HOW PAUL SOUBRY DROVE NEW FLYER TO THE TOP

How Paul Soubry has turned New Flyer Industries into an investor favourite and North America’s biggest bus maker

Apolitical stalemate between New Jersey’s Republican governor and its Democrat-controlled legislature over a proposed gasoline-tax hike froze all transportation funding in the state in July. Road construction stopped, bridge repairs were interrupted, rail projects were brought to a standstill and a US$500-million order for more than 1,200 commuter buses from Winnipeg-based New Flyer Industries Inc. was suspended. It was the kind of news that could have brought a smaller company to its knees.

New Flyer had not actually won the contract itself, but rather adopted it after acquiring Illinois-based Motor Coach Industries (MCI) from private-equity firm KPS Capital Partners for US$455 million in late 2015. In an investor presentation about the acquisition, MCI’s long-term relationship with the New Jersey Transit Authority was touted as an “excellent example of the quality of MCI’s customer base.” Just eight months later, New Jersey asked New Flyer to conduct “an immediate and orderly shutdown of all ongoing work” due to the political crisis.

New Flyer’s shares lost 1.8% the day of the July announcement, but more than made up that ground the following day. By late September, the shares had gained more than six per cent from their July low. It’s part of an impressive run that has made New Flyer the top-performing stock on the CEO 100 list. Over the past two years, New Flyer’s shares have more than tripled in value due to a series of well-orchestrated acquisitions including, most recently, MCI. “We’re confident this thing will be a roadblock for us, a speed bump,” New Flyer CEO Paul Soubry says of the New Jersey contract. “We’ll get over it and we’ll move on.”

Soubry is optimistic the state will resolve its funding stalemate and, when it does, the 86-year-old company will resume making buses for it. In the meantime, the company has pulled forward some work from other customers so its production lines aren’t sitting idle. Although MCI hasn’t been as easy to integrate as some of New Flyer’s other acquisitions, Soubry has no regrets about the deal, which he described as a “great marriage” on the company’s second-quarter earnings call.

Soubry joined New Flyer in 2009 after it had gone through a tumultuous decade that involved two private-equity flips, an IPO and the financial crisis. “When I joined, we made the decision that we were going to fix the box before we thought outside the box, so we spent a lot of time on lean implementation in our facilities and transformation of the culture and world-class systems,” he says. “That’s done very well and that’s taken down our costs and allowed us to be competitive. We’re now able to deploy that methodology and thinking in our acquisitions.”

Today, New Flyer is the largest transit-bus and motor-coach manufacturer in North America, with a market cap of $2.5 billion and expected deliveries of 3,450 units in 2016. New Flyer’s recent acquisitions include a parts maker called TCB Industries in 2010; aftermarket assets from