I never thought the Learjet program would be scrapped, Bombardier Chairman Martel testifies

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Eric Martel, who put the Learjet 85 luxury jet development program on hold in January 2015 while president of Bombardier’s commercial aircraft division, said he was confident the pause would last two years, as he had recommended, and that the program would be restarted instead of completely quit.

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Martel, who returned as Bombardier’s president and chief executive officer in 2020 after leading Hydro-Québec for five years, was on the witness stand Wednesday in Quebec Superior Court to defend the planemaker’s actions, which is being sued by two of its suppliers, Winnipeg. based at Cormer Group Industries and the French company AviaComp.

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Bombardier built a plant in Querétaro, Mexico, in 2010 to manufacture the airframe for the Learjet 85, and Cormer won a contract from the Quebec aircraft manufacturer to supply components. Bombardier required Cormer to produce these components in Querétaro, and Cormer inaugurated its plant on January 14, 2015, across from Bombardier’s. Several Bombardier representatives participated in the inauguration, but the next day, the Quebec multinational announced the “pause” of the Learjet 85 project and then, in October 2015, it scrapped the project permanently, abandoning its suppliers at the same time.

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Cormer claims $12.4 million with interest from Bombardier in compensation, while AviaComp claims $4.2 million with interest. In the latter case, the French firm had already manufactured parts for the aircraft.

Martel, who left Bombardier in May 2015 for Hydro-Québec, said he did not expect the project to be abandoned for good in the months after he left.

“In good faith, based on my own experience and that of my teams, when I left we were all convinced that with a two-year break, we had the people, the money to succeed in the development of the (Learjet 85) and to put an aircraft in service in 2017 and (an improved version) in 2020.”

Martel testified the next day for Bombardier president Pierre Beaudoin, who had been shown a 2012 strategic plan by Cormer’s lawyer Alexander De Zordo that mentioned pause and abandonment scenarios for the project. Beaudoin, however, had maintained that he had never been aware of the pause scenarios before an October 2014 board meeting where Martel had presented this hypothesis among others, however without making a recommendation at the time.

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Martel, for his part, says he is not aware of this plan. When he took over as president of the business jet division in January 2014, the current project followed a strategic plan that called for its development and the entry into service of a first model in 2017 and a second, more sophisticated model in 2020. The company still believed in a recovery of the sales of airplanes in the category of “light airplanes”, to which the small luxury airplanes belonged, to a sale price to the public of 17 million dollars. Before the economic crisis of 2008-09, this market reached 200 aircraft per year. But since 2009, this market has never exceeded 50 aircraft sold per year, the total number Bombardier expected to sell.

Martel quickly realized that the business plan, which aimed at 50 sales per year, would not work: “This market never came back. It stayed on 50 planes. … It was a mystery to me and to the industry,” he told Judge Thomas Davis.

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Bombardier, which expected to receive orders for the Learjet 85, received none in 2013 and also did not expect to receive any in 2014, the worst-case scenario imaginable that defyed all forecasts.

“Honestly, that category completely changed our models and our understanding of the market, of what has happened historically,” he said.

Martel had to consider both the hiatus and abandonment scenarios shortly after arrival, but preferred the former, a preference he had expressed as early as July 2014 in an email to a collaborator, writing: “I was thinking about the pause scenario. I was thinking if we kept about 50 key people so we could protect the program and continue to make improvements to the product like weight loss…we could probably get by altogether on about $30 million in 2015 and $30 million in 2016 .”

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However, he testified, the company was not there yet. Bombardier still intended to produce the plane, and in September 2014 asked its suppliers, among other things, to lower their prices, a request that went “unanswered,” it acknowledged.

Late the following month, shortly after his boss Beaudoin maintained in an interview that the Learjet 85 was still in the pipeline despite an uncertain market, different scenarios were presented to the board of directors, ranging from keeping the program as is until giving up doing it, finding a partner or putting it on hold. The board asked Martel and his team to study the issue further and return with a recommendation in January.

De Zordo asked if Cormer and the other vendors had been notified of these scenarios: “No, we don’t want to confuse the issue,” Martel said.

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“There is no one who is informed of any decision or scenario until we make a decision in 2015,” he added later.

The recommendation to pause the program then went to the board of directors, which approved it on January 14, 2015, when Cormer was opening its plant, and was announced the next day.

Martel maintained, however, that this decision should not lead to the abandonment of the program: “The pause option allows us to gain time. The recommendation was to pause the program. We were not going to cancel it, that was clear, ”he said again.

“We wouldn’t have spent $30 million just to spend $30 million if we didn’t think we could find something. …In good faith, we took a serious look at what we needed and put the resources in place. However, I don’t know what happened next.” The decision to abandon the project was made in October 2015, five months after Martel left for Hydro-Québec.

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Martel explained that Bombardier had then given a new vocation to its plant and that the suppliers that had settled around it were growing. He said Bombardier always acts like a “good father” to its shareholders. However, he said he did not know that Cormer had to close his plant and liquidate equipment before he could make a single part.

Pierre Beaudoin explained Tuesday that the company had suffered a dry loss of $2.6 billion on the Learjet 85 project.