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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