D-Jet Production In Trouble

[mathewc]

London aircraft jobs in jeopardy
AIRCRAFT PRODUCTION: London company kept waiting for months for $35 million federal loan
By HANK DANISZEWSKI, THE LONDON FREE PRESS

Hundreds of London jobs are on the line while aircraft-maker Diamond Aircraft waits for federal help to launch jet production, Mayor Joe Fontana warns.

Just days away from Tuesday’s federal budget, Fontana said the company has waited for months for a $35-million federal loan that would help it launch production of the innovative five-seater D-Jet, saving the jobs of 200 employees working on the project and creating at least 500 new jobs at the London plant.

“I am getting extremely frustrated that there has been no response — that puts the D-Jet program in jeopardy,” he said Wednesday.

Diamond chief executive Peter Maurer wouldn’t comment on how long the company is prepared to wait for federal help, but Fontana said the Conservative government is gambling with the company’s patience.

“You can only hold your finger on the ‘go’ button for so long,” he said.

Maurer said the company has 240 orders for the aircraft.

Diamond has received a $35-million loan commitment from the private sector and lined up another $20 million from private investment. But he said full production of the jet and all the funding deals hinge on the federal loan request.

“We are basically poised to push the go button as soon as the funding is secured,” Maurer said. “The missing puzzle piece is the federal investment.”

Fontana said he brought Diamond Aircraft’s request to Industry Minister Tony Clement about two weeks ago and got an e-mail response from the minister saying he was “looking for a satisfactory solution.”

Diamond’s loan request is still under review, said Heather Hume, a spokesperson for Clement’s office.

“A lot of due diligence needs to be done in an application such as this and a decision is pending,” she said.

Conservative backbencher Ed Holder of London West echoed Hume, saying the size of the loan request made it necessary for the government to exercise “due diligence.”

In 2008 the federal government committed $20 million to the research and development phase of the D-Jet program.

But since then, Maurer said, Diamond has run into problems and delays after the company that manufactured the engine for the D-Jet went bankrupt and Diamond went on to develop its own, more powerful engine.

Maurer said the company also suffered an economic setback after the 2008 recession and the market for private aircraft shrank dramatically.

Diamond was forced to lay off 180 employees who produced propeller aircraft, but kept the 200 workers on the D-Jet program who now make up about half the plant’s workforce.

Maurer said the total cost of the D-Jet program is about $250 million. with the company and its shareholders putting up most of the cost.

He said the technology going into the D-Jet program will spin off, allowing the company to create different versions of the aircraft such as a twin-engine model and a military version.

He said Diamond has quickly become a world leader in some segments of the small aircraft market, using the latest technology such as an aircraft fuselage made of composite material rather than sheet metal.

“We have come from nowhere to take a leadership position,” he said.

ABOUT DIAMOND AIRCRAFT

— With roots in Austria, it opened a London plant in 1992.

— Employs about 400 people at its 250,000-sq.-ft. plant.

— In 1997 it opened the Diamond Flight Centre at the London airport.

[North Shore]

So if the market is so great, why isn't the private sector stepping in to loan Diamond the $35 Mill?

[High and Behind]

You would think that with those 240 orders they would have some cash flow to get things moving.
I hate to see anyone go out of business, but I'd say the timing is a bit off.

Hope they work it out.

[Beefitarian]

Have they stopped building piston engined planes?

I wonder how much longer there's going to be any work in Canada?

viewtopic.php?f=54&t=71790&hilit=china

[MUSKEG]

I find it mildly conflicting that when our vehicle industry was in trouble two years ago the general concensus was to let them fall. Now when a small aircraft builder is in trouble it's circle the wagons and get the Gov to chip. Why? This is a small niche market at best. Is it a nice product? I'm sure it is, but there is lots and lots of nice product out there at this time. It sucks to lose a business (Just happened to me) but we take our chances and you win some you lose some.

[High and Behind]

Good point MUSKEG.

Business is all about cash flow and if your looking to the government to bolster your business your in trouble right from the start.
I'm thinking that if they are crawling into bed with federal money that this may be the last gasp. And with an election looming this loan would be sliding further and further down the priority scale.

[Expat]

I think we should do our share to try and maintain this manufacturing expertise in Canada. Things are going to China very fast these days, never to come back.
A snowmobile maker, with government assistance, bought a bankrupt aero business, and grew it very well. Bombardier and its staff have repaid in taxes a lot more than they got from the various governments back then...

http://www.bbc.co.uk/news/business-12684919

[Gannet167]

Neither Boeing, Airbus or Bombardier would exist today without some "funding" to get them on their feet. They employ a lot of people and pay a lot of corporate tax these days. The question is if this funding is throwing more good money after bad into a venture that will inevitably fail. Perhaps this money is better spent on another federal initiative. Perhaps this company will be a world leader in the production of aircraft in 20 years.

[Hedley]

The government flushed Nortel down the toilet without lifting a finger. Ok. Given that, why would they step in, in this case?

[Geo]

The government flushed Nortel down the toilet without lifting a finger. Ok. Given that, why would they step in, in this case?

1) Nortel had corporate Governance "issues" that hammered their stock price year after year when they kept having to restate earnings. I don't think they're a good yardstick to measure by.

2) A more fair comparison might be Bombardier. They have had over a decade of financial support in the form of federal government loans to their clients to enable them to buy some great airplanes.

3) Here we have an Austrian company has come and invested (past tense, not future) in Canada to manufacture planes for the North American market. They're asking for a lousy $35 MM loan that they have already been promised so they can expand their business of manufacturing aircraft in Canada.

In an interesting parallel, the Canadian government has already invested in the R&D for this aircraft, which may also be used by our military, and for which companies in Canada will get to make...

Wait a sec, is this the F-35 thread?

g

[Siddley Hawker]

During the time I took to write this, the Government probably blew through a couple of hundred million dollars. What's a paltry 35 mil?

[oldncold]

according to vancouver board of trade the interest on the national debt is 1000dollars A SECOND. WE WHINE WAY TOO MUCH ABOUT THE SMALL SHI..

realtity of the tax bill will really bites us when the last of the baby boomers retires .

[DanJ]

I was in favour of helping out the auto companies and I'm in favour of helping Diamond. I think this is a more realistic use of "stimulus" dollars than throwing money at cities to repave roads. I'd rather there be more people working and paying the taxes that can then be used to pave the roads.

[High and Behind]

Some fair arguments for sure.

But by my calculations this venture has already procured 75 million dollars to get this project going. Along with the 240 orders they have, why is there no more capital to get this to production? Is another 35 million really going to do it?

As far as corporate taxes are concerned, as individuals we pay a higher percentage of tax than any corporation does.
Which makes no sense when my taxes go to fund this project.

Neither Boeing, Airbus or Bombardier would exist today without some "funding"

True. But why should governments continue to fund these private ventures when we are slashing funding to other critical areas of our social programs and infrastructure. What happens when Diamond closes it's doors (speculative)??

Guess where our 35 million is??

Gone, because you can guarantee that the London division is a shell to protect the main company in Austria from having to pay back the debt. This is done in our country all the time and is never prosecuted because it does not fall under international law.

There were automotive parts manufacturers that were based in Europe and had subsidiary companies operating in Canada to provide everything from door hinges to fuel injectors. When the Auto industry went in the tank they shut there doors and walked away with millions of dollars of government money and didn't pay a cent of severance to any of there employees that had worked there for years.

In the US, Boeing gets funding and the state of California goes broke. Manages to get a billion dollar loan because the budget from the feds wasn't enough to pay civil servants (Which is illegal by the way, how Arnie got away with that one I'll never know).
Now who's on the hook for that?

So when you say that this is small whinny sh!t, I beg to differ. There are glaring flaws in our countries policies of funding to corperations. Just look at what is happening in Thompson Manitoba with Vale Inco and how this South American company has reneged on there deal they made with the feds and are holding the employees as finnancial hostages.

It's BS my friends.

[RenegadeAV8R]

The government flushed Nortel down the toilet without lifting a finger. Ok. Given that, why would they step in, in this case?

Maybe because "Dunn, Beatty, and Gollogly were fired on April 28, 2004 for financial mismanagement. Dunn and other top-level executives were accused of engaging in accounting fraud by the SEC."
http://en.wikipedia.org/wiki/Nortel

[Vickers vanguard]

35 millions is peanuts ! really.....

[bigsky]

Some of the questions that need to be asked are:

1. Where is the money going?
2. What is the production investment versus the management investment?
3. If the company fails will the managers still be paid out some sort of horrendous bonus?
4. Do the principals and managers have a personal investment in this?
5. Are the principals and managers skimming the creme off the top even before the butter is produced?

The bottom line is the government had best do their "due dilligance" before dumping more into this program.

[Expat]

It is a rat race down there, and countries that support their industries will prosper and conquer, while those that only encourage foreign investment, and spend all on social programs, or useless armaments will lose their economic clout. It is already happening.

[Bede]

How about ending corporate welfare? If the product has so much potential, it's easy to find private investment. The federal government has spent billions on Bombardier and has yet to be paid back. If you divide out the cost by jobs, it's huge, well into the hundreds of thousands.

[cgzro]

Has this thing been certified yet?