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

National Post (Latest Edition) - Financial Post Magazine - - FRONT PAGE - >BY KRISTINE OWRAM

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

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