the inside story behind the bungled bombardier c series the inside story behind the bungled...

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  • M a r t i n P a t r i q u i n F e b r u a r y 8 , 2 0 1 6

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    The inside story behind the bungled Bombardier C Series

    The C Series has a lot going for it, but management missteps have brought Bombardier to the brink

    It was an astonishing bit of candour,

    uttered as it was by the president and

    CEO of one of the largest

    transportation companies in the

    world. The Quebec government had

    just announced a $1.3-billion

    investment in the C Series, the new

    line of commercial jets from Montreal-

    based rail and aerospace company

    Bombardier. Plagued by technical

    delays, cost overruns and nagging

    existential questions about its very

    purpose, the C Series has long been

    a source of unwelcome headlines for

    the company.

    Landing on the same day as the

    company’s ugly third-quarter report—

    Bombardier had lost nearly $5 billion,

    mostly having to do with writedowns

    on the C Series—the $1.3-billion

    government investment, equivalent to

    about $160 for every man, woman

    and child in the province, was meant

    to be a bit of good news in an

    otherwise gloomy day for the

    company. Bombardier president and

    CEO Alain Bellemare spoke to

    journalists following the announcement, one of whom noted that as recently as July, management had

    assured investors the company had enough cash to see the C Series into production. Now the Quebec

    government was investing, and the company was petitioning the federal government to do the same. “I’m

    having trouble understanding what happened,” the journalist said.

    “That’s an excellent question,” Bellemare responded to the non-question, in his raspy French bonhomie.

    A front view of a CS 100 on the production line. Structurally complete, the plane could be described as in the finishing stages at the Bombardier facility in Mirabel, Quebec on the 1st of Feb. 2016. (Photograph by Regor LeMoyne)

    converted by

  • “Actually, I wonder that too.”

    Related: Why Quebec’s Bombardier bailout isn’t as crazy as it sounds

    Left unsaid in Bellemare’s ensuing explanation was how the company was able to secure the money from

    a government in the depths of austerity measures mere months after saying it wouldn’t need financial

    assistance for an airplane project that is 2½ years late, US$2.2 billion over budget and sorely lacking in

    confirmed orders.

    Even more gobsmacking to analysts and observers: that Bombardier was able to secure the funding

    without relinquishing its corporate governance structure, despite having lost nearly 90 per cent of its value

    since June 2008. This dual-class share structure ensures that the Bombardier family and that of company

    scion Laurent Beaudoin remain in control of the board; the company has had a CEO from the Beaudoin

    or Bombardier families for 66 of its 73 years in business.

    The power the Bombardier-Beaudoin clan wields over Bombardier the company is surpassed only by

    their secrecy. Very little is known about the family dynamics at play behind this crown jewel of Quebec Inc.

    The shares are controlled by the four children of Joseph-Armand Bombardier, the mechanic and inventor

    who in 1937 gave the world the snowmobile. Claire Bombardier Beaudoin, J.R. André Bombardier,

    Janine Bombardier and Huguette Bombardier Fontaine control the majority of Bombardier’s voting


    Yet despite being the picture of discretion, the families are reportedly frustrated that the battered share

    price has drained much of their wealth—since 2008 the value of their Bombardier stake has dropped from

    $2.2 billion to $260 million. And according to a source close to the family, who spoke to Maclean’s on condition of anonymity, they put the blame squarely on Pierre Beaudoin, 53, the company’s erstwhile

    CEO and its current executive chairman.

    J. Armand Bombardier, 52, designer of the Bombardier snowmobile, stands beside the latest model on the production line of his Valcourt, Quebec, factory, 60 miles east of Montreal. (Granby la voix de l’Est/CP)

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  • Pierre is the son of Laurent Beaudoin, who turned his father-in-law Joseph-Armand

    Bombardier’s fledgling snowmobile company into a global transportation brand. Pierre joined the

    company in 1985 and became its CEO in 2008. Pierre became Bombardier’s executive chairman in

    2015, after stepping down as CEO.

    “The families are very disappointed in Pierre. They’re wealthy, so it’s more a question of pride. They’ve

    taken the stock collapse almost as a personal slight,” says the source close to the family.

    As president of Bombardier Aerospace, Pierre launched the Learjet 85 business airplane in 2007. Less

    than a year later, as Bombardier CEO, he launched the C Series program. Today, the Learjet has been

    shelved, with the company incurring a $1.4-billion writedown last year on the shuttered project, while the C

    Series has only 243 confirmed sales. Meanwhile the company’s new VIP business jets, the newest

    editions to the Global Express program launched in 1993, were meant to hit the market in 2016. That’s

    been delayed by at least two years.

    With the success of the C Series in doubt and Bombardier’s share price dipping below a dollar in recent

    weeks, former executives at the company are irked. “The reason the company is where it is today is

    because of the leadership,” says a former Bombardier senior executive, who spoke to Maclean’s on condition of anonymity. “Pierre would never have been CEO of that company if he didn’t have his name,


    Now, after so many stumbles, taxpayers are being asked once again to cough up. Bombardier will likely

    receive its infusion of federal cash. In 2008, the Conservative government approved a $350-million loan to

    cover research and development costs of the C Series. This loan, along with the $117 million from the

    Quebec government and $310 million from the British government—Bombardier Aerospace employs

    6,000 people in Belfast—has yet to be repaid.

    Despite evident governance issues and bleak financial prospects, Bombardier remains “a key anchor

    firm for Canada’s aerospace industry,” according to a recent government memo prepared for the Liberal

    Federal Transport Minister Marc Garneau speaks to staff at Bombardier’s CS100 plant Friday, December 18, 2015 in Mirabel, Que. After years of delays and cost overruns, Bombardier’s CSeries commercial aircraft has been certified by Canada’s transportation regulator. THE CANADIAN PRESS/Ryan Remiorz

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  • government last fall. Translation: for all its warts, allowing Bombardier to fail would have enormous political

    implications for Justin Trudeau’s government.

    Here’s another translation. Rightly or wrongly, Bombardier will continue to exist thanks in large part to the

    Canadian taxpayer.

    Related: Jason Kirby’s idea for Bombardier: What if we let it fail?

    In many ways, the development of the C Series is entirely in line with the company’s high-risk, high-reward

    history of either conquering market segments or conjuring them out of thin air. The company that became

    Bombardier was birthed in a garage in Valcourt, Que., a swath of wo

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