Paris 2011: Bombardier’s China strategy reaches far beyond new factories
Canada’s Bombardier and China’s Comac will become close partners in the coming years under the terms of a framework agreement signed between the two companies in March that calls for cooperation in seven major areas, according to Bombardier Commercial Aircraft vice president of international business Ben Boehm. But while industry executives such as Embraer CEO Frederico Curado have called the potentially far-reaching tie-up “very important,” some have expressed doubts about what exactly Bombardier, in particular, has to gain by lending its marketing and technical expertise to a partner that has historically proved an elusive target of opportunity.
In fact, Bombardier had not long ago attempted a somewhat less ambitious collaboration with the Chinese, in 2007, when, under a deal signed at the Paris Air Show with China’s then-dominant aerospace conglomerate Avic I, it agreed to participate in the development of the ARJ21-900 in return for a $400 million investment in research and development and construction of new facilities to support the development of the C Series. But when the Chinese turned their attention away from stretching the ARJ21-700 into a 105-seat regional jet and toward development of the 160- to 190-seat C919, the partnership fizzled, leaving Bombardier searching for new avenues of collaboration.
Certainly, Bombardier still saw a need to make headway into a market that, by its own reckoning, stands to account for 18 percent of the world’s demand for 20- to 149-seat airliners over the next 20 years. After all, the Canadian manufacturer hasn’t sold a commercial airplane in China for several years, while its Brazilian rival, Embraer, has enjoyed relative success in the country, particularly of late, with its 100-seat E190.
Synergies Between the Companies
Indeed, this latest framework agreement–if, in fact, it does bear as much fruit as Boehm expects–would extend Bombardier’s participation in China’s commercial aircraft industry far beyond anything its Brazilian rival has managed. For its part, Embraer maintains a joint venture with Avic in the northern city of Harbin. It recently built the last of just forty-one 50-seat ERJ-145s over some eight years and will soon begin building Legacy business jets, likely at a similarly modest rate. Although Boehm almost scoffed at the mere suggestion that the Embraer joint venture might serve as some model for Bombardier, one might argue that Embraer’s attempt to cultivate industrial ties with the Chinese, even if only marginally successful, helped pave the way toward wider success in selling the E190, even in the presence of a potential domestic rival in the Comac ARJ21-700.
Nevertheless, said Boehm, “just putting final assembly lines into China is not good for either party. That, to me, is a patchwork fix.
“The real root reason why Bombardier and Comac are doing this is because we see synergies between our two companies that, quite frankly, are there for better customer value and to sell more planes. Let’s be blunt about it,” he concluded. Such “synergies” will manifest themselves first in customer relationships and support, systems commonality, materials commonality, supply chain “opportunities” and, finally, said Boehm, “potentially looking at where each of our products’ family derivatives might go.”
The Bombardier executive counted “roughly ten or so” suppliers that the C919 and C Series share already, “and potentially even more,” although he conceded Bombardier has completely locked in its supplier base for the C Series. Meanwhile, the Chinese, well aware of the implications of an October 2015 certification of the Airbus A320neo, appear serious about sticking to the schedule for the C919, leaving little time for major changes to systems. Still, Boehm ranked supplier commonality as one of the most important long-term benefits of the framework agreement.
“If you look at our three products today [the ARJ21, C919 and C Series], they don’t overlap at all, but there are some gaps between them. So we see opportunities potentially in the longer term but acknowledge in the short term that each of us is full up with what we’re already working on,” said Boehm.
Bombardier and Comac have already established what Boehm called working teams, each dedicated to a specific area of collaboration. He said he couldn’t comment on specifics, but he counted “between 50 and 100” Bombardier Commercial Aircraft employees on his international team now stationed in China, either permanently or on a temporary basis. These are apart from Bombardier Aerospace employees in Shenyang, where Shenyang Aircraft builds the three center sections of the C Series fuselage.
“So our focus right now is really on getting the working teams together and then starting to put some program plans together for each of those seven work areas,” said Boehm.
Apart from the fact that Comac and the C919 didn’t exist in 2007, the circumstances of this agreement differ broadly in that, this time, the sides have already outlined the areas of focus on which they planned to collaborate and have actually established some timelines “in terms of where we want to be next,” said Boehm. “The timelines revolve more around governance…about, for example, how often do the executive members of the steering committee get together…that type of thing.” Still, Boehm didn’t expect Bombardier and Comac to have signed a firm agreement on any one area of cooperation by the time the Paris Air Show started.
In the areas of customer support and help with Western certification of the C919, it seems clear that Bombardier has much to offer its Chinese partners. But, to some, questions about what technical assistance Comac can immediately offer Bombardier appear somewhat less obvious. Boehm, however, pointed to China’s huge pool of engineers as one resource from which the Canadian company can certainly benefit. “There is a shortage of engineers in North America right now,” he said. “It’s not as easy as it used to be to hire large groups of engineers. They also have fairly good research-and-development centers where there are good opportunities. They have some flight test centers that potentially can be used, wind tunnels that potentially can be used. There are a lot of development opportunities that can be really good for Bombardier.”
Perhaps more significantly, though, the two companies together can more broadly cover what Boehm called the global “geopolitical spectrum.” Certainly, it appears Bombardier can use help in China and the Asia Pacific region at large, where it has yet to place a C Series airplane.
Nevertheless, Boehm would not concede that the deal with the Chinese reflects any sense of desperation. “The C Series in China. . .I’m not really worried about it yet,” he said. “Historically the Chinese market is not one to focus much on new product developments; they typically take the tried-and-true products. If you look historically, they have never been a launch customer for Airbus or Boeing, so from that perspective I’m really not too concerned.”
As for reasons Bombardier has failed to sell any commercial aircraft to a Chinese airline for several years, Boehm hesitated to identify any specific shortcomings in the product line or sales strategy. “It’s not as simple as a one-of answer,” he said. “I would say that we’re more focused on where we want to go. Bombardier is putting a lot more investment in and a lot more focus on the Asia Pacific region than we have perhaps in the past. And our plan is to turn that around.”