Identifying Bombardier’s nemesis isn’t difficult: It’s the very family that propelled it to greatness, only to oversee its near destruction in recent years. The Bombardiers and the Beaudoins should have left a long time ago, when it was becoming apparent their remarkable creation was in danger of stretching itself to breaking point.
Today, Bombardier is busy dismantling itself in an effort to shed excessive debt and buy time – the train and business jet divisions, the last two operations of any size, are soliciting offers.
Bombardier’s survival in some form is possible, perhaps likely, but is far from assured. What is assured is that, at best, it will be small and inglorious compared with its former self, when it was emerging as a global rival to Airbus and Boeing and one of the world’s top rail players. One of Canada’s last great family dynasties messed up – big time.
Bombardier actually started the dismantling process in 2003, when the company sold Bombardier Recreational Products (BRP), the maker of snowmobiles, which were invented by Joseph-Armand Bombardier in the mid-1930s. The sale made sense. Snowmobiles by then were a non-core business and the cash was needed to put fancy new planes in the sky and trains on the rails. (Shorn of Bombardier control, BRP went on to thrive.)
The fateful moment came in 2005, when the board, captive to the Bombardier and Beaudoin family that controls the company through majority ownership of the super-voting A shares – and still does – gave the green light to the development of the C Series passenger jet.
Paul Tellier, who was CEO until his premature resignation at the end of 2004, when the C Series was still in the feasibility stage, considered the plane’s launch a kamikaze run. Airbus and Boeing simply would not tolerate competition to their bread-and-butter small jets, he guessed, and he would ultimately be proved right.
As the C Series went billions of dollars over budget and its order book failed to fill up, Bombardier ramped up the dismantling process. Out the door went the water-bomber division; the Q400 turboprops used by short-haul carriers such as Toronto’s Porter Airlines; and the C Series itself, which was sold for a nominal sum in 2018 to one of the very companies that despised its very existence, Airbus (the plane is now called the Airbus A220).
Bombardier has also sold a 30-per-cent stake in Bombardier Transportation (BT), the train business, to Caisse de dépôt et placement du Québec; the wing-making factory in Northern Ireland; and, just recently, its regional jets – the small jets it turned into flying minivans – which went to Japan’s Mitsubishi Heavy Industries. It’s now trying to extricate itself from the joint venture it formed with Airbus to produce the A220.
Today, Bombardier is out of the commercial jet business. What’s left is business jets and a majority stake of BT. As far as anyone can tell, it plans to sell one or the other. It is reportedly talking to French train giant Alstom about putting Alstom and BT together, as well as with Textron of the United States, owner of Bell Helicopter and Cessna aircraft, and private-equity firms to take over its business jet division.
If both BT and the business jets are sold, Bombardier will be left with essentially nothing. Shareholders apparently have little hope it can revive itself. On Friday, the shares traded at $1.40, having fallen more than a third in the past year, putting the company’s worth at $3.5-billion. Their record high was $26.30 in 2000.
Which brings us to the Bombardier and Beaudoin family, the overseers of one of the greatest examples of wealth creation, then wealth destruction, in Canadian corporate history.
Throughout Bombardier’s decline, the family hung on to management, boardroom and ownership control, despite several efforts by the pension funds to ease them out of the picture and dilute or outright dismantle the dual-class share structure that ensured their hammerlock on the business.
In a normal company, Pierre Beaudoin would have been marched out the door for a series of miscalculations that brought the company to the brink of bankruptcy in 2015. But the families kept him as CEO from 2008 to 2015, when he was replaced by Alain Bellemare, after which Mr. Beaudoin became executive chairman – in effect a reward for shabby performance. He is now chairman, meaning the family genes continue to infiltrate the boardroom and sway its decisions.
It’s impossible to say the company would have been saved if the Bombardier and Beaudoin family was sent on permanent golf leave 10 or 15 years ago. But had they bowed out, the company would certainly have had more options. It might have attracted a strategic investor that allowed the C Series, which is now selling well, to thrive under Bombardier control. It might have decided to kill off the C Series before it took flight so it could concentrate instead on overhauling the regional jets and fluffing up the successful business jets. The company could have entered an entirely new clean-energy transportation business.
But the family was sacrosanct – even as the company went into a long crisis, even as it begged governments for money, even as shareholders suffered horrendous losses. It wasn’t so much the C Series that brought Bombardier to the brink of destruction; it was a family that used its iron-clad control to shield itself from new ideas.
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