Staying competitive remains top priority for Canadian OEM

Paris Air Show » 2007
June 12, 2007, 7:05 AM

Bombardier has assembly plants in Wichita, Toronto and Montreal and manufacturing plants in Montreal, Belfast in the UK, and Querétaro in Mexico. But Pierre Beaudoin, Bombardier president and chief operating officer, dismisses the notion that manufacturing in high-cost economies is an anachronism.

“We were the first to look at building an airplane in partnership [with low-cost suppliers] in this industry. But because we have experience with that type of partnership relationship, we also believe that to be a leader in this industry you need a manufacturing background. We need to keep core competencies that are crucial to permit us to continue to lead,” Beaudoin said.

Currency headwinds have made life harder, Beaudoin conceded last month.
Bombardier has more than 10,000 employees in Canada and the UK, and the U.S. dollar’s decline against both the Canadian dollar and the British pound “affected our bottom line in constant dollar terms more than $400 million. But this is not something we can control as a manufacturer so we need to make ourselves competitive and become as profitable as the others in the industry.” The immediate target is a margin of 8 percent, with an industry-leading 15 percent the ultimate goal.

Part of that will come from an expansion in Bombardier’s service provision, part from reducing the level of investment to eliminate the “excess over average” costs of launching new aircraft from the balance sheet. But most will come from expense reduction and operational improvements, Beaudoin said, with process improvements at existing sites such as Belfast complemented by lower cost input from Mexico and China.

Jean Séguin, vice president of engineering and supply chain, said the process improvements include a company-wide achieving excellence program and lean manufacturing initiatives.

The four Belfast plants produce fuselages for almost all Bombardier regional and business aircraft, nacelles for General Electric, International Aero Engines and Rolls-Royce engines, and a wide range of composite components, some using advanced techniques such as resin transfer molding.

Lean manufacturing has been pioneered on the Learjet fuselage line, where all operators have been cross trained so that they can do any job on the line and materials are organized so that they do not have to leave it. The number of shifts has been reduced from two or three to one as a result, Séguin said, as productivity has increased 20 percent and employee involvement has grown.

Now, he said, the same methodology is being applied to CRJ700/900 fuselage assembly. Ultimately it will be extended to the whole facility, and there are similar plans at the company’s other manufacturing sites.

Another part of the industrial strategy is investing in the automation of processes such as metal bonding, chemical milling and riveting. An auto riveter at Belfast drills and countersinks the holes, applies sealant and inserts the rivets, and does it all faster than the two people who would be required to do the work otherwise.

“The other part of the industrial strategy is expanding our activities and building our base in emerging economies,” Séguin said. Work started at the Querétaro factory in Mexico last year with the aim of producing all electrical harness as well as some major structural assembly.

Currently the fuselages of the Challenger 850 are being produced in Mexico, along with the Q400 rudder, horizontal stabilizer and elevator. Previously supplied by Mitsubishi Heavy Industries (MHI) in Japan, the Q400 components “are now being done in Mexico to the tune of one a week by Mexican workers,” Séguin said. “We’re now between 400 and 500 workers in that facility.”

Assembly of the Q400’s center and forward fuselage, meanwhile, has been moved from MHI to Belfast, but the forward and rear fuselage are due to be moved to Bombardier’s Chinese partner, Shenyang Aircraft Corp. (SAC). “We should see the first item–the doors–this summer, with the forward and rear fuselage being delivered toward the end of this year,” Séguin said. “We don’t know of any production work of that status being done at those rates in China. And we will bring the know-how we have built up in Belfast to Shenyang.”

“We decided to transfer the Q400 from Japan to Belfast because it required a lot of technical input and a lot of know-how and the Challenger 850 was a program that was going to be in relatively low volumes compared to the past,” Beaudoin added.

Another variable in the profitability equation is the relationship with vendors. These are very challenging times, with “a lot of pressure particularly on hard metals” at the moment, Séguin said, “so we need to be a lot more innovative.”

There is no single strategy. “On metals, for instance, we are taking longer contracts, longer partnerships with the suppliers to provide them stability over the years. We are also using the leverage that Bombardier has to provide contractual arrangements so that our vendors can [share that leverage],” he said.

New markets are another opportunity. “We’ve signed a contract in Russia this year. We’ll be the first to qualify aerospace grade metals in Russia,” explained Séguin. And the company is developing other techniques such as e-auctions to generate competition for the supply of various commodities.

For new technologies, meanwhile, Bombardier has designated one of its test aircraft in Wichita so that suppliers can use a flight test aircraft to develop their systems. “Through that partnership, in turn, we also develop new systems ahead of launching programs. We develop our understanding to remove the risk once we decide to launch a new program with that particular technology,” said Séguin.

The final arrow in Séguin’s quiver is the supplier intervention team, a technique imported from the automotive industry that involves multi-disciplinary teams going to vendors to identify waste and the means to remove it, then sharing the cost and the savings to the benefit of vendors, Bombardier and its customers.

“Working with a Chinese partner like SAC is very important to our long-term strategy,” Beaudoin commented. “China is a big market and a market where we need to position ourselves to be a part of it.

“The reality today is that it’s also a closed market on regional aircraft. They are developing their own airplane, and we feel it will be at least initially an airplane for the Chinese market, it will not compete directly with us outside China. But I think we need to understand very well that aircraft and we need to understand if there are opportunities for Bombardier to work with the Chinese in a more involving way.”

All Change in Belfast
Belfast is known for more than airplanes, of course. For the last three decades of the 20th century it was racked by sectarian violence involving paramilitary organizations with roots in the Protestant and Catholic communities, and employment patterns were heavily influenced by religious affiliations.

Michael Ryan, vice president and general manager of Bombardier’s Belfast site, said initiatives such as a new program that enables apprentices to receive their first year’s training in their own community have extended recruitment to “areas we would never have attracted applicants from in the past.”
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Attempts to rebalance the workforce have been hampered by the need for redundancies, which tend to fall on those with least seniority, but the company has managed to increase the proportion of Catholics from 5 to 15 percent. “Where we started from, we were never going do it in less than years or even decades,” Ryan said, “but we’ve managed to keep it at 15 percent and we now have 35 percent Catholic apprentices.”  

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