Bombardier wins court case against supplier Honeywell on engine costs

MONTREAL — Motor supplier Honeywell Intercontinental Inc. will have to negotiate with Bombardier Inc. on the charge of the jet engines it rolls out for the Montreal-based mostly airplane maker, a Quebec Remarkable Court decide has ruled.

Handed down final month, the decision marks the newest advancement in an 8-12 months dispute involving the companions.

The judge discovered that Honeywell has an obligation to negotiate in superior faith with Bombardier with the aim of decreasing the price tag tag on propulsion techniques set up in its Challenger company jets.

The ruling also demands the U.S. company to hand in excess of a sheaf of product sales documents to an unbiased auditor, who will evaluate irrespective of whether the organization sold turbofan engines to rivals at lower prices, which the deal with Bombardier prohibits.

Honeywell has filed a movement to attraction the final decision, a go Bombardier is contesting.

Bombardier to start with sued Honeywell in 2016, before long soon after rivals started looking to get in on the market for a long-variety “tremendous mid-sizing” business jet that Bombardier had carved out.

“With the arrival of competition Bombardier’s romantic relationship with Honeywell became strained,” Justice David Collier wrote. “Bombardier’s market share for tremendous mid-sizing jets fell as competition entered the market place, when Honeywell became the sole engine company for all four competing OEMs (primary products brands).”

Commencing in the 1990s, Honeywell began to design and style and build engines solely for Bombardier, but afterwards started giving very similar methods to Bombardier rivals Gulfstream Aerospace Corp., Embraer S.A. and Textron Inc., the decision notes.

Bombardier has argued that the North Carolina-based aerospace large then hiked the selling price of engines for Bombardier in spite of a contractual obligation to increase them though cutting down prices more than time. It also promises Honeywell was marketing engines to rivals on far more favourable terms, irrespective of a provision that Bombardier would profit from the ideal cost.

Honeywell has explained the goal of boosting motor effectiveness though slashing costs was “aspirational,” and has denied Bombardier’s correct to an audit to confirm no matter whether better offers ended up created with opponents. It also argues it has not bought the identical engine to opponents, insisting that the HTF7000 engine designs experienced variations certain to every single organization.

Nonetheless, the proof demonstrates “there is appreciable similarity” in between the engines offered to all four corporations, the choose said, indicating the contract’s provision around ideal charges for Bombardier thus applies.

Honeywell’s argument boils down to a promise that Bombardier will get the very best price tag for goods sold especially to the enterprise fairly than the in general very best value, the judge wrote, calling that “a manifestly absurd consequence.”

“Honeywell’s textual argument has the outcome of guaranteeing that Bombardier will get the most effective price for the merchandise sold to Bombardier — a manifestly absurd result,” the decide wrote.

The arrangement establishes that Bombardier and Honeywell agreed to protect Bombardier’s competitive advantage, presented its $18-million financial commitment in establishing the item and its position as the “start shopper.” Prior to the Challenger, Honeywell experienced not generated a new motor in much more than a quarter-century, in accordance to a person professional cited by the decide.

“Bombardier welcomes this selection by the court and will proceed to go after the matter, trying to get correct payment for each the contracts in dilemma,” the organization mentioned in an emailed assertion.

Bombardier is searching for $447 million in damages from Honeywell about statements it overpaid among 2012 and 2017. It is also trying to find to slash the price in upcoming a long time.

The court has not handed down a ruling on damages.

This report by The Canadian Push was to start with revealed Jan. 19, 2024.

Firms in this story: (TSX:BBD.B)

Christopher Reynolds, The Canadian Push