Bombardier Report

Analysis of Bombardier:
Bombardier took on its present form in 1976 when MLW-Worthington, a manufacturer of locomotives, acquired Bombardier Ltd., a manufacturer of snow tractors and snowmobiles. The company was renamed Bombardier Inc. in 1978. The company has been active ever since in the acquisitions of various aerospace and transportation companies around the world.
Nature of the Business
Bombardier conducts business in five main areas: transportation equipment, aerospace, defense, motorized consumer products, and in financial and real estate services. The total revenues increased by 20% from $5.9 billion to $7.1 billion over the last year.
To be able to see the extent of Bombardier’s operations it is best to look at each manufacturing group separately.
Aerospace is Bombardier’s most important industry. It accounted for 47% of sales and 33% of profit in 1995 and makes Bombardier the fourth largest civilian airplane manufacturer in the world. Bombardier’s customers are spread out over the globe. They range from government and private commercial airlines to wealthy individuals and corporations in need of private jets. The products that are driving the growth in this division are the RJ, the Global Express, and the Lear-45. De Havilland, which was recently purchased with help from the Ontario government, produces the Dash-8 series of airplanes. The Dash-8 has had its production rate increased to 48 planes a year with about 81 on order. Modified versions of the Dash-8 are in the works that could enable an even bigger increase in production. Bombardier has cut costs and increased the profit margin at de Havilland to improve profitability. Bombardier will likely exercise the option to buy the remaining 49% from the Ontario government. The outlook for the success of the RJ is very good, although most of its sales rely on a small number of companies, these companies are pleased with the RJ’s performance to date. Bombardier\'s entrant into the long-range market is the Global Express that has “about 60 orders” on the table, but needs 100 to break even at a price of $34 million. It is experiencing strong competition from Gulfstream, which produces a plane that is targeted for the same market as the Global Express. Bombardier has been successful in turning around the troubled Learjet operations and now expects Learjet to expand its aircraft production with the introduction of the Lear-45, which already has 90 orders on hand. The Canadair 50 seat regional jets are continuing to be turned out at a rate of 60 per year. Overall the Aerospace industry has strong growth potential, provided that Bombardier sticks to its successful niche marketing strategy. Bombardier is competing with some of the biggest companies in the world. Boeing, McDonnell Douglas, Lockheed Martin, and Raytheon are all counted as the opposition.
Transportation Equipment
This industry is responsible for 22% of sales and 22% of profits for 1995. The nature of this group is cyclical. Bombardier manufactures subway cars, high speed trains, passenger cars, and a variety of other equipment, which is primarily sold in the North American and European markets. Bombardier has made many acquisitions in this industry that are usually acquired at a loss. These acquisitions along with the huge loss in the Eurotunnel contract has made it difficult for Bombardier to show it’s real profitability in this industry. Revenues have increased by 20% since 1994. Bombardier has 28% and 12% of the North American and European markets respectfully. The outlook for expansion in the North American market is encouraging with the contract with Am-Trac to supply high-speed trains and equipment for use in the United States. Recent developments in Mexico has led to an increase in demand for railway cars in that country. As well, the acquisition of Waggonfabrik Talbot will give Bombardier a strong foothold in the European market that already accounts for 60% of sales. One area of concern is that Bombardier’s competitors in this industry are becoming stronger. The merger between Asea Brown Boveri (ABB) and Damhler-Benz has created a strong competitor. The reemergence of Morrison Kundsen has also increases the competition in this area. The fact that more and more transportation authorities are being privatized and will need to adapt their fleets to meet consumer preferences creates a positive outlook. To accomplish these adaptations these companies will have to renew their 1000’s of vehicles.
Motorized Consumer Products.
The biggest products in