Bombardier will get just one dollar for the majority stake in exchange for Airbus’s purchasing and marketing power to support an aircraft that has won fans for its fuel efficiency but few recent orders due to doubts over its future.

In reality, the terms of the deal mean Bombardier could pay Airbus to take over by agreeing to underwrite $700 million of risks related to cost overruns in coming years.

“It’s an unexpected move by Airbus but indicates they see good market potential for the CSeries. Neither they nor Boeing currently offer an aircraft in the regional jet market,” said aerospace consultant John Strickland of JLS Consulting.

Airbus shares rose around 5 percent.

The deal is similar to one that Airbus walked away from in 2015 when it decided the investment in a plane that had not yet entered service was too risky - with one major difference: that some of the jets will be produced in the United States.

That could change the power balance in Bombardier’s costly trade dispute with Boeing, though it is not the main reason why the two former rivals have come together, executives said.

The U.S. Commerce Department has threatened a possible 300 percent duty on CSeries jet imports after backing Boeing’s complaint that Bombardier received illegal subsidies and dumped the planes at low prices.

The deal with Airbus now means CSeries jets can be built at Airbus’ Alabama assembly plant, which according to the two companies would exempt them from import duties.

“Assembly in the U.S. can resolve the (tariff) issue because it then becomes a domestic product,” Bombardier’s chief executive, Alain Bellemare, told reporters at Airbus’s headquarters in Toulouse.

Airbus CEO Tom Enders hailed the tie-up as “a win for Canada ... a win for the UK,” referring to Bombardier’s wing-making factory in Northern Ireland whose future had been threatened by the distant trade war.

He said it would also create new U.S. jobs.

The deal appeared to catch Boeing off guard. Locked in a separate 13-year trade dispute with Airbus, Boeing called it a “questionable deal” between two of its subsidized competitors.

Bellemare said he hoped the deal would be approved within 6-12 months. Canadian Innovation Minister Navdeep Bains, who must officially decide whether to green-light the deal, said it looked like “Bombardier’s new proposed partnership ... would help position the CSeries for success”.

Bombardier, which had not secured a new order in 18 months for the 110-130 seat plane, said the partnership should more than double the value of the CSeries program.

While it will lose control of a project developed at a cost of $6 billion, the deal gives the CSeries improved economies of scale and a better sales network.

For Airbus, the deal strengthens the bottom end of its narrowbody portfolio after poor sales of its own A319 model and expands its global footprint, potentially opening up further deals in other sectors in Canada.

Tony Webber, a former chief economist at Qantas, said the CSeries could complement Airbus’s existing single-aisle models.

STRATEGIC DECISION

Bellemare said the deal was expected to close in the second half of 2018.

“We’re doing this deal here not because of this Boeing petition. We are doing this deal because it is the right strategic move for Bombardier,” he said, referring to Boeing’s complaint that the Canadian firm received illegal subsidies and dumped CSeries planes at “absurdly low” prices.

Bombardier said the deal would not result in job losses and would keep the head office in Montreal and unions said the deal would benefit the program.

The Boeing-Bombardier dispute has snowballed into a bigger multilateral trade dispute, with British Prime Minister Theresa May asking U.S. President Donald Trump to intervene to save British jobs.

Bombardier is the largest manufacturing employer in Northern Ireland and May’s Conservatives rely on the support of the small Northern Irish Democratic Unionist Party (DUP) party for their majority in parliament.

Business Secretary Greg Clark said Britain would work closely with the planemakers, while the DUP said the agreement was “incredibly significant news” for Belfast.

Talks for the deal between Airbus and Bombardier first started over dinner at the end of August.

Enders said the deal was different from an earlier round of talks in 2015, when he abruptly ordered an end to negotiations. He said the CSeries’ had since been certified, entered service and was performing well.

Some analysts said the deal could drive Boeing closer together with Brazil’s Embraer, with which it already cooperates.

Under the deal, Bombardier will own about 31 percent of CSeries Aircraft Limited Partnership (CSALP), which manufactures and sells the jets, while Investissement Québec, the investment arm of the province of Quebec, will hold 19 percent.

Bombardier is in the middle of a five-year turnaround plan after considering bankruptcy because of a cash-crunch as it developed multiple planes simultaneously, including the CSeries.

($1 = 1.2529 Canadian dollars)

Additional reporting by Ankur Banerjee in Bengaluru, Alana Wise in Atlanta, David Ljunggren in Arlington, Va., Michael Holden in London and Richard Lough and Sudip Kar-Gupta in Paris; Writing by Denny Thomas, Guy Faulconbridge and Richard Lough; Editing by Mary Milliken, Himani Sarkar and Mark Potter

REUTERS. OCTOBER 17, 2017. Airbus-Bombardier deal expected to jumpstart CSeries jet sales in Asia: analysts
Jamie Freed

SINGAPORE (Reuters) - Airbus SE’s (AIR.PA) deal for a majority stake in Bombardier Inc’s (BBDb.TO) CSeries jet program is expected to jumpstart sales of the Canadian aircraft in Asia, analysts said.

FILE PHOTO: Bombardier’s C-series aircraft is pictured at an airport during its static demo event in New Delhi, India October 5, 2017. REUTERS/Adnan Abidi/File Photo
The Airbus-Bombardier deal will give the European planemaker a 50.01 percent interest in the CSeries program, while the jet will get a better sales network. The 110-to-130 seat plane has not secured a new order in 18 months and is being threatened by a possible 300 percent duty on U.S. imports.

In Asia, Korean Air Lines Co (003490.KS) is so far the only customer of the narrowbody jets and is slated to soon take delivery of the first of 10 CS300 aircraft.

“Interest in the CSeries has been low in this region and having Airbus supporting the program could be a big boost,” Brendan Sobie, Singapore-based chief analyst at CAPA Centre for Aviation, told Reuters on Tuesday.

Airbus has a much stronger market position in Asia than Bombardier, which is in the middle of a 5-year turnaround plan after considering bankruptcy because of a cash-crunch as it developed multiple plane programs simultaneously.

Airlines in Asia have likely held back from placing orders due to concerns that Bombardier’s weak financial position placed the CSeries program in jeopardy, said Shukor Yusof, founder of Malaysia-based aviation advisory firm Endau Analytics.

“Potential buyers of the CSeries are now given comfort with Airbus becoming a major shareholder thus ensuring stability in the program,” he said.

Several Asian airlines could not be reached immediately for a comment on the Airbus-Bombardier deal.

While the deal would reinforce the effective global duopoly of Airbus and Boeing Co (BA.N), it would also boost the CSeries’ appeal to potential buyers, said Association of Asia Pacific Airlines Director General Andrew Herdman.

CHINESE DREAMS

Bombardier has been pushing particularly hard to sell the CSeries in China, with an executive last month saying the planemaker was in talks with the country’s three top airlines and aimed to close deals in the coming months.

China has been working to develop homemade alternatives to break the grip that Airbus and Boeing hold over the world’s commercial aerospace industry.

As a narrowbody jet with a range of more than 3000 nautical miles, the CSeries fills a gap between China’s 90-seat ARJ21 regional jet and its larger 158 to 168 seat C919 narrow body.

Before the Airbus deal was announced, Bombardier had held talks with Chinese firms about investing in the CSeries jets and improving sales through better access to the Chinese market, two sources familiar with the situation told Reuters.

Richard Aboulafia, a U.S.-based analyst at Teal Group, said the decision not to invest in the CSeries made China look “much less serious” about developing its aerospace sector.

“They could have swept in any time with a relatively modest offer, and acquired mountains of intellectual property.”

Reporting by Jamie Freed; Editing by Himani Sarkar

REUTERS. OCTOBER 17, 2017. Midnight in Toulouse: How CSeries deal shook status quo
Tim Hepher

TOULOUSE, France (Reuters) - Two years ago, Airbus Chief Executive Tom Enders halted negotiations to buy Canada’s CSeries program at midnight after the talks with Bombardier leaked to Reuters. On Tuesday, he performed a U-turn by backing a similar deal after all - again at dead of night.

The nocturnal gymnastics by Europe’s largest aerospace group stunned the aircraft industry which had been riveted for weeks by a trade dispute between Boeing and Bombardier that threatened to hit the CSeries with large U.S. import fees.

Now, the 110-130-seat jet will be built for U.S. airlines at Airbus’s Alabama assembly plant, circumventing any import penalties in a move that apparently caught Boeing off guard.

Analysts say that potentially turns the CSeries from an attack on U.S. jobs, as portrayed in Boeing’s complaint, to a job creator in a key Republican state, though Boeing termed the move a “questionable deal” between two of its subsidized competitors.

The deal also signals the end of Airbus efforts to promote the A319, its smallest jet which has not posted a sale in years.

“The stunning Airbus-Bombardier partnership for the CSeries program guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing’s tailpipe,” Leeham Co analyst Scott Hamilton wrote.

Strategically, however, the move extends well beyond the noise of Boeing’s spat with Bombardier and could trigger a riposte from other planemakers, including Boeing itself.

Commercial aerospace has four main powers dominated by Airbus and Boeing, which share the market above 150 seats.

Brazil’s Embraer and Canada’s Bombardier compete between 100 and 150 seats as well as in the market for smaller regional jets.

But China and Russia lead a field of new entrants vying to break into the $125 billion a year commercial market, along with smaller regional players such as Japan.

BOEING-EMBRAER ALLIANCE?

Tuesday’s deal starts to rearrange the deck in a move that many have been expecting since former Airbus head Louis Gallois warned six years ago that the market was getting too crowded.

In particular, it could drive Boeing closer to Embraer, with which it already cooperates. Embraer’s E2 jet is one of the main potential losers from the CSeries deal.

“The world has two top-tier airframers, and two second-tier airframers,” said Teal Group analyst Richard Aboulafia.

“Airbus and Bombardier are now allies. This greatly increases the likelihood of a stronger Boeing-Embraer alliance as a response.”

Such a move has long been contemplated in private.

The CSeries benefits from a new type of efficient engine. Its launch in 2008 eventually prompted Airbus to put the same generation of engine on its own A320 to protect its main profit source.

That in turn forced Boeing to dump plans for an all-new single-aisle plane in 2011 and opt for a makeover of its best-selling 737 with similar engines, to be known as 737 MAX.

But sitting in Boeing’s filing cabinets are designs for an all-new jet that would have involved intense collaboration with Embraer, according to two people familiar with the project. A template for closer co-operation therefore already exists.

Boeing and Embraer declined to comment.

The two companies already work on projects including runway safety and alternative jet fuels. Their partnership has intensified in recent years to include Boeing’s commitment to joint sales and support of Embraer’s KC-390 military aircraft.

The Airbus-Bombardier deal also marks a pause in strategic advances made by China, widely seen as the most serious future competitor to Airbus and Boeing.

Debt-laden Bombardier had been in talks with China as it waited for Airbus to come around to the CSeries.

“China has missed out on a huge opportunity to advance its aims by not getting the CSeries,” an industry strategist said.

PRODUCT STRATEGY

The deal also has potentially far-reaching consequences for product strategy and technology at Airbus and Boeing.

A person close to Bombardier said Airbus would aim to pressure the key Boeing 737 MAX 8 model by squeezing it from below with the CSeries and from above with the popular A321neo. Some critics say it could also develop a larger CSeries.

But critics say airlines don’t want such a patchwork of products. The deal clashes with one of the core philosophies in the Airbus brochure to date - a compatible family of aircraft where pilots and maintenance staff can be redeployed easily.

Airbus will also get its hands on promising technology.

Workers in Belfast, whose jobs have been at the center of a political storm over the Boeing-Bombardier dispute, are using innovative wing production techniques that may now be deployed by Airbus for future jets.

That could increase tensions at the World Trade Organisation where Boeing has battled with Airbus for years over government loans. Bombardier received such UK funding in Belfast, meaning recent trade friction may shift to the larger stage at the WTO.

Additional reporting by Jamie Freed, Allison Lampert, Brad Haynes; Editing by Giles Elgood

BLOOMBERG. 17 October 2017. Bombardier Held Talks With China Over C Series
By Josh Wingrove , Frederic Tomesco and Sandrine Rastello

• Chinese state-owned firms were interested in jet, people said
• Bombardier reaches deal to sell majority stake to Airbus

Bombardier Inc. discussed a potential sale of a stake in its C Series program with Chinese firms before reaching a pact with European giant Airbus SE, according to people familiar with the talks.

Airbus announced Monday it acquired a majority stake in the jet project for nothing, reshaping the airline sector amid a trade dispute with Chicago-based Boeing Co.

Bombardier had been in touch with a small group of Chinese state-owned enterprises about a C Series investment, according to two people familiar with the talks who asked not to be identified as the matter is private. The firms included Commercial Aircraft Corp. of China Ltd., one of the people said. Comac declined to comment on the Airbus deal and their media department said they weren’t aware of any talks with Bombardier.

Mike Nadolski, a Bombardier spokesman, said the Montreal-based company wouldn’t comment for this story as a matter of policy. Quebec Economy Minister Dominique Anglade, acknowledged other negotiations when asked if talks were held with China specifically.

“There were discussions, I can’t get into details of private conversations, but I can tell you there were discussions, exchanges and at some point one has to decide and this is the option that has the most potential, the most growth for the C-series,” said Anglade, whose government paid $1 billion for a C Series stake only to see it cut down by the Airbus deal.

‘Most Interested’

“All that you could imagine was considered. At the end of the day, we chose the option that guaranteed jobs in the long term in Quebec, ensured growth of the sector in Quebec, and ensured the durability of the C-series program.”

Representatives of China’s State-owned Assets Supervision and Administration Commission didn’t immediately respond to a faxed request seeking comment on Tuesday morning.


JPMorgan Chase & Co. analyst Seth Seifman said earlier Monday in a report that Comac is "the aero company that might be most interested," in Bombardier’s aerospace assets. The Financial Times reported in May that Comac was interested in the C Series program. Robert Spingarn, an analyst at Credit Suisse Group AG, said Canada and China were "ideally aligned" for such a pact. Bombardier has been exploring various options for its aerospace assets as it continues to bleed cash.

Canadian Innovation Minister Navdeep Bains said the Airbus deal will mean more opportunities for Canada’s aerospace sector.

“This is about Bombardier looking at a strategic partner," he told reporters in Ottawa Monday night. "We’re going to make sure that we get the best outcomes for the aerospace sector; we get the best outcomes for the employees."

Canadian governments have long been supporters of Bombardier. The federal government pledged C$372.5 million ($297 million) in "repayable program contributions" for a pair of Bombardier jet programs earlier this year, including the C Series.

The Quebec government bought a 49.5 percent stake in the C Series program for $1 billion in 2015. That stake had been reduced to 38 percent before the Airbus deal, and will be cut further to 19 percent with the Airbus partnership. The province received no direct compensation for the reduction under the Airbus agreement.

— With assistance by Ken Wills, and Dong Lyu

BLOOMBERG. 17 October 2017. Despite Trump’s Plea, Bannon Isn’t Going to Stop His Campaign Against GOP Incumbents
By Justin Sink  and Jennifer Jacobs

• A Rose Garden embrace for McConnell, epitome of establishment
• Pleads for Bannon to back off threatened party purge

Steve Bannon won’t abandon his war against congressional Republican incumbents, not even after President Donald Trump publicly pleaded for a truce that could salvage the tax overhaul at the heart of his legislative agenda.

Trump’s ousted chief strategist will continue to back insurgent candidates who pledge to usurp Senate Majority Leader Mitch McConnell, a person familiar with Bannon’s plans said. His message was made plain on Monday on the Breitbart News website he once again runs: “Bitter Mitch! Triggered by Bannon,” one headline crowed.

Trump sought to unite Republicans with a public embrace of McConnell, who stood next to the president in the White House Rose Garden on Monday during an impromptu 40-minute news conference. Trump declared his party “very unified,” described himself as “closer than ever before” with McConnell and said he’d ask Bannon to back off a promised “season of war” against Republican incumbents.

There are deep fears in the White House and among Republicans that the tax overhaul, considered vital for next year’s midterms by the party’s strategists, will follow Obamacare repeal to the legislative ash heap. That would likely leave Trump without a substantive legislative accomplishment after a year in office.

Trump and Bannon have spoken in recent days, said someone familiar with the conversation. But the president’s former chief strategist hasn’t changed his outlook toward his party’s establishment.

The Bannon-allied Great America Political Action Committee on Monday endorsed in its “Trump Ticket” for Republican primaries Kelli Ward, who is challenging incumbent GOP Senator Jeff Flake in Arizona, and in Wisconsin, Kevin Nicholson, who has said he would vote against re-electing McConnell as majority leader.

In a sign of his increasing concern about the tax overhaul, Trump also sought to cover his bases with the opposition party, inviting Democratic senators Bob Casey of Pennsylvania and Deborah Stabenow of Michigan to participate in a meeting at the White House on Wednesday. Both are members of the tax-writing Senate Finance Committee, and both face re-election next year in states Trump carried.

It will take more than a hastily arranged news conference with McConnell to salve ill feeling between the president and GOP lawmakers.

Twitter Foil

Barely two hours earlier, before a private lunch with McConnell, Trump publicly berated congressional Republicans that he said “are not getting the job done.” He launched repeated Twitter fusillades against McConnell as recently as August, blaming the Kentucky Republican for failing to win passage of an Obamacare repeal and making a “mess” of legislation to raise the nation’s borrowing limit.

Even as he committed to standing by Republican senators who Bannon eviscerated during an appearance at the Value Voters Summit on Saturday, the president expressed fondness for his former campaign chairman. He told reporters at a Cabinet meeting earlier Monday that some Republicans should be “ashamed” of their votes.

Trump is “frustrated” with Senate Republicans over the health-care failure and the challenges that have surfaced in the process of overhauling the tax code, White House budget director Mick Mulvaney said Tuesday.

“Republicans need to start figuring out a way to pass stuff, and not look for reasons not to pass stuff,” Mulvaney said on Fox News. “They ran promising tax reform, and we’re sort of hitting a hurdle on that.”

Lawmakers -- particularly those facing tough re-election battles -- will watch closely to see if Bannon heeds Trump’s public call.

Republicans are defending just eight Senate seats next year, and only one -- Nevada’s Dean Heller -- is in a state won by Hillary Clinton. That means that for many GOP senators, their biggest risk of defeat comes from a well-financed and organized primary challenge from the right.

The recent primary loss of Senator Luther Strange, an Alabama Republican ousted by challenger Roy Moore, a Bannon-backed former judge who has said Muslims shouldn’t be allowed to serve in Congress and homosexual activity should be outlawed, has deepened incumbents’ anxieties.

Crucial Months

For Trump, keeping those senators in the fold will be crucial in the coming months.

The president is eager to overhaul the nation’s tax code to cut corporate rates, pass legislation to repeal Obamacare, and forge an immigration deal that strengthens border security and provides protection from deportation to those brought to the U.S. as children. He also must accomplish mundane but essential legislative tasks as funding the government for another year and raising the legal debt ceiling, or risk shaking markets and depressing his popularity. In each case, success or failure could come down to a handful of senators.

Attempts to bully lawmakers on a vote to repeal and replace Obamacare led to dramatic embarrassment on the floor of the Senate. The president’s job approval rating -- just 36 percent Oct. 13-15, according to Gallup -- is lower than any other modern president at this point in his first term.

Trump’s appearance beside McConnell in the Rose Garden was an acknowledgment that his initial approach to Washington had failed and that Bannon’s threat of a party purge wouldn’t be sufficient to prevail in Congress.

Governing Majority

McConnell said his concern was maintaining a governing majority. He offered a pointed reminder of insurgent candidates who won party primaries in 2010 only to cost Republicans Senate seats in the election as their rhetoric repelled swing voters.

“The goal here is to win elections in November,” the Kentucky Republican said.

McConnell named four 2010 Republican Senate nominees: Todd Akin of Missouri, who repulsed voters with talk about “legitimate rape”; Richard Mourdock of Indiana, who said pregnancy from rape is “something that God intended to happen”; Christine O’Donnell of Delaware, who said she’d dabbled in witchcraft; and Sharron Angle of Nevada, who said Sharia law -- Islamic religious law -- had taken over several U.S. cities.

“They were not able to appeal to a broader electorate in a general election,” McConnell said. “The way you do that is not complicated. You have to nominate people who can actually win, because winners make policy and losers go home.”

Wrong Strategy

Former House Speaker Newt Gingrich, a Trump adviser, said Bannon was pursuing “exactly the wrong strategy” and should instead focus on defeating Democrats facing re-election. He said the decision to run far-right candidates in the 2010 election had likely prevented Republicans from building on their majority and achieving goals like the repeal of Obamacare.

“My whole career has been focused on, how do I elect more Republicans -- not how do I cannibalize Republicans,” Gingrich said in an interview with Fox News. “I think Bannon is going to spend enormous amount of money on the wrong targets in the wrong way.”

Some Republicans on Capitol Hill downplayed Bannon’s threat.

Senator Cory Gardner of Colorado, the chairman of the National Republican Senatorial Committee, said Bannon is helping the party in some instances, backing candidates for Democrat-held or open seats who have a good chance of prevailing in their general elections in states like West Virginia and Tennessee.

Despite the president’s public overtures on Monday, his ability to work in partnership with McConnell is unclear as they confront complicated legislative goals such as overhauling the tax code and acting on immigration.

During the news conference, Trump said that he was drafting an economic development bill -- but hadn’t yet filled in the top Senate Republican.

“I haven’t even told Mitch because I want to focus on tax cuts and some other things right now,” Trump said.

— With assistance by Laura Litvan, Sahil Kapur, and Toluse Olorunnipa

BLOOMBERG. 17 October 2017Bombardier Surges as Much as 25%, Most in 18 Months
By Frederic Tomesco

• Deal improves long-term outlook for slow-selling C Series jet
• Bonds surge most among U.S. high-yield notes amid heavy volume
• Airbus Executive VP: Right Time for Bombardier Deal

Bombardier Inc. surged the most in 18 months after the company ceded control of its slow-selling C Series jet program to Airbus SE.

The deal improves the chances that the all-new single-aisle aircraft will catch on with airlines worldwide, backed by Airbus’s marketing muscle. Bombardier hasn’t landed a major order since April 2016 and the plane absorbed a new blow in recent weeks when the U.S. Commerce Department slapped it with 300 percent tariffs after a complaint by Boeing Co.



“The value associated with the reduced stake is likely much higher,” Fadi Chamoun, a BMO Capital Markets analyst, said in a note to clients. “For Bombardier, the deal reduces risk and opens up the opportunity for the program to achieve commercial success that would have been nearly impossible to contemplate otherwise.”

Airbus’s control of the C Series boosts the jetliner’s viability after more than $6 billion in development costs drained Bombardier’s cash and forced the Montreal-based manufacturer to rely on government assistance. The deal gives Airbus a smaller narrow-body aircraft fitting below its own A320-series models and competing with the smallest variants of Boeing’s workhorse 737.

Stock Surge

Bombardier’s widely traded Class B shares advanced 18 percent to C$2.81 at 11:55 a.m. in Toronto after climbing as much as 25 percent for the biggest intraday gain since April 2016.

The company’s $1.25 billion of 6.125 percent bonds due in January 2023 surged 6.7 cents on the dollar to $101.75, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes were among the biggest gainers of the day for U.S. high-yield bonds.

Airbus, based in Toulouse, France, climbed 4.8 percent to 80.79 euros. Boeing fell less than 1 percent to $258.63.

Following Boeing’s complaint to the U.S. that Bombardier sold at least 75 of its C Series jets to Delta Air Lines Inc. for “absurdly low prices,” President Donald Trump’s administration imposed the import duties in recent weeks -- roiling U.S. relations with Canada and the U.K., where Bombardier makes the plane’s wings.

Airbus believes it will be able to get around the tariffs by locating some production of the C Series at its factory in Alabama, said Patrick de Castelbajac, Airbus’s strategy chief. The plane would also continue to be built in Canada.

“The aircraft would be manufactured on U.S. soil,” he said in an interview with Bloomberg TV.

Bringing Airbus into the C Series gives the program “selling firepower” from Asia to Europe that Bombardier doesn’t have, Economy Minister Dominique Anglade said in a phone interview.



“I can tell you there were discussions, exchanges and, at some point, one has to decide. And this is the option that has the most potential, the most growth for the C Series,” Anglade said.

Under the terms of the deal, Airbus will acquire a 50.01 percent stake in the single-aisle plane platform. The Canadian planemaker will own 31 percent while the province of Quebec, an investor in the C Series, will hold 19 percent. None of the partners will contribute any cash when the deal closes.

— With assistance by Allison McNeely, and Sandrine Rastello

BLOOMBERG. Oct 17, 2017. Airbus Sends a Thank You Card to Donald Trump
By Chris Bryant, is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.

There’s chutzpah and then there’s the deal that Airbus SE just struck with Bombardier Inc. By acquiring a 50 percent stake in Bombardier’s struggling C Series commercial jet program -- for free -- Airbus has handed Boeing Co., its U.S. nemesis, a whopping black eye.Fearing the C Series could let Bombardier become “another Airbus”, Boeing successfully persuaded the Trump administration to slap massive duties on the aircraft, even though it doesn't really offer a similar product. But if Boeing thought Bombardier was going to fall on its sword, boy was it wrong.

Airbus to the Rescue. Bombardier has tumbled since 2011 amid worries about the C Series.

Airbus can now bring to bear the full weight of its international sales, supply chain and maintenance capabilities to the C Series. And by adding a final assembly for the aircraft in Alabama, Airbus might make the Americans think twice about those punitive tariffs (jobs for U.S. workers!).For the European aerospace giant, this deal feels like a slam dunk. Unlike two years ago, when it first toyed with making a C Series investment, the aircraft is now a much less risky proposition. It's been certified by regulators and the first customers seem very pleased with it. True, the program's still consuming cash, but Bombardier is promising to absorb another $700 million in losses after closing.Airbus can’t really lose here. Indeed, by acquiring warrants over 5 percent of Bombardier's stock at the current price, there's potential for considerable upside. Bombardier has lost two-thirds of its value since 2011 amid fears over the future of the C Series. It’s sad that after taking a big risk and sinking $6 billion into an innovative new plane, Bombardier wasn’t ultimately able to deliver it on its own. It has about 350 orders for the C Series, but thinks the market could have appetite for 6,000 small planes of its ilk over 20 years.But Bombardier chief executive Alain Bellemare had a simple question to answer: Is it better to own a larger majority stake in an aircraft program valued at just $2 billion, which hasn’t secured a major order for 18 months; or a minority stake in one with much better prospects? After closing, Bombardier will own 31 percent of the C Series partnership, while Quebec will hold 19 percent.

CASH BURDEN

As I argued here yesterday, Bombardier’s finances were arguably too weak to contemplate going it alone, especially with Boeing and the U.S. government trying to suffocate it. Now with Airbus as partner, Bombardier stands a better chance of convincing wavering customers to buy the plane and of making money with it more quickly. Bombardier's goal was to reach cash break-even on the C Series by 2020. In bringing a trade case against Bombardier, Boeing seems to have forgotten the first law of all playground scuffles: if you pick a fight, always be sure to land the knock-out punch. Airbus just delivered it.

BLOOMBERG. BUSINESSWEEK. 17 October 2017. Bombardier Timing.  The deal will lift both companies – and poses trouble for Boeing
By Benedikt Kammel

Just as he was being lampooned in Bild Zeitung’s dreaded “Loser-of-the-Day” column, Tom Enders proved his impeccable timing: Within hours, the Airbus chief had blindsided rival Boeing Co., expanded a strong U.S. beachhead, and won control of the most advanced single-aisle jet on the market—all without spending a penny.

In the dead of the European night, Enders announced that Airbus would take control of Bombardier Inc.’s C Series aircraft, a program that’s as financially troubled as it is technologically advanced. In a deal similar to one he entertained two years ago, but vetoed because the plane wasn’t yet ready for production, Airbus will pay no money, but will take 50.01 percent ownership in the program in exchange for helping Bombardier market the struggling jet.

“Enders has done a splendid job for Airbus shareholders,” Sandy Morris, an analyst at Jefferies, said via e-mail. With control of the C Series, “the deal should always work for Airbus.”
Airbus shares rose as much as 3.7 percent in Paris trading to the highest in almost a month. Bombardier surged 25 percent, the most in more than two years.
Bombardier is in need of a friend: The C Series is low on orders and high on costs, the Canadian company’s smaller planes are slow sellers, and its train business is in dire straits after losing out on a combination with Siemens AG. Airbus, for its part, is emerging from its own challenges in ramping up production of its A350 and A320neo models. So when the opportunity flared up again in August, Enders pounced.
The alliance, Enders says, will help Bombardier by adding the plane to the Airbus sales roster, and airlines will have greater confidence that it will get the long-term support they need to keep it flying.
“Customers always ask the question of security, and if their product will be serviced in the long run,” Enders said in a phone interview. “Airbus gives this program much-needed security.”
An added bonus for the hard-talking German: Bombardier’s new wingman stands to inflict real pain on Boeing. The U.S. company had groused that Bombardier was selling the C Series to customers like Delta Air Lines at “ridiculously” low prices. Its complaint was heard by President Donald Trump, who slapped a 300 percent tariff on the plane, making it unsellable in the U.S.
Airbus offered a workaround: assemble the C Series at its plant in Mobile, Alabama, turning it into a de-facto U.S.-made product. Boeing called the accord a “questionable deal between two heavily state-subsidized competitors” with a thinly-veiled intent of skirting competition rules set by the U.S. government.
Enders needed a bit of good news. Newspapers in France and Germany have been filled with reports of bribery at the manufacturer, which Enders has said might result in hefty fines. He told Germany’s Handelsblatt that he would quit if it seems Airbus needs a new leader, though he said the company hasn’t reached that point. With Airbus facing tens of millions of euros in legal fees, Bild Zeitung anointed Enders the day’s biggest loser on Monday.
By the time the Bombardier agreement was announced less than 24 hours later, Enders had regained his footing. He touted the deal as a perfect match that lets Bombardier stand on Airbus’s broad shoulders while handing his company a fuel-efficient aircraft with advanced technology, with composite materials that make the fuselage lighter, large windows, and over-sized middle seats. The C Series, about the size of smaller A320s, is operated by Swiss and Air Baltic for short-haul routes, and more than a dozen other carriers have ordered the plane.
The single-aisle aircraft market is the hardest-fought category in commercial aviation, because it’s the backbone of the industry. Airbus’s A320 family made the company when it was introduced in the 1980s with advanced technology such as electronic controls that replaced the earlier generation of manually-triggered hydraulics.
But even with new engines on the A320neo, the aircraft is starting to age. And its smaller A319 has sold poorly—Airbus hasn't booked a single new order in five years—and Enders has all but conceded that the version is dead.
While the C Series will help fill that hole in Airbus’s lineup with a modern alternative, it could be years before the C Series will make a significant contribution to profits. Bombardier will deliver about 30 of the planes this year, less than the number of A320s Airbus makes in a single month.
Still, integrating the C Series may prove a distraction. The A380 super jumbo is a slow seller and Airbus needs to decide whether it wants to reinvigorate the double-decker; the new A350-900 long-range jet has been hit by production snags and its bigger sibling is bleeding orders; the A400M military transporter, from which Enders—a former paratrooper in the German army—has braved parachute jumps, is plagued by technical issues and cost overruns.
Enders says he’s confident Airbus can manage the challenge. Given the C Series is in service, Airbus won’t need to dispatch thousands of engineers to save a troubled program. One issue that will provide some food for thought: should the C Series get a new name? “We want to make sure our brand gains some visibility on that aircraft,” he said.
That’s the plane he paid nothing for. Who’s the loser now?

BLOOMBERG. 17 October 2017. Airbus Snaps Up Bombardier Jet in New Challenge to Boeing
By Frederic Tomesco , Josh Wingrove and Rick Clough

• European planemaker will contribute no cash when deal closes
• Pact opens new front in the battle for global aircraft sales
• Airbus Takes Majority Stake in Bombardier C-Series

Airbus SE agreed to acquire a majority stake in Bombardier Inc.’s C Series program and will start assembling the jetliner in the U.S., vaulting a technologically advanced but slow-selling plane onto the front lines of the battle with Boeing Co. over global aircraft sales.

Without putting up a dime at closing, Airbus will take just over half of a partnership controlling the C Series. The European planemaker’s marketing muscle and production expertise boosts the viability of the all-new aircraft after more than $6 billion in development costs forced Bombardier to rely on government assistance.

The deal also thrusts Airbus into the middle of a bitter trade spat between the Canadian manufacturer and Boeing. Following a Boeing complaint that Bombardier sold 75 of its C Series jets to Delta Air Lines Inc. for “absurdly low prices,” President Donald Trump’s administration slapped the aircraft with import duties of 300 percent in recent weeks -- roiling U.S. relations with Canada and the U.K., where Bombardier makes the plane’s wings.

In a potential effort to circumvent the tariffs, Airbus will add another final assembly line for the C Series at its factory in Mobile, Alabama. The facility will serve U.S. customers and complement production in Canada, according to a company statement late Monday.

“This is a program that has been waiting for a deus ex machina, and wow, it really got one,” Richard Aboulafia, an aerospace analyst at Teal Group, said in an interview. The deal casts Airbus as a global player while Boeing comes off as “a bit shortsighted and protectionist. It makes Boeing look like they’ve been playing tic tac toe against a chess master.”

‘Questionable Deal’

Bombardier jumped 18 percent to C$2.81 at 9:34 a.m. in Toronto, after climbing as much as 25 percent, the most intraday since April of last year. Boeing fell 1.1 percent to $256.97 in New York, while Airbus shares rose 3.6 percent to 79.86 euros in Paris.

“The main risk would appear to be only that Airbus gets distracted,” Sandy Morris, a London-based analyst with Jefferies, said in a note.

It’s too soon to say if the new Alabama production line would enable the C Series to avoid U.S. tariffs. The duties were applied to C Series planes “regardless of whether they enter the United States fully or partially assembled,” according to a U.S. government fact sheet on the matter. Boeing said Airbus and Bombardier were just trying to get around the restrictions.

“This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Boeing, the world’s largest aerospace company, said in an emailed statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”

CEO’s Reversal

Discussions with Bombardier started in August, said Airbus Chief Executive Officer Tom Enders. The Canadian company had also been in touch with a small group of Chinese state-owned enterprises about a C Series stake, said two people familiar with the talks.

Bombardier’s talks with China included Commercial Aircraft Corporation of China, or Comac, said one of the people, who asked not to be named because discussions were private. Comac declined to comment on the Airbus deal and its media relations department said it wasn’t aware of any talks with Bombardier. The Canadian company declined to comment.

The Bombardier deal marks a reversal for Enders, who personally vetoed a similar accord just two years ago, when the future of the C Series was in doubt and Airbus was grappling with the ramp-up of its bigger A350 model. Airbus isn’t interested in any other Bombardier assets, he said.

“Airbus gives the program security,” he said of the C Series in a telephone interview. Whereas some customers may have wavered previously because they couldn’t be sure of long-term customer support from the manufacturer, Airbus’s industrial heft changes the equation, he said.

Trudeau Call

Trump and Canadian Prime Minister Justin Trudeau discussed the deal Monday evening in a phone call, according to a statement from Trudeau’s office that provided no details of the conversation.

Bombardier hasn’t landed a major order for the plane, which typically seats 108 to 160 passengers, since the Delta deal 18 months ago. The company values the C Series at about $2 billion, and expects the joint venture to double the value of the program, CEO Alain Bellemare told reporters at a press conference late Monday in Montreal.

The company has agreed to provide $350 million in funding for the C Series in the first 12 months after the close of the deal, and as much as $350 million more, if required, over the two subsequent years, said Chief Financial Officer John Di Bert.

By adding the C Series to its lineup of larger jetliners, Toulouse, France-based Airbus gains a new dimension for its portfolio while offering access to a fuel-efficient aircraft with advanced technology, large windows and over-sized middle seats. The C Series is operated by carriers such as Deutsche Lufthansa AG’s Swiss unit.

Smaller Workhorse

The all-new Canadian jet is smaller than most variants of the Boeing 737 Max, the upgraded version of an airframe that was designed 50 years ago. The same goes for most of Airbus’s A320 family of jets, which debuted in the late 1980s. Both the C Series and the A320neo, the newest version of Airbus’s single-aisle workhorse, are powered by the geared turbofan engine made by Pratt & Whitney, a division of United Technologies Corp.

“Airbus is now willing to accept that certain markets require a smaller aircraft,” Torbjorn Karlsson, partner in the civil aviation practice at Korn Ferry International in Singapore, said in an interview. “There are a lot of unserved markets in the U.S. but my guess is the biggest new market potential is in Asia. Boeing will not have a response and that’s going to make it tougher for them to compete. This sharpens the battle lines.’’


After the transaction, which is expected to be completed in the second half of next year, Airbus will own 50.01 percent of the C Series partnership. Bombardier will hold about 31 percent and the province of Quebec, which invested $1 billion in the C Series after the cost overruns and delays, will have approximately 19 percent. Quebec will remain an investor in the C Series until at least 2023, said the province’s economy minister, Dominique Anglade.

Canadian Review

Canadian Innovation Minister Navdeep Bains said the deal is subject to review under the Investment Canada Act.

“In my review, I’ll be looking to see how this deal will benefit Canadians, support our aerospace sector and create good jobs,” he said in a statement. “On the surface, Bombardier’s new proposed partnership with Airbus on this aircraft would help position the C Series for success.”

A Canadian government official said the deal is expected to be approved after its required review. The official, who asked not to be named because the discussions are private, characterized the deal as a company-to-company agreement that nonetheless had the support of France, Germany and Canada -- the latter in part because it would preserve Bombardier jobs in the company’s home country.

Another official, also speaking on condition of anonymity, said the sale would have no impact on the previously announced federal funding for Bombardier. Canada pledged C$372.5 million ($300 million) in “repayable program contributions” earlier this year.

— With assistance by Dong Lyu, Angus Whitley, and Julie Johnsson

NAFTA

Global Affairs Canada. October 17, 2017. Trilateral Statement on the Conclusion of the Fourth Round of NAFTA Negotiations

Ottawa, Ontario - Today, United States Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland, and Mexican Secretary of the Economy Ildefonso Guajardo successfully concluded the fourth round of the renegotiation and modernization of the North American Free Trade Agreement (NAFTA). The round took place in Arlington, Virginia, from October 11-17, 2017, covering seven full days of discussions in nearly 30 groups. 

Building on the progress made in prior rounds, the United States, Canada, and Mexico have now substantively completed discussions in the Chapter on Competition.

Additionally, negotiators made progress in several other negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes.

Parties have now put forward substantially all initial text proposals.  New proposals have created challenges and Ministers discussed the significant conceptual gaps among the Parties. Ministers have called upon all negotiators to explore creative ways to bridge these gaps. To that end, the Parties plan on having a longer intersessional period before the next negotiating round to assess all proposals. Mexico will host the fifth round of talks in Mexico City from November 17-21, 2017. Additional negotiating rounds will be scheduled through the first quarter of 2018.

NAFTA partners are working hard to ensure the new agreement provides a solid framework to create jobs, economic growth and opportunity for the people of North America. Ministers have reaffirmed their mandate to Chief Negotiators to reach an agreement in a reasonable period of time. Negotiators will continue intersessional engagement, as well as intensive consultations with their respective stakeholders.

Global Affairs Canada. October 16, 2017. Foreign Affairs Minister to participate in round four of NAFTA negotiations

The Honourable Chrystia Freeland, Minister of Foreign Affairs, will join Ildefonso Guajardo Villarreal, Mexico’s Secretary of Economy, and Ambassador Robert E. Lighthizer, United States Trade Representative, to deliver a statement at the conclusion of the fourth round of negotiations on the modernization of NAFTA. The Minister will also participate in a media availability.

The Globe and Mail. 17 Oct 2017. U.S. demands major changes on dairy. Dairy: Opening up supply management likely to find broad support. Roles reverse as Ottawa seeks protectionism while Washington calls for Canada to phase out supply-management system
ADRIAN MORROW

The Trump administration is demanding that Canada end its system of supply management, which fixes prices for dairy, eggs and poultry by protecting Canadian producers from foreign competition.
The U.S. proposal, presented late on Sunday at the renegotiations of the North American free-trade agreement unfolding at a Washington-area hotel, would see all tariffs associated with supply management phased out over a 10-year period, which would flood the Canadian market with American imports and effectively end the current system, two sources briefed on the U.S. demand said.
In the interim, the sources said, Washington wants the right to start exporting up to 400,000 tonnes of milk and 175,000 tonnes of poultry to Canada annually, accounting for roughly 17 per cent of the market.
Canadian negotiators flatly rejected the demand, said the sources, who spoke on condition of anonymity to reveal sensitive details of the confidential discussions.
The demand is a rare role reversal for Canada and the United States at NAFTA talks, with the Trump administration fighting for an open market and Ottawa fighting for protectionism. Canada has agreed to open its market slightly to foreign competition in previous trade pacts – including a 3.25-per-cent share of dairy in the Trans-Pacific Partnership in 2016. But Washington’s demand goes far beyond that.
“Outrageous. It would be the end of supply management,” Dairy Farmers of Canada president Pierre Lampron said in a statement. “We do not see supply management as being on the table. The Prime Minister and his cabinet have clearly expressed their support and willingness to defend the dairy industry and supply management.”
The United States had previously also demanded that Ottawa reverse a decision this spring that squeezed American imports of ultra-filtered milk – an ingredient for making cheese – out of the Canadian market, and provide the United States with more data on the Canadian dairy system.
Supply management is a system of quotas and tariffs – some as high as 300 per cent – designed to guarantee a steady level of income to Canadian dairy and poultry farmers.
Critics of the system argue it is unfair to consumers to fix dairy and poultry prices rather than leaving it to the open market, including foreign imports.
One source said many senior officials in the Canadian government are privately ambivalent about supply management as a policy, but see it as a useful bargaining chip in NAFTA talks.
Prime Minister Justin Trudeau has publicly vowed to defend it, arguing that all countries, including the United States, have some sort of protectionist system in place for agriculture, whether they be trade barriers or subsidies.
Unlike U.S. Donald Trump’s more protectionist demands, opening up supply management is likely to find broad political support.
Last week, at a Capitol Hill meeting with Mr. Trudeau, the chairman of the U.S. House ways and means committee, which oversees trade policy, said he wanted to see more American dairy make its way north of the border.
“We need to make progress on issues such as customs barriers, border, intellectual-property protection and greater market access for U.S. dairy producers,” Kevin Brady said.
The demand is the final major U.S. proposal to hit the table. The United States is also pushing for rules forcing Canadian and Mexican auto makers to put 50-per-cent American content into cars and trucks, a hard limit on the amount of U.S. government procurement Canadian and Mexican companies can bid on, a sunset clause that would kill the deal in five years unless all three countries agree to extend it and a gutting of the pact’s dispute-resolution systems.
Canada and Mexico have opposed nearly all of the United States’ major demands, setting the stage for tense talks.

The Globe and Mail. 17 Oct 2017. U.S. lumber slams Canada in trade filing. Timber lobby hammers subsidies in latest exhortation to International Trade Commission over softwood. Barring a trade truce between the United States and Canada, the International Trade Commission is expected to issue a final ruling on the countries’ softwood lumber dispute by Dec. 21.
BRENT JANG

The American softwood industry is urging the U.S. International Trade Commission to stand firm against Canada, accusing Canadian producers of flooding the market with subsidized lumber.
As the Washington-based ITC gets closer to issuing its final determination in December in the trade battle, the U.S. lumber lobby is taking the opportunity to hammer Canada.
“The softwood lumber dispute is indeed long-running, but that is because the fundamental problem driving this dispute has not changed: Canadian producers operate in a system that incentivizes production through the government’s provision of low-cost raw materials and other assistance,” the American group said in a recent 376-page filing to the ITC.
Barring a trade truce between the United States and Canada, the ITC is expected to make its final ruling by Dec. 21. This past January, the ITC issued a preliminary ruling, saying Canadian softwood is harming the U.S. lumber industry.
Provincial stumpage fees paid by Canadian lumber firms are too low and amount to subsidies, according to the influential U.S. group called COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations or Negotiations. COALITION also said Canada sells softwood below market value in what it calls pervasive dumping.
Canada has steadfastly argued that its industry isn’t subsidized while maintaining Canadian lumber shipments help and don’t hurt the U.S. sector.
But in its new submission to the ITC, COALITION countered that American producers are being injured because Canadian lumber is unfairly grabbing market share.
“These subsidies allow Canadian producers to produce at levels and sell at prices that are not responsive to or reflective of market signals,” the U.S. group said in its filing in late September. “This allows Canadian producers to flood the U.S. market, thereby expanding supply and negatively impacting prices beyond what a natural market would normally bear. In the best of circumstances, U.S. producers pay the price for this distorted market with lost market share and missed opportunities for profit, investment, expansion and employment. In the worst of circumstances, U.S. producers lose their livelihood altogether.”
This latest clash marks Round 5 in the cross-border fight dating back to 1982. The 2006 Canada-U.S. softwood lumber agreement expired in October, 2015. The U.S. lumber sector petitioned the U.S. Department of Commerce to begin its probe in November, 2016, after the expiration of a one-year litigation moratorium.
The Commerce Department applied preliminary countervailing duties averaging 19.88 per cent on Canadian lumber for four months, expiring in late August, while preliminary anti-dumping duties averaging 6.87 per cent began in late June and will last until late December.
“In short, this dispute represents a textbook example of the unequal playing field that U.S. trade laws are intended to remedy,” COALITION said in its filing to the ITC. “The evidence before the commission in this investigation demonstrates that the domestic industry was harmed by Canadian imports because subject imports were significant in volume and had a significant suppressing effect on price to the detriment of U.S. producers’ market share and financial performance.”
Unifor, Canada’s largest privatesector union, said on Monday that the rebound in the U.S. housing market has bolstered Canadian wood shipments, but the export rally is being jeopardized. “The expiry of the Canada-U.S. softwood lumber agreement and imposition of new duties, if left unchecked, will dramatically affect Canadian softwood lumber producers’ access to their key market,” Unifor said in a 40-page report covering a wide range of forestry issues.
The U.S. lumber lobby is seeking to limit softwood shipments to cap the Canadian share of U.S. lumber consumption at a lower level than in the recent past. In 2015, Canada’s market share in the United States was 30 per cent – below the maximum of 34 per cent allowed under the 2006 softwood lumber agreement.
Most of the trees in Canada are on publicly owned land, in contrast with the United States, where most timber is on private property and companies pay market rates to harvest it, U.S. producers say.
Within Canada, there are variations in the way that provincial stumpage fees are established. While British Columbia and Quebec have auction-based pricing systems, Ontario and Alberta do not rely on market-based methods to set their stumpage prices, industry observers say.
U.S. lumber producers say they aren’t impressed by any of the timber-pricing systems in Canada because they are administered by provincial governments.

The Globe and Mail. 17 Oct 2017. OPINION. Canada must prepare for life after NAFTA
GORDON RITCHIE, Former Canadian ambassador for trade negotiations and deputy chief negotiator of the Canada-U.S. free-trade agreement

With the current meetings in Washington, the real NAFTA negotiations are about to begin. U.S. President Donald Trump has proclaimed that he is determined to tear up the worst trade agreement in the history of the world and prefers to engage in head-to-head negotiations with Canada.
Canada’s preferred option must be to stick with the North American free-trade agreement, either in its present form or somehow modernized. Updating this 25-year-old pact could see some minor adjustment and the extension to new fields, such as the digital technologies with implications for copyright, trademarks and other intellectual properties under attack from piracy from China and elsewhere. Unfortunately, the Americans seem to be unprepared to address these positive steps.
Instead, they are obsessively focused on the trade deficit. This spells serious trouble for Mexico. Although U.S. exports to Mexico have increased by more than 450 per cent since 1993, U.S. imports have risen even faster, by nearly 650 per cent, to generate a bilateral deficit of $63-billion (U.S.) on merchandise trade. U.S. negotiators are insisting on draconian measures to redress this imbalance, notably by rigging the rules of origin for duty-free products to shift production, particularly in the auto sector, away from Mexico and into the United States.
For Mr. Trump – the self-proclaimed world’s greatest negotiator – the opportunity to formally announce withdrawal from NAFTA must be irresistible. The Mexican government and economy will come under great pressure to bend to his demands. It costs him nothing, as no action can be taken for six months and then only if Congress acts to “repeal and replace” the NAFTA implementing legislation. The worst that can happen, from his selfcentred perspective, is that he fulfills his election commitment to tear up NAFTA.
The Mexican government finds itself between a rock and a hard place, and has made it clear that it intends to walk out of the negotiations if the American threats escalate, and is attempting to prepare for the serious economic consequences of a breakdown. If, instead, Mexico accedes to American demands, it will face an angry reaction from the electorate in next year’s presidential elections.
Prime Minister Justin Trudeau has expressed his moral support for the Mexicans in this dilemma but will be compelled to focus on his own country’s interests if things get nasty, as they almost surely will.
In the very near future, expect the NAFTA option to be off the table. That will almost inevitably lead to one-on-one negotiations between Canada and the United States, which is indeed Mr. Trump’s preferred option. Some have held out hope that we could simply fall back on the original Canada-U.S. free-trade agreement (FTA), which would lead to a number of technical issues. This would depend on Congress’s willingness to repeal only the laws relating strictly to NAFTA.
Whether or not the original FTA framework proves useful, bilateral negotiations would come up against the same hard U.S. demands. Canada’s situation is very different from Mexico’s. The Canadian and U.S. economies, at comparable stages of development, were closely integrated long before NAFTA. Although no one has apparently briefed Mr. Trump, this trade is balanced. In fact, according to his own Special Trade Representative, “The U.S. goods and services trade surplus with Canada was $12.5-billion in 2016.” Canada remained by far the best customer for American products over all, and the most important export market for 35 American states.
None of this has deterred the U.S. negotiators from pressing their aggressive demands, which have reportedly included: Repealing the dispute-settlement provisions that give Canadian exporters some limited insurance against the most aggressive American protectionism, e.g. lumber, Boeing/ Bombardier;
Loaded rules of origin stipulating a very high level of U.S. content for duty-free goods;
Access to procurement by Canadian governments at all levels while capping Canadian firms’ access to U.S. public purchasing;
Busting open the supply management system protecting Canadian farmers, especially dairy.
All of these demands come with a five-year “sunset” clause requiring that we go through all this again a few years down the road. This adds up to demands for one-way free trade. On the face of it, this is an absurd overreach. The Trump administration is obviously counting on pressure from business and financial interests to force the Canadian government to accept such a onesided proposal that they have already dismissed as a complete “nonstarter.”
The Canadian government (as well as the provinces, business and labour) is now forced to contemplate life without a free-trade agreement. While this is far from a preferred choice, it would not be the end of the world. In the absence of a bilateral agreement, the most-favoured-nation rules of the World Trade Organization would apply and offer many of the same protections. Tariffs would be restored, but at a much lower level than before the free-trade agreement, averaging roughly 3.5 per cent on shipments to the United States. Unquestionably, existing economic linkages would be put under stress but most would survive. This is clearly not the option the Canadian government would prefer but it could be better than what is currently on offer from the Trump administration.
Meanwhile, the impact on U.S. businesses would be just as severe if not more so. In an unprecedented statement, the U.S. chamber of commerce, the broadest and perhaps most influential business lobby, came out strongly against dismantling NAFTA, which it earlier estimated underpinned about 12 million American jobs. The powerful U.S. agricultural lobby has also weighed in, particularly concerned over threats to its booming exports to Mexico.
These interest groups could be expected to have a real impact on Congress where the final decisions must be taken. In other words, for all his bluster, Mr. Trump does not hold all the cards.

REUTERS. OCTOBER 17, 2017. NAFTA trade ministers to square off over hard-line U.S. demands
David Lawder, David Ljunggren

WASHINGTON (Reuters) - Trade ministers from the United States, Canada and Mexico wrap up a contentious round of NAFTA trade talks on Tuesday marked by aggressive U.S. demands that have left the future of the 23-year-old free trade pact in doubt.

The proposals to drastically reshape the North American Free Trade Agreement to help shrink U.S. trade deficits have cast a pall over the modernization talks, leaving some participants and analysts wondering how the NAFTA partners can avoid an impasse.

The U.S. demands, previously identified as red lines by its neighbors, include forcing renegotiations every five years, reserving the lion’s share of automotive manufacturing for the United States and making it easier to pursue import barriers against some Canadian and Mexican goods.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland are scheduled to meet and take stock of the negotiations before issuing statements at a joint event at 3 p.m. (1900 GMT). They later plan to separately brief media.

Lighthizer has made no apologies about his hard negotiating line, which he has said reflects U.S. President Donald Trump’s desire to claw back lost manufacturing jobs and shrink U.S. goods trade deficits amounting to $64 billion with Mexico and $11 billion with Canada last year.

Trump has continued his attacks on NAFTA throughout the talks launched in August, repeating his threats to terminate the pact if Mexico and Canada won’t agree to changes.

U.S. negotiators opened a new front over the weekend with a proposal that Canada dismantle its system of protections for the dairy and poultry sectors, a move that Ottawa will reject, a source briefed on the matter said on Monday.

U.S. opposition to NAFTA’s dispute resolution mechanisms, plans to restrict outside access to government contracts and attacks on Canadian dairy and softwood lumber producers have further stoked the grim mood among trade officials.

While Mexican and Canadian officials have expressed dismay at the U.S. proposals, they have publicly taken a less confrontational stance, with three more negotiating rounds scheduled through December.

“This is what negotiations are like,” Vanessa Rubio, Mexico’s deputy finance minister, said on Saturday.

“There are sectors where you get to a deal quicker, and in other sectors where you don’t. But let’s just say we’re in the normal process of a free trade negotiation.”

Canadian and Mexican officials are loosely allied with U.S. industry, farm and services lobbying groups who are opposed to the Trump proposals and stepping up their efforts to persuade administration officials to ease them.

Financial markets have taken notice of the acrimony over the negotiating table. By Monday, Mexico’s peso MXN=D2 hit a near five-month low with fears growing about the future of the deal underpinning $1.2 trillion in annual trade between the three countries.

Mexico sends nearly 80 percent of its exports to the United States.

Additional reporting by Dave Graham; Editing by Kim Coghill

BLOOMBERG. 17 October 2017. Mexico and Canada Reject U.S. Nafta Demands
By Josh Wingrove , Andrew Mayeda and Eric Martin

• Mexico, Canada Reject U.S. Demands in Nafta Talks

The ministers leading Nafta negotiations are set to wrap up the latest round of high-level talks after Canada and Mexico rejected what they see as hardline proposals by the U.S.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland are meeting in Washington on Tuesday as battle lines form around contentious U.S. proposals. They will speak at a press conference together in the afternoon at the end of the fourth round of talks.

Mexico and Canada have repeatedly and publicly rejected the U.S. demands on dairy, autos, dispute panels, government procurement and a sunset clause. Officials familiar with the discussions describe two tracks to the negotiations -- an impasse on a few of the most contentious proposals, and progress being made on updating the pact in other areas.

On Monday, Canada flatly rejected the most recent proposal to dismantle its supply-management system for dairy. The fifth round of talks is expected to take place in early November in Mexico.

VENEZUELA

Global Affairs Canada. October 17, 2017. Canada calls into question the legitimacy of Venezuela’s electoral process

Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement regarding the October 15, 2017 regional elections in Venezuela:

“Canada is very concerned by the actions of the Venezuelan regime to hinder free and fair elections, especially via its unconstitutional control of the National Electoral Council (CNE).

“Sunday’s elections were characterized by many irregularities that raise significant and credible concerns regarding the validity of the results.

“The irregularities demonstrate that the CNE does not act as an independent institution for elections, but rather entirely according to the wishes of the government.

“Venezuelans have a constitutional right to choose their leaders through free, fair and transparent elections. We congratulate the Venezuelan people who were able to vote and exercise their democratic rights despite the many obstacles they encountered.

“Canada will continue to stand for the Venezuelan people and for the defence and restoration of democracy in Venezuela.”

Quick facts

• On July 30, 2017, Canada denounced the Maduro regime’s action to create an undemocratic National Constituent Assembly and called on Venezuela’s regime to uphold the rights enshrined in the UN Charter and in human rights treaties to which the country is a signatory.
• On July 16, 2017, millions of Venezuelans voted overwhelmingly to reject the government’s proposal to establish a constituent assembly.

Canada and the Venezuela crisis: http://www.international.gc.ca/world-monde/issues_development-enjeux_developpement/response_conflict-reponse_conflits/crisis-crises/venezuela.aspx?lang=eng&_ga=2.167337534.1019262185.1508072505-1998334265.1508072505

________________

LGCJ.: