Canada-United States Economic Competitiveness in a Period of Financial Instability: a common cause agenda.

Author:Smith, T. Bradbrooke
Position:PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE CONFERENCE on An Example of Cooperation and Common Cause: Enhancing Canada-United States Security and Prosperity Through the Great Lakes and North American Trade: Cleveland, Ohio April 2-4, 2009 - PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE CONFERENCE on An Example of Cooperation...
 
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Session Chair--T. Bradbrooke Smith

Canadian Speaker--Daniel Desjardins

United States Speaker--Craig Reed

United States Speaker--Jeff Weedman

INTRODUCTION

MR. SMITH: Sitting behind this bell, I feel as if Henry King is here with us, and the bell is liable to ring at any time. It is a great privilege to be here, and I am sorry Henry is not among us, I came to this panel as raw as you all, and I was actually invited to chair another panel on an agricultural subject, which I have some knowledge of from a "barnyard" point-of-view. However, this panel's topic is one which I claim no expertise in or knowledge of whatsoever. Fortunately, we have a distinguished panel to help us. First is Daniel Desjardins from Bombardier.

CANADIAN SPEAKER

MR. DESJARDINS: Thank you. Good morning. Before I start, let me say a few words about Bombardier's year-end results. Yesterday, we published our year-end results for Bombardier's fiscal year, which ended on January 31, 2009. (1) I am happy to announce that last year was the best year ever for Bombardier. We made twenty billion in United States dollars in revenues (2) and reported a billion dollars for our net income. (3) Earnings per share were fifty-six cents, (4) which is three times more than last year. (5) We are very proud of those results; however, this positive feeling lasted only a moment, because we also announced a layoff of three thousand employees in addition to the one thousand employees that we let go a month ago, mainly within Bombardier Aerospace. (6) One of the analysts this morning quoted our result as saying, "upping the train, the plane's going to be late."

Let me next present what we do at Bombardier. I think it is important to understand how we manage our operation in North America and how critical an open border is to us. Our corporate offices are in Montreal. (7) We have a workforce of sixty-six thousand employees worldwide, (8) eight thousand employees in the United States, (9) and twenty thousand in Canada. (10) As I said, our revenues last year were twenty billion in United States dollars, (11) and more than ninety-six percent of our revenues are generated outside Canada. (12) This is true, even though there are twenty thousand Bombardier employees in Canada, roughly one-third of our workforce. (13) The reason for high Bombardier revenues outside of Canada, is because we hardly sell anything in Canada. (14) Bombardier lives and breathes off exports and therefore open borders. (15) Twenty-eight percent of our exports are sold in the United States, (16) fifty-one percent in Europe, (17) and we are listed on the Toronto Stock Exchange. (18)

We have two fields of activities. First, Bombardier Aerospace, which after Boeing and Airbus, is the third largest civil aircraft manufacturer in the world. (19) Also, we are the largest manufacturer of business aircraft, (20) and a good part of that is based in the United States, home of the narrow body aircraft Learjet. (21) The revenue from aerospace was ten billion dollars, (22) and the backlog stood at twenty-three billion dollars, (23) which is basically over two years of production in backlog. Second is, Bombardier Transportation, which is the world leader rolling stock manufacturer. (24) Bombardier Transportation had revenue of ten billion dollars, (25) a backlog of twenty-four billion, (26) and employs thirty-four thousand individuals around the world. (27)

Bombardier has fifty-one manufacturing facilities in twenty-one countries. (28) Now what do we do in the United States? First, let us talk about our products, Bombardier Transportation provided rail cars to the New York and to the Chicago Transit Authorities. (29) It also provided light rail vehicles to Minneapolis, (30) and sold commuter cars to the Long Island and New Jersey Transit Authorities. (31) We manufactured the Acela Express, which is the fastest train in the United States and is operated by Amtrak in the Boston, New York, and Washington corridor. (32) The Acela Express is the fastest train in the United States, but is far from being the fastest in the world (33) and is sadly indicative of the lack of investment in rail infrastructure in the United States. (34) We manufacture other trains that can go up to two hundred fifty kilometers an hour. (35) The Acela Express could also go faster if the track was improved. (36) We also make "people movers," such as the Monorail System in Las Vegas, Nevada. (37)

Our workforce in the United States consists of twenty-seven hundred employees at Bombardier Transportation. (38) We have a major plant in Plattsburgh where we assemble all of our rail cars and rolling stock sold in the United States. (39) We also have facilities in the state of New York for the maintenance of rolling stock (40) and in Pittsburgh, Pennsylvania, where over a thousand or our United States employees work, most of whom are white collar engineers. (41) Pittsburgh is our center of excellence for the Automated People Mover (APM), which we sell in the United States and worldwide. (42) For example, we sold the APM to the Beijing Airport for us during the 2008 Olympics. (43) Pittsburgh is also our worldwide center of expertise for system integration. (44) Basically, this expertise allows us to provide the cars, the signaling, and the data and control room, whenever new systems with civil engineering are built. From January 2006 to December 2008, Bombardier Transportation North America purchased over six hundred seventy-five million dollars worth of supplies from three hundred suppliers in thirteen states. (45)

Bombardier Aerospace has over one thousand commercial aircraft in operation in the United States. (46) Our Canadair Regional Jet (CRJ) program is the fifth most successful program in the history of civil aviation by numbers sold and in operation. (47) It is a standing success, and most of you probably have flown on one of our CRJs in the United States. Bombardier Aerospace facilities are mainly concentrated in Wichita, Kansas, which is also home of our Learjet brand. Two thousand of Bombardiers employees work in Wichita. (48) There are roughly fifteen hundred Learjet aircrafts in operation in the United States, (49) and twenty-two thousand Learjet aircrafts in operation around the world. (50) We manufacture all of our business narrow body business jets in Wichita. If our commercial aircrafts and our business aircrafts are added together, there is one Bombardier aircraft taking off or landing every four seconds. (51) Bombardier spends two billion dollars annually in the United States on supplies across thirty-eight states. (52) We recently launched our C Series Aircraft on July 13, 2008, which is our "game changer." (53) The C Series Aircraft will enter into service in 2013, (54) and fifty percent of the value of the supply chain of this aircraft will come from the United States. Most of the value will derive from purchasing the new Pratt and Whitney engine, which is owned by Unitech Technologies. (55) With the air frame, the composite wing, and the new engine, the C Series Aircraft will deliver up to twenty percent savings in fuel consumption compared with any other aircraft in its category. (56)

What does it mean for us? As I said, Bombardier Aerospace relies on a strong supply chain in the United States. We have components moving back and forth across the border. Bombardier Aerospace's Learjet is an important exporter of business aircraft. United States' laws and regulations are central to our business, and we need predictability. As you have seen from the short description of our activities, the system to control the flow of components and of personnel across borders is extremely important to us. We pay careful attention to United States' regulations, including International Traffic in Arms Regulations and export control regulations. That way we know what we are dealing with and it is essentially predictable. Strong relations are also an asset, especially when it involves consistency across the border. We rely on a strong Federal Aviation Administration (FAA) certification system in the United States and in a strong cooperation between the FAA and Transport Canada.

There is now an exceptional free market in the aircraft industry in North America. With this free market, North America is the home of two of the three largest manufacturers worldwide, (57) Boeing and Bombardier. Therefore, any protectionist measure in aerospace will be entirely counterproductive and will inhibit the growth of the United States industry. Again, not only do we manufacture aircraft in the United States, but also many components of our aircraft are manufactured in the United States.

We also rely on a strong and consistent financial market. Bombardier is traded on the Toronto Stock Exchange, (58) but we rely on the United States market in order to ensure that we have appropriate funding. Even though the Canada banking sector may be among the most stable and sound, the United States' meltdown affected our customers, and therefore affected us. In fact, many of Bombardier's issues strictly stem from the financial crisis. For example, the financial crisis is one of the key reasons why we had layoffs. For Bombardier Transportation in the United States, protectionism is a fact of life, and we learned to live with it. The Buy America Act in the rail industry has been around for almost two decades, (59) so we established plants in the United States to satisfy the need. However, the Buy America Act still affects us, because there is a different rule between the United States and Canada, and therefore it is still a challenge. While Buy America and similar procurement regimes around the world are a fact of life, we face another enormous issue in Canada where no such national standard is applied to ensure that manufacturers invest locally. (60) I make the point to underline one key thing, how difficult it is to reestablish a free and open market once a country...

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