BUSINESS WATCH

Flying high with the little engine that could

New conquests by Montreal-based Bombardier Inc. have thrust it into the forefront of world passenger trade

Peter C. Newman March 27 1989
BUSINESS WATCH

Flying high with the little engine that could

New conquests by Montreal-based Bombardier Inc. have thrust it into the forefront of world passenger trade

Peter C. Newman March 27 1989

Flying high with the little engine that could

BUSINESS WATCH

New conquests by Montreal-based Bombardier Inc. have thrust it into the forefront of world passenger trade

PETER C. NEWMAN

This is the week that Montreal-based Bombardier Inc. decides to proceed with manufacturing a commuter stretch version of its Challenger aircraft, and, by April 30, the Montreal-based multinational expects to prepare a final bid for Short Bros. PLC of Belfast, one of Northern Ireland’s largest companies. Both firms have been building prototypes of short-haul, 48passenger aircraft for which an initial market of at least four dozen units has already been identified, with projections over the next decade calling for the sale of 1,500 planes.

Acquisition of the government-owned Irish facility would be right in line with Bombardier’s 1986 purchase of Canadair Inc. from the Canadian government for $125 million. Short Bros, was already making lighter-than-air balloon craft when the Wright brothers (who made the first powered flight in 1903) placed an order with the company for six biplanes in 1908. The British government expropriated Short Bros, in 1943. It has built a succession of successful aircraft, including some of the first flying boats and vertical-takeoff models, but sank so deeply into the red that the Thatcher government recently decided to pay down its $819 million of debt and privatize it. Bombardier is one of two bidders still on the shortlist; the other is a joint venture set up by Britain’s General Electric Co. PLC and Fokker in the Netherlands. The Canadian company is thought to have the winning edge because it has promised to maintain the Irish company as an integrated concern, instead of selling off its various operations, as a British-Dutch syndicate wants to do. Once the purchase is completed, Bombardier plans to combine facilities and produce the new plane for the international market.

That has been the pattern at Canadair, which has already sold 160 Challengers to 12 countries and has a backlog of orders. The present production rate of 18 aircraft a year is being increased to 24, but future emphasis will be on the new stretch version. Orders worth more than $700 million are already in hand for

the $ 14-million stretch model, and production is expected to reach four planes per month by 1994. Canadair continues turning out CL-125T water bombers, and the Pentagon has expressed lively interest in its CL-227 Sentinel surveillance system. The company won the controversial $ 1.4-billion Canadian contract for overhauling our CF-18 jet fighters and it has just begun work on a long-term, $ 1.6-billion order for parts of France’s A330/340 Airbus.

Laurent Beaudoin, Bombardier’s chairman and chief executive officer, recently told me, “Three-quarters of our labor force is located in Canada, yet 80 per cent of our sales are exports.” He added: “Total sales will be well over $1.5 billion this year. The secret of being able to compete worldwide is to choose your niche, then exploit it by motivating your people through a highly decentralized organization. Our head office is tiny—fewer than 40 people. That means each division has full responsibility for marketing and developing its products.”

Although aircraft sales are the glamorous part of the business, Bombardier has done even better in railway and subway rolling stock. Its $ 1.2-billion contract for 825 New York City subway cars in 1982 was followed by sales to the Boston underground, Amtrak and the

Southeastern Pennsylvania Transportation Authority. The company has acquired Pullman and Budd railway car designs and recently set up a Florida subsidiary to make 72 monorail cars for Disney World. That could lead to more U.S. orders, but Bombardier is equally busy in Europe. Bombardier owns a controlling interest in Constructions ferroviaires et métalliques, Belgium’s leading railway-carmaker, which is participating in a new Paris-LondonBrussels express train project to be routed through the tunnel link beneath the English Channel. The Montreal company also owns Rotax GMBH of Gunskirchen, Austria, which makes most of that country’s streetcars as well as manufacturing engines for Bombardier’s Ski-Doo snowmobiles.

The Ski-Doos were the Montreal company’s original business, invented in 1959 by its founder, Joseph Armand Bombardier, who died in 1964. Sales of the winter vehicle are still climbing at an annual 18 per cent, which means that last year 120,000 units moved through the company’s network of 2,000 dealers, with deliveries scheduled from warehouses at Boucherville, Que., Malone, N.Y., and Wausau, Wis. TO expand seasonal marketing, Bombardier last year came out with a summertime water version called the Sea-Doo, a scooter that is expected to sell about 25,000 units this year.

Beaudoin is a 50-year-old chartered accountant who married one of Bombardier’s daughters, Claire, and joined the company in 1963. He was president by the time Bombardier took its first major diversification initiative—the reverse takeover of MLW-Worthington Ltd., a Montreal locomotive manufacturer, in 1976. The Bombardier family still owns 35 per cent of the company’s equity and two-thirds of its voting stock. “Almost back to the 1940s when Monsieur Bombardier commercialized his first snow vehicle,” Beaudoin recalled, “we were in the export business because every country with winter conditions wanted to buy them.”

Not all of Beaudoin’s ventures have worked out. He was at one time hoping to set up a joint venture with a Japanese manufacturer to produce small urban cars in Canada, but the power plant would have to have been imported from Japan, and the sudden rise of the yen made it uneconomical. He invested $10 million in a prototype and says that some day he hopes to push into the car industry. He is more upset about not being able to break into the most profitable market closest to home: refitting the rickety rolling stock of Via Rail. “The cars certainly need modernization,” Beaudoin said, “but you’ll never have a good passenger service in Canada unless you have rails specifically devoted to that use. Running passenger cars on freight rails is too slow and too uncomfortable. Certainly, it would pay to modernize the Montreal-Toronto-Windsor corridor, but that’s going to take a major financial commitment. Nobody seems ready to make it.”

Meanwhile, Beaudoin travels the world, seeking orders, buying up rivals and preaching his gospel of decentralized management—creating, in effect, a prototype of the kind of company Canada needs for the 21st century.