Why Governments Should Never Run Anything—Part CCC231

    Liberal policies lead to this. Pass it on. Let’s not forget Detroit

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    This meme has a lot to do with today’s blog. Let government run enough things, and we’ll all be worse off.

   Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

    Wherein we see the results of decades of subsidies and government privilege; shoddy products and high prices. Bombardier relies on government handouts and special treatment, produces bad products which take far more people than necessary.

TORONTO STREETCARS WERE ANOTHER WORRISOME SIGN.

Canadians can take solace in the news today that ours aren’t the only governments that find themselves expensively on the hook for Bombardier’s management challenges. As Kristine Owram reports in today’s Financial Post, over in London, England, the city has just published its post- mortem report on the mess left behind after the London Underground hired Bombardier to upgrade its signalling. Two years into the contract, London’s transit agency pulled the plug on the arrangement. It had to pay 85 million pounds (about $160 million) to Bombardier to cancel the contract, even though that now means delaying the upgrades by five years and incurring an additional 886 million pounds ($1.7 billion) to fix the problem with a new contractor.

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     Typical government activity–high costs, cancellations, good times–This is the result of no one really being responsible–It’s not their money, of course they’ll waste it.

In Canada, excuses must be made for Bombardier’s costly errors. We all know “there have been delays in getting into service” the hard-to-sell CSeries plane, rationalized La Presse columnist Yves Boisvert last week, but “do we want to let down one of the few truly Canadian high-tech industrial companies” by failing to protect it from unexpected setbacks? When Toronto voted to sue Bombardier for not delivering dozens of promised streetcars the company suggested we consider the blame due to others. “Obviously not all the delays in this project have been caused by Bombardier,” said a spokesman.

But in London, they’re less forgiving about what they see as Bombardier’s major role in the transit screw- up. From the transit department’s perspective, “it was Bombardier’s shameful performance that led to the programme’s failure.” The agency alleged that it “was duped by Bombardier from the outset about its expertise and experience.” KPMG, which had been hired to do a “lessons learned” review, concluded that the benefits Bombardier promised to deliver were unrealistic and its “capability to deliver these benefits had not been adequately demonstrated or interrogated.” The city’s Budget and Performance Committee said “the programme failed because Bombardier was unable to deliver what it said it would deliver.” London’s mayor, meanwhile, put it more bluntly: Bombardier had “totally stuffed it up.”

Londoners are lucky that they won’t ever be forced to write another cheque to Bombardier — unlike Canadian taxpayers who seem condemned to signing up for another $ 1. 3 billion handout, expected in next week’s f ederal budget. Bombardier’s lobbyists have been vigorously working with the Liberal government, having now had 30 lobbying discussions since the start of t he 42nd Parliament three months ago. While the signalling system is working just fine in Ottawa, brightly flashing warnings at the government indicate that the problems at Bombardier run much deeper than liquidity issues and the subsidy express somehow only hurtles further forward with seemingly unstoppable inevitability.

The London cock- up is only the latest in a series of omens that the Liberal government is about to put nearly a billion- and- a- half scarce public dollars into a company that routinely demonstrates its difficulty in actually executing on its business. The two- and- a- half years of delays in bringing the CSeries to market may have been unexpected, but there’s no reason to assume they were inescapable. Boeing recently informed customers that its own new product, the 737 Max, may actually arrive ahead of schedule. Yes, that plane’s a redesign of an existing model and not a novel innovation, but the issue isn’t how long Bombardier took to launch the CSeries, it’s how badly it evidently judged its own capabilities in timing and costs, which ran US$2 billion over budget. And it’s not just a CSeries problem: The company has also fallen two years behind on its Global 7000 jet project.

Not unrelated is Bombardier’s ability to adeptly assess the current aerospace market, given that it hasn’t had a firm CSeries order in a year and a half, that its long-hopedfor sale to United Airlines flopped when the U. S. carrier opted for Boeing’s Next Generation 737 instead, and that a mounting pilot shortage appears to be making the midmarket runs the CSeries caters to less feasible for airlines. Meanwhile the plane- maker had to shelve its Learjet 85 program last year after demand proved tepid.

The Toronto streetcars were another worrisome sign that Bombardier’s issues run well beyond its balance sheet. Underframes and sides made at the company’s plants in Mexico were not fitting at the correct angles when they arrived for assembly in Thunder Bay. Then there were problems with electrical connectors, again discovered only at the final assembly stage. The streetcars were hardly as complicated as inventing a brand new aircraft; they were, rather, adapted from an existing Bombardier model already in use in Europe. And yet, by the start of 2016, Bombardier had delivered to Toronto just 14 out of the 74 streetcars it had committed to have by then, and is now facing legal action from Toronto over the $1.25 billion deal.

Nothing has been proven in any court, but it’s certainly possible to picture a scenario where federal taxpayers are made to sink cash into Bombardier at the same time that Toronto taxpayers are trying to get it out. At least that’s one local government willing to stand up for accountability and fiscal sanity.

In the U. K., too, the head of the London Underground said he realized he could not keep throwing good taxpayer money after bad, and ultimately had to walk away from Bombardier, despite the embarrassment and costly cancellation free. “I am afraid too many times in the public sector we see a reluctance to do the right thing, which is ( to) stop a contract, stop money draining away from taxpayers,” he said. Some, having seen the red flags signalling that problems at Bombardier are far more serious than a cash crunch, have the prudence to walk away. Canadian politicians can’t seem to help running towards them like bulls.

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     The rationale for supporting Bombardier is that Canada needed to be a player in international aircraft building. It’s turned out well–the product is shoddy, the cost high. The inevitable result of government support.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Power Teaching: How to Find Someone to Teach Your Child when the Education System has Failed.
Cui Bono–Cherchez les Contingencies

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