Bombardier GlobalEye Production Talks|$5 Billion-Plus Radar Plane Deal, Canada's Share?

The part Bombardier doesn't build yet

Bombardier says it is in advanced talks with Saab to build the GlobalEye surveillance plane in Canada. Yet Ottawa has signed only a non-binding term sheet, and it has not said who builds what. The Defence Investment Agency announced the term sheet on September twenty-fifth. It covers six GlobalEye aircraft, each built on Bombardier's Global 6500 business jet.

The project's expected funding envelope is more than five billion dollars. Pricing, delivery timing and final industrial arrangements were not announced. On the same Friday, Bombardier's chief executive, Éric Martel, spoke at a Globe and Mail business event in Toronto. “GlobalEye is our priority right now,” he said. His team had been in Sweden again the week before.

He said Bombardier is “focused on building and finishing GlobalEye here in Canada.” The company is also scouting Canadian sites for a new factory dedicated to military work. A company hunting for a factory. A government that has not committed to buy. Between those two facts sits one word Martel used. Finishing. The GlobalEye is made in partnership with Bombardier. That is true.

But the partnership is narrower than it sounds. Bombardier's role today is limited to supplying airframes and engineering collaboration. The jets are assembled at Toronto's Pearson airport as stripped-down business jets. They are then sent to Sweden to be stripped down and rebuilt with the surveillance components. Saab is the main manufacturer and systems integrator.

It makes the radar, the sensors and the command controls in Sweden. Ottawa wants these planes to detect threats at long range and to serve as flying command-and-control centres. The part that makes that possible is not added in Canada. Bombardier had already disclosed talks with Saab about taking a bigger slice of production. The Globe reported the aim was to capture more economic value from the alliance.

Martel is now signalling that those negotiations are at a mature stage. So the question is not whether Bombardier stays in the program. It is whether the finishing moves here.

What Ottawa signed, and why

That puts the buyer at the centre. In May, Prime Minister Mark Carney announced at the CANSEC defence expo that Canada had selected Saab as a preferred supplier. The sudden announcement took the industry by surprise. Carney has also said that if Canada agrees to buy the planes, they would be militarized in Canada. Today, the surveillance fit-out happens in Sweden.

Ottawa has made no binding commitment, but it has indicated a strong intention to reach a deal. The government's wording holds both ideas at once. It said the agreement “does not constitute a contract or commitment to procure aircraft,” but that it “represents concrete progress.”

Saab's chief executive, Micael Johansson, said in a news release that the agreement “establishes a clear framework for the next phase” of talks. Two parties, two carefully chosen statements. Neither says which company will finish the plane, or where. That answer sits in a document the public cannot read. The term sheet is not public. The government said it reflects months of negotiations with Saab.

It said the sheet lays out how Saab can meet Canada's requirements, including industrial participation and a delivery schedule. In other words, Canadian work is already a line item in the talks. How big that line is has not been disclosed. The case for that Canadian work is also the case under attack.

Sources told CBC News the GlobalEye has met only a handful of the military's requirements, and will need important modifications. Ottawa says the American contenders, Boeing and L3Harris, are in the same situation. The government said GlobalEye was selected based on geopolitical and economic criteria.

Stephen Fuhr, secretary of state for defence procurement, said: “Canada’s approach to defence procurement must deliver more than military equipment.” The next round of talks, the government said, will focus on a “Canadian configuration and development program designed to meet Canada's requirements.” The Conservatives have criticized the decision to proceed without going to tenders.

They have written to the auditor general and the parliamentary budget officer, asking for an investigation. Conservative defence critic James Bezan asked whether officials were “putting political decisions ahead of national security, defence and operational readiness.” So Canadian industrial work is not a side benefit of this purchase. By the government's own account, economic criteria helped pick the plane.

That is exactly what the critics want examined.

The prize beyond six planes

The May decision also passed over American companies that wanted to bid. Boeing makes the E-7 Wedgetail. L3Harris is selling the Aeris X. Here is the detail that changes the picture. The Aeris X would also use the same Bombardier airframe as the GlobalEye. Bombardier's jet sat inside two of the three rival planes. Choosing Saab over L3Harris did not decide whether Bombardier supplied an airframe.

What it can decide is the work that comes after. Saab has put that work on the table before. Last year, Saab executives said the entire GlobalEye could be built in Canada if the Department of National Defence placed an order. That would mean another production line for the aircraft, in addition to the existing one in Sweden. And the talks reach beyond Canada's own fleet.

According to CBC, Ottawa is working with Saab to manufacture some aircraft for other GlobalEye clients in Canada. Current or potential customers include NATO, Sweden, France, the Netherlands and the United Arab Emirates. Orders for the plane have poured in as military spending grows around the world. Earlier this year, NATO said it would open negotiations with Saab for up to ten GlobalEye planes.

The list price is five hundred and fifty million euros each. At that price, ten planes would come to five point five billion euros. That is one prospective buyer, still in negotiations. But it shows why a production line in Canada could matter far beyond six Canadian planes. This is where Martel's factory search fits. Bombardier is in the middle of a major buildout of its defence unit.

The new plant would mirror its existing defence-manufacturing operation in Wichita, Kansas. Saab tied a Canadian line to a Canadian order. Whether Bombardier or Saab would hold the finishing work on that line has not been set out in anything published.

One bet, one document

Saab has also pitched building its Gripen fighter under licence in Canada, if Ottawa buys it. Ottawa is weighing whether to scale back its order of 88 American-made F-35s and buy Gripens instead. That could have been a second door into Saab's work. Yet Martel has been much cooler toward a joint venture with Saab on the Gripen.

The radar-plane decision is also not expected to signal where Ottawa is heading on the F-35 review. For now, Bombardier's stated Saab priority is a single plane. Back to the opening gap. Bombardier is preparing as if the finishing work is coming. Ottawa has signed a framework that does not commit it to buy. Read together, Martel's words are a claim on the part of the plane now built in Sweden.

That claim will be settled in the final contract's industrial terms. The thing to watch is whether the final agreement places the surveillance fit-out in Canada, with Bombardier doing it. If it does, Bombardier moves beyond the shell, and a second line comes into view. If the finishing stays in Sweden, or the talks change or fail, Bombardier remains an airframe supplier, as it is today.

The government has given no timeline or final cost.

Informational only, not investment advice. Figures and quotes come from the linked reports.