KEEPING IT ALL ON TRACK
Laurent Troger remains confident Bombardier’s rail division has a bright future
Who we are as global players means we have a unique capability to bring the best solution to cities and countries (around the world). This is where we at Bombardier are unique.
It’s a warm May day in Leipzig, Germany, and Laurent Troger is holding court.
Sitting back in a leather lounge chair on the sidelines of The International Transport Forum, a stack of notes untouched by his side, the soft-spoken head of Bombardier Inc.’s booming transportation division is fielding questions on the minutiae of rail projects around the world. Operational glitches on a line in Indonesia?
“It’s a matter of continuously investing into your infrastructure and operations.” Streetcar delivery delays in Toronto?
“Let’s not forget, most of the rail services in Toronto are in fact provided by Bombardier.” Nothing seems to throw him off. Later, between juggling a busy schedule of interviews and meetings with politicians from around the world, he’ll sit on the forum’s marquee panel, discussing road deaths as a public health crisis (“If you want a pill for that,” he quips, “take the train.”)
Though quiet and slightly media-shy, Troger is in high demand, and his pitch throughout is clear: Rail can provide the solutions governments are looking for, and Bombardier is the best company todoit.
“Who we are as global players means we have a unique capability to bring the best solution to cities and countries (around the world),” he says. “This is where we at Bombardier are unique.” There is a lot riding on just how well the 54-year-old engineerturned-executive delivers on that pitch.
The transportation division is Bombardier’s most profitable, and is critical to the five-year turnaround plan chief executive Alain Bellemare hopes will finally put the company’s bad old days behind it.
While the turnaround appears to be on track, with Bombardier’s stock rising more than 500 per cent since a low-point in 2016, Troger is facing some of his biggest tests yet. Questions about how Bombardier Transportation will compete with Chinese rail giant CRCC Corp. and the blockbuster merger between Germany’s Siemens SE and France’s Alstom have dogged his division over the past year. There have been run-ins abroad as well.
The offices of Bombardier’s Russian railway joint venture were visited by authorities in April, a few months after Sweden moved to appeal the acquittal of a Bombardier employee accused of aggravated bribery.
Back in Canada, the division’s reputation has also taken hits. Earlier this year, it was shut out of a $6.3-billion light-rail transit project awarded by the Caisse de Dépôt et Placement du Québec in Montreal, in its own backyard. And just this week, the Toronto Transit Commission said 67 of 89 new streetcars produced by the transportation division, many of which were delivered late, had welding defects and would be sent back to the company’s manufacturing facility in La Pocatière, Que., for repairs.
Troger, who brushes off the questions of competitiveness and declines to discuss the Montreal deal, treats the concerns as a bump in the road of the transformation he was tasked with bringing about when he was took over as head of Bombardier Transportation (BT) in December 2015, several months after Bellemare himself became Bombardier’s new chief executive. A rail industry veteran who spent more than 15 years at Alstom before joining Bombardier in 2004, Troger was given the goal of making BT more agile in what was becoming an increasingly competitive market.
While that has meant layoffs, like those across Bombardier, Troger’s biggest contribution has been the concept of “platforming,” essentially standardizing the base trains are built on to make the manufacturing process more efficient, in order to reduce complexity and minimize delays. Cameron Doerksen, an analyst at National Financial Bank, says the strategic way in which Bombardier was bidding on contracts has also made the division more focused than it was a few years earlier. “If you go back six or seven years ago, they had a period where they booked several large scale programs that featured all-new train designs and they just stretched their engineering thin and took on too much risk,” Doerksen says. “Now, they are not bidding on projects that require an all-new train with all-new research and development . ... They are much more focused in key markets and on key contracts where it makes the most sense for them.” Despite the “more aggressive” market, Troger, who lives and works in Berlin where BT’s headquarters is located, says the turnaround is going well. “Today where we are, versus the initial plan, we now have the foundation for a complete restructuring,” he says.
“It’s a matter of executing it by 2020, but all the assumptions have been laid out, and the progress is where we expected it to be. It will happen.”
Now that the deal to sell the CSeries jet program — on which Bombardier had spent billions over the past decade — to Airbus SAS has been finalized, all eyes will be on Troger and the transportation division. “Transportation just became even more important as of July 1, which means more and more of (Bellemare’s) time will be focused on that,” says McGill University associate professor Karl Moore, an expert on the company. While Doerksen says the initial results of Troger’s transformation moves have been “terrific” and “speak for themselves,” growing competition in the rail industry, particularly from behemoth CRCC Corp., which resulted from a merger between two Chinese firms in 2015, is still a major challenge. “The company has done a good job so far, but the challenge is going to be to maintain their share and compete against growing competition in their markets from the Chinese competitors like CRCC Corp., which we’ve seen make some inroads in North America,” Doerksen says.
“They are for sure going to target other areas where BT is present.” Potentially exacerbating the challenge of a growing and more aggressive CRCC Corp. is the pending Siemens SE and Alstom merger aimed at positioning the two companies to better compete with China.
Troger, however, brushes off concerns about competitiveness, suggesting that the Siemens-Alstom partnership may not be all it’s cracked up to be and pointing to what he says is Bombardier’s “complete portfolio of products and services” and its presence in 60 countries and more than 250 cities.
“The emergence of big players has always been perceived as an extraordinary move,” Troger says. “I say you need to read it twice. We are strong, agile and competitive, and there has been a lot of transformation in this organization. As far as I’m concerned, it’s important for us to focus on developing our business.”
To that end, it was dealt a significant blow in February when the Caisse announced that it had selected a bid by SNC-Lavalin and Alstom to provide rolling stock, systems, operation and maintenance for a major Montreal infrastructure project, a contract worth more than $1 billion.
That the project was in the city where Bombardier is headquartered — and that the Caisse is one of its largest shareholders — only added insult to injury. Michael Sabia, the head of the Caisse, told Bloomberg last month that it made its decision “because we ran a competitive process and Alstom won.” Troger would not comment on the decision, but it is clear that it bothered him.
“It seems in Canada that the industrial focus is not at the same level as in other countries,” he says. “In other countries they favour their local industries and it seems in Canada that’s not the case.” “I think we have to be careful in Canada that we don’t shoot ourselves in the foot. Canada is a fantastic country to develop and manufacture product. Not to realize that it is a strong asset to the country and to think that there is better product elsewhere .... I am very, very surprised.” Moore said that the optics of the Caisse’s decision could be used by competitors against Bombardier on future bids.
“The reputation of not delivering as you promised at times takes years to overcome,” he says. “The reality is that they ’re getting better at it, but I think it will take years for the market to accept that fully.” The sting that reputational issues can deliver is nothing new to BT.
Last August, the company was shut out of a $3.2 billion contract to supply 1,695 subway car’s for New York City because of cost overruns and delays — it had been nearly two years late in delivering 300 subway cars for a previous project on New York’s subway system. In Toronto, the company has missed several delivery targets for the TTC’s streetcar order and an order by regional transportation agency Metrolinx for new railcars. Many of the streetcars that were delivered to the TTC will be sent back to Bombardier for repairs. “Welding issues are not uncommon in the industry, but in this case, Bombardier has been proactive and responsible to ensure the cars meet the expected longevity, all in full transparency with TTC and their riders,” says spokesman Eric Prud’homme.
Troger, who spoke to the Post before it was revealed the streetcars had to be sent back for repairs, says he does not believe the delays in Toronto have affected the company ’s ability to attain new contracts. “I can understand ... the pain that has been observed for a short period of time, which has been generated by external factors, but at the same time let’s also focus on what we have done well,” he says. “I think we have, particularly in Ontario but also in Quebec, to be proud of what we’ve done and not to forget all of this because of one problem that we may have had on our journey.”
At Berlin’s Hauptbahnhof rail station, located a one-hour train ride from where the ITF Summit was held, an enormous Bombardier sign sits atop the main platform at the busy hub welcoming passengers to Germany’s capital city. Streetcars and trains marked with the Bombardier name weave across Berlin.
Despite the concerns over increased competition and delivery issues, Troger is confident his division has a bright future. “Rail is an answer to ecological challenges, it’s an answer to congestion challenges, it’s an answer to return on invested capital challenges, and it’s also an answer to local employment as well,” he says. “This is the reason why this industry has been here for 175 years, and we’ll be here for the next decades to come. I have no doubt about that.”