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Bombardier CSeries

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Eric Sola

on 11 May 2015

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Transcript of Bombardier CSeries

Profit Margin of 1.8% in 2006
Non-profitable from FY 2002 to FY 2004
FY 2014: -6.2%
$2B increase in expenditures to accelerate CSeries, Global 7000, Global 8000, Challenger 650 and Learjet 85 programs
FY 2013: 3.2%
R&D expenses
2005: $173M
2006: $175M
$55M to CSeries
2014: $347M
$5.4B to date on CSeries
Global GDP growing at average rate of 3.15%
China and India’s GDP expected to double by 2026
GDP directly affects the air travel market
Increases need for new aircraft
Expected market growth 2006 - 2025
Commercial: 56%
Regional: 22%
Business: 25%
Bombardier Market share
Business segment: 27%
Regional segment: 28
%
Bombardier:
The CSeries Dilemma

Luis Lopera
Laurent Domaingue
Daniel Hurtado
Eric Sola
Bello Illias

Agenda
Background
Mission, Vision & Goals
Finances
Trigger Event/Industry Trends
Five Forces/Benchmark/SWOT
Problem/Sub-Problems
7S & Business Model
Alternate Solutions/Matrix of Change
Strategic Plan and Risk Management
Conclusions
Background
SWOT Analysis
Dr. Luis Rabelo
EIN 6182 - Engineering Management

Increasing oil prices and global demand
Overall market recovering from 2001 terrorist attacks and 2002-2003 SARS outbreak
Ongoing Wars
Afghanistan 2001
Iraq 2003
Increasing Revenue Passenger Kilometer (RPK)
Each kilometer a paying passenger has flown
Increasing Global GDP
Fastest growing in China and India
Stable in U.S. and Europe
Aircraft Segments - Commercial
Carry over 100 passengers
Largest segment and growth expected in the 100 to 150 passenger aircraft
CSeries goal to capture 50% of market share
20% more fuel efficient than direct competition
Aircraft Segments
Business
Carry less than 20 passengers
70% of market in North America
Represented 47% of Bombardier's revenue stream
27% ownership of global market share
Global
Challenger
Learjet
Carry 30 to 100 passengers
Strong presence from Bombardier with 5 different models
Turboprop (Q-Series)
Most fuel efficient
Low maintenance
Jet (CRJ)
Lowest cost per seat in the market
Aircraft Segments - Regional
Aircraft Segments - Military
Supply dominated by U.S. military contractors
Demand also dominated by U.S.
Governments preferring to purchase from domestic contractors
Canada's spending increased since year 2000
Bombardier Inc. is a Canadian transportation company.
Company is split into three subsidiaries.
Bombardier Aerospace
Bombardier Transportation
Bombardier Capital
Bombardier Aerospace is an important market player in plane industry.
Business
Commercial
Military
Owns hugely popular brands in the plan market such as Learjet
.
Financial Analysis: State of the Market
Passenger air travel traffic growth and Revenue Passenger Kilometer (RPK) (“Boeing,” 2014) | (“International Civil Aviation Organization (ICAO),” 2014)
Annual average crude oil prices (“U.S. Energy Information Administration,” 2014)
Financial Summary
S
W
O
T
Wealth Potential
Demand is cyclical at approx. 9 year cycles
Driven by replacements of aging aircraft
Demand had a growth trend
Delivery trend lagging by 2 years after orders are placed
Boeing and Airbus order to delivery lead time 2 to 5 years
Mid-Size Commercial Aircraft
Key forecast recommendations
Increase R&D budget for Cseries
2006 actual $55M
Target availability to market by end of 2012
Offer discounts on bulk orders
Cseries: $62M for CS100 and $71M for CS300
Boeing: $82M for 737
Airbus: $88M for A320
Opportunity of 1,060 orders over 3 years (2012 – 2014)
Forecasted revenue if captured by Bombardier $70B
Actual revenue captured by Boeing and Airbus $300B
4,700 actual orders in 2012 – 2014 period
Forecast Analysis
Industry competitors consisting of Commercial and Regional jets
New entrants primarily in Regional Segment
Older: Embraer & Bombardier
Newest: Mitsubishi & Sukhoi
No true substitute for aircraft if crossing oceans
Five Forces of Porter
Boeing and Airbus
Strengths: Duopoly of commercial jet segment
Weaknesses: No regional aircraft product
Embraer
Strength: Released 100+ passenger jet before Bombardier
Bombardier
Strengths: Fuel efficiency and lower price point than Boeing and Airbus
Weaknesses: Time to release CSeries and poor financials
Benchmarking
Newly Designed Aircraft
Reputation
Management
Product Variety
Low Profit Margin
Poor Vertical Integration
Lack of Trust of Investors
Multiple Aircraft in Development
Increasing Oil Price
New Regional Jet Entrants
Increased R&D Expenditures at Embraer
Spread of Infectious Diseases
Increasing Global GDP
Increasing Global Population
High Backlog at Boeing & Airbus
Fuel Efficient Engine for CSeries
Problem Statement
Having a blurred strategy and postponing the CSeries project have raised more questions than answers from the investors and other stakeholders, revealing a limited implementation capability, poor competitiveness, and diminished management credibility from Bombardier.
The CSeries was put on hold several times due to external and internal factors:
Unfavorable market conditions in 2005
Low reliability in design and suppliers.
Company felt short in budget after surpassing $3.4 billion dollars.
The company did not have a clear strategy tied to resource planning and financial goals.

Current Scenario
7S Framework Analysis
Shared Values: To strive for the evolution of mobility with long-term delivery
Strategy: Alignment of resources to improve goal-setting practices and execution while reducing production costs.
Structure: General board of directors overseeing 2 business segments; Aerospace and Transportation
Systems: Business processes engaged in R&D initiatives to transform aircraft performance supported by a high-performing supply chain
Skills: Extensive hardware capabilities with 3 types of fuselage.
Staff: Very technical oriented towards hard skills and less soft skills
Style: indecisive and irresolute management that needs to be more inclusive and enhance overall communication.
Potential Alternative Strategies
Alternate 1
Complete CSeries Plane & Develop Top Management Implementation Strategy
Pros
ROI on CSeries development
Potential cost reduction measures
Cons
Technology aged due to development time
Additional implementation costs
Alternate 2
Divest from the CSeries and refocus on traditional markets, R&D and company core competencies.
Focus on Business and Military
Pros
Great potential for growth in Military
Potential Cutting Edge Products
Cons
R&D Costs
Longer Term ROI
Alternate 3
Divest from the CSeries and refocus on traditional markets, R&D and company core competencies. Purchase competitor with existing plane in the 100-150 passenger market.
Pros
Great potential for growth in Military
Access to new design and IP
Exiting plane with existing market share
Cons
R&D Costs
Longer Term ROI
Increased investments through purchases
Alternate 4
Complete CSeries Plane, Direct Lease/Rent Option & Develop Top Management Implementation Strategy
Pros
ROI on CSeries development
Potential cost reduction measures
New sources of revenue
Cons
Technology aged due to development time
Additional implementation costs
Increased financial risk
Increased liability of ownership
Potential Alternative Strategies, Cont.
Comparative Analysis - Alternative Strategies
A comparative analysis was conducted.
Based on 6 factors: Technology, Quality, Flexibility, Cost, Delivery and Return on Investment (ROI)
Alternative 1 was found to be the most positive for of all explored alternatives.
Alternative 3 was a close second based mainly on the benefits provided by the acquisition of technology.

MOC Shows difficulties within the current practices
Also shows difficulties in transition
Target practices are more aligned and complementary
Matrix of Change
Recommended
Strategic Plan
Release date late 2012/Early 2013
Forecast of High Demand for 2013
Introduce model at a cheaper sales price than competitors.
Accelerate CSeries Program
Process Benchmarking
Analyze and Understand Competitors.
Evaluate internally and compare to competition.
Allocation of Resources
Put release date back on track.
Meeting forecast of high demand by 2013.
Create short term revenue.
Create a Small Profit Margin
Quick turnaround on revenue.
Capitalize in large volume of sales.
Opportunity to streamline CSeries further.
Short Term Plan
Presenter: Luis Lopera
Presenter: Luis Lopera
Long Term Plan
Focus on R&D
Great source for accessing innovation.
Create ongoing improvements.
Adapting to new trends and technology.
Aim to be the Top Leader
Keeps the company motivated.
Access to acquiring top talent.
Lead to providing high quality products.
Focus on Developing Training Courses.
Help maximize the use of their product.
Builds and establishes long-term relationships with the customer.
Risk Management Plan
Conclusion
Bombardier is at a crossroads with Cseries program.
Recommend focusing resources on getting CSeries program back on track.
Bombardier can become a true challenger to Boeing and Airbus in the mid-size commercial market.
CSeries Implementation
Aim Toward Leadership
Re-allocation of Resources
Focus on Implementation
References
Presenter: Luis Lopera
Presenter: Eric Sola
Presenter: Eric Sola
Presenter: Daniel Hurtado
Presenter: Daniel Hurtado
Presenter:
Daniel Hurtado
Presenter: Daniel Hurtado
Presenter: Laurent Domaingue
Presenter:
Laurent Domaingue
Presenter:
Laurent Domaingue
Presenter:
Laurent Domaingue
Presenter: Eric Sola
Presenter: Eric Sola
Presenter: Laurent Domaingue
Presenter:
Eric Sola
Presenter: Laurent Domaingue
Presenter: Eric Sola
Presenter: Laurent Domaingue
Presenter: Eric Sola
Presenter: Eric Sola
Presenter: Eric Sola
Presenter: Daniel Hurtado
Presenter:
Luis Lopera
Presenter: Luis Lopera
New Business Model
New Strategy Map
Presenter: Daniel Hurtado
Presenter: Luis Lopera
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References, Cont.
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References, Cont.
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