BUSINESS

Clipping Canadair’s wings

ERNEST HILLEN April 25 1983
BUSINESS

Clipping Canadair’s wings

ERNEST HILLEN April 25 1983

Clipping Canadair’s wings

BUSINESS

For sheer shock value the event rivalled Prime Minister John Diefenbaker’s stunning 1959 refusal to rescue the costly Avro Arrow fighter plane. CBC TV’s the fifth estate turned its attention last week to another financially plagued aircraft, Canadair Ltd.’s Challenger 600. In a textbook display of investigative reporting, the one-hour program revealed that the Crown corporation’s ambitious but flawed executive jet program could cost Canadian taxpayers $2.3 billion, most of which would never be recovered.

In a series of devastating revelations, the hard-hitting program reported that instead of the 235 jets that the Montreal-based company expected to have built by now, there were just 76; that one bizarre sales arrangement resulted in a potential customer, Federal Express Corp. of Memphis, Tenn., receiving a free jet and $3 million when it cancelled an order for 25 of the widebodied Challengers; and that government investment so far included $1.35 billion in loan guarantees in addition to a $200-million infusion six months ago. The public affairs program further reported that cabinet was given a secret memo last October warning that the debt-ridden aircraft manufacturer would need another $500 million to $1 billion to stay alive. At that rate, concluded the CBC, each of the 2,400 jobs involved in building the jet would represent a cost of $600,000.

But the program’s incredible list of findings did not end there. It even went on to question the plane’s airworthiness, maintaining that no fewer than

three cabinet ministers—Mark MacGuigan, Lloyd Axworthy and Pierre Bussières—have had close calls flying in the two Challengers that the government owns; that officials have discouraged Prime Minister Pierre Trudeau from travelling in them because of the risk; and that investigators have discovered engine and airframe problems. Furthermore, Canadair’s sales figures have been inflated, and the department of justice has been asked to examine the company’s selling practices, the fifth estate said. Justice Minister MacGuigan

The Challenger is considered so risky, said the CBC\ that Trudeau has been warned against ñying in it

acknowledged that his department had already sought a Toronto law firm’s advice on one particular sales contract.

The report also said that of the 76 Challengers completed only about half are in service and of those at least six are for sale at well below the factory price of $8.5 million. One customer, Technique Avant Garde (TAG), a Middle East firm that distributes the jets, ordered 51 planes but has taken only seven, it said. Not only that, but one aircraft that TAG did buy for about $5 million was eventually sold back to the Canadian government for $10 million.

Not surprisingly, the broadcast

caused an uproar in Parliament, with opposition MPs hurling a barrage of questions across the floor. They demanded a special inquiry and the resignation of at least one cabinet member, Energy Minister Jean Chrétien. As minister of industry, trade and commerce in 1976, Chrétien bought Canadair from General Dynamics Corp. of St. Louis, Mo., for $38 million to stave off a possible shutdown of its sprawling north-end Montreal plant.

Prime Minister Trudeau said that the government does not regret having helped Canadair and is willing, in fact, to pump even more money into the company. Canadians should have the “nerve” to save the company, he said. Trudeau admitted that the cabinet has known about the company’s financial troubles since last fall. But he rejected calls for a public inquiry, arguing that Canadair’s difficulties were caused by bad business decisions rather than “scandalous” activities, as Opposition Leader Erik Nielsen charged. Said Trudeau: “Because it is the taxpayers’ money, I think Parliament should look at it first, and if they think an inquiry is necessary, then we will consider it.”

Government concerns about Canadair’s management have already prompted Ottawa to place the company under the umbrella of the Canada Development Investment Corp. a government holding firm, Trudeau said (page 40). Now, with the Challenger apparently not yet likely to go the way of the Arrow, Trudeau said he hoped that the CDIC will make “better business judgments.” That sentiment was clearly shared by Canadair’s Challenger work force.

-ERNEST HILLEN in Toronto.