Boeing Throws Bombardier Under the Air Bus
$150 billion dollar market cap company Boeing has decided to throw its weight around against competitors. The company complained to the US government that Canadian competitor Bombardier, the inventor of the Snowmobile and the maker of planes, had received unfair subsidies from the UK and Canada which resulted in the company winning a major contract.
Boeing got back at the $4B-sized company by supporting the US in a move to impose a 220% import tax on Bombardier's products. For example, a $50M plane sold by Bombardier would cost a US company $160M to purchase. This severely decreases the competition in the US from foreign companies. Bombardier stock (TSE:BBD.B) fell 8% today as the reality set in. Meanwhile, the stock of Boeing (NYSE:BA) rose 0.5% and is up 63% year to date.
The UK stepped in to back Bombardier mainly because Bombardier is one of the largest employers in Northern Ireland. Even politicians in Quebec, Canada called the tariff "absurd", as the news sparked shock and anger throughout Canada's largest province, where Bombardier is headquartered.
One of the most imminent concerns has to do with how US airline Delta will react to the tariff news. The company purchased $5.6B worth of Bombardier C-Series planes last year in a deal for 125 jets. If the tariff's are imposed on Delta, it could triple the price of the planes. Canada and the UK hope that Delta won't change its mind.