MONTREAL/NEW YORK (Reuters) - Canada’s Bombardier Inc (BBDb.TO) hit back on Friday at rival U.S. planemaker Boeing Co’s (BA.N) claim that it sold jets well below cost to win market share in the United States, the latest sign of increasing trade tensions between the two countries.
The risk of the United States imposing a tariff, which would likely depress sales of Bombardier’s newest jet, and concern over how big that tariff might be, unsettled investors, sending the Canadian company’s shares down just over 4 percent.
Boeing wants the U.S. government to investigate what it describes as rock-bottom prices for Bombardier’s new CSeries aircraft, including an “absurdly low” sum of $19.6 million it says Delta Air Lines Inc (DAL.N) paid for a jet costing $33 million to build.
“The allegation is absurd,” Bombardier spokesman Bryan Tucker said, in response to numbers contained in a petition sent to the U.S. Commerce Department by Boeing on Thursday.
The spat comes days after Washington imposed duties averaging 20 percent on imports of Canadian softwood lumber, prompting claims in Canada that Boeing was taking advantage of the Trump administration’s tougher stance on trade.
Boeing spokesman Dan Curran said the filing against Bombardier was “an initiative we chose to take ourselves”.
He declined to say whether Boeing also planned to ask the United States to pursue Canada through the World Trade Organization, as it has against European rival Airbus. (AIR.PA)
Domestic cases, where companies can petition for duties on specific products, typically take around a year. That is much quicker than a 13-year-old transatlantic battle on jetliner subsidies at the WTO, an international forum open only to nations.
Planemakers “often sell below costs to break into a new market or with a new product, particularly if it involves a significant launch customer,” said U.S.-based trade policy expert Joel Johnson.
Such tactics cause long-term harm by creating momentum that rivals find hard to reverse, Boeing’s petition said, although industry analysts say Boeing and Airbus both regularly offer discounts of 50 percent or more.
Boeing has said it competed for last year’s Delta order against the CSeries CS100 with used 717s, which it no longer makes, and used jets from Brazil’s Embraer (EMBR3.SA), since Delta was only ready to pay a low price and wanted smaller jets than its more modern 737.
But it said Bombardier’s actions could upset the wider market and erode future sales of its best-selling 737.
Still, its complaint puzzled some analysts and trade lawyers, since Canada is in talks to sign a deal later this year or in early 2018 to acquire 18 Boeing fighter jets. “It’s certainly the right political climate for a trade complaint. But I‘m not sure this is the best idea,” said aerospace analyst Richard Aboulafia.
Canada has rejected Boeing’s accusations and says the CSeries uses many U.S. parts and generates thousands of U.S. jobs. Around half of the 110 to 130 seat CSeries is made in the United States, including the engine, cockpit control panels and avionics. Trade experts say an investigation could result in Delta and other buyers having to pay extra duties on future deliveries, effectively raising the price but not benefiting Bombardier.
Canadian trade lawyer Mark Warner said Canada could challenge final decisions at the WTO or through NAFTA.
Delta did not respond to requests for comment.
Additional reporting by Fergal Smith in Toronto, David Ljunggren in Ottawa, Brad Haynes in Sao Paulo and Tim Hepher in Paris.; Editing by Bernadette Baum, Tom Brown and Bill Rigby