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Bob Brown in Command

Who would have guessed that plain Robert Brown – spit-and-polish soldier, career civil servant – could match Laurent Beaudoin's fabled record as CEO of Bombardier

By Konrad Yakabuski

Report on Business Magazine

November 2000

A well-aged dankness in the Stone Frigate, the oldest dormitory at Kingston's Royal Military College, is reputed to be ideally suited to the cultivation of spiders, the common cold and a strong character. Residents of the 180-year-old former naval warehouse, which is separated from the other dorms by Parade Square, have long seen the ability to endure their barracks' inhospitable clime as a mark of fortitude. Among the Class of '67, no one impressed this upon new recruits as concertedly as cadet no. 7344, R.E. Brown, the "serious and reserved" – according to his yearbook caption – leader of the Stone Frigate's "C" flight.

More than three decades after his return to civilian life, the military training still comes through in almost everything about Bob Brown – from his respectful, almost deferential, manner to the barracks-like orderliness of his impeccably appointed office. "You will see certain things around this room that some people may see as weaknesses as much as strengths," the silver-haired Brown explains, pointing to his perfectly shined shoes and the polished oak floors of his 30th-floor suite on Montreal's René-Lévesque Boulevard. "But I believe that in order to have discipline in an organization, you have to show you have discipline yourself. The way you present yourself is extremely important. You learn that at military college because you have to."

There is no doubt Brown, president and CEO of transportation goliath Bombardier Inc., makes a good first impression. Judging from the performance of Bombardier's stock since Brown took over as chief executive 20 months ago, he is making a lasting one on investors too. Those who worried that the "serious and reserved" Brown, a former career civil servant, could never provide Bombardier with the same momentum the dynamic Laurent Beaudoin furnished during more than three decades at the helm – 33 as president overlapping 20 as CEO – have been quieted. Brown is showing himself to be as much a builder as Beaudoin, with an even more ambitious strategy for growing the company and its profits. The latter were up 30% in the year ended Jan. 31, 2000, Brown's first as CEO, and he has vowed to increase the bottom line by at least as much this year and next. "The market has confidence in Brown because he's delivered," says one Bay Street analyst, who admits to being an early skeptic. "In the end, that's all that counts."

Brown, 55, has been busy on other fronts besides profits. He has laid plans for doubling Bombardier's sales within five years, from $13.6 billion in fiscal 2000. He has championed the firm's launch of a 90-seat jet, edging Bombardier closer toward a direct challenge to industry titans Boeing Co. and Airbus. Through the launch of new motorized playthings, he has made good on his pledge to turn around the troubled recreational products division, with the help of its president, Beaudoin's 38-year-old son, Pierre. (The division's pretax income for the first half of fiscal 2001 soared to $21.2 million from $1.1 million in the first half of 2000.) More important, Brown has moved to correct what many analysts see as Bombardier's greatest weakness – its lopsided financials. About 60% of fiscal 2000 sales and 80% of pretax profit came from the aerospace division. Bombardier's $1.1-billion purchase in August of DaimlerChrysler AG's railcar operations, known as Adtranz, will help restore balance to the revenue stream. The acquisition, which must first pass muster with European competition authorities, will double the transportation division's annual sales to more than $8 billion. Provided Brown can work Bombardier's legendary magic on Adtranz's money-losing operations, the purchase will cushion the company's profit base against a cyclical downturn in the aircraft industry.

Brown's performance as CEO would not surprise anyone who reviewed his nine-year stint, beginning in 1990, running some – then all – of Bombardier's aerospace operations. Over that period, the unit was transformed from the fledgling owner of the troubled and then-recently privatized Canadair Ltd. – with essentially a single product, the Challenger business jet, and less than $1 billion in sales – into the world's third-largest civil aircraft manufacturer. It was during Brown's tenure, in 1992, that Bombardier delivered the first 50-seat Canadair Regional Jet (CRJ), an offshoot of the Challenger that has since revolutionized air travel in North America and Europe. On small- and mid-sized routes, airlines have scrambled to switch to faster, smoother and more economical RJs from noisy turboprops and expensive-to-operate – and usually half empty – larger jets. The hub-and-spoke system that for decades forced passengers to change planes frequently en route to smaller destinations has been abandoned as airlines use RJs to offer direct flights between smaller markets. Today, demand for regional jets is running at roughly 400 a year, and Bombardier has retained its industry lead despite stiff competition from new challengers, such as Brazil's state-owned Embraer (Empresa Brasileira de Aeronautica) and the German-American Fairchild Dornier.

Yet, through it all, Brown laboured out of the public eye as president of the aerospace unit, a result of his understated manner on the one hand and Beaudoin's larger-than-life demeanour on the other. When Beaudoin, shortly after turning 60 in 1998, announced he was passing his operating titles to Brown, few Bombardier watchers knew what to expect. Many hoped the change was only cosmetic and that Beaudoin, who remains Bombardier's chairman, would continue to run things.

For a while, it looked that way. Brown officially took over the following February, but it wasn't until seven months into his tenure as CEO that the reality hit home on Bay Street. In late September of 1999, Bombardier held its annual powwow for analysts and institutional investors at "Le Windsor" in Montreal. The three previous editions of the event had done little to dispel a long-standing complaint of analysts, who saw Bombardier's management as one of the most secretive, providing minimal disclosure and harbouring a suspicion of the investment community and media that bordered on paranoia.

The 1999 event was different. First, Brown stunned the audience by publicly setting profit targets, promising to increase earnings per share by 30% to 40% in fiscal 2001 and 2002. Second, Beaudoin was nowhere in sight. "If ever there was a statement to the market that 'Look guys, Brown is in charge,' that was it," says one analyst who attended. "After that everyone said: 'Oh my God! Bob Brown is really the man. Beaudoin's stepped aside.' "

Brown concedes that unveiling the earnings targets was his idea. "It was a deliberate [move] on my part to indicate there was a change from the past. I discussed it with Laurent and we both decided it was a good thing for me to differentiate myself." Regardless of the motive, investors applauded the move, sending Bombardier's stock 11% higher that day. The company's subordinated voting shares, which returned 45% in the year leading up to the announcement, yielded 120% in the one following it. Analysts attribute the stock's performance, at least in part, to Bombardier's increased transparency under Brown.

Brown was born in England, the son of a Canadian Army civilian employee and his British-born wife, but he was barely out of diapers when the family settled back in Ottawa. Unlike many army households, the Browns did not move around, enabling their first-born to attend local schools straight through to graduation at Nepean High School. There, young Bobby Brown was both a star pupil and – as a 6-foot-2-inch senior – basketball player. Ottawa in the '60s was an even tamer place than it is today, and Brown – studious and soft-spoken – fit right in. "There was never any of that radical Haight Ashbury [attitude] at Nepean. We were upper-middle-class kids of senior bureaucrats and military people," recalls Rear Admiral Ken Summers (retired), a former classmate who went on to serve as chief of staff to the NATO Supreme Allied Command Atlantic.

Brown, who describes his own upbringing as modest, says he chose an army education mostly for the free tuition. After spending two years at Royal Roads Military College in Victoria, he rejoined Summers at Kingston's RMC, where both ended up in the Class of '67 along with Gilles Ouimet, now president and CEO of aircraft engine-maker Pratt & Whitney Canada Corp. Classmates sensed then that Cadet Brown's self-discipline, smarts and athletic prowess – he was the star centre, captain and high scorer of the basketball Redmen – would take him far. "Bob was the quiet, intellectual type. I don't remember him ever getting into any trouble. You could tell he was destined for great things," says Bryan Stephenson, a retired major-general in the Canadian Forces and now senior vice-president at CPAS Systems Inc., a Toronto software company. "It's a shame Bob didn't stay in the military. I'm sure he would have made chief of defence staff."

After finishing up his military service with the Canadian Forces stationed in Germany, Brown sought employment where most bright 26-year-old Ottawans did in the early '70s – the federal bureaucracy. He got his first big break when Gordon Osbaldeston, then Treasury Board deputy minister, hired Brown as his executive assistant in 1974. The post enabled Brown to observe the work of a master – Osbaldeston, who went on to become Canada's top mandarin as Clerk of the Privy Council in the early '80s – and sit in on Treasury Board meetings with a jeune loup of the Trudeau cabinet named Jean Chrétien. It was at Treasury Board that Brown caught the business bug, developing a passion for economics. Osbaldeston suggested that his talented young protégé spend some time in a smaller pond to hone his skills; Brown headed east in 1976 to spend two years as senior bureaucrat at the Council of Maritime Premiers. It was the heyday of industrial policy of the tinker-with-the-market variety, and Brown became one of the best at it. When he returned to Ottawa, he rose rapidly through the ranks of the industry department before reaching the second-highest bureaucratic post in the Department of Regional Industrial Expansion (DRIE) in 1985.

In the mid-'80s, DRIE was dispensing a billion dollars annually in industrial grants. At 40, Brown was one of two associate deputy ministers – the other was Georgina Wyman – who faced constant lobbying by business and politicians alike to steer subsidies to their own bailiwicks. Brown had responsibilities for the so-called capital-goods wing of the department, dealing with such sectors of the economy as aerospace, petrochemicals, telecommunications and Crown corporations, including Canadair and de Havilland Inc. "Bob was very cool when he got into high-pressure situations, when there was heavy political lobbying," recalls Arthur Kroeger, another legendary federal bureaucrat, who served as DRIE deputy minister in 1985-86. "I can't think of any negatives in the year I spent with him. There is no doubt he could have been deputy minister. He might have been a very credible DM of Finance."

Alas, the federal bureaucracy was a hazardous place to work in the mid-'80s. The landslide victory of Brian Mulroney's Conservatives in 1984 ushered in a period of disruption from which the civil-servant elite took years to recover. The new political masters were highly suspicious of their so-called servants in the bureaucracy, many of whom had developed a deep-seated allegiance to both the Trudeau-era Liberals and a stubborn belief in its dirigiste ways. Promising an end to interventionism and big government, the Mulroneyites collided with the bureaucracy early and often. DRIE saw four deputy ministers come and go in as many years. The department, which was rocked by the resignation of Sinclair Stevens as minister amid conflict-of-interest allegations, was facing a slow death as the Tories moved to transfer many of its activities to other departments.

Brown's own career took an unexpected turn with the arrival of Kroeger's successor at DRIE, Ray Hession, in 1986, which created an opening for a new deputy at Supply and Services. Brown had his eye on the job; Wyman got it. Brown took it personally. It was, former colleagues say, the proverbial straw that broke his devotion to his chosen profession. "There is no doubt that is what precipitated his decision to quit the public service," says one. "He had been built up to become deputy minister and, at that moment, the bubble burst." Brown puts it less categorically: "I was an associate deputy minister at 41. All my appraisals had been good. I felt I was going to move forward in the system." But faced with the prospect of biding his time until another deputy posting – likely in a less-desired non-economic portfolio – came open, Brown began to study his options.

As a senior bureaucrat dealing with industry, Brown's Rolodex was chock full of direct lines to CEOs. But it was Beaudoin who called Brown first, on the recommendation of former Liberal industry minister Ed Lumley. Lumley, who calls Brown the "best-kept secret in Canada," credits his former bureaucrat with helping to negotiate billions of dollars worth of investments in Canada by automakers in the early '80s. "Bob's just got a great strategic mind. And he had this great track record of [doing deals] internationally. It was a natural fit with Bombardier because that was a class company with a class CEO," says Lumley, now vice-chairman of investment dealer BMO Nesbitt Burns. Beaudoin discovered in Brown not only a seasoned administrator but a worthy opponent at gin rummy. "We met, and I found Bob and I had personalities that went well together," he recalls. "The chemistry worked."

A few weeks before Beaudoin and Brown talked in September, 1986, the Mulroney government wrapped up the sale of Canadair to Bombardier. Brown had not been directly involved in the negotiations to sell the money-losing aircraft builder, which were handled by another government agency. Once he received overtures from Bombardier, Brown says he immediately informed his superiors – Hession and then-clerk of the privy council Paul Tellier. "Bob asked me what was next for him in the public service. I told him he was one of the best, but that I couldn't offer him any assurances," remembers Tellier, now president and CEO of Canadian National Railway and a Bombardier director. Deputy ministers are cabinet appointees, and Tellier's hands were tied. "As head of the public service, I should have tried to keep him. But on a personal level, I knew this was a golden opportunity for him." Brown left the meeting with his mind made up, agreeing to stay on until the following February and withdrawing himself from all departmental dealings with Bombardier until then.

Beaudoin took Brown on at head office as his right-hand man on corporate strategy, charging his new deputy with executing his ideas. The relationship was mutually satisfying; Beaudoin benefited from Brown's administrative skills, honed in government, and Brown, in addition to perfecting his French, observed a master entrepreneur at work. Beaudoin, a chartered accountant who married founder Joseph-Armand Bombardier's daughter, had transformed Bombardier from a humble maker of Ski-Doos into one of North America's leading railcar manufacturers. Now, he aimed to go even farther in aerospace. Together, Beaudoin and Brown put together the purchase of Shorts Bros. PLC in Northern Ireland and won Bombardier's first contract to build parts for Airbus. "That's where I saw Bob's talent as a negotiator," Beaudoin says. "He had a way of getting people to accept his ideas."

In 1989, Beaudoin announced the biggest gamble in Bombardier's history. He bet half the company's then-market capitalization – $250 million – to develop the world's first regional jet, the CRJ. The following year, he put Brown in charge of Canadair, giving him responsibility for making the CRJ concept fly. In 1992, Brown was named head of all North American aerospace operations, which soon included not only Canadair, but Learjet in Wichita, Kan., and de Havilland. Under Brown, the aerospace unit launched at least half a dozen new planes, including the Learjet 60, the luxury Global Express business jet, new models of the popular de Havilland Dash-8 turboprops, a modernized version of the C415 waterbomber and the 70- and 90-seat CRJs. Within a decade, Bombardier came to claim about half the global market in regional aircraft, jets and turboprops combined.

Succession is a taboo topic in many companies, especially family-run ones. The market is continually trying to decode internal signals – promotions, demotions and departures – to finger the heir apparent. Beaudoin and his in-laws control 60% of Bombardier's voting stock; and, in the early '90s, many people figured the CEO was still young enough to wait until his son, Pierre, was experienced enough to take over. "When I joined Bombardier, I did not believe I would ever have the opportunity to be CEO," Brown concedes. Few would have disagreed. But when president Raymond Royer, a 22-year company veteran, quit suddenly in 1996, that thinking began to change. Royer was not replaced. Instead, Bombardier restructured, creating five divisions, each headed by a president who reported directly to the CEO. Pierre Beaudoin stayed put running the recreational products division, historically a core unit but one that had been marginalized by the railcar and aircraft units. Had Laurent Beaudoin sought to groom his son for the top job, observers thought, he would have moved him. Instead, Brown, named president and chief operating officer of Bombardier Aerospace, emerged as the leading candidate to succeed Beaudoin.

Although he was little known to the public, Brown had by then gained a high profile in the aerospace industry, making him a prime target for poaching by one of Bombardier's competitors. The company had already been stung. In 1995, Bryan Moss, a 16-year Canadair veteran and the head of Bombardier's business aircraft division, jumped ship to join Savannah, Ga.-based Gulfstream Aerospace Corp., which was developing the Gulfstream V to take on Bombardier's showcase Global Express. Many Bombardier watchers believe Beaudoin worried Brown would become the next target, secretly moved then to assure him the top job would be his if he waited.

Brown himself insists he did not formally broach the topic of succession with Beaudoin until late 1996, when the two travelled together to a convention in Orlando. "I want to tell you what's inside me and what I think I'm capable of and ask you whether you think there is an opportunity for me inside the company," Brown says he told Beaudoin. "The response from Laurent was: 'Well, I think there's an opportunity for you inside the company.' " Beaudoin says he has no regrets about his choice. "Bob's performance as CEO has been excellent," he opines, adding Brown had already proved his talents on the aerospace side. "Now, he's also shown his leadership vis-à-vis Bombardier's other divisions."

Beaudoin remains Brown's closest adviser and Bombardier's chief strategist, continuing to loom large on the big files. Brown says he wouldn't have it any other way. "I am very clearly running the organization. I'm very good at executing things, at getting things done. And I'm a very, very good negotiator," he says prefatorily. "But Laurent is one of the best. So, when you've got someone like that on the bench, you're going to use him. We're both committed to building a stronger Bombardier that will endure and prosper for a long time. We're not in there flipping things. We're both builders."

They are both a bit touchy, too, about the public perception that Bombardier builds on taxpayers' backs. Brown's background in a grant-giving arm of the Ottawa bureaucracy can't help but reinforce that line of thinking. Yet Brown has not sought any new government funding for Bombardier since he became CEO. Canadair benefited from federal subsidies – albeit modest ones relative to overall development costs – to launch the 50- and 70-seat versions of the CRJ. But Bombardier says it will develop the 90-seater, at a cost of about $200 million, without a cent of government money. This dramatic move reflects, in part, Brown and Beaudoin's exasperation at the tenacity of their PR problem. Bombardier remains the Canadian multinational most closely associated in the media's eye with government largesse, from direct investments in its planes by Ottawa through Technology Partnerships Canada, to the financing of foreign purchases of Bombardier's aircraft by the Crown-owned Export Development Corporation. Brown defends the aid Bombardier has received on the grounds that its competitors have gotten much more from their governments, especially Embraer. The World Trade Organization recently ordered Brazil to stop offering below-market interest rates to Embraer's customers. But with competition in the regional-aircraft market growing fiercer by the day, subsidies are not likely to disappear any time soon. Bombardier refuses to renounce its claim to future government aid or existing EDC funding.

So, Brown, like Beaudoin did, will have to learn to live with the criticism. It is a small price to pay for being a market leader. Forecast International/DMS of Newtown, Conn., estimates deliveries of regional jets in the 30- to 120-seat category will total 4,435, worth $95.6 billion (U.S.), between this year and 2010. Bombardier, says Forecast aviation analyst Bill Dane, can expect to capture at least a third of the market based on dollar value.

If Bob Brown can extend that sort of accomplishment – and perhaps even do it without government aid to boot – then Bombardier stands to become a textbook case of smooth succession. Still, it's early days. "You don't find out how good or bad a CEO is until he gets into a difficult position," says a Bay Street analyst. "Bob Brown has not been faced with a difficult position. He has been moved into a well-oiled machine. There hasn't been a hitch."

Brown cut the logs to build his family's cottage on the Rideau River, south of Ottawa. And he chops the firewood to keep it warm in winter. But other than being a professed "big user of all Bombardier's [recreational] products," Brown's passion is clearly his work. He credits an understanding wife and children for enabling him to indulge so fully in it. Brown and his wife, Sherrill, a native Montrealer who met her future husband when she was an exhibition manager at the National Gallery of Canada, have been married for 28 years. The couple have three children: Erin, 25, a financial analyst at Bell Canada International in Montreal; Rob, 22, who works in corporate finance at RBC Dominion Securities in Toronto; and Colin, 18, a sophomore at Mount Allison University.

Brown typically works 12-hour days, six days a week. If he's not in the office by 7:30, it usually means he's either attending a breakfast meeting for a charity – he co-chairs the fundraising campaigns of both the Université de Montréal and Centraide, the Montreal United Way chapter – or travelling. Brown's been doing a lot of that since he became CEO, visiting Bombardier's far-flung operations around the globe. "I'm a strong believer that you've got to be there. You've got to see people, their body language, to make sure everybody's embracing the values of the company," he says. "And when you ask for something to be done, you've got to go back to make sure it's been done." To be sure, Brown's affability should not be mistaken for softness. Like the former cadet flight leader at RMC, the Bombardier CEO does not tolerate mediocrity. "One of Bob's great qualities is that he not only surrounds himself with the right people but also takes the tough decision if somebody is not performing," observes Tellier.

Brown returned to RMC for his 30-year class reunion in 1997 a clear success. Of all present, he perhaps was least in need of the Oldsmobile Aurora the college was raffling off as a fundraiser. But, as is often the case among the most-likely-to-succeed, he won it anyway.

Not content with his booty, Brown traded it in for two new cars, giving one to his sister, the other to his kids. That's Bob, friends chimed, always doubling his money.


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