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Winnipeg Free Press - PRINT EDITION
Chinese supplier puts Bombardier production targets at risk: analyst
MONTREAL -- Bombardier has taken steps to reduce the risk a Chinese supplier will delay the first test flight of the CSeries, but an industry analyst who toured its facility remains concerned about its ability to produce sections of the fuselage once full production begins next year.
The Montreal-based aircraft manufacturer, which hopes to begin test flights by the end of the year, recently moved production of the mid-fuselage section from Shenyang, China, to an in-house facility in Belfast.
SAC Commercial Aircraft Company (SACC) continues to supply the rear fuselage section and has already shipped the first one to Mirabel, Que., where it has been joined with other sections.
Although this is positive, Walter Spracklin of RBC Capital Markets said the Chinese partner remains a risk to meet full production targets.
"We believe the facility's ability to 'repatriate back' the fuselage components that were moved away from SACC remains a key uncertainty -- as it was not made clear on this trip why SACC struggled," he wrote in a report.
Cameron Doerksen of National Bank Financial said Bombardier (TSX:BBD.B) moved the mid-fuselage work in-house because SACC took on more work than it could handle and slowed development progress, but intends to shift the work back for full production because of its lower costs.
"The SACC building is largely empty currently, but appears to be large enough to support the originally intended work volume on the CSeries," he wrote.
The Chinese have been ramping up the complexity of parts it has delivered over the past five years for the Q400 fuselage and tail section. Doerksen expects Bombardier will pursue a similar strategy for the CSeries program.
"When the work was shifted to SACC from Mitsubishi in 2007, there were some initial production issues, but these were quickly resolved and SACC is now a reliable supplier on the Q400."
Doerksen said Bombardier indicated again the first test flight of the CSeries remains on track. The schedule remains "very tight" and the analyst said the first-test flight vehicle will have to be rolled out by early to mid-November for the program to remain on time.
"There is a high degree of skepticism that the CSeries will meet the target test-flight date, but we would not consider a short delay to be a major issue for the program," he wrote, adding the market assumes there will be a delay of at least several months.
Meanwhile, Bombardier says there are no plans at this time to resume negotiations to end a strike by 825 unionized Learjet employees in Wichita, Kan.
-- The Canadian Press
Republished from the Winnipeg Free Press print edition October 17, 2012 B5
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