Shake-up continues at Bombardier

The shake-up continues at Bombardier, with new CEO Alain Bellemare replacing Mike Arcamone, the president of the commercial aerospace unit, with the former president of mega-lessor International Lease Finance Corp., Fred Cromer.

Bellemare also retained the consulting firm Plane View Partners, whose CEO, Henri Coupron, was the former CEO of ILFC. Both men lost their jobs when AerCap purchased ILFC, making AerCap the second largest lessor in the world (behind GECAS).

Arcamone’s days were considered numbered once Bellemare was named CEO in February.

Landing Cromer is a major positive for Bombardier. Arcamone’s strength was production, for which the CSeries program benefited as it was challenged by supply chain issues. But Arcamone, who came from the auto industry, didn’t have aviation sales experience. Cromer’s experience as president of ILFC brings sorely needed direct commercial aviation know-how to Bombardier, complimenting Bellemare’s background from Pratt & Whitney.

Coupron’s involvement is also a major positive. In addition to his time as CEO of ILFC, Coupron had a long career at Airbus, followed by a short tenure at consultantcy Seabury Group before joining ILFC.

These are major steps that will help remake Bombardier’s commercial unit and give support to the CSeries.

Bellemare is expected to complete his studies and recommendations how to remake Bombardier and the aerospace programs in advance of the Paris Air Show in June.

32 Comments on “Shake-up continues at Bombardier

  1. We have seen many senior management people leaving in the last two or three years. It’s hard to keep the count but according to one estimate the total now stands at seven. That being said, to me that’s just what the doctor ordered. It addresses Bombardier principal’s weakness: the lack of commercial aviation expertise at its commercial aircraft division (BCA). In this case the ‘doctor’ who ordered this appears to be Henri Coulpron, the former head of ILFC. My understanding is that Fred Cromer is one of Coulpron’s protégé.

    One of Bellemare’s first move was to hire Plane View Partners as a strategic consultant. It was a brilliant move, and what we see today is a direct result of that. Bellemare said today that “Having Fred and Henri on board gives us a strategic edge like we’ve never had before.” He couldn’t have said it better. The next logical move will be to hire a chief salesman at BCA. Coulpron and Cromer probably know who they want already.

    Bombardier could hardly have done any better today, short of hiring John Leahy himself.

  2. Leeham: “Arcamone’s days were considered numbered once Bellemare was named CEO in February.”

    I would put it this way: Arcamone’s days were considered numbered once Hachey was ‘retired’ last July.

    Both Hachey and Arcamone came from the automobile industry and they brought with them their manufacturing expertise. But Bombardier is more than just a manufacturer. It has the formidable task of selling airplanes as well. So it takes more than a manufacturing expert to run Bombardier. Bellemare himself is a manufacturing expert but at least he comes from the aerospace sector and he is very well connected. That makes a big difference. But he was smart enough to know that this is not enough and that he needed commercial aviation experts to work with him.

  3. And another big news and shake-up…
    http://www.bloomberg.com/news/articles/2015-04-10/bombardier-exploring-sale-ipo-of-rail-unit-reuters-reports

    With this new pattern is emerging a new management team capable of selling and signing contracts et an hyper professional level. In addition, the railway sector consolidation desire of Bombardier is another sign of a coming transformation of a company to play a leading global role, both in the aerospace sector than in the railway sector. Bombardier will never abandon the rail transport because the global trend towards greater urbanization and transit . Siemens is a logical choice for an alliance in this sector.

  4. Why I have no confidence in Bombardier? I’m looking at an old Flight International issue, Sept. 1998 announcing “Bombardier unveils plan for 90 seat jet family”. Its been almost 20 years now and they’re still dilly dallying , stroking and massaging this plane and it still hasn’t even been certified yet. By contrast the same publication June 1999 with the title ” Embraer pushes stretch plan”, announcing the plans for Ejets. Not only have they brought the cash cow to market they even plan to role out the next generation E2 in the same time frame. My conclusion is: Embraer fires from the hip. They do the right market analysis and delivers what they claim as fast as possible. Bombardier’s claim to fame. Sponging government funds on white elephants while delivering their other specialty, lip service. Always painting a rosy and positive image and failing to deliver. If I were to put money one, Embraer would be the one.

    • No it’s not a black berry, and the last thing it needs right now is sour grapes. 😉

    • More seriously, Blackberry’s difficulties stem from its lack of timely investments in new high-tech products. Whereas Bombardier’s problems stem for investing into too many high-tech products at once: CSeries, Lear 85 and Global 7000/8000. That is one too many: the Lear 85. It was not only a risky design but also completely unnecessary.
      A big mistake for a small aircraft.

      Bellemare has been in placed for less than two months and we are already seeing positive results. Another two months will bring us close to the Paris Air Show. I am preparing myself for a few more surprises before we get there and during the show as well.

  5. An other bad new for Bombardier is, as a consquence of the crisis in Ukraine, the order by IFC for 32 (+10 option) CS300 is more and more uncertain. IFC is considering to cancel the order.

    • And if it was a negotiating tactic on the part of IFC ? Fred Cromer, ex-ILFC, the new head of commercial aviation, probably have more than one solution in his bag !

  6. The CSeries had its first ‘passenger’ recently as a Transport Canada official boarded the plane for a test flight. Also, FTV5 flew 7.5 hours straight and when the airplane came back the pilots said they had another 2 hours of fuel left. So the plane can fly up to 9.5 hours. There should be no problem to make it to Le Bourget this Summer!

    https://www.youtube.com/watch?v=C1vVqrk7ar4

  7. I am still hoping the CSERIES will be successfully entering the market (it doesn’t matter they will be sold by Bombardier or other company), as I really like to fly 100-150 passengers plane with 5 a breast. I flew American MD80 DFW-SEATAC last January, after not having the chance for years, I really like 5 abreast better than the 6 abreast of 737 or A320/319. Interjet (a Mexican Airlines) has place additional firm order of Sukhoi SSJ100s after over a year of service. This shows that the 5 abreast plane have good satisfactory level for the airlines and passengers for certain flight missions. Why does Delta purchase 88 used 717s from Southwest replacing their DC9s? Why don’t they buy or lease Embraer 195 (same capacity) ? Having three product developments (CSeries, Global7000/8000, and Learjet85) at the same time seems to be the main reason that almost makes Bombardier collapse financially. Even Boeing also made mistake developing 747-8 while 787 was still in development. 747-8 program was also to be blamed why the the 787 program was in trouble due to resource constrain.

    • If you like the MD-80 cabin, imagine the CSeries! Both the MD-80 and the SSJ100 have a fuselage diameter one foot smaller than the CSeries. But all three are five-abreast. That is an enormous difference. And that is not counting the overhead bins and the toilet that accommodates a wheelchair and the large windows and the low cabin altitude and the super quiet engines and… Just tel me how many you want and I will give you a good price 🙂

      • The problem is Bombardier can’t discount too much the Cseries for several reasons.

        First, the production rate of the aircraft will be significantly lower than those of the A320 and B737, which means higher unit cost for the CSeries. In fact, the production rate will probably never reach the original full production rate of 20 airframes/month and will probably never reach the current full production rate of 10 airframes/month. Moreover, Bombardier is at the beginning of the learning curve with this new aircraft while the A320 and 737 are produced since decades. Also, the CSeries is a more technological advanced aircraft that the 737MAX and the A320NEO. All these factors contribute to a higher unit production cost.

        Second, the development cost of the program reach 5.4 billion $ (3.4 billion initially) comparatively to 2.0-2.5 billion for Boeing and 1.0-1.5 billion for Airbus. Higher development cost means higher profit margin to breakeven for the whole program. Also, with the huge success of the NEO and MAX, Bombardier will probably never reach its initial goal of 50% market share for the 100-150 seats segment (6900 aircrafts). Lower market share and higher development cost means higher profit margin.

        Thus, for all these reasons, Bombardier can’t discount to much the Cseries.

        • 1. “First, the production rate of the aircraft will be significantly lower than those of the A320 and B737, which means higher unit cost for the CSeries.”

          You forgot that, everything else being equal, the wages are lower in Canada and the Canadian dollar is favourable to Bombardier.

          2. “Second, the development cost of the program reach 5.4 billion $ (3.4 billion initially) comparatively to 2.0-2.5 billion for Boeing and 1.0-1.5 billion for Airbus.”

          Yes but the CSeries will outlive them both.

          3. Also, with the huge success of the NEO and MAX, Bombardier will probably never reach its initial goal of 50% market share for the 100-150 seats segment (6900 aircrafts).

          Below 150 seats, Airbus and Boeing cannot compete and the numbers are already there to support this statement. And even more so when Bombardier will introduce the CS500.

          • 1 – In fact, only a small part of the Cseries is manufactured in Canada. The wings are manufactured at Belfast, Northern Ireland when the fuselage is manufactured in China. Also, several components are manufactured by Alenia (Italy). Most of the suppliers of the Cseries are US (Rockwell Collins, Goodrich, PW) or European (Fokker, Liebherr-Aerospace).

            Also, the Euro is also very favorable to Airbus. I think that the wage is even lower in Europe than in Canada. Canada is midway between US and Europe.

            2- Perhaps, but Bombardier will probably need to sell over 1000 air-frames before to break-even over the entire project. 5.4 billion is only a part of the cost. You need to recover the production loss of the early air-frames too. In fact, the “deferred production cost” of the 787 is larger than the actual development cost.

          • The cockpit and rear fuselage are both manufactured in Montréal. Belfast makes the wings. That is in-house and the wages are comparable. The fuselage is manufactured in China. The reason why BBD went there is because the manufacturing costs are much lower than anywhere else. As for the empennage it is manufactured in Italy and BBD got such a good deal on the first batch that Alena threatened to pull out if they did not get more money. That probably means BBD is getting the empennage below cost. The landing gear comes from Germany but it is assembled in the Montréal region. The engine is built across the Mirabel tarmac and PW&C has a small facility adjacent to the CSeries assembly hall where they dress the engine and attach it to its pylon before delivery.

            And of course the whole aircraft is assembled in Mirabel. Bombardier is gearing up for this and recently completed construction of a brand new pre-assembly building. The next step will be to build the hangar for the movable line. It’s all very high tech and extremely efficient. For this reason it should not take very long for the CSeries assembly line to reach cruising speed. And the delays have allowed the various suppliers to be better prepared for higher rates of production. I expect the CSeries to break-even around 500-600 frames and I view this as a more realistic figure.

          • “I expect the CSeries to break-even around 500-600 frames”

            So you are assuming a profit margin of 10 millions per aircraft and even a few millions more dependently how much you assume for the “deferred production cost” (terminology not exactly applicable to Bombardier, but you know what I mean) and for the penalty for the 3 years delay. It is well know that Boeing paid billions in penalty for the 787 delays and I think a few hundred million for Bombardier is realistic.

            Considering a discount of 50% for the A320, the unit cost is about 50 million per aircraft. With a profit margin of 10%, the profit per aircraft is about 5 million. With a profit margin of 20%, the profit per aircraft is about 10 million. Since you seem to assume that the CSeries is less expansive than the A320, then this mean that your are assuming a profit margin of about 30% per aircraft. I don’t think that this figure is realistic for Bombardier.

            “As for the empennage it is manufactured in Italy and BBD got such a good deal on the first batch that Alena threatened to pull out if they did not get more money.”

            From my understanding, it is more a production rate issue. Bombardier initially planned a production rate of 20 air-frames/month. Now, it is officially a production rate of 10 air-frame/month. This production rate will not be reached before several years and may be never reached. So, it is normal that Alenia is complaining about low production rate and other issues.

          • “Belfast makes the wings. That is in-house and the wages are comparable.”

            Belfast is in Europe, so yes the wage is comparable for Airbus. Employees in Belfast are paid in pound sterling, not in Canadian dollars.

            “The landing gear comes from Germany but it is assembled in the Montréal region.”

            Assembly, is in fact only part of the total cost. You also need to consider components production cost.

            “The engine is built across the Mirabel tarmac”

            “Built” or just “assembled”. From my understanding the engine was designed by P&W(US) and PW&C assembles the PW1500G variant (rating 19000/21000/24000lb) at Mirabel.

            “The fuselage is manufactured in China. The reason why BBD went there is because the manufacturing costs are much lower than anywhere else.”

            The wage is China is rising year after year. And with the evaluation of the yuan, its more and more expansive to manufacture in China. Also, several components of Airbus and Boeing aircraft are manufactured in China but not at such extent.

        • I will leave it to Javier to make projections and produce intersecting curves of potential break-even points of total programme cost versus manufacturing break-even costs. The latter is for now, like for the 787, the most important and most urgent. But first Bombardier needs to start delivering aircraft as soon as possible to airlines and operators around the world. That will give them the cash they need to develop the CS500. After that they can estimate when they will start manufacturing below the selling price. And later on still they can figure out when the programme will become profitable. For the latter it is still a bit early to even speculate.

          It is very difficult at this stage to establish a timeframe for the rate of production. It all depends on the number of firm orders they will get and when they will be required. It is very important for BBD to be able to produce aircraft rapidly to attract potential customers who would need their aircraft quickly. For A&B are fast approaching full capacity and they might not be in a position to satisfy hurried customers. That could be an advantage for the CSeries. Montréal and Belfast are well prepared for high rates of production, and China built, like BBD did in Belfast, a brand new manufacturing centre to produce at high rates. As for Alenia, which produces a significant portion of the aircraft, I am glad they are eager to go to higher rates. And besides they should know how to do this very well now since they already do so for the 787, only bigger.

          The important point here is to understand that BBD is well prepared for relatively high rates of production. But the problem is the number of firm orders they have gathered so far. BBD says 300 is what they need to be confortable. They are not there yet but there is plenty of time left before EIS. The first step that was required to get there quickly was to hire as soon as possible a commercial aviation specialist. They now have one or two. Up to now enough effort has been put into aircraft design and manufacturing. It’s time to start doing business.

  8. With the ruble’s halving in value since last year and Russia’s economy in free fall, can IFC find carriers to place the CSeries it commited to?

    Can IFC finance the CSeries without the Canadian export loans it was supposed to get?

    Is IFC under pressure to refocus on CCCP-built aircraft?

    Is IFC looking for a pretext to cancel its CSeries order?

    Looks like it.

    http://www.ainonline.com/aviation-news/air-transport/2015-04-09/russian-lessor-ifc-eyeing-alternatives-bombardier

    • The answer to your questions is ‘All of the above’. It’s a very complex situation and I have no idea how Bombardier is going to save this substantial order. But if someone can pull this up it is Fred Cromer, the new president of Bombardier Commercial Aircraft. After all he used to run an aircraft leasing company himself.

    • With all these sanctions against Russia, IFC has probably a lot of difficulty to obtain international financing for this purchase. Financing can be obtained in Russia, but IFC will be probably under pressure to purchase a local aircraft. So, the probability for IFC to ditch the CSeries for a Sukhoi Superjet is not negligible.

  9. Now, what counts is the creation of economic potential. One that is on the horizon with the ” external” vision of Alain Bellemare. Linked to the vision of Fred Cromer and that of Henri Courpron, Bombardier already has another strong position on the market. Imagine for a moment that all the contacts, experience and expertise of Cromer and Courpron bring to Bombardier ! Finally, the $ 5.4 billion who scare is nothing when you consider that this sum is already spent to cover much of the development costs of the CS500 , CS700 , CS900 , etc. All this for a pittance !

  10. The CS500 will make the perfect compliment to the 737-900ER, or A321. Delta has chosen product differentiation with the higher comfort A339, so I’m optimistic that this will lead to AA, UA, and DL all flying the CS500 by 2025.

    • We often say that the CSeries is a game changer. That would be true only for the CS500. For the CS100/300 are only filling a vacuum, whereas the CS500 would ‘attack’ the duopoly head-on.

      • I do exactly the same reading ! The CS100 and CS300 are appetizers … The real part certainly begin with the CS500 . I think as soon as the 737max be launched , Bombardier CS500 released on later than in 2018. For the sale , and delivery in 2020-2021 …

  11. Wow! I can’t believe you guys are not working as marketing executives for Bombardier. You’re so informed, enthusiastic, and hung ho over this product no one dares say anything negative about it without one of you defensively pouncing on that comment. Your comments are filled with figures, statistics even imaginary scenarios. It sounds much like an adolescent support for a sports team.

    • I have over 25 years of experience in strategy and finance. From time to time , you need to master the capabilities of expectations about the future. It is better to want some speculation vs structure a vacuum from nothing. And what can we deal with two players, Airbus and Boeing, as we discuss and return from all sides since many years ? We can only hope that a third player arrives ! And that’s Bombardier ! Young , intelligent, involved in a huge game of chess on a global scale : that wish for? It’s like baseball : a game based on the anticipation ! You have to imagine the future! Like us! To fill a gap in our modernity overcome the erasure of the future …

      • BOMBARDIER comment.

        For some time I’ve followed the stories here about the Cseries and have read the comments made by the same BBD lickspittles over and over how superior this product is and how brilliantly the company operates. I worked at Bombardier for over a decade and believe me your visions of this company greatly contrast to what I’ve experienced firsthand. There are several reasons why they are taking a beating but I don’t want to get into that.
        The product here as excellent as it may be, is secondary. Everyone has a good product suited for specific market sectors. It’s the creation and execution of the program and timing that counts. Embraer, contrary to Bombardier’s employee brainwashed mindset, created products that outpace and outsell Bombardier. Statistics such as economics and range are one thing but if you can’t translate those figures into firm orders and market enthusiasm you have nothing but numbers on paper. The Cseries has been put forward to the market and the market has responded with a lukewarm response but miracles do happen.

  12. I don’t know if you have been hacked, but you certainly have been plagiarized. Whatever the case may be, both of you always speak with a single voice. And another interesting coincidence, which can be found in at least one other post, is that both of you happen to be ex-Bombardier employees.

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