Jose Boisjoli faced a major challenge when he took the reins of the newly created Bombardier Recreational Products (BRP) company in December 2003, one that comes perhaps once in a lifetime for a business executive.
When the recreational products business was sold to a group of private investors by Bombardier Inc. at the end of 2003, Jose was put in charge and told to make the operation a success, and to do it quickly, please. The investors were planning to sell the company to the public through an IPO (initial public offering), possibly within five years, and they wanted the company to begin posting strong numbers as soon as possible.
“In the last few years,” Boisjoli said recently, “we were the small brother at Bombardier. It was quite a shock for many of us when BRP was sold. In that first year at BRP, we faced many challenges; some were not expected (such as the exchange rates), but you can’t plan for those things.”
The challenge facing Boisjoli and his team: Take a $2 billion business based in Canada and with manufacturing operations stretching from the United States to Asia and Scandanavia, cut all dependence on a sophisticated parent company — and the administrative and financial resources that it could provide — organize a creative, independent-minded and efficient management team to run the new diversified company, sell of excess plans and equipment and pay down the nearly $250 million U.S. debt incurred in the spin-off.
And at the same time, deal with the surging Canadian dollar and its related exchange rate problems against the Euro and the U.S. dollar.
And bring out creative new powersports products in a tightly competitive industry.
And explain to suppliers and dealers why they would benefit from this huge change.
And demonstrate to consumers that BRP was a new and vital company, even though it was one that had a glorious powesports heritage, and that it was one worth spending money with.
Boisjoli and his team accomplished all these things and more. And they did it in 12 months. That’s why the editors of Powersports Business selected him as the 2005 Executive of the Year.
Although Bombardier, Inc., the international manufacturing giant that produces everything from railway cars to private jets, was founded on the snowmobile business, the decision was made to sell the recreational products division to raise money for the cash-strapped company.
The sale of the recreational products operation that produces ATVs, snowmobiles, PWC, jet boats and marine engines, was completed in December 2003 to a group of investors made up of the Bombardier family (35%), Bain Capital (50%) and Caisse de depot et placement du Qubec (15%), a Canadian pension fund. The sale also included the Rotax engine business, based in Austria, that produces small displacement engines and karts.
BRP’s board of directors is run by representatives of the investment groups. Laurent Beaudoin, son-in-law of Joseph Bombardier, the company founder, serves as BRP chairman. He also runs Bombardier, Inc.
GETTING DOWN TO BUSINESS
Boisjoli attacked BRP’s problems in two areas: company organization and cost reduction.
First, he moved the company from its segmented silo structure defined by business segments to a more integrated one based on geography and aimed at producing results at the corporate level not at the division level.
“I combined operations in North America,” he told Powersports Business, “because they are on the same continent and there is a synergism in sales and marketing and dealer and customer support.” The main focus here was to integrate all services in North America.
If there was an easy step to this process, perhaps the organization was it. After all, it basically involved changing assignments and reporting relationships. The tough step, though was cutting costs.
There was plenty of fat that had collected as part of BRP’s operations under the Bombardier corporate umbrella. This included manufacturing operations scattered across the globe, an extended product lineup that resulted in manufacturing complexities and increased costs. The cost problem was compounded by surging exchange rate difficulties that saw BRP paying higher costs for materials and labor and receiving lower revenues from sales. Increasing cost for raw materials such as steel, aluminum and petroleum-based products further hurt the situation.
The ongoing cost reduction plan, has three parts:
1. Reduce Product Complexity. This involves making changes in the lineup and simplifying the way products are produced.
2. Improve Product Sourcing. BRP had sources in Mexico, China and India, and took a hard look at how these processes could be improved. “We have no choice but to look at these facts of life,” Boisjoli said last year. “Even if a product is assembled in the United States or in Canada, there are many components for it coming from everywhere in the world. It’s a trend that’s stronger and stronger in all types of industries.”
3. Sell Excess Facilities. Rather than have facilities for each business silo, Boisjoli’s team began integrating the use of these facilities and selling the unneeded plants. BRP put three plants on the block, even though they were good operations. “Basically, all these factories are very well equipped with good equipment, good employees and good facilities,” said Boisjoli at the time, “but we’re operating those at 25% to 35% capacity.” The goal was to sell to a strategic partner who would work out a long-term agreement with BRP.
Cost reduction means employee layoffs, and this was one of the toughest things that Boisjoli had to go through in the past year. Close to 1,200 people were let go, many of them his personal friends. “You have to understand,” he said recently, “that I’ve been with BRP for 15 years. I know these people and their families. Our decisions affected a lot of people.” BRP employment today stands at 6,000
Boisjoli is an engineer by training and experience, so product development takes a high priority with him. The target audience most recently for PWC and snowmobile products has been the Generation Y prospect, the wave of teenagers that will be the next big group of buyers of powersports products, if they can be attracted.
That’s why the Sea-Doo 3D watercraft and the Ski-Doo Freestyle snowmobile were designed and marketed as exciting, easy to use, inexpensive entry-level machines. The 3D was introduced last year, but poor weather affected its U.S. sales. The Freestyle was introduced to dealers in February and drew rave revues.
Boisjoli and his team also have been involved in major industry issues, especially riding access. BRP has taken the lead in fighting a court decision in Quebec that could serious reduce snowmobile riding in that area. The decision is seen by BRP executives and others as possibly leading to similar restrictions elsewhere in North America. “The government of Quebec expects us to take a leadership position (on the access issue),” says Boisjoli, “and we intend to do that.”
His concern, however, is that the powersports industry’s approach to the access issue is piecemeal, that we’re not approaching it in an organized fashion. “My hope,” he says, “is that the industry can work together better. We’re doing things on a small scale in Quebec, and we’re learning things that can be applied in other areas.
“To be honest, I wish that all big OEMs could sit at a table and come up with a plan. If all major OEMs and their top people would participate, there would be a chance to make it work.”