Bombardier Inc. is the 20th and 21st century version of the 19th century Canadian Pacific Railway. The company has a vision of making Canada into an aerospace leader in the world, just as CPR and its promoters saw the railway joining Canada from sea to sea.
And like the CPR, it has soaked a staggering amount of government cred- it facilities, caused its share of political storms and controversy, provoked alien- ation between Western Canada and Quebec and, in the last few years, made very little money for its shareholders.
Next to Nortel, and now that Seagram’s has gone, it grabs more headlines than any other publicly traded Canadian company. Hardly a week goes by without a crisis headline. As I write this, today’s headline is ”œQuebec government agrees to $750 million guarantee to Bombardier.” Within days, CEO Paul Tellier would be out, two years to the day after he was brought in execute a turnaround of the troubled transportation giant.
Since there are now only four com- panies in the business of making pas- senger airplanes ”” Boeing, Airbus, Embraer from Brazil and Bombardier ”” the competition is fierce and for keeps. The Americans and Europeans, through Airbus and Boeing, obviously will not dismantle their airplane mak- ers, no matter how costly. The question is: Can and should Canada, though its governments and taxpayers, be spend- ing so much time, effort and money to keep Bombardier competitive?
What journalist Peter Hadekel has done is present the story of Bombardier’s relations with the gov- ernment, its success and failures as a company, it strengths and weaknesses competing internationally, into a remarkably balanced book. We are asked to make up our own mind.
It is a refreshing approach. Too often lately, journalists and other writ- ers have published polemical works on a given subject rather than attempt to inform and enlighten the reader. This book is in the second tradition, one that collects the evidence from inter- views, annual reports and dissection of the company’s financial statements by analysts, and presents a broad spec- trum of opinion to the reader.
Most Canadians know a part of the Bombardier story. Maybe they have ridden on a Ski-Doo (their pioneer transport vehicle) or a Sea-Doo or an all-terrain vehicle. Many have traveled in one of their small jets, known as the RJ, that have helped rev- olutionize air travel in North America and have carved out an impressive 60 percent share of the global regional jet market. Or one of their rail cars on the Montreal or New York subways. Tens of thousands work for the company in Quebec, Ontario, the US and Europe.
It’s a company that was family-run until two years ago when they decided to go outside and hired the most respected Canadian business person of that time, Canadian National CEO Paul Tellier. Tellier has shaken and rat- tled the company, selling back the recreational products to the family, cutting jobs in Canada and Europe, and closing down extraneous but cost- ly offshoots. It’s a company that is family-run again, now that Tellier is gone and executive chairman Laurent Beaudoin again has his hands on the steering wheel.
In his two years on the job, Tellier was forced to petition the federal and provincial governments, fight the World Trade Organization (WTO) and Embraer, the Brazilian short-haul jet maker, in court and rationalize the rail division that was far too big and disor- ganized. Meanwhile the stock price had dropped from a heady $25 to less than $2.50 in a few years.
Bombardier under Beaudoin, the son-in-law of founder J. Armand Bombardier, was a company brimming with ideas. Some worked, some didn’t. The controversial maintenance contract for the CF-18 was snatched away from Winnipeg in the 1980s. It alienated Western Canada and confirmed to them that Bombardier was a Quebec company getting all the juicy handouts. It turned out that the contract did more political harm than it made business sense.
Bombardier’s beginnings in the air- line business were through its pur- chase of Canadair from the federal government for next to nothing. It revived Canadair, bought LearJet of Wichita, Kansas, and De Havilland from the Ontario and federal govern- ments. It bought Short Brothers PLC in Belfast, Northern Ireland, for a knock- down price from the British govern- ment. Launched into the passenger transit rail car business, it began gob- bling up European rail makers for what it thought was a growing market for rail cars there and in North America.
Beaudouin took chances in his determination of make Bombardier a significant international player. Without his boldness and imagina- tion, plus negotiating skill, the compa- ny would never have become the respected player it is today.
Along came Sept. 11, 2001 and that changed everything in the trans- portation, industry, especially, the air- line business. Bombardier, of course, took a series of heavy knocks and Tellier was trying to right them, plug- ging the businesses with potential and dumping those that are dying.
Of course, it is the federal govern- ment and to a lesser extent provincial governments that found the loans for research and development, and then, the manufacture and cus- tomer financing for the sale of the planes. The Export Development Corporation (EDC) was the vehicle for much of the money. There were doubters inside the government and outside but they had to contend with forceful personalities like Peter Smith, head of the industry association.
”œWhen you look at the modest amount of money that was invested,” he told Hadekel in one of dozens of interviews the author initiated with people in the business from Switzerland to Brazil, ”œand we’re talking hundreds of millions of dollars compared with billions of dollars in sales. The return on that investment came in all kinds of ways that tend to be overlooked by the media and critics: employment genera- tion, technological innovation, person- al income tax, corporate income tax, and the economic activity related to advancement of GDP. It’s not embar- rassing for us to continue pounding our chest and say to government, excuse me, but if you want Canada’s aerospace industry to be successful, you’ve got to play in this game.”
There are many lessons to be learned by students of business, bureaucrats dealing with business, politicians attempting to find out how the two interact, and those involved in government relations. And here Paul Tellier, who came from being the top bureaucrat in Ottawa, to privatizing Canadian National, to nursing Bombardier back to profitability offers some advice that in itself would be jus- tification for this crisply and meticu- lously written book. He said:
”œToday, in any significant job in the business sector, gov- ernment relations are very critical. When you start the year, and you have a good business plan, the greatest uncer- tainty about not achiev- ing your plan comes from government, what they can do to you ”” legislation, regulation, taxation. So whether this is Bombardier, CN or the Royal Bank of Canada, for a CEO to under- stand how the government works is a major asset.”
This easily could become a textbook for industrial strategy experts and government relations people, in business schools and on the reading lists of political science courses.