CEO Denies Company Could Move To US

"Surprising."

"Detrimental to Canada's industrial future."

"There's been some sort of quid pro quo..."

That's how some Canadians reacted when they heard that their government has awarded a contract for new CF-18 simulators -- not to the home team, CAE, Inc., but to Bombardier Aerospace, which plans to buy the sims from L-3 Communications in New York. To make that deal work, Ottawa will have to pay $44 million more than CAE bid and uses what, to Canadians, amounts to foreign goods and services.

The situation is especially irksome to Canadian patriots because CAE has a worldwide reputation for the fine quality of its simulators. That raises a lot of eyebrows in the Great White North.

Under the contract, estimated to be worth $270 (Canadian), Bombardier will build training centers at two Canadian Forces bases and L-3 will supply the simulators themselves. As a result of losing the bid, CAE now says it's had to lay off 300 workers.

CAE may be an industry leader in simulation machinery, said aerospace analyst Richard Stoneman, "yet in their own home country they can't land a training contract. The guys from L-3 must be laughing up their sleeves."

While Canadians across the country are scratching their heads -- some angrily -- Stoneman suggests the government's decision to go with Bombardier to prevent it from selling off its aviation training division as part of a corporate restructuring. "The government was not amused, having sunk all sorts of money into that facility, to have Bombardier walk and hand it over to a non-Canadian operator. So there's a suspicion there's been some sort of quid pro quo with Bombardier over not selling off that asset."

"We're continually pressing for more information on what brought the decision about," said CAE CEO Derek Burney. "Once we've exhausted that, we'll decide what action to take."

To add what looks like insult to injury, Ontario-based Atlantis Systems, is listed on the contract as working with Bombardier. But Atlantis executives have written the Canadian defense minister to say they have nothing to do with the project, according to Burney.

"That puts the Canadian content (on the Bombardier bid) way down from where it allegedly was," he said.

The flap comes just one day after the Pentagon awarded a major contract to CAE. Burney says that contract will be handled by his company's Tampa (FL) subsidiary. But Burney denied that he plans to move the company, lock, stock and simulator, to Tampa in the wake of the pilot-training contract award.

So far, there's been no comment from Bombardier and no comment from Prime Minister Paul Martin.

FMI: www.cae.com/en/general/index.shtml, www.aerospace.bombardier.com, www.l-3com.com