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Bombardier Inc.

Bombardier Inc.

EARLY HISTORY: FOCUS ON SNOWMOBILES

SNOWMOBILE DOWNTURN, DIVERSIFICATION

ACQUISITIVE DECADE

BECOMING A GLOBAL LEADER IN AIRCRAFT AND RAIL

IN THE WAKE OF THE 2001 TERRORIST ATTACKS

PRINCIPAL OPERATING UNITS

PRINCIPAL COMPETITORS

FURTHER READING

800 Rene-Levesque Boulevard West
Montreal, Quebec H3B 1Y8
Canada
Telephone: (514) 861-9481
Fax: (514) 861-7053
Web site: http://www.bombardier.com

Public Company
Incorporated:
1942 as LAuto-Neige Bombardier Limitee
Employees: 56,100
Sales: $14.78 billion (2006)
Stock Exchanges: Toronto
Ticker Symbol: BBD
NAIC: 336411 Aircraft Manufacturing; 336510 Railroad Rolling Stock Manufacturing

Bombardier Inc. boasts a rich legacy of innovation in the motorized transportation industry and is among the most successful manufacturing companies in Canada. A leading maker of regional aircraft and business jets and passenger rail equipment, the company was also known for its recreational vehicles, including snowmobiles (the Ski-Doo and Lynx brands), personal watercraft (Sea-Doo), and all-terrain vehicles. After stumbling in the 1970s, Bombardier (pronounced bohn-BAR-dee-ay) reemerged as a force, particularly in the aircraft and rail equipment industries, in the final decades of the 20th century, enjoying healthy sales and profit gains. However, the staggering downturn in the airline industry early in the new millennium resulted in a reorganization which included divestment of the recreational vehicle business.

EARLY HISTORY: FOCUS ON SNOWMOBILES

Bombardier Inc. is the progeny of inventor and entrepreneur Joseph-Armand Bombardier, who was born near the eastern Quebec village of Valcourt in 1902. An inveterate tinkerer, Bombardier took it upon himself early in life to devise a solution to the difficulty of traveling during the winter when snow-covered roads in his native Quebec kept people isolated. At the age of 19, Bombardier started his own garage and worked as a mechanic, while he labored diligently in his spare time to create a vehicle that would allow easy winter travel, eventually building several prototypes that could travel on snow. Over a ten-year period, in fact, he crafted motorized test vehicles ranging from one-seat units to multipassenger carriers.

Bombardier finally came up with what he believed was a suitable solution to winter travel. In 1936 he submitted his patent application for the B7, a seven-passenger snowmobile that sported a revolutionary rear-wheel drive and suspension system (patent approval came in 1937). Bombardier soon found himself besieged with 20 orders for the innovative vehicle, and he quickly assembled a work crew, comprised largely of relatives and friends, in order to begin manufacturing B7s for country doctors, veterinarians, telephone companies, foresters, and others who benefited from easy winter travel. In 1940 he built a modern factory with an annual production capacity of 200 vehicles, and in 1941 he introduced a bigger version of the B7 named the B12. The B12, used for cargo and mail transport as well as ambulance and rescue services, resembled a small blue school bus with round passenger windows, tanklike treads on the rear, and skis on the front.

Despite strong demand, wartime material and fuel restrictions reduced Bombardiers output during the early 1940s. Nevertheless, the optimistic Joseph-Armand incorporated the company in 1942 as LAuto-Neige Bombardier Limitée, or Bombardier Snowmobile Limited. The war turned out to be a boon for the company. That same year, the government ordered 130 B1s, which were a specially tailored version of the original B12. Moreover, in 1943 Bombardier was asked to design and produce a special armored all-track snowmobile, the Khaki, which led to the development of the armored Mark I. Between 1942 and 1946 Bombardier produced more than 1,900 tracked vehicles for the armed forces. Unfortunately, the company reaped few profits from the sales, and Joseph-Armand was even forced to give up the royalties for the use of his patents in all military vehicles.

The massive production boom did help Bombardier to hone his manufacturing and design skills, experience that proved useful after the war, when civilian orders for the companys snow vehicles ballooned. Between 1945 and 1952 the company shipped 1,600 B12s. It also began producing the C18, which was a larger version of the B12 that could carry 25 school children. By 1947 the company was generating annual sales of CAD 2.3 million and realizing profits of more than CAD 300,000. Unfortunately, sales plummeted to less than CAD 1 million in 1949 after the Quebec government implemented a snow-removal program for rural roads. Joseph-Armand scrambled to compensate for the setback, relying on his inventiveness to come up with new products that could utilize his patented technologies.

Among several new products the company tested during the late 1940s was the Tractor Tracking Attachment, a patented tread mechanism that could be attached to a tractor, thus improving performance in muddy terrain. Between 1949 and 1954 Bombardier sold thousands of the devices throughout North America, and cash from that successful product was dumped into research and development of a variety of all-terrain vehicles for the mining, oil, agriculture, and forest industries. Two of the most successful innovations introduced during that period were the Muskeg and the J5. The Muskeg was a breakthrough tractor-type machine that could perform multiple functions in difficult terrain. Joseph-Armand considered it one of his greatest inventions, and modern versions of the vehicle were still being produced in the early 1990s. The J5 was the first tracked vehicle designed specifically for logging.

By the end of the 1950s Bombardiers sales were approaching CAD 4 million annually as profits soared toward the CAD 1 million mark. It was during that time that Joseph-Armand, who was still managing the business, renewed his childhood dream of building a small snowmobile that could whisk a person over snow-covered terrain. With the advent of lighter engines, high-performance synthetic rubbers, and an improved tracking technology patented by his son Germain, Joseph-Armand believed that he could accomplish his goal. By 1959 the Bombardier team had developed a working prototype that lived up to Joseph-Armands dream, and that year the company began mass production of the acclaimed Ski-Doo snowmobile. The first model sported five-foot wooden skis, a coil-spring suspension system, and could travel at speeds of 25 miles per hour.

The vehicles, which originally sold at a price of CAD 900 each, launched an entirely new industry that would explode during the next two decades. Although demand for the new snowmobile was slow in the first two years after its introductionproduction rose from just 225 in 1959 to about 250 in 1960in 1961 unit sales lurched to 1,200 before rocketing to more than 2,500 in 1962. Besides capturing the interest of trappers, foresters, prospectors, and other workers, the SkiDoo became popular as a sport vehicle.

COMPANY PERSPECTIVES

Our mission is to be the worlds leading manufacturer of planes and trains. We are committed to providing superior value and service to our customers and sustained profitability to our shareholders by investing in our people and products. We lead through innovation and outstanding product safety, efficiency and performance. Our standards are high. We define excellenceand we deliver.

Bombardier continued to improve the vehicle and began introducing new lines. By 1964 the company was shipping more than 8,000 Ski-Doos annually, and Joseph-Armand died knowing he had realized his original dream of providing safe, practical, and economical transportation in isolated, snow-covered regions. During his career, Bombardier secured more than 40 patents, and he left his sons in charge of a financially sound company with more than CAD 10 million in annual sales and profits of more than CAD 2 million annually. Germain, Joseph-Armands eldest son, assumed the presidency, but passed the torch to his brother-in-law, Laurent Beaudoin, in 1966.

Beaudoin (pronounced bow-DWAN) was only 27 years old when he assumed the presidency at Bombardier Limited, as it was named in 1967. Also, he was joined by an aggressive young group of top managers that averaged 30 years in age. That group of executives successfully guided the company through its headiest growth stage; North American snowmobile shipments vaulted from 60,000 units in 1966 to a peak of 495,000 units annually in 1972, and Bombardier produced more than one-third of that number. During that period the companys sales and profits surged from CAD 20 million and CAD 3 million, respectively, to CAD 183 million and CAD 12 million, impressive growth that was achieved by attacking the giant U.S. market, unveiling a broad line of new snowmobiles, and pursuing an aggressive marketing initiative.

SNOWMOBILE DOWNTURN, DIVERSIFICATION

In 1969 Beaudoin took Bombardier public, planning to use the resulting cash to vertically integrate the company and profit from related economies of scale. In fact, during the 1960s and early 1970s Bombardier acquired several new companies, the largest of which was the Austrian firm Lohnerwerke GmbH. The two companies were merged to form Bombardier-Rotax in 1970. Lohnerwerkes subsidiary, Rotax, had previously supplied engines for Bombardiers Ski-Doos. Lohnerwerke, a tramway manufacturer founded in 1823, gave Bombardier an entry into the tram and rail transit industry. A year later, Bombardier also purchased its largest competitor, Bouchard Inc., which produced the third best-selling snowmobile on the market. As it turned out, Bouchard exited the snowmobile industry at an opportune time, as demand for the vehicles began tumbling shortly after the buyout.

KEY DATES

1937:
Joseph-Armand Bombardier receives approval of his patent for the B7, a seven-passenger snowmobile.
1942:
Bombardier incorporates his company as LAuto-Neige Bombardier Limitée, or Bombardier Snowmobile Limited.
1959:
The Ski-Doo snowmobile makes its debut.
1967:
Company is renamed Bombardier Limited.
1969:
Company goes public.
1974:
Contract with Montreal to supply 423 subway cars marks first major move into rail equipment.
1976:
Bombardier enters the aviation industry through purchase of controlling interest in Herous Limited.
1986:
Air carrier Canadair is purchased from the Canadian government.
1988:
The Sea-Doo personal watercraft is introduced.
1989:
Company buys Short Brother PLC, a Northern Ireland aircraft producer.
1990:
Learjet Corporation, famed builder of business jets, is acquired.
1992:
Company assumes a controlling stake in de Havilland, a maker of turboprop aircraft (five years later the remaining interest is acquired); the first Canadair Regional Jet (CRJ) is delivered.
1998:
Deutsche Waggonbau AG, a Berlin-based maker of train and subway cars, is acquired.
1999:
The first Global Express business jet is delivered.
2001:
Adtranz is acquired for $725 million, making Bombardier the worlds largest producer of passenger-rail equipment; company begins delivery of the CRJ 700.
2003:
Recreational products segment is sold.
2004:
Aerospace and transportation job cuts are announced.
2006:
Despite challenges Bombardier Aerospace unit maintains strong market presence.

Indeed, the energy crises of the early 1970s left the snowmobile industry gasping. Of 100 North American manufacturers, only six survived the ugly industry shakeout of the mid-1970s. The ever resilient Bombardier was one of those left standing. Confident that the industry would one day recover, Bombardier management remained committed to sustaining its leadership position and capturing as much market share as possible. Still, Bombardier suffered serious sales and earnings declines. Just as it had done following the creation of the Quebec snow-clearing program of 1949, Bombardier scrambled during the early and mid-1970s to develop new products to bolster sagging snowmobile sales. The Can-Am off-road motorcycle, which used parts supplied by manufacturers of Ski-Doo components, was introduced in 1972, and two years later the company began manufacturing a fiberglass sailboat. Bombardier also landed a big contract to produce stadium seats for the 1976 Montreal Olympic Games. In addition, the company entered the aviation industry in 1976 when it purchased a controlling interest in Herous Limited, a manufacturer of aircraft maintenance and landing gear.

In 1974 Bombardier had won a CAD 118 million contract with the city of Montreal to supply 423 subway cars by 1978. At the time, snowmobiles still accounted for about 90 percent of the struggling companys sales, so the subway car contract represented a major new push for Bombardier. Some analysts, however, frowned upon the move because most of North Americas rail equipment manufacturers had already exited the business in the 1960s in light of foreign competition and stagnant demand. In contrast, Bombardier worked to acquire and master related technologies during the 1970s as part of an effort to position itself as a major player in the global rolling stock industry. In addition to the Montreal contract, Bombardier supplied 36 self-propelled commuter cars to Chicago in 1977, 21 locomotives and 50 rail cars to VIA Rail Canada in 1978, and 117 commuter cars to the New Jersey Transit Corporation in 1980. In 1981, moreover, Bombardier received an order for 180 subway cars to be used in Mexico City.

ACQUISITIVE DECADE

After slogging through the snowmobile industry downturn of the 1970s, Bombardier was beginning to reshape itself into a successful manufacturer of transit equipment by the early 1980s. Importantly, Bombardier landed a huge contract in 1982 to supply New York City with 825 subway cars. Also during the early 1980s, Bombardier diversified into military equipment, believing that it could implement the same strategy it was using to dominate the North American rail transit market. In 1977 the company had purchased the marketing rights, at a discount, to a truck developed by Am General Corporation of the United States, a deal that turned out to be a boon for the company. In 1981 the Canadian government awarded Bombardier a contract to supply 2,767 trucks. Bombardier delivered the last truck ahead of schedule in 1983, leading to a second order for 1,900 of the vehicles. The company also received a contract in 1985 to supply 2,500 trucks to the Belgian Army.

By the mid-1980s Bombardier was again generating hefty profits, despite turbulence in the North American transit market and ongoing sluggishness in snowmobile sales. Beaudoin, who was known as a savvy deal maker, capitalized on the downturn in the transit industry to increase market share and bolster its competitive position. In 1987, for example, Bombardier acquired Pullman Technology, a division of Pullman-Peabody, followed the next year by the purchase of the Transit America division of The Budd Company. The company also acquired major interests in transit companies in Belgium and France. In the early 1990s Bombardier acquired UTDC, a major Canadian competitor, and Concarril, Mexicos top manufacturer of railway rolling stock. Those purchases cemented Bombardiers role as a leading global supplier of transit cars. That status was confirmed when Bombardier was awarded the contract to build specialized rail cars for the massive Eurotunnel, a transit system linking England and France beneath the English Channel.

At the same time Bombardier was expanding in the transit industry, the company was also launching an aggressive diversification drive into the aerospace market. That drive began with the 1986 purchase of the troubled air carrier Canadair from the Canadian government. The government had dumped $2 billion into the development of the Challenger corporate jet, a nine-seat craft that was to be the foundation of Canadair. Bombardier paid just $121 million for the company and was quickly able to turn the operation around through cost-cutting and aggressive marketing of the projects sophisticated technology. The acquisition effectively doubled Bombardiers size and represented its intent to become a player in the aerospace industry. To that end, in 1989 Bombardier purchased Short Brother PLC, a Northern Ireland aircraft producer, and the following year bought Learjet Corporation, builder of the well-known business jets.

BECOMING A GLOBAL LEADER IN AIRCRAFT AND RAIL

Meanwhile, Bombardier continued to firm up its position in the sporadic snowmobile market. Although the business represented less than 10 percent of sales by the early 1990s, Beaudoin refused to exit the market, citing Bombardiers historic expertise in the industry. Throughout the mid-1980s, in fact, Bombardier continued to beef up its snowmobile division with new technology and products. By the early 1990s Bombardier was still controlling about 50 percent of the Canadian snowmobile market and more than 25 percent of the entire North American market. In addition, Bombardier introduced the Sea-Doo watercraft in 1988 to compete in the growing market for individual sit-down jet-boats. The design was actually the offspring of a 1968 effort by Bombardiers research staff, and it was chosen as the number one watercraft of its type by Popular Mechanics in 1988. By the early 1990s Bombardier was serving about 40 percent of that emerging North American segment. Bombardier was also branching out globally with its motorized consumer products division, as evidenced by its 1993 buyout of the leading Finnish snowmobile maker.

Throughout the 1980s and early 1990s Bombardier grew and prospered by purchasing undervalued operations and turning them around with sound management, but not all of its efforts proved profitable. For example, several of its transit deals, including the giant Eurotunnel contract, actually lost money for the company. In general, though, Beaudoins deals were successful and most of the companys operations thrived. As a result, Bombardiers sales mushroomed from CAD 1.4 billion in 1987 to an impressive CAD 4.4 billion in 1992. Profits rose at a rate of 15 percent annually during the period to CAD 133 million in 1992. Bombardier had become one of Canadas largest and most successful manufacturing companies, and it was steadily expanding throughout Europe and North America.

Further expansion of Bombardiers aerospace operations came in 1992 when the company gained a controlling 51 percent stake in Ontario-based de Havilland, a manufacturer of turboprop aircraft, such as the Dash 8 regional airplane. The Province of Ontario took the remaining 49 percent interest in de Havilland, which had been a division of Boeing, retaining the stake until January 1997, when Bombardier gained full control. Another key development in aircraft also occurred in 1992: the delivery of the first Canadair Regional Jet (CRJ), an aircraft that helped revolutionize the airline industry in the 1990s. The CRJ 100 was a redesigned version of Canadairs Challenger business jet, having been fitted with 50 seats and designed to fly routes of 650 to 1,500 kilometers (400 to 950 miles) in length. For consumers, it had the advantage over traditional turboprop regional planes, such as the Dash 8, of being a jet, and a particularly quiet one at that, while for airliners the planes flight range made it ideal for routes longer than those that had been served by regional turboprops and shorter than those covered by conventional jets. Orders poured in for the CRJ during the mid-1990s as regional airliners proliferated and conventional airliners began setting up spoke-to-spoke routes in the hub-and-spoke system that had overtaken the industry. After delivery of the first CRJ 100 to Germanys Lufthansa CityLine in November 1992, Bombardier went on to deliver another 168 planes to 16 airlines in 11 countries by mid-1997. At that time the company had firm orders for another 86 CRJs and options from customers to purchase 198 more.

Bombardier continued to expand its operations and acquire new companies in the mid-1990s. In April 1995, for example, it purchased German transportation equipment manufacturer Waggonfabrik Talbot, which employed a workforce of about 1,200. Importantly, the wisdom of Bombardiers decision to retain its motorized consumer craft business became evident when that market rebounded in 1994. Buoyed by new product introductions, sales by that division surged 39 percent in 1994 to account for roughly 17 percent of company revenues. More importantly, profits from Ski-Doo and Sea-Doo products represented 37 percent of total company profits, making that division central to Bombardiers gains in that year. As a result of new acquisitions and improving markets, Bombardiers revenues sailed from CAD 4.77 billion in 1993 to CAD 5.94 billion in 1994, as net income climbed from CAD 177.3 million to CAD 247.3 million. Revenues increased still further in 1995, to CAD 7.12 billion, but net income dropped to CAD 158 million because of a CAD 155 million write-down of the companys 3 percent stake in Eurotunnel.

In April 1996 Bombardier was reorganized into five groups: Bombardier Aerospace, Bombardier Transportation (the rail operations), Bombardier Recreational Products, Bombardier Services (later Bombardier International), and Bombardier Capital. It was the first of these groups, Bombardier Aerospace, that led the company to new heights of prosperity in the final years of the 20th century. In addition to the continued success of the CRJ 100 regional jet, Bombardier successfully rolled out more aircraft models, including two new business jets. In 1998 came the first delivery of the Lear-jet 45 business jet, which had been jointly developed by Learjet, de Havilland, and Shorts. This super-light jet had a maximum range of 2,120 nautical miles and a cruising speed of 534 miles per hour. Within two years, Bombardier had delivered more than 100 of the new jets. During 1999, Bombardier completed another key introduction, the Global Express business jet, an ultra-long-range, high-speed corporate jet capable of circling the globe with just two stopovers. Bombardier invested CAD 400 million in the project, which began in the early 1990s and was codeveloped by Canadair, Learjet, de Havilland, and Shorts, with the assistance of 11 outside partners, who ponied up another CAD 400 million. The addition of Global Express gave Bombardier a full range of business jets, ranging from the lower-end Learjet through the middle-market Challenger to the high-end Global Express, which sold for $34 million.

With sales of regional jets booming and the red-hot U.S. economy driving sales of corporate jets to record levels (the U.S. market accounted for more than half of Bombardiers overall revenues), Bombardier Aerospaces revenues skyrocketed, jumping from CAD 4.28 billion in 1996 to CAD 6.44 billion in 1998 to CAD 10.56 billion in 2000. By the latter year, aerospace operations accounted for two-thirds of overall revenues and more than 85 percent of the companys profits. The head of Bombardier Aerospace, Robert E. Brown, was rewarded for this stellar performance in February 1999 with a promotion to president and CEO of Bombardier Inc., with Beaudoin remaining chairman of the board.

It should be noted that a number of observers were critical of what they perceived as too-close ties between Bombardier and the government of Canada and pointed out that Bombardiers rapid ascension in the aerospace industry was aided by government subsidies, particularly in regard to the development of the CRJ. In fact, Bombardiers chief competitor in the area of regional aircraft, Empresa Brasileira de Aeron utica S.A. (Embraer) of Brazil, took its case of unfair trade practices to the World Trade Organization (WTO). Bombardier did likewise, accusing Embraer of gaining market advantages from its ties to the Brazilian government. At times the competitive battle between the worlds two main regional jet makers threatened to escalate into an all-out trade war between their respective home nations. The conflict continued unresolved into the early 21st century, although a number of WTO rulings in the matter supported the Canadian position.

In the late 1990s and early years of the 21st century, Bombardier Transportation began playing a more prominent role within the company. In February 1998 Bombardier acquired Deutsche Waggonbau AG, a Berlin-based maker of train and subway cars, thereby doubling the size of its European rail equipment operations. In December of that same year, Bombardier signed its biggest rail contract ever, a $1.8 billion deal with Virgin Rail Group of Britain to build 78 high-speed diesel-electric locomotives and train coaches. The company entered the burgeoning Chinese market in November 1999 by establishing a joint venture that would construct a manufacturing facility in China to build 300 intercity mass transit railcars for the Ministry of Railways. In August 2000 Bombardier agreed to acquire Berlin-based DaimlerChrysler Rail Systems GmbH (known as Adtranz) from DaimlerChrysler AG for $725 million. Adtranz was a major maker of rail equipment with 1999 revenues of $3.4 billion and 22,000 employees. In addition to production of electric locomotives, Adtranz specialized in propulsion and train controls, services, and signaling, providing Bombardier Transportation with a broader range of activities and making Bombardier the worlds largest producer of passenger-rail equipment. The acquisition of Adtranz, which was completed in May 2001 and was the largest in company history, meant that 40 percent of Bombardiers revenues would be generated by the rail transportation unit.

In addition to creating a more powerful rail unit, Bombardier also worked hard to remain at the forefront of the regional aircraft and business jet sectors. Having concluded that there was still room in the market for regional turboprops, Bombardier in late 1999 made its first deliveries of the Dash 8-Q400, a 70-passenger twin-turboprop designed for regional airliners high-density, short-haul routes. By early 2001, Bombardier had delivered 29 of the new models and had firm orders for an additional 33 and options on 32. In January 2001 deliveries started for the CRJ 700 model regional jet, a stretched, 70-seat version of the CRJ 100/200. Bombardier already had firm orders for 173 additional CRJ 700s and options had been taken on 313 more. Moreover, the company was already developing the next-generation CRJ, the 900, an 86-passenger model scheduled to enter airline service in early 2003. For all of its models of regional aircraft, Bombardier entered 2001 with firm orders for 574 units and 1,047 options, a backlog that represented potential sales of tens of billions of dollars. Also under development was the Bombardier Continental business jet, an all-new super midsize corporate jet designed for transcontinental flights. The company hoped to receive certification of the Continental by early 2003.

Meanwhile, in March 2001, Bombardier bolstered its recreational vehicles operations with the purchase of the engine assets of Outboard Marine Corporation, including the Evinrude and Johnson outboard marine engine brands. Despite this acquisition, recreational products, the founding business of Bombardier, had been left in the exhaust of the rapidly expanding aircraft and rail units. Only 11 percent of the revenues and 6 percent of the profits for the fiscal year ending in January 2001 came from recreational products.

The one cloud on the horizon was the impact that a prolonged economic slowdown might have on the companys operations, with business jet sales being particularly vulnerable during economic downturns. Furthermore, the regional jet industry that Bombardier had pioneered had never been through an economic downturn, providing an air of uncertainty surrounding the company.

IN THE WAKE OF THE 2001 TERRORIST ATTACKS

Following the September 11, 2001, terrorist attacks on the United States, pressure on the airline industry increased exponentially. Air passenger traffic in and out of Toronto, for example, fell by 37 percent in the wake of the attacks on the East Coast of the United States executed by commercial aircraft. Bombardier responded with employee layoffs and reduction of its fiscal 2002 profit growth target. The key airline industry had been under the pressure of falling fares prior to the attacks.

To worsen matters, Canadian Business Online explained, leadership turmoil erupted with the abrupt departure of the president and CEO of the aerospace operation. Pierre Beaudoin was named president and COO of Bombardier Aerospace in October. The grandson of the founder and son of the chairman joined the family controlled business by way of the recreational products in 1985. He moved to the aerospace division in February 2001, as president of the business jets unit.

Fiscal 2002 (year-end January) produced $21.6 billion in total revenue: 56 percent from the regional and business passenger aircraft aerospace operation; 32 percent from rail; and most of the remaining 12 percent from the recreational division. Net income was off 60 percent from the prior year to $390 million.

In June, CEO and President Robert Brown maintained Bombardier would achieve its predicted earnings growth per share of 10 percent, but by August, the company reduced fiscal year estimates by 21 percent. Its stock price took a beating. Bombardier attributed the downturn to the battered U.S. economy and its beleaguered airline industry. However, losses related to a three-week employee strike in April 2002 also had been accrued.

Troubles were not confined to aerospace. A $663-million Bombardier Capital Financing write-down, in 2001, well exceeded the segments ten-year total profits, according to Canadian Business. Robert Fay, an analyst with Toronto-based Canaccord Capital Corp., told Rasha Mourtada: Looking at the current situation of Bombardier, thats probably the worst decision the management has made, Fay says of the companys move into the manufactured housing and mortgage market by providing consumer lending. Analysts applauded when Bombardier abandoned the troublesome manufactured housing and customer finance areas.

However, the Canadian companys problems did not end there. The shaky performance of Adtranz and equipment failure on rail cars produced for Amtrak created other headaches. What was more, the WTO, in January 2002, determined Canada had illegally assisted Bombardier in its effort to gain an aircraft contract.

In December 2002, Brown left the company. Paul Tellier, a board member since 1997, was appointed president and CEO, taking command beginning in January 2003. The company reported fiscal year (ended January 31, 2003) revenue of $17.3 billion. With profits off, stock price and credit ratings came under pressure. Tellier, known for his role in the turnaround of Canadian National Railway, set a plan in motion to do the same for Bombardier. The finance unit, which was responsible for nearly 70 percent of debt, would be pared down. The companys dividend was cut by half. According to Business Week. Bombardier would concentrate on the aerospace and transportation units, which were of roughly equal size.

In August, Bombardier agreed to sell the recreational unit for CAD 1.23 billion in cash: 50 percent to Bain Capital of Boston; 35 percent to four of the founders children; and 15 percent to Caisse de depot et placement du Quebec. The sale assisted in Telliers drive to reduce debt, improve cash flow, and raise equity, according to the New York Times. The recreational vehicle unit, struggling with losses, had re-branded some of its products under the John Deere name during the year.

The sale of Military Aviation Services and Belfast City Airport added more to the Bombardier coffer. A deal to sell the bulk of Bombardiers Capitals business aircraft portfolio to GE Commercial Equipment Financing, for CAD 475 million, also was struck during 2003. In March 2004, Tellier proposed a transportation sector restructuring to reduce excess capacity, improve performance, and restore earnings capability, the Bombardier web site history recounted.

Losses continued in fiscal 2004. During the last three months of the calendar year the company announced a series of significant job cuts. In addition, another top management shakeup occurred in December 2004 with the resignation of Tellier, followed by the departure of two independent directors and two senior executives.

A new office of the president was created. Laurent Beaudoin served as chairman of the board and CEO of Bombardier Inc. and shared leadership responsibilities with presidents of transportation and aerospace, Andre Navarri and Pierre Beaudoin, respectively. Telliers departure short-circuited a change in corporate governance in which the CEO and chairman roles were separated out. In a further sign that the family is reasserting itself, son Pierre has also been appointed to the board. An unwinding of Bombardiers multiple-voting shares, long sought by investors, seems as distant as ever, wrote Matthew McClearn for Canadian Business. During 2005, Bombardier Capital continued to wrap up business, making further divestitures including inventory finance operations and the manufactured housing portfolio.

For fiscal 2006, the company reported the transportation units 2004 turnaround initiative had started to generate sustainable results. The segment recorded seven consecutive quarters of profits. Markets in China, southeast Asia, Russia, and Eastern Europe were being cultivated as a complement to the transportation units North American and European stronghold.

As for aerospace, despite the challenges of the times, Bombardier had maintained a strong regional aircraft market position: 55 percent of 22- to 99-seat aircraft and 37 percent of 100-seat. The company, furthermore, was seizing 60 percent of all new aircraft orders in the 20- to 99-seat category, according to a September 2006 Airfinance Journal article. The regional jet market was also expected to move toward the 100- to 149-seat level, bringing Bombardier into direct competition with Airbus and Boeing.

Dave Mote

Updated, David E. Salamie; Kathleen Peippo

PRINCIPAL OPERATING UNITS

Bombardier Aerospace; Bombardier Transportation. AEROSPACE: Headquarters (Canada); Toronto Site; Learjet Inc. (U.S.A.); Short Brothers plc (Northern Ireland); Flexjet (U.S.A.); Flexjet Asia-Pacific; Amphibious Aircraft (Canada); Skyjet (U.S.A.); Skyjet International Ltd. (U.K.). TRANSPORTATION: Headquarters (Germany); Locomotives (Switzerland); Rail Control Solutions (Sweden); North America (Canada); Total Transit Systems (U.S.A.); Bogies (Germany); Light Rail Vehicles (Austria); Propulsion and Controls (Switzerland); London Underground Projects (U.K.), Mainline & Metros (Germany); Services (Belgium).

PRINCIPAL COMPETITORS

Embraer - Empresa Brasileira de Aeronáutica S.A.; Siemens AG; Gulfstream Aerospace Corporation; Boeing Commercial Airplanes; Delta AirElite Business Jets, Inc.; Flight Options LLC; NetJets Inc.; CitationShares Holdings, LLC.

FURTHER READING

Barker, Robert, Bombardier May Be Going Places, Business Week, June 16, 2003, p.96.

Bertin, Oliver, Bombardier Targets New Niche, Globe and Mail, November 24, 1997, p. B8.

, A Global Gamble: Bombardier, the Montreal Maker of Snowmobiles, Jet Skis and Regional Airliners, Is Betting $400-Million That Its New Executive Jet Will Solidify a World-Class Reputation and Give It More Respect at Home, Globe and Mail, August 24, 1996, p. B1.

Bombardier: A Dream with an International Reach, Montreal: Bombardier Inc., 1992.

Bombeau, Bernard, Regional Manufacturers Carve Up the Market, Interavia, May 1997, pp. 33, 3638.

Bourette, Susan, Bombardier Rewards Brown by Promoting Him to Top Job, Globe and Mail, December 9, 1998, p. B1.

Came, Barry, Sky King: Bombardiers New Regional Jet Is Revolutionizing the Way People Fly, Macleans, August 11, 1997, pp. 3036.

Chipello, Christopher J., Bombardier, Going Outside Family, Names Brown CEO, Wall Street Journal, December 9, 1998, p. B13.

, Jet Maker Looks to the Old Economy: Bombardier of Canada Seeks a Smoother Ride with Railroad Deal, Wall Street Journal, September 12, 2000, p. A21.

Crowe, Nancy, Bombardier Gears Up, Vermont Business, December 1986, p. 89.

DePalma, Anthony, The Transportation Giant up North: Bombardier Rises, with Some Help from Friends in Ottawa, New York Times, December 25, 1998, p. C1.

Family Affair: the Regional Jet Market Has Arguably Been a Victim of Its Own Success, Airfinance Journal, September 2006, pp. 34+

Ferrabee, James, Bombardier Stock on a Magic Carpet Ride, Gazette, December 19, 1994, p. C2.

, Confident Chunnel Man, Gazette, February 1995, p. D7.

Ford, Royal, Red Line Cars Are Born in Vermont, Boston Globe, November 7, 1993, p. 69.

Gibbens, Robert, Bombardier Buys German Railcar Firm, Financial Post, February 25, 1995, p. 19., Bombardier Is Aiming High, Financial Post, April 11, 1991, p. 21.

Goldsmith, Charles, Gulfstream and Bombardier Stage Business-Jet Dogfight, Wall Street Journal, June 20, 1997, p. B4.

Hadekel, Peter, Bombardiers Ski-Doo Division Is Profiting from Borrowed Techniques, Gazette, April 16, 1993, p. F1. Koselka, Rita, Lets Make a Deal, Forbes, April 27, 1992, p. 62.

Lang, Amanda, Dynasties, Globe and Mail, Report on Business Magazine, June 1, 1995, p. 60.

Leger, Kathryn, Tough Guy on the Tarmac: Laurent Beaudoin Keeps Bombardier on Top of Global Markets with a Combination of High Technology and Hardball, Financial Post, August 1, 1998, p. 8.

Livesay, Bruce, Ceiling Unlimited: Bombardiers Global Ambition and Constant Innovation Have Propelled It to No. 1 in Our CEO Survey, Globe and Mail, March 28, 1997, p. 36.

Louiseize, Kelly, Bombardier Wants Provinces Help, Northern Ontario Business, October 2005, pp. 19+

McArthur, Keith, Bombardier Endures Jet Controversy, Globe and Mail, June 25, 2001, p. B3.

McClearn, Matthew, Pilot to Bombardier: Bye, Canadian Business Online, December 2004.

McGovern, Sheila, On the Move: The Snowmobiles Bombardier Built for Rural Quebec Are the Still-Thriving Roots of a World Transportation Empire That Includes Planes, Trains, and Sea-Doos, Gazette, November 1, 1993, p. C8.

Moorman, Robert W., Bigger and Better, Air Transport World, May 1999, pp. 3234+

, Booming with Bombardier, Air Transport World, August 1998, pp. 102+

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Mourtada, Rasha, Buckle Your Seat Belts, Canadian Business Online, September 2002.

Newman, Peter C., A Lesson in How to Choose the Right Stuff, Macleans, December 21, 1998, p. 50.

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Shalom, Francois, Firefighting: Canadair Says Bombers Problems Are Merely Glitches, and Promises to Fix Them for Unhappy French, Gazette, March 18, 1995, p. C3.

Sheppard, Robert, The Nimble and the Bulky: Small Regional Jets and Giant Airliners Appear to Be the Way of the Future for the International Aviation Industry, Macleans, August 7, 2000, pp. 2425.

Shifrin, Carole A., Bombardier Bets on New Regional Turboprop, Aviation Week and Space Technology, December 15, 1997, pp. 3842.

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Walmsley, Ann, Meet the New Boss Same As the Old Boss?: Bombardiers Robert Brown Has a Tough Act to Follow As He Steps into Laurent Beaudoins Shoes, Globe and Mail, March 26, 1999, p. 85.

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Yakabuski, Konrad, Bob Brown in Command: Who Would Have Guessed That Plain Robert BrownSpit-and-Polish Soldier, Career Civil ServantCould Match Laurent Beaudoins Fabled Record As CEO of Bombardier, Globe and Mail, Report on Business Magazine, October 27, 2000, p. 74.

, Bombardier Sets Out on a European Odyssey: Canadian Firm Establishes New Trade Beachhead on Old Continent, Toronto Star, December 19, 1993, p. D1.

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Bombardier Inc.

Bombardier Inc.

800 René-Lévesque Blvd. West
Montreal, Quebec H3B 1Y8
Canada
Telephone: (514) 861-9481
Fax: (514) 861-7053
Web site: http://www.bombardier.com

Public Company
Incorporated:
1942 as LAuto-Neige Bombardier Limitée
Employees: 79,000Sales: C$16.1 billion ($10.71 billion) (2001)
Stock Exchanges: Toronto Brussels Frankfurt
Ticker Symbol: BBDNAIC: 336411 Aircraft Manufacturing; 336510 Railroad Rolling Stock Manufacturing; 336999 Other Transportation Equipment Manufacturing; 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing

A diversified manufacturer of transportation equipment, Bombardier Inc. is best known as the worlds leading maker of regional aircraft and business jets. The company is also the worlds leading manufacturer of passenger rail equipment and produces recreational vehicles, including snowmobiles (the Ski-Doo and Lynx brands), personal watercraft (Sea-Doo), and all-terrain vehicles. About 92 percent of its revenues in 2001 came from sales outside of Canada, and the companys main production facilities were located in Canada, the United States, and the United Kingdom. The company boasts a rich legacy of innovation in the motorized transportation industry and is among the most successful manufacturing companies in Canada. After stumbling in the 1970s, Bombardier (pronounced bohn-BAR-dee-ay) reemerged as a force, particularly in the aircraft and rail equipment industries, in the final decades of the 20th century, enjoying healthy sales and profit gains into the new millennium.

Early History: Focusing on Snowmobiles

Bombardier Inc. is the progeny of inventor and entrepreneur Joseph-Armand Bombardier, who was born near the eastern Quebec village of Valcourt in 1902. An inveterate tinkerer, Bombardier took it upon himself early in life to devise a solution to the difficulty of traveling during the winter when snow-covered roads in his native Quebec kept people isolated. At the age of 19, Bombardier started his own garage and worked as a mechanic, while he labored diligently in his spare time to create a vehicle that would allow easy winter travel, eventually building several prototypes that could travel on snow. Over a ten-year period, in fact, he crafted motorized test vehicles ranging from one-seat units to multipassenger carriers.

Bombardier finally came up with what he believed was a suitable solution to winter travel. In 1936 he submitted his patent application for the B7, a seven-passenger snowmobile that sported a revolutionary rear-wheel drive and suspension system (patent approval came in 1937). Bombardier soon found himself besieged with 20 orders for the innovative vehicle, and he quickly assembled a work crewcomprised largely of relatives and friendsin order to begin manufacturing B7s for country doctors, veterinarians, telephone companies, foresters, and others who benefited from easy winter travel. In 1940 he built a modern factory with an annual production capacity of 200 vehicles, and in 1941 he introduced a bigger version of the B7 named the B12. The B12, used for cargo and mail transport as well as ambulance and rescue services, resembled a small blue school bus with round passenger windows, tanklike treads on the rear, and skis on the front.

Despite strong demand, wartime material and fuel restrictions reduced Bombardiers output during the early 1940s. Nevertheless, the optimistic Joseph-Armand incorporated the company in 1942 as LAuto-Neige Bombardier Limitée, or Bombardier Snowmobile Limited. The war eventually turned out to be a boon for the companyin 1942 the government ordered 130 B1s, which were a specially tailored version of the original B12. Moreover, in 1943 Bombardier was asked to design and produce a special armored all-track snowmobilethe Khakiwhich led to the development of the armored Mark I. Between 1942 and 1946 Bombardier produced more than 1,900 tracked vehicles for the armed forces. Unfortunately, the company reaped few profits from the sales, and Joseph-Armand was even forced to give up the royalties for the use of his patents in all military vehicles.

The massive production boom did help Bombardier to hone his manufacturing and design skills, experience that proved useful after the war, when civilian orders for the companys snow vehicles ballooned. Between 1945 and 1952 the company shipped 1,600 B12s. It also began producing the C18, which was a larger version of the B12 that could carry 25 school children. By 1947 the company was generating annual sales of C$2.3 million and realizing profits of more than C$300,000. Unfortunately, sales plummeted to less than C$1 million in 1949 after the Quebec government implemented a snow-removal program for rural roads. Joseph-Armand scrambled to compensate for the setback, relying on his inventiveness to come up with new products that could utilize his patented technologies.

Among several new products the company tested during the late 1940s was the Tractor Tracking Attachment, a patented tread mechanism that could be attached to a tractor, thus improving performance in muddy terrain. Between 1949 and 1954 Bombardier sold thousands of the devices throughout North America, and cash from that successful product was dumped into research and development of a variety of all-terrain vehicles for the mining, oil, agriculture, and forest industries. Two of the most successful innovations introduced during that period were the Muskeg and the J5. The Muskeg was a breakthrough tractor-type machine that could perform multiple functions in difficult terrain. Joseph-Armand considered it one of his greatest inventions, and modern versions of the vehicle were still being produced in the early 1990s. The J5 was the first tracked vehicle designed specifically for logging.

By the end of the 1950s Bombardiers sales were approaching C$4 million annually as profits soared toward the C$1 million mark. It was during that time that Joseph-Armand, who was still managing the business, renewed his childhood dream of building a small snowmobile that could whisk a person over snow-covered terrain. With the advent of lighter engines, high-performance synthetic rubbers, and an improved tracking technology patented by his son Germain, Joseph-Armand believed that he could accomplish his goal. By 1959 the Bombardier team had developed a working prototype that lived up to Joseph-Armands dream, and that year the company began mass production of the acclaimed Ski-Doo snowmobile. The first model sported five-foot wooden skis, a coil-spring suspension system, and could travel at speeds of 25 miles per hour.

The vehicles, which originally sold at a price of C$900 each, launched an entirely new industry that would explode during the next two decades. Although demand for the new snowmobile was slow in the first two years after its introductionproduction rose from just 225 in 1959 to about 250 in 1960in 1961 unit sales lurched to 1,200 before rocketing to more than 2,500 in 1962. Besides capturing the interest of trappers, foresters, prospectors, and other workers, the Ski-Doo became popular as a sport vehicle.

Bombardier continued to improve the vehicle and began introducing new lines. By 1964 the company was shipping more than 8,000 Ski-Doos annually, and Joseph-Armand died knowing he had realized his original dream of providing safe, practical, and economical transportation in isolated, snow-covered regions. During his career, Bombardier secured more than 40 patents, and he left his sons in charge of a financially sound company with more than C$10 million in annual sales and profits of more than C$2 million annually. Germain, Joseph-Armands eldest son, assumed the presidency, but passed the torch to his brother-in-law, Laurent Beaudoin, in 1966.

Beaudoin (pronounced bow-DWAN) was only 27 years old when he assumed the presidency at Bombardier Limited, as it was named in 1967. Also, he was joined by an aggressive young group of top managers that averaged 30 years in age. That group of executives successfully guided the company through its headiest growth stageNorth American snowmobile shipments vaulted from 60,000 units in 1966 to a peak of 495,000 units annually in 1972, and Bombardier produced more than one-third of that number. During that period the companys sales and profits surged from C$20 million and C$3 million, respectively, to C$183 million and C$12 million, an impressive growth that was achieved by attacking the giant U.S. market, unveiling a broad line of new snowmobiles, and pursuing an aggressive marketing initiative.

1970s: Snowmobile Downturn, Diversification

In 1969 Beaudoin took Bombardier public, planning to use the resulting cash to vertically integrate the company and profit from related economies of scale. In fact, during the 1960s and early 1970s Bombardier acquired several new companies, the largest of which was the Austrian firm Lohnerwerke GmbH. The two companies were merged to form Bombardier-Rotax in 1970Lohnerwerkes subsidiary, Rotax, had previously supplied engines for Bombardiers Ski-Doos. Lohnerwerke, a tramway manufacturer founded in 1823, gave Bombardier an entry into the tram and rail transit industry. A year later, Bombardier also purchased its largest competitor, Bouchard Inc., which produced the third best-selling snowmobile on the market. As it turned out, Bouchard exited the snowmobile industry at an opportune time, as demand for the vehicles began tumbling shortly after the buyout.

Indeed, the energy crises of the early 1970s left the snowmobile industry gasping. Of 100 North American manufacturers,

Company Perspectives:

Bombardiers mission is to be the leader in all the markets in which it operates. This objective will be achieved through excellence in the fields of aerospace, rail transportation equipment, recreational products and financial services.

All Bombardier units must meet the needs of their customers and markets as well as reach and maintain world-class performance. They must also create added value in order to sustain their own growth and achieve a superior level of economic return to shareholders.

only six survived the ugly industry shakeout of the mid-1970s. The ever resilient Bombardier was one of those left standing. Confident that the industry would one day recover, Bombardier management remained committed to sustaining its leadership position and capturing as much market share as possible. Still, Bombardier suffered serious sales and earnings declines. Just as it had done following the creation of the Quebec snow-clearing program of 1949, Bombardier scrambled during the early and mid-1970s to develop new products to bolster sagging snowmobile sales. The Can-Am off-road motorcycle, which used parts supplied by manufacturers of Ski-Doo components, was introduced in 1972, and two years later the company began manufacturing a fiberglass sailboat. Bombardier also landed a big contract to produce stadium seats for the 1976 Montreal Olympic Games. In addition, the company entered the aviation industry in 1976 when it purchased a controlling interest in Herous Limited, a manufacturer of aircraft maintenance and landing gear.

In 1974 Bombardier had won a C$118 million contract with the city of Montreal to supply 423 subway cars by 1978. At the time, snowmobiles still accounted for about 90 percent of the struggling companys sales, so the subway car contract represented a major new push for Bombardier. Some analysts, however, frowned upon the move because most of North Americas rail equipment manufacturers had already exited the business in the 1960s in light of foreign competition and stagnant demand. In contrast, Bombardier worked to acquire and master related technologies during the 1970s as part of an effort to position itself as a major player in the global rolling stock industry. In addition to the Montreal contract, Bombardier supplied 36 self-propelled commuter cars to Chicago in 1977, 21 locomotives and 50 rail cars to VIA Rail Canada in 1978, and 117 commuter cars to the New Jersey Transit Corporation in 1980. In 1981, moreover, Bombardier received an order for 180 subway cars to be used in Mexico City.

Acquisitive 1980s

After slogging through the snowmobile industry downturn of the 1970s, Bombardier was beginning to reshape itself into a successful manufacturer of transit equipment by the early 1980s. Importantly, Bombardier landed a huge contract in 1982 to supply New York City with 825 subway cars. Also during the early 1980s, Bombardier diversified into military equipment, believing that it could implement the same strategy it was using to dominate the North American rail transit market. In 1977 the company had purchased the marketing rights, at a discount, to a truck developed by Am General Corporation of the United States, a deal that turned out to be a boon for the company. In 1981 the Canadian government awarded Bombardier a contract to supply 2,767 trucks. Bombardier delivered the last truck ahead of schedule in 1983, leading to a second order for 1,900 of the vehicles. The company also received a contract in 1985 to supply 2,500 trucks to the Belgian Army.

By the mid-1980s Bombardier was again generating hefty profits, despite turbulence in the North American transit market and ongoing sluggishness in snowmobile sales. Beaudoin, who was known as a savvy dealmaker, capitalized on the downturn in the transit industry to increase market share and bolster its competitive position. In 1987, for example, Bombardier acquired Pullman Technology, a division of Pullman-Peabody, followed the next year by the purchase of the Transit America division of The Budd Company. The company also acquired major interests in transit companies in Belgium and France. In the early 1990s Bombardier acquired UTDC, a major Canadian competitor, and Concarril, Mexicos top manufacturer of railway rolling stock. Those purchases cemented Bombardiers role as a leading global supplier of transit cars. That status was confirmed when Bombardier was awarded the contract to build specialized rail cars for the massive Eurotunnel, a transit system linking England and France beneath the English Channel.

Key Dates:

1937:
Joseph-Armand Bombardier receives approval of his patent for the B7, a seven-passenger snowmobile.
1942:
Bombardier incorporates his company as LAuto-Neige Bombardier Limitée, or Bombardier Snowmobile Limited.
1959:
The Ski-Doo snowmobile makes its debut.
1967:
Company is renamed Bombardier Limited.
1969:
Company goes public.
1974:
Contract with Montreal to supply 423 subway cars marks first major move into rail equipment.
1976:
Bombardier enters the aviation industry through purchase of controlling interest in Herous Limited.
1986:
Air carrier Canadair is purchased from the Canadian government.
1988:
The Sea-Doo personal watercraft is introduced.
1989:
Company buys Short Brother PLC, a Northern Ireland aircraft producer.
1990:
Learjet Corporation, famed builder of business jets, is acquired.
1992:
Company assumes a controlling stake in de Havilland, a maker of turboprop aircraft (five years later the remaining interest is acquired) ; the first Canadair Regional Jet (CRJ) is delivered.
1998:
Deutsche Waggonbau AG, a Berlin-based maker of train and subway cars, is acquired.
1999:
The first Global Express business jet is delivered.
2001:
Adtranz is acquired for $725 million, making Bombardier the worlds largest producer of passenger-rail equipment; company begins delivery of the CRJ 700.

At the same time Bombardier was expanding in the transit industry, the company was also launching an aggressive diversification drive into the aerospace market. That drive began with the 1986 purchase of the troubled air carrier Canadair from the Canadian government. The government had dumped $2 billion into the development of the Challenger corporate jet, a nine-seat craft that was to be the foundation of Canadair. Bombardier paid just $121 million for the company and was quickly able to turn the operation around through cost-cutting and aggressive marketing of the projects sophisticated technology. The acquisition effectively doubled Bombardiers size and represented its intent to become a player in the aerospace industry. To that end, in 1989 Bombardier purchased Short Brother PLC, a Northern Ireland aircraft producer, and the following year bought Learjet Corporation, builder of the well-known business jets.

1990s and Beyond: Becoming a Global Leader in Aircraft and Rail

Meanwhile, Bombardier continued to firm up its position in the sporadic snowmobile market. Although the business represented less than 10 percent of sales by the early 1990s, Beaudoin refused to exit the market, citing Bombardiers historic expertise in the industry. Throughout the mid-1980s, in fact, Bombardier continued to beef up its snowmobile division with new technology and products. By the early 1990s Bombardier was still controlling about 50 percent of the Canadian snowmobile market and more than 25 percent of the entire North American market. In addition, Bombardier introduced the Sea-Doo watercraft in 1988 to compete in the growing market for individual sit-down jet-boatsthe design was actually the offspring of a 1968 effort by Bombardiers research staff, and it was chosen as the number one watercraft of its type by Popular Mechanics in 1988. By the early 1990s Bombardier was serving about 40 percent of that emerging North American segment. Bombardier was also branching out globally with its motorized consumer products division, as evidenced by its 1993 buyout of the leading Finnish snowmobile maker.

Throughout the 1980s and early 1990s Bombardier grew and prospered by purchasing undervalued operations and turning them around with sound management, but not all of its efforts proved profitable. For example, several of its transit deals, including the giant Eurotunnel contract, actually lost money for the company. In general, though, Beaudoins deals were successful and most of the companys operations thrived. As a result, Bombardiers sales mushroomed from C$1.4 billion in 1987 to an impressive C$4.4 billion in 1992. Profits rose at a rate of 15 percent annually during the period to C$133 million in 1992. Bombardier had become one of Canadas largest and most successful manufacturing companies, and it was steadily expanding throughout Europe and North America.

Further expansion of Bombardiers aerospace operations came in 1992 when the company gained a controlling 51 percent stake in Ontario-based de Havilland, a manufacturer of turboprop aircraft, such as the Dash 8 regional airplane. The Province of Ontario took the remaining 49 percent interest in de Havilland, which had been a division of Boeing, retaining the stake until January 1997, when Bombardier gained full control. Another key development in aircraft also occurred in 1992: the delivery of the first Canadair Regional Jet (CRJ), an aircraft that helped revolutionize the airline industry in the 1990s. The CRJ 100 was a redesigned version of Canadairs Challenger business jet, having been fitted with 50 seats and designed to fly routes of 650 to 1,500 kilometers (400 to 950 miles) in length. For consumers, it had the advantage over traditional turboprop regional planes, such as the Dash 8, of being a jetand a particularly quiet one at thatwhile for airliners the planes flight range made it ideal for routes longer than those that had been served by regional turboprops and shorter than those covered by conventional jets. Orders poured in for the CRJ during the mid-1990s as regional airliners proliferated and conventional airliners began setting up spoke-to-spoke routes in the hub-and-spoke system that had recently overtaken the industry. After delivery of the first CRJ 100 to Germanys Lufthansa CityLine in November 1992, Bombardier went on to deliver another 168 planes to 16 airlines in 11 countries by mid-1997. At that time the company had firm orders for another 86 CRJs and options from customers to purchase 198 more.

Bombardier continued to expand its operations and acquire new companies in the mid-1990s. In April 1995, for example, it purchased German transportation equipment manufacturer Waggonfabrik Talbot, which employed a workforce of about 1,200. Importantly, the wisdom of Bombardiers decision to retain its motorized consumer craft business became evident when that market rebounded in 1994. Buoyed by new product introductions, sales by that division surged 39 percent in 1994 to account for roughly 17 percent of company revenues. More importantly, profits from Ski-Doo and Sea-Doo products represented 37 percent of total company profits, making that division central to Bombardiers gains in that year. As a result of new acquisitions and improving markets, Bombardiers revenues sailed from C$4.77 billion in 1993 to C$5.94 billion in 1994, as net income climbed from C$177.3 million to C$247.3 million. Revenues increased still further in 1995, to C$7.12 billion, but net income dropped to C$158 million because of a C$155 million writedown of the companys 3 percent stake in Eurotunnel.

In April 1996 Bombardier was reorganized into five groups: Bombardier Aerospace, Bombardier Transportation (the rail operations), Bombardier Recreational Products, Bombardier Services (later Bombardier International), and Bombardier Capital. It was the first of these groups, Bombardier Aerospace, that led the company to new heights of prosperity in the final years of the 20th century. In addition to the continued success of the CRJ 100 regional jet, Bombardier successfully rolled out more aircraft models, including two new business jets. In 1998 came the first delivery of the Learjet 45 business jet, which had been jointly developed by Learjet, de Havilland, and Shorts. This super-light jet had a maximum range of 2,120 nautical miles and a cruising speed of 534 miles per hour. Within two years, Bombardier had delivered more than 100 of the new jets. During 1999, Bombardier completed another key introduction, the Global Express business jet, an ultra-long-range, high-speed corporate jet capable of circling the globe with just two stopovers. Bombardier invested C$400 million in the project, which began in the early 1990s and was codeveloped by Canadair, Learjet, de Havilland, and Shorts, with the assistance of 11 outside partners, who ponied up another C$400 million. The addition of Global Express gave Bombardier a full range of business jets, ranging from the lower end Learjet through the middle-market Challenger to the high-end Global Express, which sold for a cool $34 million.

With sales of regional jets booming and the red-hot U.S. economy driving sales of corporate jets to record levels (the U.S. market accounted for more than half of Bombardiers overall revenues), Bombardier Aerospaces revenues skyrocketed, jumping from C$4.28 billion in 1996 to C$6.44 billion in 1998 to C$10.56 billion in 2000. By the latter year, aerospace operations accounted for two-thirds of overall revenues and more than 85 percent of the companys profits. The head of Bombardier Aerospace, Robert E. Brown, was rewarded for this stellar performance in February 1999 with a promotion to president and CEO of Bombardier Inc., with Beaudoin remaining chairman of the board.

It should be noted that a number of observers were critical of what they perceived as too-close ties between Bombardier and the government of Canada and pointed out that Bombardiers rapid ascension in the aerospace industry was aided by government subsidiesparticularly in regard to the development of the CRJ. In fact, Bombardiers chief competitor in the area of regional aircraft, Empresa Brasileira de Aeronáutica S.A. (Embraer) of Brazil, took its case of unfair trade practices to the World Trade Organization (WTO). Bombardier did likewise, accusing Embraer of gaining market advantages from its ties to the Brazilian government. At times the competitive battle between the worlds two main regional jet makers threatened to escalate into an all-out trade war between their respective home nations. The conflict continued unresolved into the early 21st century, although a number of WTO rulings in the matter supported the Canadian position.

In the late 1990s and early years of the 21st century, Bombardier Transportation began playing a more prominent role within the company. In February 1998 Bombardier acquired Deutsche Waggonbau AG, a Berlin-based maker of train and subway cars, thereby doubling the size of its European rail equipment operations. In December of that same year, Bombardier signed its biggest rail contract ever, a $1.8 billion deal with Virgin Rail Group of Britain to build 78 high-speed diesel-electric locomotives and train coaches. The company entered the burgeoning Chinese market in November 1999 by establishing a joint venture that would construct a manufacturing facility in China to build 300 intercity mass transit railcars for the Ministry of Railways. In August 2000 Bombardier agreed to acquire Berlin-based DaimlerChrysler Rail Systems GmbH (known as Adtranz) from DaimlerChrysler AG for $725 million. Adtranz was a major maker of rail equipment with 1999 revenues of $3.4 billion and 22,000 employees. In addition to production of electric locomotives, Adtranz specialized in propulsion and train controls, services, and signaling, providing Bombardier Transportation with a broader range of activities and making Bombardier the worlds largest producer of passenger-rail equipment. The acquisition of Adtranz, which was completed in May 2001 and was the largest in company history, meant that 40 percent of Bombardiers revenues would be generated by the rail transportation unit.

In addition to creating a more powerful rail unit, Bombardier also worked hard to remain at the forefront of the regional aircraft and business jet sectors. Having concluded that there was still room in the market for regional turboprops, Bombardier in late 1999 made its first deliveries of the Dash 8-Q400, a 70-passenger twin-turboprop designed for regional airliners high-density, short-haul routes. By early 2001, Bombardier had delivered 29 of the new models and had firm orders for an additional 33 and options on 32. In January 2001 deliveries started for the CRJ 700 model regional jet, a stretched, 70-seat version of the CRJ 100/200. Bombardier already had firm orders for 173 additional CRJ 700s and options had been taken on 313 more. Moreover, the company was already developing the next-generation CRJ, the 900, an 86-passenger model scheduled to enter airline service in early 2003. For all of its models of regional aircraft, Bombardier entered 2001 with firm orders for 574 units and 1,047 options, a backlog that represented potential sales of tens of billions of dollars (the jets, for example, sold for between C$33 billion and C$45 billion each). Also under development was the Bombardier Continental business jet, an all-new super midsize corporate jet designed for transcontinental flights. The company hoped to received certification of the Continental by early 2003.

Meanwhile, in March 2001, Bombardier bolstered its recreational vehicles operations with the purchase of the engine assets of Outboard Marine Corporation, including the Evinrude and Johnson outboard marine engine brands. Despite this acquisition, recreational products, the founding business of Bombardier, had been left in the exhaust of the rapidly expanding aircraft and rail units. Only 11 percent of the revenues and 6 percent of the profits for the fiscal year ending in January 2001 came from recreational products. These percentages were certain to fall even further with the addition of Adtranz and the continuing rollout of new aircraft models. Bombardiers order backlog totaled C$31.71 billion as of January 2001, boding well for the future of a company that had within the span of decade or so become one of the worlds major transportation equipment companies. The one cloud on the horizon was the impact that a prolonged economic slowdown might have on the companys operations, with business jet sales being particularly vulnerable during economic downturns. Furthermore, the regional jet industry that Bombardier had pioneered had never been through an economic downturn, providing an air of uncertainty surrounding the company.

Principal Subsidiaries

AEROSPACE: Bombardier Inc.; Learjet Inc. (U.S.A.) ; Short Brothers plc (U.K.). TRANSPORTATION: Bombardier Inc.; Bombardier Transit Corporation (U.S.A.) ; Bombardier-Concarril, S.A. de C.V. (Mexico) ; DWA Deutsche Waggonbau GmbH (Germany) ; Talbot GmbH & Co. KG (Germany) ; Bombardier-Wien Schienenfahzeuge AG (Austria) ; BN S.A. (Belgium) ; Société ANF-Industrie S.A. (France) ; Vagonka _eská Lipa a.s. (Czech Republic) ; Prorail Limited (U.K.) ; Vevey Technologies S.A. (Switzerland). RECREATIONAL PRODUCTS: Bombardier Inc.; Bombardier Motor Corporation of America (U.S.A.) ; Bombardier-Rotax GmbH (Austria) ; Bombardier-Nordtrac Oy (Finland). CAPITAL: Bombardier Capital Inc. (U.S.A.) ; Bombardier Credit Receivables Corporation (U.S.A.) ; BCI Finance Inc. (U.S.A.) ; Bombardier Capital Rail Inc. (U.S.A.) ; Bombardier Capital Ltd.; Bombardier Capital Leasing Ltd.; Bombardier Finance Inc.; Bombardier Capital Mortgage Securitization Corporation (U.S.A.) ; Bombardier Capital CF II Inc. (U.S.A.) ; Bombardier Capital Insurance Agency Inc. (U.S.A.) ; RJ Finance Corp. Two (U.S.A.) ; Bombardier Capital International B.V. (Finland) ; Bombardier Capital International S.A. (France) ; Bombardier Inc. INTERNATIONAL: Bombardier Inc.

Principal Operating Units

Bombardier Aerospace; Bombardier Transportation; Bombardier Recreational Products; Bombardier Capital; Bombardier International.

Principal Competitors

Empresa Brasileira de Aeronáutica S.A.; Fairchild Dornier Corporation; Gulfstream Aerospace Corporation; The Boeing Company; Airbus S.A.S.; Textron Inc.; Raytheon Company; BAE Systems; Dassault Aviation SA.

Further Reading

Bertin, Oliver, Bombardier Targets New Niche, Globe and Mail, November 24, 1997, p. B8.

, A Global Gamble: Bombardier, the Montreal Maker of Snowmobiles, Jet Skis and Regional Airliners, Is Betting $400-Million That Its New Executive Jet Will Solidify a World-Class Reputation and Give It More Respect at Home, Globe and Mail, August 24, 1996, p. B1.

Bombardier: A Dream With an International Reach, Montreal: Bombardier Inc., 1992.

Bombeau, Bernard, Regional Manufacturers Carve Up the Market, Interavia, May 1997, pp. 33, 36-38.

Bourette, Susan, Bombardier Reward Brown by Promoting Him to Top Job, Globe and Mail, December 9, 1998, p. B1.

Came, Barry, Sky King: Bombardiers New Regional Jet Is Revolutionizing the Way People Fly, Macleans, August 11, 1997, pp. 3036.

Chipello, Christopher J., Bombardier, Going Outside Family, Names Brown CEO, Wall Street Journal, December 9, 1998, p. B13.

, Jet Maker Looks to the Old Economy: Bombardier of Canada Seeks a Smoother Ride with Railroad Deal, Wall Street Journal, September 12, 2000, p. A21.

Crowe, Nancy, Bombardier Gears Up, Vermont Business, December 1986, p. 89.

DePalma, Anthony, The Transportation Giant up North: Bombardier Rises, with Some Help from Friends in Ottawa, New York Times, December 25, 1998, p. C1.

Ferrabee, James, Bombardier Stock on a Magic Carpet Ride, Gazette, December 19, 1994, p. C2.

, Confident Chunnel Man, Gazette, February 1995, p. D7.

Ford, Royal, Red Line Cars Are Born in Vermont, Boston Globe, November 7, 1993, p. 69.

Gibbens, Robert, Bombardier Buys German Railcar Firm, Financial Post, February 25, 1995, p. 19.

, Bombardier Is Aiming High, Financial Post, April 11, 1991, p. 21.

Goldsmith, Charles, Gulfstream and Bombardier Stage Business-Jet Dogfight, Wall Street Journal, June 20, 1997, p. B4.

Hadekel, Peter, Bombardiers Ski-Doo Division Is Profiting from Borrowed Techniques, Gazette, April 16, 1993, p. F1.

Koselka, Rita, Lets Make a Deal, Forbes, April 27, 1992, p. 62.

Lang, Amanda, Dynasties, Globe and Mail, Report on Business Magazine, June 1, 1995, p. 60.

Leger, Kathryn, Tough Guy on the Tarmac: Laurent Beaudoin Keeps Bombardier on Top of Global Markets with a Combination of High Technology and Hardball, Financial Post, August 1, 1998, p. 8.

Livesay, Bruce, Ceiling Unlimited: Bombardiers Global Ambition and Constant Innovation Have Propelled It to No. 1 in Our CEO Survey, Globe and Mail, March 28, 1997, p. 36.

McArthur, Keith, Bombardier Endures Jet Controversy, Globe and Mail, June 25, 2001, p. B3.

McGovern, Sheila, On the Move: The Snowmobiles Bombardier Built for Rural Quebec Are the Still-Thriving Roots of a World Transportation Empire That Includes Planes, Trains, and Sea-Doos, Gazette, November 1, 1993, p. C8.

Moorman, Robert W., Bigger and Better, Air Transport World, May 1999, pp. 3234 +.

, Booming with Bombardier, Air Transport World, August 1998, pp. 102+.

, The Deal Maker: From Selling Snowmobiles to Saving Aircraft Companies, Laurent Beaudoin Has Made Bombardier a World-Class Player, Air Transport World, July 1992, p. 44.

Newman, Peter C., A Lesson in How to Choose the Right Stuff, Macleans, December 21, 1998, p. 50.

Pasztor, Andy, and Daniel Michaels, Regional-Jet Makers, Flying High, See Clouds Looming: Economic Slowdown, Labor Disputes and Large-Plane Rivals Could Stall Demand, Wall Street Journal, July 12, 2001, p. B4.

Shalom, Francois, Firefighting: Canadair Says Bombers Problems Are Merely Glitches, and Promises to Fix Them for Unhappy French, Gazette, March 18, 1995, p. C3.

Sheppard, Robert, The Nimble and the Bulky: Small Regional Jets and Giant Airliners Appear to Be the Way of the Future for the International Aviation Industry, Macleans, August 7, 2000, pp. 2425.

Shifrin, Carole A., Bombardier Bets on New Regional Turboprop, Aviation Week and Space Technology, December 15, 1997, pp. 3842.

Tremblay, Miville,Le sang jaune de Bombardier: La gestion de Laurent Beaudoin, Sainte-Foy, Québec: Presses de lUniversité du Québec, 1994, 131 p.

Velocci, Anthony L., Jr., Claims, Counterclaims Intensify Gulfstream, Bombardier Rivalry, Aviation Week and Space Technology, June 28, 1999, p. 66.

Walmsley, Ann, Meet the New Boss Same As the Old Boss?: Bombardiers Robert Brown Has a Tough Act to Follow As He Steps into Laurent Beaudoins Shoes, Globe and Mail, March 26, 1999, p. 85.

Wells, Jennifer, Bombardiers Big Gamble, Macleans, September 2, 1996, pp. 3638.

Yakabuski, Konrad, Bob Brown in Command: Who Would Have Guessed That Plain Robert BrownSpit-and-Polish Soldier, Career Civil ServantCould Match Laurent Beaudoins Fabled Record As CEO of Bombardier, Globe and Mail, Report on Business Magazine, October 27, 2000, p. 74.

, Bombardier Sets Out on a European Odyssey: Canadian Firm Establishes New Trade Beachhead on Old Continent, Toronto Star, December 19, 1993, p. D1.

Dave Mote
update: David E. Salamie

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