Why Bombardier failed

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pelmet
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Why Bombardier failed

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Re: Why Bombardier failed

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Re: Why Bombardier failed

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pelmet
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Re: Why Bombardier failed

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With the sale of its CRJ business to Mitsubishi announced in June, Bombardier essentially exits a sector it entered 33 years ago when it acquired Canadair from the Canadian government. In the meantime, close to 2,000 CRJ and 1,300 Q-Series airplanes have been produced and delivered, and a brand-new aircraft—the C Series—has been developed, but the tenure of Bombardier in commercial aerospace will ultimately be remembered as a financial and strategic failure.

It all started with a strategic dilemma at the end of the 1990s. Bombardier had been very successful with its CRJ family of airplanes, stretching its original 50-seat version into 70- and 86-seat ones, but it was reaching the end of what could be done with this generation of aircraft and within the regional segment.

Bombardier executives realized that while the 100-150-seat segment was already occupied by the Airbus A318/319 and Boeing 737-600/-700, these products were not optimized for that segment. This opened an opportunity for Bombardier to design an aircraft that would specifically address the segment’s needs and thus compete advantageously with the incumbents.

After several false starts, the urge to design a new aircraft proved too strong to resist, and a revamped C Series program was launched in 2008 with an ambitious road map. The aim was to capture 50% of a market (100-150 seats) estimated at 6,000+ airplanes over 20 years and offer “best-in-class” performance for fuel efficiency, cash operating costs and CO2 emissions, thanks to major innovations such as resin infusion and geared turbofan technologies. It was a daring project, to say the least.

And it turned out to be too big a challenge for the company: After spending around $5.5 billion to develop the aircraft (more than twice as much as initially planned) and losing billions in the process, Bombardier’s leaders realized that carrying it on would probably bring the whole company down. With the C Series’ future hanging by a thread and its two other commercial aircraft programs (CRJ and Q-Series) reaching the end of their lives, it chose to exit completely.

In hindsight, Bombardier’s management made several strategic mistakes along the way that could have been avoided, had it been more lucid about their market and the industry dynamics at play.

The first mistake was not realizing that the segment they were targeting with the C Series was not just an extension of the markets they knew. It was a completely different market, with different requirements, different success factors and two incumbents with a huge competitive advantage in terms of the installed base, marketing clout and economies of scale in design, production and customer support. In essence, the C Series was not just about a product, as good as it may be, competing with another, but rather about a relatively small Canadian company facing off with two global giants in a market they had “duopolized” for decades.

The second mistake was believing Bombardier’s experience in developing smaller aircraft (28 in 20 years!) would give it a head start and take it up the learning curve quickly for the C Series as well. But with so many innovations involved and such a short timeframe to deliver (five years between the official launch and entry into service), it was wishful thinking, and Bombardier had to relearn pretty much everything from scratch about designing and managing a new aircraft program.

The third mistake was underestimating the challenge of getting its supply chain to deliver on specifications, time and cost. With some daring outsourcing decisions and without proper supply chain management processes in place, Bombardier quickly found itself at the mercy of its suppliers, which ultimately drove costs out of control. It is no surprise that Airbus is revisiting its supply chain to make the A220 program profitable.

All in all, Bombardier management failed at the most basic step of corporate decision-making: analyzing industry dynamics and using that analysis to inform strategic decisions. Instead of going after a market where entry barriers were huge, where the company’s bargaining power (with buyers and suppliers) was low and where rivalry was already intense, Bombardier would have been better off sticking to its core business and protecting its market share from new entrants such as Mitsubishi, Comac and Sukhoi while keeping the pressure on Embraer and ATR—unless it expected from the beginning to sell the C Series program to Airbus or Boeing. But in that case, Bombardier executives probably would have had a different number in mind than the symbolic $1 Airbus ended up paying for the takeover.


Discuss this Article 24

on Aug 6, 2019
Bombardier had the vision and technologically successfully implemented it.
Bombardier upended the single aisle 100-150 passenger market. Duopoly Boeing and Airbus had to react. And it brought forth the GTF engine design into mainstream airliners.
I'm sure Bombardier will still earn from whatever share they have left on the revolutionary CSeries.
Kudos to Bombardier.
There's life still for the Dash 400 and the CRJ with upgrades.
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Talyn
on Aug 6, 2019
I agree. The author states the challenge was too big, but they built an excellent aircraft.
What was too big was being able implement the overall program due to the financial and management challenges.
Airbus picked up the C-Series program for free and the aircraft is in demand.
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on Aug 6, 2019
Lets not forget the huge amounts of money the Canadian taxpayer gave to the company for this aircraft. It became a joke by various newspaper columnists that Bombardier's successful business is not related to trains and airplanes but to extracting money from various governments.
Having said that, I do believe that the C Series is a wonderful airplane.
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.
on Aug 6, 2019
It would be interesting to see a similar analysis of Boeing for the MAX as well as Airbus for the A380.
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on Aug 6, 2019
It’s also worth noting that Bombardier might still have pulled it off, but for Boeing launching a predatory (and hypocritical) trade war attack with US government support.
Ironically, that resulted in Airbus taking over and making Boeing’s position worse.
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Talyn
on Aug 6, 2019
I disagree. Regardless of Boeings' move Bombardier didn't have the financial and management skill to pull off the C-Series entry into the market.
The limited sales prior to the Airbus free-bee take-over prove the uncertainty the market had about the long-term viability of the aircraft. After the Airbus take-over the market responded with greater confidence and subsequent sales.
Boeings' move was flat out "bone-headed". If Boeing would have been smart enough they could have picked up the C-Series which would have given them more flexibility in planning and designing the proposed NMA.
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hugo.br.aviatio...
on Aug 6, 2019
I would say that Boeing only did it because the company already knew about negotiations between Airbus and Bombardier to sell the CSeries program to Airbus.
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Talyn
on Aug 8, 2019
Since Airbus only paid a $1USD for the C-Series Bombardier could have opened up a bid for the program and got more than a buck to recoup that Canadian taxpayers investments.
But Bombardier and the Canucks were probably so pissed off at Boeing they just took the dollar.
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p.cauchi@infoae...
on Aug 6, 2019
The CSeries has been an obsession at Bombardier and for the Québec industry since the BRJ-X introduced at 1998 Farnborough International, the same kind of obsession that Airbus showed with the A380.
Following the steps of Airbus, Bombardier swallowed more than US$3B of public money for the CSeries program.
For now being under the umbrella of Airbus, the CSeries now A220 will find more customers with cut-throat prices like most Airbus jetliners and especially the A320.
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on Aug 6, 2019
So true.
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johnbraen@optim...
on Aug 6, 2019
About the late 90’s early 2000’s Bombardier spend 80 million Canadian on preliminary engineering. When their market analysis showed there wouldn’t be enough demand to break even, they balked. Then Embraer made a suspiciously similar looking airplane in the E170/190. Only after they delivered 500 aircraft did Bombardier decide to get back in the game with the C - Series. What a shame nice airplane!
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on Aug 8, 2019
The CSeries may have brought the GTF to the market but it also caused nearly six months of delays when little or no test flying could take place. The consequent costs and, critically, delay in both Certification and Entry into Service may have had just as much impact, if not more, than any Management decisions.
Remember Mitsubishi was Bombardier’s partner in the BRJ-X and essentially continued developing the original Regional sized aircraft. Judging by sales, that route might have been even more disastrous!
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on Aug 8, 2019
Hindsight is 20/20, who doesn’t make mistakes? Boeing’s recent one is 5b and counting. The A220 is a great airplane and in time will be a huge comercial success, too bad that yet another Boeing mistake led the program to the portfolio of Boeing’s arch rival. That’s what happens when unfettered capitalism lets Wall Street in effect dictate corporate policy and decision making
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on Aug 8, 2019
It's going to be a very crowded aerospace labor market next year in Canada
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on Aug 8, 2019
The article also failed to mention that Bombardier was also developing two other clean sheet aircraft during this period, the Global 7000/8000, and composite Lear 85, the financial burden was huge. In my opinion the Lear should have never even moved forward. It would have been interesting to see where they would be if they had been more strategic with these programs.
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on Aug 8, 2019
When I worked in Montreal 2013-2014, my co-workers told me that Bombardier had also lost a lot of money, due to investing in the real estate finance end in Wall Street, and with the collapse of that house of cards, it was a major impact on Bombardier capital. Can anyone confirm/ deny that?
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QuestionMark
on Aug 8, 2019
Has to be seen in context with the parallel development efforts of the Global 7000/8000 and the Learjet 85, stretching Bombardier's resources further beyond limits. The initial CSeries program cost estimate of $2,1bn, incl. $1bn for the engine, was decidedly low-balled. Also, the liason with China contributed to a mess in major component design and build subcontracting.
The Learjet 85 turned out to be beyond Bombardier's technical capabilities.
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on Aug 8, 2019
The Learjet 85 was well within BA's technical capabilities - it had the accumulated knowledge of Canadair and Shorts/Learfan that had both produced large composite structures & airframes for decades. What it couldn't overcome was the political decision of trying to vacuum form composites halfway up a mountain in Mexico!
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on Aug 8, 2019
Hilarious story,, those liberal Cannucks only work about 30 hrs/week and sometimes never show up to work at all....
Not to mention they totally neglected the fact that Embraer would easily beat them to fill that aircraft market.....
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on Aug 8, 2019
I think the author's thesis could have been summed up in one word: "hubris". Bombardier was really quite good at pushing a new aircraft into service in a five-year cycle--albeit usually an improved derivative. But doing so with two nearly clean-sheet programs simultaneously with three other derivatives (CRJ 1000, Global 7000 and Challenger 3X0) was folly.
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on Aug 8, 2019
Haha, I forgot about the CRJ1000.
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on Aug 8, 2019
Bombardier is not as stupid as the author suggests. It laid off virtually all of the financial risk to the Canadian taxpayer. The real losers are just those taxpayers, and the laid off workers. Bombardier's senior executives awarded themselves massive compensation increases despite the C Series disaster.
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on Aug 10, 2019
Bombardier once before made a major bet (in 1989 ish) with the original CRJ. I recall there was an 18 month gap in orders for CRJ with Lufthansa being the only credible customer.. It was a worrying time in Montreal (I was there) But eventually the CRJ revolutionised Regional travel. No more dodging the thunderstorms in a Beech 1900. The many many delays (decade plus) in launching what became the C series probably indicated tho the market that BBD was not really committed to making airliners. Partner choice was sometimes questionable, and the associated hidden costs ignored or not anticipated. And when the C did get launched, there were then three projects- LJ85/ Global and Cseries, and the cash flow from the large CRJ sales was by then drying up. So to protect the overall company BBD have had to shed all airliner related business- Glad Im retired . Airbus may mnake a success of it, if they can take costs out. MRJ can never make profit, heaven knows how much MHI have wasted - it must be several billion US - with all the delays and still no service entry- Hell its been 4 years (nearly since first flight and they were still discovering fundamental design issues long after that.- A comparable analysis would be welcome once the dust settles in Nagoya. As for Russian & Chinese regional airliners... No hope in the real world . Bombardier aimed high but too late, bet the company and effectively
lost, sad to say
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on Aug 30, 2019
Thank you for the article AND for the cogent discussion.
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shimmydampner
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Re: Why Bombardier failed

Post by shimmydampner »

Whoa whoa whoa..... Am I to understand that an aviation company struggled/failed because of incompetent management? I've never heard of such a phenomenon!
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rookiepilot
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Re: Why Bombardier failed

Post by rookiepilot »

shimmydampner wrote:
Sat Nov 16, 2019 10:32 am
Whoa whoa whoa..... Am I to understand that an aviation company struggled/failed because of incompetent management? I've never heard of such a phenomenon!
Nah.

It's Trump's fault. Harper's. Jason Kenney's. Don Cherry's.

Is that poster who disagreed with me on BBD, still maintaining it as a great investment? Going to 10-20 bucks?
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Zaibatsu
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Re: Why Bombardier failed

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It failed because we weren’t willing to underwrite it at any costs like Airbus and Embraer or even Boeing would be if it came down to it.

It was Trump style US protectionism that broke the camels back on what was a winning product, which followed a line of winning products that pushed entrenched competitors like Fokker, Avro, McDonnell Douglas, Hawker Siddely out of business.

Kenny and Harper helped Bombardier. They gave Quebec the equalization formula that they enjoy today. Those skeletons are buried deep in their closet but their supporters weren’t ever too interested in facts.

Funny how BBD stock is down yet they didn’t kill anyone with interior products. That’s how backwards the American capitalist system and the modern right wing is. Lives are worthless. Only a companies ability to protect their investment and make growth and returns is worth something.
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ayseven
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Re: Why Bombardier failed

Post by ayseven »

Good response.
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