The Globe and Mail - 22.02.2020

B6 OTHEGLOBEANDMAIL | SATURDAY, FEBRUARY 22, 2020

When Alain Bellemare joined Bombardier as CEO in
early 2015, he promised a new beginning that would
see the Canadian plane and train maker realize its
“true potential.”
Five years later, with Bellemare having an-
nounced Monday it was selling the rail division to
France’s Alstom, Bombardier is starting over yet
again.
You can call the company many things: a shadow
of what it once was; a failed experiment in empire
building; a poster child for bad decisions, poor exe-
cution and woefulgovernance. It is all that, but may-
be most of all, it is cautionary tale for family-con-
trolled businesses.
The company has been a chronic turnaround sto-
ry since 2001. Twice in the past two decades, it has
turned to outsider leaders, who presided over asset
sales, recapitalization, belt-tightening and tough
decisions to keep the company alive. After cutting
short the tenure and plans of Bombardier’s first sa-
viour, Paul Tellier, the Bombardier/Beaudoin family
that controls the company has continued to back
Mr. Bellemare as he carried out the near-complete
dismantling of their baby to shore up company’s
balance sheet.
Long gone are the dreams of turning the com-
mercial airliner market on its head with a 100- to
150-seat jet called the C Series, and turning its spraw-
ling train division into a sufficiently profitable oper-
ation. Longer still gone are the ambitions to turn
Bombardier into Canada’s version of General Elec-
tric, dating to a time when GE was the world’s most
admired enterprise, rather than a perennial turn-
around story itself.
Instead, assuming various transactions now un-
der way come to fruition, what’s left will be a busi-
ness with a single line: selling high-end corporate
jets to giant companies and the ultrawealthy. If
you’re an optimist, it’s a profitable and worthwhile
endeavour that helps people connect quickly. If
you’re not, it’s an unfashionable venture during an
era of mounting environmental concerns and grow-
ing income inequality.
Bombardier will be an orphan in the aerospace

sector – a lone business without the backup of a di-

versified group of aerospace and defence units like

its competitors have, units that bring in steady cash

flow and technology transfer capabilities through

military contracts with theirown governments. It

will also be operating in a cyclical industry that is

near the end of a very long upcycle.

After years of de-emphasizing the importance of

aerospace, law and policy makers in Ottawa are

faced with tough decisions. Bombardier’s shrinking

already has huge implications for one of Canada’s

most valuable sectors, which directly employs

about 215,000 people and accounts for $25.5-billion

in domestic economic activity. But aerospace’s

share of GDP has slipped over the past decade and

could further erode thanks to Bombardier’s dis-

mantling.

Canada’s position as an aviation power dates to

the Second World War, when this country made

planes for the Allied effort far from the reach of Ger-

man bombers. Ever since, “the Canadiangovern-

ment in one way or another has been an active com-

mercial partner with the aerospace industry,” says

Richard Dicerni, who served as federal deputy min-

ister of industry from 2006 to 2012 and is now head

of Alberta’s public service.

The sector has provided high-skilled, high-paying

jobs, and successive governments going back dec-

ades have tried to hold on to the expertise in aero-

space design and manufacturing through a series of

funding programs. But Bombardier’s downsizing

has already been a major blow. Its regional jet busi-

ness, which once dominated high-value industrial

exports from Canada, was sold to Mitsubishi, and

with the Japanesegovernment backing the pur-

chase, many of the high-skilled jobs will likely shift

across the Pacific. Years of work on the C Series now

belong largely to France’s Airbus SE. If another com-

pany took over Bombardier’s corporate jet business,

what would the Canadian aerospace sector look like

in five, 10 or 15 years?

But selling off the jet division to a deeper-pocket-

ed competitor is only one of the three paths open to

Bombardier. The second is that it could limp along

for years with the help ofgovernment aid, maintain-

ing jobs but otherwise not contributing much to the

broader national economy – at least until the next

recession hits.

The third option requires both Bombardier and

the government to make a bold and risky move, on

par with its push into regional jets in the 1980s,

which was highly successful (for a while), or its foray

into 100-seater jets, which was not. An ambitious

CEO could see some potential in building a larger

aerospace and defence group around business jets –

which, though not great as a stand-alone entity

could make a decent base for a consolidation play.

Many former and current Bombardier insiders

and executives says what’s needed is new leader-

ship that can deliver the kind of operating discipline

that’s been sorely lacking for years, a team with the

corporate development capability to spot and move

on promising merger-and-acquisition opportuni-

ties, and to piece them together into something big-

ger and better. This will also mean finding a source

of capital – perhaps an aerospace-focused private

equity giant like Carlyle Group or the Caisse de de-

pôt et placement du Québec, a past partner – willing

to back them. In this scenario, the founding family

would finally have to give up control of the compa-

ny it created in 1934, perhaps by agreeing to reduce

its voting-share power like it did at Ski-Doo maker

BRP Inc., where it holds a minority stake. Bombar-

dier’s ability to attract top talent and big capital de-

pends on it.

But if Bombardier is prepared to get serious, so

must Ottawa. The company’s future hinges on what

it does with this second chance and how the Cana-

dian government responds. Ottawa can either step

up with the kind of support needed to create a glob-

al aerospace player – or watch it slip further into

middle-power mediocrity.

Bellemare sounded optimistic this week as he insist-

ed Bombardier’s US$8.2-billion deal with Alstom

would give the debt-crippled company a new lease

on life.

There was the Bombardier chief executive Mon-

day, under the bright lights of the Radio-Canada TV

studio, trying to explain to an incredulous host how

it could have come to this. How could things have

soured so quickly in five years under his watch that

the company was forced to sell asset after asset,

shunting 65 per cent of its revenue out the door, in-

cluding the rail division, its biggest revenue gener-

ator?

All this started last summer as an effort by Bom-

bardier’s board to examine ways to pare down more

than US$9-billion in debt. “The challenge was bigger

than I expected,” Mr. Bellemare said on TV. “We no

longer had the financial capacity to support the

debt load.”

If the rail deal (which will see the Caisse roll its

stake into Alstom and become its biggest sharehol-

der) clears all regulatory and other hurdles, Bom-

bardier will end up with just 18,000 employees and

one lone class of products that only a handful of

people or companies will ever be able to afford. The

CEO nonetheless put his best spin on the future of

an empire that once employed 70,000: “It’s a lot!”

he said of the shell that remains.

“We’re still the heart of the aerospace industry in

Much of Bombardier’s future

is pinned on its new Global

7500 jet, a model of which

is seen in Montreal in 2018.

It’s the biggest, fastest and

most expensive private jet

the company has built.

CHRISTINNEMUSCHI/REUTERS

AlookatBombardier’sprospectsasitmovesitsfocustojets

COVERSTORY

BY NICOLAS VAN PRAET AND SEAN SILCOFF