Thursday, September 22, 2011

Bombardier says sourcing fuselage from China just one of challenges for CSeries

MONTREAL - Bombardier hopes it can defy skepticism and deliver the CSeries on time despite juggling several challenges including sourcing the main fuselage from China, aerospace CEO Guy Hachey said Thursday.

Developing the 110- to 149-seat aircraft for delivery beginning the end of 2013 is more worrisome than receiving orders because no manufacturer has been on time, he told a CIBC investor conference.

"It is something that is systemic in our industry and we're trying to fight that. We're trying to convince the world that we'll be on time, which nobody believes."

Hachey said the Montreal-based manufacturer gave itself 5 1/2 years to develop the new aircraft from scratch, more than other plane makers planned for their new entries.

It also follows a decentralized model that relies on key suppliers, something that large rivals such a Boeing have only started to adopt.

Still, it faces about five to six "pressure points" in the plane's development. They include fly-by-wire, avionics, electronics and composite wings.

"The fact that we've sourced a major structure in China, long-term it had a lot of strategic and cost reasons for it, but also there's a learning curve with that effort," Hachey said.

With such a complex effort valued at $3.5 billion, there are so many potential trouble spots for the new plane that promises 20 per cent fuel savings and 15 per cent lower operating costs.

"I would be lying if I was saying that everything was OK. We absolutely have areas right now that are off our schedule, but are they so far off that we don't feel we can make it, not yet."

Hachey said Bombardier feels it has enough room at the end of the program's development schedule to absorb a few months of delays here and there.

Those pressures are sure to mount, however, as it approaches the first schedules flight the end of 2012.

Mitigation plans are in place to address identified problem areas.

"What I'm the most worried about is the things that will come about as we move forward that I don't know about and we've run out of time."

In terms of orders, Bombardier is targeting to have 23 customers with some 300 orders by the time the plane enters into service. Leasing companies are looking for about 40 customers, he said.

It currently has received 133 firm orders, 119 options and 10 purchase rights for the two sizes of CSeries. It also has a letter-of-intent signed last month for up to 30 additional aircraft.

Slots are already filled in 2014, 2015 and partway in 2016.

Bombardier's goal is to have a mix of different types of customers in a variety of geographic regions, instead of a couple of large orders for 100 planes.

Hachey said it has four or five sales campaigns that are quite advanced.

"China is important. We'd like to have one in China but other parts of the world, the Middle East and so on are very important to us."

A large order from Delta Air Lines remains possible, even though the U.S. carrier has postponed its purchasing decision for 100 mid-size planes, he added.

Bombardier's business jet programs are doing well, especially the Globals and Challenger families of aircraft despite financing issues for buyers. But Hachey said commercial orders have been slowed by economic difficulties.

Consequently, the manufacturer has announced reduced production rates for its Q400 this year and CRJ regional planes early in 2012.

About 350 of the 1,200 CRJ employees are affected by the move. Half are union workers, the other half are salaried engineers and others.

All affected employees will be transferred to business jet production that is ramping up or programs in development such as the Learjet 85, Global 7000 and 8000, or CSeries.

On the Toronto Stock Exchange, Bombardier's shares hit a new 52-week low of $3.74 before closing up one cent to $3.99 in Thursday trading.

http://www.winnipegfreepress.com

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