Dispute worth hundreds of millions | Bombardier wins a round against its supplier Honeywell

Bombardier has won an important round in a dispute worth several hundred million between it and Honeywell, engine manufacturer of one of the models in its Challenger family of private jets. The American multinational will have to negotiate in good faith with the aircraft manufacturer in order to offer it better prices.

This legal dispute between the two companies concerns the HTF7000 engine, chosen to be found under the wings of the Challenger 300 – a medium-sized aircraft – at the turn of the 2000s. The business jet is now called Challenger 3500.

In the 1990s, Honeywell began to design and build the HTF7000 exclusively for Bombardier, underlines Quebec Superior Court Judge David R. Collier, in his decision rendered on December 11. Over time, the American multinational began to offer it to competitors of the Quebec aircraft manufacturer, such as Gulfstream, Embraer and Textron, adds the magistrate.

“Relations between Bombardier and Honeywell deteriorated with the arrival of competitors,” writes Judge Collier in his 30-page decision. Due to market pressures, Bombardier was unable to raise the price of the Challenger while paying more for Honeywell engines under a price escalation formula. »

The Montreal-based company criticized its supplier for selling its HTF7000 engine at advantageous prices to other business jet manufacturers when it was the company that should have benefited from this advantage under the contracts in force.

“Certain statements made by Honeywell during the proceedings [judiciaires] suggest that it may have decided not to disclose documents concerning its cost reduction programs, despite the obligation imposed on it to do so,” says Judge Collier, in his decision.

Between 2012 and 2017, Bombardier estimates that it overpaid 447 million. The Quebec multinational is also seeking damages from its supplier. Judge Collier did not rule on the question of the amount to be paid to Bombardier.

The magistrate’s decision forces Honeywell to negotiate with Bombardier in order to allow it to reduce its costs. The American giant will also have to provide a sales record to an auditor. The latter will have the mandate to verify whether Bombardier’s rivals have indeed been able to obtain HTF7000 engines at advantageous prices.

“As for damage subsequent to 2017, Bombardier will initially focus on the process already underway,” the Quebec manufacturer said in a statement sent by email. The procedure and audits requested will make it possible to define the next steps in due form.

Bombardier and Honeywell, however, have not finished fighting in court. The North Carolina-based company confirmed by email that it had appealed the decision. Before the Quebec Court of Appeal, she will have to demonstrate that the trial judge erred.

On the Toronto Stock Exchange, Friday afternoon, Bombardier’s Class B share gained 11 cents, to trade at $52.22.