Business

Pratt & Whitney jet engine plants get $300M in federal investment

Two Pratt & Whitney plants that build jet engines will receive $300 million in tax incentives and subsidies from the federal government.

Aerospace firm already employs more than 6,000 across Canada

Pratt & Whitney employs more than 6,000 people across Canada. This employee is shown at a company jet engine plant. (Stephen Morrison/EPA)

Two Pratt & Whitney plants that build jet engines will receive $300 million in tax incentives and subsidies from the federal government.

Industry Minister James Moore announced the funding at the company's facilities in Mississauga, just west of Toronto. At the same time, Infrastructure Minister Denis Lebel made a similar announcement at the Longueuil, Que., facility on the other side of the river from Montreal.

The Ottawa funding will help the company develop the next generation of environmentally conscious jet engines, Moore said.

"Our government is proud to make smart investments that support high-quality jobs across the country," the minister added.

The funds will support 1,500 jobs across both facilities, the government said in a release, but will also help another 1,200 other companies along the supply chain, Moore said.

The funds will take the form of a repayable contribution through the government's Strategic Aerospace and Defence Initiative. That means the funds could theoretically prove to be a loan to be paid back, as that program requires any eligible projects to "clearly demonstrate that the applicant has, or can reasonably be expected to obtain, the financial resources to complete the project and repay the Crown."

Pratt & Whitney has been building jet engines in Canada since 1928 and employs more than 6,000 in Canada. The company is building the new geared turbo fan engines that are being used on Bombardier's CSeries aircraft which is undergoing flight tests

In a release, the government said Pratt & Whitney has invested more than $10.6 billion of its own money in research and development since 1982. But a Fraser Institute study last year found that Pratt & Whitney had received more than $3.3 billion in Canadian government subsidies in inflation-adjusted terms since 1970, more than any other private company has received from Industry Canada.

Mark Milke, a senior fellow at the Fraser Institute, says taxpayer subsidies to industry do not guarantee jobs.

"The question is whether it’s the best use of the money and whether government is the best entity to decide where capital should flow and the answer is nine times out of 10 a 'no,'" he said in an interview with CBC's The Exchange with Amanda Lang.

"You’ve got taxpayers in France, taxpayers in the U.S., taxpayers in Canada, taxpayers in Brazil – a poor country —subsidizing the aerospace industry.  One of the longer-term remedies is free trade agreements that are tougher, that ban this kind of displacement of taxpayer money into corporations," he added.

Subsidies are politically popular, Milke said, but they don't make companies efficient.

With files from Reuters

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