Pratt & Whitney deal not quite as advertised

The Conservatives, who once railed against "corporate welfare" handouts to industry, are now showering $300 million of free loans on American-owned aircraft engine-maker Pratt & Whitney, headquartered in Longueuil, Que.
Phuc Cong Ly works on a PW500 engine at the Pratt & Whitney plant in Longueuil, Que. ((Paul Chiasson/Canadian Press))

The Conservatives who once railed against "corporate welfare" handouts to industry are now showering $300 million of free loans on American-owned aircraft engine-maker Pratt & Whitney, headquartered in Longueuil, Que.

If that isn't enough to land Stephen Harper in hot water with his own Conservative supporters, it turns out the same company got another $350 million in loans from Canadian taxpayers just four years ago, none of which has been repaid.

Even before the latest so-called "repayable investment," government figures show Pratt & Whitney owed taxpayers a total of about $1.2 billion, most of it dating back more than 13 years.

The company isn’t exactly broke.

Pratt & Whitney Canada is a subsidiary of a huge U.S. conglomerate, United Technologies Corp., which last year posted profits of $4.2 billion on sales of almost $53 billion.

While it may be cold comfort to average taxpayers, federal officials insist Pratt & Whitney "is in good standing on its government loans."

The latest goodie for the company was announced Monday with great hope and fanfare by federal Industry Minister Tony Clement.

Alas, the deal may not be exactly as advertised.

What isn't mentioned

The official government news release explains the $300-million federal "investment" is part of a $1-billion research project by Pratt & Whitney to develop a new generation of aircraft engines at facilities near Montreal and Toronto.

Industry Minister Tony Clement says the money for Pratt & Whitney will be used to improve the company's civil and military aircraft engines. ((Sean Kilpatrick/Canadian Press))

The release does not mention the company is also getting an additional $178 million from public coffers in the form of federal and provincial tax credits.

The government announcement also claims the deal will "create and maintain an average of more than 700 highly skilled jobs during the project work phase, and more than 2,000 jobs during the 15-year benefits phase."

The company later explained that it hopes to hire about 200 new staff for the research and development project, expected to take about five years.

At $300 million from taxpayers, that works out to $300,000 a year per job.

As for the rest of the jobs, Clement's press secretary, Lynn Meahan, explained that "hypothetically, without the project, the workforce would have shrunk."

She said the promised 2,000 long-term jobs would come from  manufacturing the new engines yet to be developed, and it is not clear how many of those positions, if any, would be new.

Repayment not coming soon

Regardless of how successful the project turns out to be for Pratt & Whitney, Canadian taxpayers won’t be getting their "repayable investment" repaid anytime soon.

The minister's spokesperson said the company doesn’t have to repay a cent of the loan during the "research and development period," in this case expected to be about five years.

After that, the company has at least another 15 years to pay up.

In 1997, the federal government gave Pratt & Whitney a similar loan of just over $1 billion.

Federal figures show more than $875 million is still outstanding.

No matter how long it takes the company to pay back the latest bit of federal largesse, the minister's spokesperson said the whole $300-million loan from taxpayers remains entirely interest free.

The deal is being funded from a federal industrial support program called the Strategic Aerospace and Defence Initiative.

Ironically, it was launched in 2007 by then industry minister Maxime Bernier, a rabid opponent of government handouts.

$300 million in one day

At the time, Bernier announced the budget for the program was $900 million over five years, with maximum annual funding of $225 million.

Pratt & Whitney alone is getting $300 million in one day.

While there is no explanation for this apparent departure from the program, federal figures suggest the Harper government may have been having trouble giving away other people's money.

Until this week, with only about 18 months to go in the five-year program, the government had doled out only $167 million of the $900 million budgeted.

Kevin Gaudet, head of the Canadian Taxpayers Federation, slammed the Conservatives for "playing Santa to Pratt & Whitney at great taxpayer expense."

"It's high time they got their priorities straight."


Greg Weston was an investigative reporter for CBC News and a regular political commentator on CBC Radio and Television from 2010 to 2015.