REINVENTING Bombardier — A True Story

To date, as part of my “Reinventing XXX” series, I already covered my interactions with the following companies: Booking, Indigo, Boeing, and Andrew Lloyd Weber’s RUG. This article describes my exchanges with Bombardier Inc. — a Canadian multinational manufacturer of business jets and transportation systems. Well, I’m not so sure that the rail business at Bombardier will survive the date I finish this article — more about the fluidity of the situation will be described below…

As I mentioned in: COVID-19 Impact on BODs — It’s Time for the Gloves to Come Off! “No two companies face the same set of problems. So, I always try to put myself in each company’s shoes and ask a simple question: despite the overwhelming challenges of COVID-19, what are their greatest post-COVID-19 growth opportunities? And by doing so, I find my answers — that I’m ready to share. It’s all that it takes to better understand companies’ priorities, where are they now, where they want to be in the future, and how I can help them to get there…”

So, to remain consistent, I describe the REINVENTION PROCESS as a 5-legged stool that includes:

· OPM — Using Other People’s Money

· Push/Pull — Adding New & Untapped Revenue Streams

· Noncustomers — Focusing On New & Untapped Market Segments

· Business Model Innovation — As Important As Technologies Behind It

· Operating Advisor/Mentor — Hands-On Assistance With Strategy AND Execution

And to demonstrate the significant Value Innovation linked to my Reinvention Process, I will focus on one, or more of its components.

The Past

Bombardier is almost 90-years-old… According to the company’s website: “Today’s Bombardier grew out of a young mechanic’s inventive genius and entrepreneurial spirit. Born in 1907, Joseph-Armand Bombardier builds his first “snow vehicle” at the ripe age of 15. His motivation? To help people travel across the snow-covered roads of rural Québec in Canada. In 1937, J.-Armand achieves his first major commercial success with the launch of the seven-passenger B7 snowmobile”

From its humble beginnings, the company grew to become one of the major conglomerates of Quebec, with impressive Transportation and Aviation divisions. And what a spectacular growth it was — mostly through aggressive acquisitions. It included: acquiring Canadair from the Canadian government, Northern Ireland’s Shorts Brothers PLC (Shorts), Boeing’s de Havilland Canada, and the LearJet. Bombardier’s Market Cap peaked around 2008 — yet over the last 10 years all the previous gains were utterly erased, and the company lost 93.6% of its value.

After significant losses attributed to the escalating costs of its CSeries aircraft design and production in 2014 — Bombardier embarked on a turn-around. It included selling the A220 commercial jet program, water bomber, Q400 turboprop, Canadair Regional Jet, and flight training divisions. And yet, despite all these divestitures, Bombardier’s debt increased from $7.6 billion in 2014 to $9.3 billion in 2019.

According to Bombardier’s press releases, the most recent decision was made to Strategically Focus on Business Aviation: “In February 2020, we announced our strategic decision to focus on business aviation and to accelerate the deleveraging and strengthening of our balance sheet through the sale of our Transportation division to Alstom SA. Expected to be completed following regulatory approvals and other conditions, this transaction will mark the conclusion of our turnaround and the beginning of a new chapter for our company. In the future, we will be focusing on our business aircraft segment, where Bombardier is a strong, well-established market leader”

The Present

The sale of Bombardier’s rail business to Alstom could have significantly reduced the company’s debt and improve its credit rating. Bombardier signed a deal to sell its rail business for €5.8-€6.2 billion in February 2020, but the COVID-19 crisis has put the deal on hold. Not surprisingly, Fitch Ratings downgraded Bombardier’s long-term debt to “CCC” — which indicates a risk of default irrespective of the economic conditions. Ouch!

According to Investopedia: “Along with Moody’s and Standard & Poor’s (S&P’s), Fitch is one of the top three credit rating agencies in the world. The Fitch rating system is as follows:

Investment grade:

AAA: companies of exceptionally high quality (established, with consistent cash flows)

AA: still high quality; slightly more risk than AAA

A: low default risk; slightly more vulnerable to business or economic factors

BBB: a low expectation of default; business or economic factors could adversely affect the company

Non-investment grade

BB: elevated vulnerability to default risk, more susceptible to adverse shifts in business or economic conditions; still financially flexibility

B: degrading financial situation; highly speculative

CCC: a real possibility of default

CC: default is a strong probability

C: default or default-like process has begun

RD: issuer has defaulted on a payment

D: defaulted

The Future

So, I invited Bombardier’s new CEO, Eric Martel, to connect on LinkedIn, and wrote to him as follows:

“Dear Eric,

I sent you a short note today on LinkedIn to congratulate you on 7500 EPD & your recent appointment! As mentioned, I’ll be delighted to join your personal Advisory Board & help to restore BBD’s former glory! It’s time to take advantage of Digitization, IT, and AI in greening & rebranding aviation industries — using QC’s unique Factor Endowment. Most importantly, I would like to help you to escape the negative narrative and create stakeholders’ excitement about BBD — in one fell swoop!

I look forward to better understand your priorities. Without a doubt, Business Model Innovation is as disruptive as Technology Innovation. So, I help companies developing unique & opportunistic growth strategies with the main focus on bringing RAPID & SUSTAINABLE revenues.

I did it with Verizon already 20 years ago! It’s all about RESULTS — or I do not get paid. So, let’s explore synergies. And it starts with learning about where you are now, where you want to be in the future, and how I can help you to get there.

The Coronavirus pandemic changes EVERYTHING, and we live in a post-pandemic reality. Many CEOs recognize the need to rapidly re-assess these new circumstances and quickly adapt. Others do not. Hence, I’m on a MISSION: to help open-minded companies to take advantage of post-COVID-19 opportunities & tap into unexploited funding!

I’m at that stage in my life where I don’t care about BOD politics and water-cooler gossips. Nor do I offer fake flatteries to CEOs. All I care about is how to solve CEOs’ problems & deliver results. So, I join Advisory Boards to do so! And it’s not about how to score one hit — it’s a process to optimize the performance & beat the odds, repeatedly!

As one of the ultimate BusinessAI™ veterans on the planet w/ over 30-yr hands-on AI expertise, I also bring supreme business savvy to separate the wheat from the chaff. Thank you and I look forward to hearing from you. Let’s explore synergies… Stay safe, stay healthy!

With warmest regards,

Oleg Feldgajer — BASC, MASC, MBA & EMBA

President & CEO

Canada Green ESCO Inc.

BODs serve investors, Competent Advisory Boards are CEOs’ best friends…

oleg.feldgajer@canadagreenesco.ca

www.canadagreenesco.ca

Preparation, Opportunism, And Luck…

Truth be told, I meant every word I said to Eric — for the following reasons. In my post: “Balancing The Three Pillars Of Success: Preparation, Opportunism, And… Luck”, I emphasized the fact that busy executives habitually don’t have the luxury to capitalize on rising opportunities. It requires preparation — which takes time that they don’t have.

And since radical innovations rarely follow a linear path — CEOs must time and again be prepared to act quickly to turn the opportunities into a lasting success. And even if you’re a lifelong learner, your existing skillset may not be enough to make the right decision — quickly and confidently.

Almost 2,000 years ago, one of the most famous Roman philosophers, Seneca, said: “Luck is when preparation meets opportunity”. His brilliant quotes inspired the entire plethora of “derivative” quotes about luck, including: “Some say opportunity knocks only once, that is not true. Opportunity knocks all the time, but you have to be ready for it” — Louis L’Amour.

So, I often say that regardless of how much success probability one might assign to each condition, a simple 1/3, 1/3, 1/3 rule would do. There is no doubt in my mind that Readiness, Opportunism, and Luck are equally important…

And even with ZERO luck, the probability of success is still above 66%. It beats the 50% probability associated with flipping the coin… By following the same logic, if you’re well prepared but still hesitant to take advantage of the unfolding opportunity — in the absence of luck, your success probability drops to 33%. In similarity, “Lady Luck” may cause a comparable predicament — if you’re ready to act but not well prepared to take full advantage of being a first-mover…

Hydrogen To The Rescue

I wrote about Green, Blue, and Grey hydrogen before. With the advent of Renewable Energy resources such as solar and wind — the world has quickly realized the need to overcome the intermittent nature of such electricity. Hence, the ability to generate hydrogen through water electrolysis, store it, and reuse it via Fuel Cells to generate pollution-free electricity any time and at any place — is a true game-changer.

And very recently, nothing generated more excitement than the green hydrogen Fuel Cells to be used in energy-intensive transportation such as: trucks, freighters, ferries, airplanes, buses, and trains. To see the trucking company such as Nikola Corporation (NKLA:NASDAQ) reaching the Market Cap of $20B+ with ZEEEEERO revenues, and to see its stock gaining 104% in just a single day post IPO — says it all…

No wonder, the excitement begins to spill into the aviation, too. Hydrogen Fuel Cell technology has the potential to provide opportunities not only to cut costs but also to SIGNIFICANTLY reduce carbon emissions. As recently reported by Fast Company:

ZeroAvia, the startup that designed the hydrogen-fueled electric powertrain inside the plane, has been testing the technology over the past year and emerged from stealth today. The company says it will run a full test flight with hydrogen on board in a few weeks. In 2022, it plans to begin supplying the powertrain for use in planes with as many as 20 seats, on flights up to 500 miles long”

Yet ZeroAvia is not alone! We also heard about Zunum Aero, a startup backed by Boeing and JetBlue, as well as about extensive experimentations with hydrogen planes by Airbus — one of Bombardier’s most influential business partners. And since Bombardier is now refocusing on business airplanes — it’s a match made in heaven…

Presently, ZeroAvia is planning to begin supplying the powertrain for use in planes with as many as 20 seats, on flights up to 500 miles long by 2022. Surely, Bombardier has the right expertise and the in-house know-how — to take full advantage of such opportunities, today.

And let’s not forget that there is no refueling infrastructure at the moment to make hydrogen-based jet fuel a viable alternative to fossil fuels. China, Japan, Korea, Australia, or Germany — first need to “green” their electric grids to produce green hydrogen. This requires massive renewable energy investments to boost their solar and wind capacity. Guess what? The Province of Quebec is already operating a ~100% renewable grid!

And for such reason, the Government of Quebec could become once more a true Factor Endowment in enhancing Bombardier’s value proposition. Turning Montreal into the biggest hydrogen refueling hub on the East Coast generates thousands of jobs and creates economic prosperity. Hence, Quebec’s largest pension fund, CDPQ, together with the Government of Quebec — could once more assist reinventing Bombardier.

Moreover, did I already mention that before his recent appointment as Bombardier’s new CEO, Eric Martel… were the President and Chief Executive Officer of Hydro-Québec — a public utility that manages the generation, transmission, and distribution of all the electricity in the Province of Quebec? I rest my case…

As per my OPM strategy (using Other People’s Money) — Bombardier could also tap into additional deep-pocketed partners and Private Equity funds. In the past, Airbus would have been the most natural partner to consider. However, since Airbus lost ~50 of its Market Cap during the last year, Bombardier could form a JV with a very well established and EXTREMELY profitable hydrogen partner — Air Liquide.

Not only Air Liquide’s Market Cap is 60X larger than Bombardier’s, this company is already operating 120 hydrogen refueling stations — designed and installed by Air Liquide around the globe. Today, hydrogen produced by Air Liquide for the refinery and petrochemical markets could recharge around 10 million hydrogen Fuel Cell Electric Vehicles…

In conclusion

My pattern recognition abilities allow me to see how to maximize business offerings & profitability. And looking at existing problems with a pair of fresh eyes — often brings a set of creative solutions, that were never even considered in the past.

My message to all the CEOs: the merit of the outside advice has nothing to do with how many years your advisor was involved within your industry. You already have all the domain-specific expertise you need. It’s time to start looking for outside-the-box thought-leaders. After all, the most successful companies strike the right BALANCE between:

· Domain-specific experts AND generalists

· Mile-deep AND mile-wide points of view

· Strategists AND tacticians

· Leaders AND managers, etc.

The best turn-arounds and pivots occur when CEOs take outside advice seriously. No matter the size of your company, surrounding yourself with smart, pragmatic, honest, and extremely diversified Advisory Boards is as important, as hiring the right employees. Otherwise, and before you know it, the “Law Of The Instruments” takes place: “To a man with a hammer, everything looks like a big nail”…

P.S. You can find additional reinvention stories in my recent posts such as:

· Reinventing Boeing

· Reinventing Indigo

· Reinventing Booking

· Reinventing Andrew Lloyd Weber

I’m at that stage in my life where I don’t care about BOD politics and water-cooler gossips. Nor do I offer fake flatteries to CEOs. All I care about is how to solve CEOs’ problems & deliver results. So, I am in the business of joining Advisory Boards/BODs of the most innovative companies all around the world. And as one of the ultimate BusinessAI™ veterans on the planet w/ over 30-yr hands-on AI expertise, I also bring supreme business savvy to separate the wheat from the chaff.

As an Operating Advisor/Jack of All Trades, I work with VC/CVC/PE funds and the companies they support — at a granular as well as strategic levels. And in addition to focusing on organic growth, my ground-breaking RedCarpet™ revenue acceleration strategies include Design, Structure, Finance, and Deployment of Opportunistic Joint Ventures. It is delivered at no cost to the client company, as we leverage “other people’s money” — an ingenious alternative to costly acquisitions…

My turnkey approach helps to raise 10X more capital at 1/10 of the cost and it is based on structured finance expertise. We financed over $1B of Renewable Energy projects in the past and now apply our expertise to the Finance, Healthcare, Fintech, Construction & Manufacturing sectors. And if our unique value innovation does not generate the desired results — we do not get paid…

What I learned over the years is that it is not just technology innovation, but also the exponential increase in the value offered to clients at a much lower cost — that makes all the difference. Yet I see too many companies focused on pushing their product out the door — while losing ~70% of additional revenue streams.

My proprietary “The Push, The Pull and The AI Bull™” process, generates huge secondary and tertiary revenue streams. Such a strategy is scalable and sustainable — resulting in significant revenue smoothing. It allows me to tackle rapid innovation issues; disruptive marketing strategies; operational efficiency improvements; brand enhancement; and securing growth capital.

In some cases, I step-in as an interim CEO to significantly accelerate scale-up and expansion. The emphasis is on EBITDA & Revenue Acceleration, Margin Enhancement & Opening New Channels in diverse markets. Unique pattern recognition abilities allow me to see what is still missing & how to maximize business offerings & profitability.

SELECT ACCOMPLISHMENTS: Using AI in CT medical diagnostic, financial fraud detection, solar PV, wind, WTE, energy efficiency, etc. Finance skills: equity, non-recourse debt, balance sheet financing, and tax equity. I also took a tiny startup public, building a $135MM enterprise & received grants from NRC & DND. Academic R&D collaborations included: UW, UofG, UofT, and MCC Consortium in Texas.

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I used #AI in #Technology, #Finance, & #Renewable #Energy for 30-yrs. Now, I help #VC/#CVC during due diligence of AI investments & advise their portfolio Cos.

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Oleg Feldgajer

Oleg Feldgajer

I used #AI in #Technology, #Finance, & #Renewable #Energy for 30-yrs. Now, I help #VC/#CVC during due diligence of AI investments & advise their portfolio Cos.

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