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Bombardier lost to competitors - Airbus and Boeing, spending billions to develop a new aircraft

In the late January evening of 2015, the 53-year-old CEO of United Technologies Alan Belmar was sitting in his office in Hartford, thinking over the next step - the company announced that day that he was removing him from the post of head of the aerospace division of the conglomerate. And then there was a call from his longtime friend Pierre Baudouin, the head of Bombardier. Baudoin complained about the crisis in the company. His father, Laurent, turned the Canadian company from a regional manufacturer of snowmobiles, first into a railway and then into an aerospace giant stepping on the heels of Boeing and Airbus. The company began to bring billions to the family. But Pierre Baudoin himself relied too heavily on the CSeries airliner — the first Bombardier aircraft that was fully developed inside the company and was supposed to occupy a market niche in the segment between regional aircraft and the Boeing 737, and now the company may disappoint investors by showing a quarterly loss of $ 1, 6 billion. Baudoin asked if Belmar could help the company.


First, Belmar refused Baudouin, but after a few weeks he flew to meet him in Montreal, hoping for a brief visit. However, the release date of the financial statements was approaching, and Baudoin convinced Belmar to take over as Bombardier’s CEO. He asked him to linger to meet with the board of directors. By Monday, Bellemar was already looking for "a place to wash his shirt," he says with a grin, and ended up with a wife sending him clothes from Connecticut. It can be said that he did not return home for another two years, until the eldest of his two sons graduated from high school.


For the next ten months, Belmar sought money to keep the company afloat, selling new stocks, bonds, and assets. In total, he managed to raise $ 5.6 billion, including $ 1 billion from the Quebec government (Bombardier is one of the largest employers in the province with high wages). He managed to stop the outflow of finances from the CSeries project, simply giving up the controlling stake to the most aggressive competitor, Airbus. Over the past three years, Belmaru has managed to put Bombardier on a path that can lead the company to one of the most remarkable turns in recent years. And he managed to retain control over the company of the Bombardier-Baudoin family, whose share is only 12.3% of the shares.


Stabilizing the company's position, Belmar faced a difficult challenge. Revenues fell from $ 20 billion in 2014 to $ 16.2 billion in 2017, but the company is no longer sinking: after three years of losses, it showed profit in the last two quarterly reports. “Belmar does amazing things,” says Richard Ebulafia, an analyst at the Teal Group. - They stopped the blood loss. Now they have to restore blood circulation. ”


The company's founder, the French-Canadian mechanic Joseph-Armand Bombardier, for almost 10 years tried to build a snowmobile in his workshop in the countryside of Quebec after a tragedy occurred in 1934: in a snowstorm he could not get to the hospital, and his two-year-old son died of an attack appendicitis. By 1942, Bombardier created a company for the production of "snow machines", it produced large vehicles that can accommodate several passengers. They were used as ambulances, school buses and postal vans.


But Bombardier’s son-in-law Laurent Baudouin, an accountant from a small town in Quebec, turned the company into an aerospace giant. Bauduan’s business credo: acquire distressed assets and provide generous government subsidies.


Laurent led the company in 1966 at the age of 27 after the death of Bombardier. When the snowmobile business collapsed due to the 1973 oil crisis, he took up railway equipment and won a tender for the construction of subway trains for Montreal. Then in 1982, he received a contract worth $ 660 million ($ 1.8 billion today) for the construction of subway cars for New York - this almost doubled the company's annual income. A series of acquisitions of European companies in the early 2000s brought Bombardier to the market leaders in railway technology.


Then came the aerospace era. Baudoin bought Canadair from the Canadian government in 1986 for $ 120 million after Ottawa wrote off more than $ 2 billion in development costs for the Challenger business jet. Together with the Learjet, which was acquired in 1990 from a bankrupt founder, Bombardier experienced a business jet boom in the late 1990s, and the Gulfstream business jet model ranked first in the sales charts.


Bombardier remade the Challenger into a 50-seat CRJ, the world's first regional jet. This was a breakthrough for the company: in the 1990s, American aircraft manufacturers built hundreds of CRJs. With the availability of cheap fuel, this made it possible to replace propeller-driven aircraft on short-haul routes to smaller cities.


Finally a big game started: a brand new Bombardier CSeries. The company was pushed to create this aircraft by several factors: the rapid development of the aerospace industry in the early 2000s and the fall in the jet market. Pierre, the son and heir to Laurent, believed that there was a free niche in the market for an economical aircraft that could take a place between regional aircraft and the smaller Airbus and Boeing models - A320 and 737. In 2008, Pierre became CEO, and the board gave him green light.


But he underestimated the competitors - Airbus and Boeing. Giants wanted to deprive the CSeries performance benefits and developed versions of the A320 and 737 with new engines. And when carriers considered buying the CSeries, Airbus and Boeing offered them discounts on their larger planes. But Baudoin did not make any discounts, believing that the CSeries could be sold even with a premium.


Against the background of slow pre-sales and technical confusion, the launch date was postponed from 2013 to 2015. The cost of development has increased from an initial estimate of $ 3.4 billion to $ 6 billion. At this time, the Bombardier business jets unit spent billions on the development of two other new aircraft: the Learjet 85 and Global 7000. On

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