Bombardier warns Canada that F-35 review may backfire

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“Cancelling the F-35s might be a good idea, but we need to think about it,” Bombardier chief executive Eric Martel told a business audience in Montreal. “We have contracts with the Pentagon. Will there be reciprocity there?”

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Bombardier has invested in recent years in its defence unit, which converts jets into military aircraft. It has two contracts with the U.S. government, one for communication aircraft and another for surveillance planes.

New Canadian Prime Minister Mark Carney ordered a review of the F-35 purchase agreement, a $19 billion deal for 88 jets that was finalized in 2023. The deal hasn’t been scrapped, but the government needs to “make sure that the contract in its current form is in the best interests of Canadians and the Canadian Armed Forces,” a defence ministry spokesperson said.

Earlier this month, President Donald Trump put 25 per cent tariffs on imports on Canadian goods that don’t fall under the Canada-U.S.-Mexico Agreement (CUSMA), and added 25 per cent import taxes to aluminum and steel products. He has repeatedly said he believes Canada should be the 51st U.S. state — a recent poll showed that 90 per cent of Canadians disagree — and members of his administration have taken the Canadian government to task for its low level of military spending.

“Trump isn’t wrong on everything,” Martel said. “We’ve been hiding behind our big brother for a while, and we’re completely dependent on him militarily.”

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In 2023, Canada finalized a deal to order as many as 16 military surveillance aircraft from Boeing Co. as part of an investment worth more than US$7 billion, rejecting a competing Bombardier proposal.

The jet maker’s shares have dropped 18 per cent since Trump was elected on Nov. 5, but are still up about 50 per cent over the past year.

In February, Bombardier set aside its financial outlook for the year because of risk and uncertainty about tariffs. “Not providing guidance is the most responsible thing for us to do,” Martel said at the time. About 60 per cent of Bombardier’s business comes from the U.S., and its planes are currently built and shipped under the rules of the CUSMA.

Bombardier has a complicated supply chain that includes manufacturing in U.S. and Mexico with more than 2,800 US-based suppliers across 47 states. U.S.-made parts and systems make up a significant proportion of the cost of its aircraft.

The Global 7500, the firm’s flagship jet, has wings made in Texas, avionics from Iowa and motors made in Indiana. More than half of its building costs are tied to U.S. manufacturing, but the assembly and finishing are done in Canada, which makes the jet subject to tariffs.

Two-thirds of Canada’s aerospace industry exports depend on the U.S. market, Martel said.

Bloomberg.com

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