Bombardier Inc. is pushing to shift major chunks of work on its Toronto-built Q400 turboprop planes to Mexico and China, even as it seeks a billion-dollar bailout from Canadian taxpayers.

The transportation giant’s proposal to shift assembly of wings and cockpits for the turboprop planes to facilities in Mexico and China, respectively, would eliminate about 200 jobs at the suburban Toronto factory where those components are assembled now, sources familiar with the situation say.

A proposal by the company to outsource wing and cockpit production was rejected by workers at the Toronto plant in October, but Bombardier has not given up on the idea. “They are still determined to offload the wing and the cockpit to Mexico and China,” said one source familiar with the discussions.

Such a move could prove hugely awkward for the federal government, which is studying a request by Bombardier for a $1-billion (U.S.) investment in its C Series plane program to match a deal struck with Quebec. The company is trying to shore up more financial resources for the new aircraft to take it to projected break-even in 2020-21. It plans to build between 15 and 20 C Series planes this year.

Bombardier wants Ottawa to come on board as a strategic partner in the C Series, and has found itself at the centre of a heated national debate on the merits of receiving public money. At the same time, it is trying to cut costs in many areas of its operations, which will help it rebuild earnings after two straight annual losses.

“The optics aren’t good when they’re asking for that kind of money from the Liberals,” said Scott McIlmoyle, president of Unifor Local 112, which represents the workers at the Bombardier Q400 plant.

“Of course it looks bad,” said Chris Murray, an analyst with AltaCorp Capital in Toronto. “But it’s a responsible thing to do for them to look at how to cut costs on the supply chain.”

A spokeswoman for Bombardier’s commercial aircraft unit did not respond to a request for comment.

Bombardier has had trouble over the past year winning new orders for commercial and business aircraft, which has hurt both revenue and profitability. At a list price of about $31-million (U.S.), the Q400 has a particular problem in that it is an estimated 20 per cent to 30 per cent more expensive than rival aircraft made by European joint venture ATR.

Although Canadian carriers such as Porter Airlines Inc. and WestJet Airlines Ltd. have embraced the Q400, Bombardier has largely failed to persuade customers outside North America to pay more for the extra speed, size and technology that the aircraft offers. It is now trying to remedy that situation.

“This is a company that’s generally proven to be very astute in dealing with governments,” said Louis Hébert, a specialist in corporate strategy at Montreal’s HEC business school. That they’re proposing this, on top of plans announced last month to lay off 2,800 workers in Canada, “shows just how grave the situation is,” Prof. Hébert said.

Bombardier’s contract with Unifor contains language declaring that the wing and cockpit assembly belongs to the Toronto plant, so the company needs the union’s approval before shifting the work. About 70 per cent of workers who voted in October rejected the idea. Mr. McIlmoyle said management told the union leadership that the entire Q400 program and about 1,000 jobs were at risk if costs were not reduced.

The company has not presented any new offers to the union since the proposal was rejected in October, he said.

In a briefing with reporters in late October, Bombardier chief executive Alain Bellemare suggested the company was still aiming to make changes to Q400 production despite the union’s stand. It’s a great aircraft but it’s too costly, he said. “We need to bring the costs down so we can bring the price down.”

Bombardier management detailed the challenges facing the Q400 at an investor-day meeting last November. Fred Cromer, who leads Bombardier’s commercial aerospace business, said that while Bombardier ought to get paid for some of the plane’s performance advantages versus the competition, airlines using the planes to fly shorter distances don’t necessarily make use of those performance advantages.

Bombardier’s production plan for the Q400 assumes it can maintain a global share of about 30 per cent for the aircraft while pushing for more. “This airplane should do much better than that against the competition,” Mr. Cromer said.

The company is already sourcing significant volumes of aircraft parts from Mexico and China.

Production at its aerospace plant in Queretaro state, north of Mexico City, includes main harnesses and electrical subassemblies for Bombardier business and commercial aircraft. The facility also has mandates to manufacture structural aircraft components, such as the Q400’s so-called “flight control work package” of rudder, elevator and horizontal stabilizer, according to Bombardier’s website.

Meanwhile, China’s Shenyang Aircraft Corp. has been supplying main components for the Q400 since a co-operation agreement was signed in 2006. The packages supplied by Shenyang represent about 12 per cent of the Q400 plane by weight, Bombardier says.

MONTREAL and TORONTO — The Globe and Mail
Published Sunday, Mar. 20, 2016 10:04PM EDT
Last updated Monday, Mar. 21, 2016 6:26AM EDT