Laurent Beaudoin does not look like a man who has just retired. He is sitting in his spacious office overlooking downtown Montreal, wearing a dark blue suit with a yellow silk tie cinched tightly around his neck. He flashes a wry smile at the notion of free time.
Certainly, the 70-year-old has had little of that during his 45 years with Bombardier Inc. (TSX: BBD.B), more than 35 of which he spent as president and CEO. He should eventually have more opportunities to relax now that he’s stepped down from those roles, although he will stay on as non-executive chairman. Beaudoin handed the job to his son, Pierre, at the company’s annual meeting in June. His final speech as CEO was more or less a dry recitation of earnings and corporate platitudes, but it was nonetheless an emotional experience for Beaudoin. “A lot of memories come back to you and make you realize it went so fast,” he says of his more than four decades at the company. “But you have to face it — it’s time for you to pull back.”
This isn’t the first time Beaudoin has tried to do that at Bombardier. He first stepped down in 1999 but returned five years later to help pull the company out of the financial tailspin it had been in since 2001. His attachment to Bombardier runs deep. After all, Beaudoin is the son-in-law of founder Joseph-Armand Bombardier, and he joined the company at age 25 as comptroller. He would go on to build Bombardier from a small maker of snowmobiles to a global manufacturer of aircraft and rail vehicles with a market cap of more than $10 billion. “I want to see that the organization continues to develop and grow,” he says simply of his decision to remain as chairman. The Beaudoin-Bombardier family also maintain 54% voting control of the company.
Beaudoin says his resignation as CEO is permanent this time, but he will be spending more time at Beaudier Inc., the family’s holding company. In addition to the voting stake in Bombardier, the family maintains partial ownership of Bombardier Recreational Products, the maker of the Ski-Doo, the Sea-Doo and other motor vehicles, sold off in 2003 as part of Bombardier’s restructuring. (It now operates as a private company.) Beaudoin’s new office is in fact located at Beaudier, where he can keep a closer watch.
Given his chairman duties and his considerable investment in Bombardier, the iconic company can never be far from Beaudoin’s mind, even in the physical sense — Bombardier’s headquarters are just a quick five-minute jaunt up the street from his new digs. All of which raises the question: how much is Beaudoin really going to pull back?
Quite a bit, according to the man himself. He will represent Bombardier abroad, maintaining contact with officials in important markets such as Shanghai and Seoul, but he will not get involved in operational issues, allowing 46-year-old Pierre to guide the company as he sees fit. Part of the reason for changing offices was to prevent executives from popping in and soliciting advice from Beaudoin while skipping Pierre in the process. “I don’t think that would give my son the chance to lead by himself,” he says.
Even so, Beaudoin’s role as chairman is largely advisory, and as Dundee Securities analyst Richard Stoneman points out, “Direction always comes from the board.” Adds Richard Bradeen, Bombardier’s senior vice-president of strategy, corporate audit services and risk assessment: “Laurent is never shy to express his views about most things.…But Laurent is stepping back from the highly engaged, day-to-day involvement.”
His son will have plenty of freedom in running the company, according to Beaudoin. “I’m not the type to be looking over his shoulder,” he says, “and he’s not the type to call twice a day and ask my opinion.” The younger Beaudoin, who most recently ran the company’s aerospace division, echoes this sentiment. “He’s always given me a lot of rope,” he says of his father. That wasn’t the case for Beaudoin’s replacement the first time he stepped down. In 1999, Robert Brown took over as CEO. He was a veteran of the company, having run its aerospace division for nine years. Beaudoin admits he still played an active role in retirement. “I stepped back a bit at the beginning, but then I got involved a lot in the strategy of the organization, and I could not pull back completely,” he says.
Two years after Brown began his tenure, the terrorist attacks of Sept. 11 stalled the market for Bombardier’s commercial aircraft. The rising Canadian dollar didn’t help matters much, either. The company’s revenues and share price plummeted, and Bombardier lost its investment grade status with ratings agencies, which management is still trying to win back. Beaudoin was unsatisfied with Brown’s performance. “Not being in the driver’s seat, it was difficult to see what was happening,” he says, “especially when you’ve built the organization and you’re there as a spectator.”
As executive chairman, Beaudoin wasn’t completely powerless, of course. He removed Brown in 2002 and installed Paul Tellier, who led the privatization of Canadian National Railway. Exactly two years after his appointment, Tellier abruptly left before completing what was supposed to have been a three-year tenure to oversee Bombardier’s restructuring. Observers speculated the two powerful personalities clashed, and Beaudoin returned as CEO to pick up where Tellier left off.
What’s different about Beaudoin’s retirement this time around is that he won’t be as involved in strategy. The company is also in a much stronger position today than it was a few years ago. Bombardier reinstated its 2.5¢ quarterly dividend in June, suspended three years ago, and it has also reduced its exposure to the troubled U.S. market, which now accounts for only 30% of its business aircraft sales compared to 70% in 2000. Eight of the 13 analysts who follow the stock have slapped a Buy rating on it, with only one advising a Sell.
High oil prices are part of the reason for Bombardier’s renewed lift, which are increasing demand for fuel-efficient aircraft like the company’s line of turboprops. Beaudoin feels vindicated by this. “Only about five years ago, everybody told mewe should get out of it,” he says. But Beaudoin believed there would still be a market for turboprops, and having invested hundreds of millions into developing such products, he wasn’t about to abandon the sector. “Today, with the energy situation, the market has changed completely,” he says with a satisfied grin.
Stoneman at Dundee Securities points out the impact of high fuel prices can be hard to predict. Sales of fuel-efficient planes could increase as a result, he says, but “the question is whether $130-fuel will kill demand for aircraft period.” That will be just one of the questions the younger Beaudoin will have to deal with as CEO. Stoneman says family-controlled companies such as Bombardier generally take a long-term approach to strategy, allowing them to contend with such problems. “Innovation requires a longer perspective than trying to crank out quarterly numbers,” he says.
Certainly, Pierre knows the aerospace division at Bombardier well; he’s been running it since 2001. Laurent never pushed him to work at the company growing up, and Pierre says he had no desire to until his father offered him the chance to help develop the Sea-Doo in 1985. The then 23-year-old initially served as a test pilot for the first few prototypes. “I told him it would be for a maximum of six months,” Pierre says. “So I screwed that up. It’s been 23 years.”
The McGill University grad with a degree in industrial relations says he’s not worried about living up to his father’s legacy. “I get that question quite a bit, and I think it’s the opposite,” he says. “My father is leaving for me a very strong company with lots of opportunities.”
As for the elder Beaudoin, one thing he won’t miss about being CEO is the rigorous schedule of meetings. “At a certain stage in life, you should be able to allow yourself to try to do things without having a fixed schedule,” he says. Beaudoin hopes to slow down at some point starting this summer. He’ll use that time for fishing, hunting and, in the winter, snowmobiling. He also owns six horses that he rides for relaxation and to focus his mind. “You have to put your attention on the horse when you’re on it. Otherwise, you’ll find yourself on the ground,” he says.
Travel is big on Beaudoin’s list, too. “I’ve been to most of the cities in the world, but if you ask me about the ones I’ve visited, I can’t say too much,” he says. That’s because he’s blown through them on business trips and never had time to explore and enjoy. He cites Vietnam as a possible destination, which he says is becoming the next China in terms of its industrial development.
The entrepreneur in Beaudoin is never far from the surface, even as he discusses vacation plans, but may now be playing lesser role: “You don’t go there only to do business,” he says of travelling to Vietnam. “You go there to visit and see what’s happening, and take a bit more time to enjoy it.”