Tuesday, April 26, 2016

Bombardier Gets What It Wants

I used to teach in the Eastern Townships, not too far from where the Bombardiers got their start making snowmobiles. I should be clear at the outset: I acknowledge that snowmobiles are essential in the Far North. But, as recreational vehicles, I find them loud and simply annoying.

Nonetheless, the Bombardier and Beaudoin families have used snowmobiles to leverage their way into the transportation business. And, Alan Freeman writes, they are masters at getting governments to come to their terms.

Consider how the families got into the aircraft business. They bought government owned Canadair back in the 1980's:

It all started in 1986, when Bombardier became the dark horse buyer for Canadair, the federally-owned aircraft manufacturer that already had spent $1.5 billion developing the Challenger business jet. At the time, the Challenger seemed even a lousier bet that the C Series is today, with Canadair having sold only five of the jets in 1984 and 22 in 1985. Bombardier paid a scant $120 million for the whole company. The Mulroney government was relieved to get the thing off its hands.

The sale turned out to be a brilliant move for both Bombardier and the government. Thirty years later, the Challenger is still in production and Bombardier’s decision to stretch the business jet into a passenger aircraft created the whole regional-jet segment of the industry. Bombardier — which started improbably as a maker of snowmobiles — turned into the world’s third-largest maker of civilian
In the 1990's, the families bought Toronto based de Havilland:

Bombardier used similar tactics in 1992 when it bought de Havilland Aircraft of Toronto from Boeing. Once again, Bombardier was the only real bidder for what looked like a doomed asset, and it managed to get grateful Ontario and federal governments to finance much of the deal. 

And they bought Shorts Aircraft from Maggie Thatcher's government in the midst of  "the troubles" in Northern Ireland. And the company has been able to snag long term contracts building rolling stock for Montreal's Metro and the Toronto Transit Commission. Bombardier has always had trouble meeting deadlines. But it has made all of those enterprises profitable:

When it came to Thatcher’s reluctant decision in 1989, the money ended up being well spent. Bombardier may be infuriating for politicians to deal with — making promises on timelines and research and development costs that it can’t seem to meet, refusing to dilute the control of the founding family — but when it comes to jobs and investment in R&D, it generally delivers what it promises.

At de Havilland, Bombardier developed the Q400 turboprop aircraft; it still makes it there. And the C Series, with its new order for 75 planes from Air Canada and the real possibility of an even-bigger order from Delta in the U.S., may be at the point of taking off.

Bombardier may be all sort of things, but it’s not a take-the-money-and-run kind of investor. If it weren’t for Bombardier, chances are Canadair, de Havilland and Shorts all would have closed down long ago and Canada would have an aerospace industry making parts for others and doing maintenance on aircraft built elsewhere.

So, don't be surprised when the Trudeau government gives Bombardier what it wants. It's very good at getting what it wants.

 Image: cfdcanda.ca


Steve said...

It seems to be terribly mismanaged. Case in point the streetcar mess in Toronto. The signal bid in London. Who is running this horrorshow?

Owen Gray said...

Good question, Steve. But this is not unusual for Bombardier. In fact, delays and cost overruns are common in the aircraft industry. Consider the history of Boeing's 787.

The Mound of Sound said...

As a faithful, long term subscriber to "Aviation Week" I find interesting the clear and open affection that industry-leading publication has for Bombardier. Endless articles reveal that they see much in Bombardier as an innovator within its market range and yet they openly fret over every setback like some doting grandparent.

Owen Gray said...

My opinion of Bombardier's airplanes is a little like my opinion of their snowmobiles, Mound. I've flown on the CRJ regional jet a couple of times. It's a nice, small, 50 seat airplane; and the ride from Ottawa to Atlanta was smooth and quiet.

But the company has succeeded in backing governments into a corner. And, as a citizen, I'm annoyed.