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Boeing UK contracts ‘jeopardised’ over Bombardier row

Boeing’s trade dispute with Bombardier “could jeopardise” its defence contracts with the UK government, the UK’s defence secretary has warned.

Sir Michael Fallon made the comments after the US opted to impose a tax on the C-Series jet made by Bombardier.

The proposed 220% import tariff could threaten Bombardier jobs in Belfast.

Rival Boeing had complained that Bombardier had received unfair state subsidies from the UK and Canada.

It claimed these subsidies helped the firm win a major order.

In 2016, Boeing won a contract to supply 50 Apache helicopters to the Army.

Bombardier said it would fight the “absurd” ruling. The firm is one of Northern Ireland’s biggest employers.

Sir Michael said during a visit to Belfast that “Boeing stands to gain from British defence spending” but that “this kind of behaviour could jeopardise our future relationship” with the firm.

“We don’t want to do that. Boeing is an important investor in the United Kingdom; an important employer in the United Kingdom.

“But we would prefer this kind of dispute to be settled on a negotiated basis and we will be redoubling our efforts with the Canadian government to bring about a negotiated settlement.”

Theresa May
Image captionTheresa May said she was bitterly disappointed by the US ruling

Prime Minster Theresa May said she was “bitterly disappointed” over the US Department of Commerce proposal to impose the tax.

She said the UK would work with Bombardier to protect “vital” jobs.

The UK government and trade unions fear the imposition of tariffs could make the Canadian firm question whether to remain in Northern Ireland, where it employs 4,100 of its 28,000-strong workforce.

Belfast
Image captionThe proposed tariff could threaten jobs at Bombardier in Belfast

The ruling damaged the global aerospace industry and was “frankly not what we would expect of a long-term partner to the UK”, said a UK government spokesman, while emphasising this was just the first step in a lengthy process.

About 1,000 jobs are linked to the C-Series, the wings of which are made at a purpose-built £520m factory at Queen’s Island in Belfast.

BoeingImage copyrightAFP/GETTY
Image captionBoeing said the dispute was about “maintaining a level playing field”

The programme is not just important to Bombardier jobs in Belfast, but also to 15 smaller aerospace firms in Northern Ireland – and dozens more across the UK – which make components for the wings.

The US Department of Commerce ruling, which could triple the cost of a C-Series aircraft sold into the United States, could potentially jeopardise a major order placed last year from US airline Delta – a $5.6bn (£4.15bn) deal for up to 125 of the jets.

Bombardier said the decision was “divorced from the reality about the financing of multibillion-dollar aircraft programmes”.

The Canadian firm said Boeing was seeking to use US trade laws “to stifle competition”.

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‘Things could get worse’

Julian O’Neill, Northern Ireland Business Correspondent

The outcome was predicted – but not the severity of the penalty.

The tariff could triple the cost of C-Series aircraft in the US, effectively killing the market for Bombardier.

It also puts a major order with Delta Airlines at risk – and things could get worse before they get better.

Washington’s Department of Commerce is due to make a second tariff ruling on 5 October.

But a more important date is next February when the US International Trade Commission will either uphold the penalty or remove it.

This was always the focus for Bombardier and its allies.

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Bombardier said it had created a “superior aircraft” that is more efficient and comfortable but Boeing was trying to prevent “US passengers from realising these benefits, irrespective of the harm that it would cause to the US aerospace industry and the cost to airlines and consumers”.

Media captionSir Jeffrey Donaldson tells Today that Bombardier tariff may have ‘devastating’ economic consequences

But Boeing said the dispute was about “maintaining a level playing field”, and said its aim was to make sure that “aerospace companies abide by trade agreements”.

Delta, however, said there was no risk to US businesses as neither Boeing nor any other US firm produced 100-110 seat aircraft to compete with the C-Series.

US Secretary of Commerce Wilbur Ross said one reason for the tariff ruling was Bombardier’s failure to cooperate with the investigation.