Bombardier gets Quebec investment but weak results hurt shares

Thu Oct 29, 2015 6:14pm EDT
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By Euan Rocha and Allison Lampert

TORONTO/MONTREAL (Reuters) - Quebec will invest $1 billion in Bombardier Inc's (BBDb.TO: Quote) CSeries jets in return for a near 50 percent stake in the struggling project, the government of the Canadian province said on Thursday, in what some called a risky gambit to protect jobs.

Shares of Bombardier fell 17 percent to close at C$1.33 on the Toronto Stock Exchange as the company burnt through $816 million in the third quarter due to weaker order flows.

"It's a risky situation, but it's a two-way street," Quebec Economy Minister Jacques Daoust told reporters. "We took it from the positive side ... Bombardier could've abandoned the CSeries program. They could have said 'forget it.'"

Quebec's aerospace sector is closely tied to Bombardier, whose 18,000-strong workforce in the province is largely focused on aerospace. The company also helps support many smaller vendors and suppliers. Daoust said the company accounts for about 40,000 direct and indirect jobs in Quebec, with average salaries almost double the provincial average.

"I cannot abandon the aerospace industry," said Daoust.

DBRS Quebec debt analyst Travis Shaw said Quebec's investment was "not unmanageable" but more information was needed to gauge whether it could affect plans to balance the province's 2015/16 budget.

"It's not clear whether the money right now is coming from an existing account that's already been budgeted for or whether this is coming from an entirely new funding," he said.

Bombardier's narrow-body CSeries line of jets, set to compete against Boeing Co's (BA.N: Quote) 737 planes and Airbus Group's (AIR.PA: Quote) A319 and A320 jets, have been delayed for years and are billions of dollars over budget.   Continued...

A Bombardier CS300 airplane is seen on a static display two days before the opening of the 51st Paris Air Show at Le Bourget airport near Paris in this June 13, 2015 file photo.  REUTERS/Pascal Rossignol/Handout