|Bombardier: An Old and Successful Partnership with France|
Bombardier: An Old and Successful Partnership with France
Speaking notes for presentation by Mr. Robert E. Brown, President and Chief Executive Officer at the France-Canada Chamber of Commerce. Paris, December 13, 2001. Source: Bombardier, Montreal.
Mr. Ambassador, Mr. Delegate General,
Dear Presidents, ladies and gentlemen, and friends: Thank you for your warm welcome.
I must say that I'm very honoured to be here today at the invitation of the France-Canada Chamber of Commerce
Today's venue, which is dedicated to our mutual friendship and prosperity, reminds me of the long-standing business relations Bombardier and its French partners have entertained for the past 40 years. As you may know, back in 1961, the French Civil Security was the launch customer of our firefighting aircraft, the famous Canadair amphibious. It was also a French company, CIMT-Lorraine, which has since been acquired by Alstom, that provided us with the technology we needed to close our first deal in the rail industry: the Montreal metro. And more recently, another French firm, BritAir airlines, was the launch customer for our CRJ700 regional jet. As you can see, our French partners have played a key role in our success, one that I'm very pleased to recognize.
This successful partnership continues to thrive today, with companies such as Lebeh-Aerospace-Toulouse, Intertechnique, ECE, Messier Dowty and Thales Avionics, all of which are among our prime partners in the aerospace industry.
In the rail industry, we have in France over 900 suppliers and subcontractors, the majority of whom work for our production facilities in Crespin, in the Nord-Pas-de-Calais. When we took over the former ANF Industries in Crespin, we modernized the plant and turned it into a European - and even a worldwide - centre of excellence. As a result, Bombardier is now a major player in the French rail industry.
I'm sure now you understand why I feel a little at home in France! What's more, while I'm here in Paris, I will be signing another major deal with the SNCF. Later tonight, in fact, I will be meeting with the President of the SNCF, Mr. Gallois, to sign a contract for the supply of 500 high-capacity regional trains, or AGC, which stands for Autorails à grande capacité.
These are durable and very promising relationships. Relationships that we continue to strengthen and to build on, day after day.
What a stark contrast, wouldn't you say, with the world around us, made up of uncertainty and change!
Change, and more specifically, harnessing change, is, in my opinion, the principal challenge that business leaders face at the dawn of the 21st century.
Nothing new there, of course. About 25 centuries ago, in fact, the Greek philosopher Heraclitus observed: "Nothing is permanent but change." And he was right!
It's a well-known fact that uncertainty has always been the lot of leaders - especially business leaders. Risk, innovation and the ability to transcend borders are all features of the major industrial adventures of our time.
As business people, we are supposed to delight in change. Yet we are constantly seeking stability in our environment.
To me, this paradox can be explained like this: we like change when we drive it, but not when it drives us!
I am, above all, a proponent of managing change. My approach stems from my personal experience at Bombardier, a snowmobile manufacturer that has used innovation to successfully reinvent itself several times throughout the years. In this respect, my experience may have a certain usefulness. I will try to summarize a few of the lessons I have learned along the way.
- Building on core know-how
The first lesson is that the company must build on its core know-how.
At first glance, this may seem strange because 30 years ago, if you had asked what Bombardier was, the answer would have been: a snowmobile manufacturer. Twenty years ago, the answer would have been: a subway manufacturer. Ten years ago, the answer would probably have been: an aircraft manufacturer. And today, especially since the acquisition of Adtranz, the answer from many Europeans would be: a railway equipment manufacturer.
So what is the common thread in what seems like a winding journey?
- It's transportation, of course - our core business.
But the common thread is also, or should I say, primarily, a relish for technical innovation, entrepreneurship and risk-taking; a particular approach to manufacturing and quality control; and a certain skill at turning companies around. All of this makes up our core know-how, which we have acquired and applied throughout our history, and in all our sectors - from recreational vehicles to rail transportation to aerospace.
As some of you may know, the Bombardier adventure began in a garage in rural Quebec. It is truly a story of passion, the passion of a man for technical innovation. Joseph-Armand Bombardier had a dream: to build a vehicle capable of transporting people over the frozen expanses of Canada during the long winter months. His dream led to the creation of the Ski-Doo snowmobile, which later inspired the concept of the Sea-Doo personal watercraft. Today, we are perfecting the engineering of the Johnson and Evinrude outboard engines that we recently acquired.
When we decided to tackle the passenger rail sector, we were betting on our demonstrated ability to operate assembly lines and to control product quality - skills acquired in the snowmobile industry. Much as we did with ANF, we began turning around a string of railway equipment manufacturers, namely by introducing new technology.
In the aerospace industry, we also turned around all of the companies we acquired: Canadair, de Havilland, Learjet and even Shorts, Europe's oldest aircraft manufacturer. We launched 12 new aircraft in 12 years, a feat no other aircraft manufacturer can claim. Bombardier is now the third largest civil aircraft manufacturer in the world.
So, despite our apparent mutations, we have grown not as a financial conglomerate, but rather, in the axis of our core know-how, namely technical innovation and successful integration of acquisitions.
This course has led Bombardier to become what looks like a multinational, with consolidated revenues nearing 15 billion euros for the current fiscal year, and some 80 000 employees mainly located in the 24 countries where we have production facilities. We aim to be recognized as the world leader in all our markets, and have already reached this goal in the personal watercraft, passenger rail, regional jet, business jet and amphibious aircraft markets.
- Preparing for unforeseeable change
Our revenues are generated about equally on both sides of the Atlantic, and in both the railway and aerospace industries. Each geographic market, and each industrial sector has its own business cycle. This effectively protects us from the jolts of the worldwide economy.
As I've said before, change comes in two types: the type you initiate, and the type you endure. And while it's entirely possible to plan for the first, you also have to prepare for the second. In any case, it seems to me that a business leader must manage both.
So, the second lesson our experience has taught us is that we must prepare for unforeseeable change as much as we must design desired change.
Our product and geographic diversity has helped us withstand the aftershocks of the September 11 attacks, which as you know, have led to a significant drop in commercial flights, particularly in the U.S., and which continue to jeopardize the financial situation of a number of airlines.
While our aerospace group did feel the combined impact of the economic slowdown and of the attacks, the outlook is already more promising. The regional jet category of aircraft is currently the only one that is flying more routes than before September 11. Because of their smaller capacity, airlines can still fill these aircraft and make money with each flight. As a result, demand for this type of aircraft seems to be stabilizing and we expect to return to higher production rates.
In the meantime, our rail transportation group, which is less vulnerable to economic woes, has continued growing. Since May 1 of this year, we have received new orders totalling nearly 3 billion euros and spanning not only the European and American markets, but also, the Asia-Pacific market, namely, China and Australia.
A genuine testimony of our confidence in the future, we have inaugurated since September, an aircraft assembly plant and announced the development of a new intercontinental business aircraft, the Global 5000. With the recession gripping the U.S. economy, one could say the business aircraft market is less than favourable. But we have learned from experience that in such circumstances, there is an even greater need to stimulate the market with new products. We have identified a latent demand for this type of aircraft and want to be the first to reap the benefits of the recovery when it comes.
This goes to show the third lesson I've learned: to harness change, you must anticipate it.
The French author and philosopher, Diderot, said of the poet that "he must be like the spider at the centre of its web - sensitive to all of the vibrations of the world around".
When everything around is moving - and quickly, as it does today - the successful company must remain, first and foremost, constantly tuned to the world around.
For instance, in the case of the snowmobile, our founder accurately anticipated the desire for freedom that would help make this machine so popular. So after inventing the utility snowmobile, he redesigned it completely to come up with a personal recreational vehicle.
For many, the snowmobile came to represent freedom, just as the automobile had at the beginning of the 20th century.
Seeing the growing popularity of this new leisure activity, Bombardier played an active role in the creation of snowmobile clubs and the development of trails. Soon, a new sport was born, and then an entire new industry. A little later, we launched initiatives promoting safe and responsible snowmobiling, and when the environmental movement started in the West, we designed snowmobiles that are quieter, more economical and in general, more environmentally-friendly. We even recently extended these efforts to our line of personal watercraft.
In the aerospace sector, we also had to listen in order to hear. There was a time, some 10 to 20 years ago, when the general consensus was that bigger was better. That's precisely when we started asking ourselves if it was conceivable that some travellers would ever want to go, for example, from Nice to Rome, without going by Paris!
We answered that question by developing, in the '80s, the Regional Jet to meet the needs of an emerging market segment.
Back then, very few analysts imagined there would ever be a market for a 50-seat jet. Which made the industrial gamble even more significant. In all, the CRJ program entailed shouldering some $250 million in development costs - or about half Bombardier's entire market value at the time.
Ten years after delivering the first aircraft, we have just delivered number 500 - and we still have firm orders and options for 2,400 more. Not bad for an aircraft for which, just 20 years ago, there was no real market!
Development based on core know-how; product and market diversification; anticipation of emerging needs; so far, I have touched on three ways of harnessing change - all three through a company's products.
But just as essential is innovation in processes, in management and even, in business development. This is the fourth and final lesson that I have learned from our experience and that I wish to share with you.
In the rail industry, about 20 years ago, it was customary to wait for calls for tenders and to answer it based on the specifications of the client. We decided to try a new approach.
We began studying the needs of our clients five or 10 years in advance in order to profile these needs - even before clients considered requesting proposals. Today, most customers are very receptive to this proactive approach.
This helped us evolve from being train manufacturers to being suppliers of turnkey rail system solutions. This proactive approach also led us to develop major projects such as the high-speed train in the Boston-New York-Washington corridor, the Vancouver SkyTrain, and beginning tomorrow, the high-capacity, self-propelled regional trains for the SNCF and French regions.
To conclude on harnessing change, let me simply say that developing and diversifying activities around core know-how, anticipating demand and innovating in both products and processes are inherently linked to an organization's culture.
Today, Bombardier is still largely controlled by its founder's descendants.
Mr. Laurent Beaudoin, the current Chairman of the Board, took a leap of faith when he offered me the position of President and CEO. I am the first CEO to come from outside the family.
I think this open-mindedness towards me is very telling about Bombardier's corporate culture.
Bombardier is probably the only North American bred multinational where French is spoken at all echelons of the company. In this sense, the company remains loyal to its roots. But Bombardier is also a blend of cultures, a company that is genuinely open to new ideas and to different ways of doing things. In each country where we operate, we make it a point to adapt to national customs -- and we benefit a great deal from them. We like to think we may be the most North American of European companies, and the most European of North American companies!
Does this make a difference in our ultra-competitive business environment? I think so. In a world that is increasingly integrated, no one can claim to impose their model on anyone and everyone at once.
Could this, perhaps, be the secret of our success? Well, in any event, I think it's the secret of how we harness change.
In lieu of a closing remark, allow me to quote the Red Queen, speaking to Alice in Through the Looking Glass: "Now HERE, you see," said the Queen, "it takes all the running YOU can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that."
Thank you for your attention.