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Bombardier Acquisition and Integration of Adtranz
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Bombardier-Adtranz
Integration Plan
SMGT 6050: Mergers, Acquisitions & Strategic Alliances
Ebube Anizor (209347741) 11/22/2010
1 Overview
OVERVIEW
Bombardier had evolved from its humble beginnings as a snowmobile manufacturer based in Joseph-
Armanan Bombardier’s garage to a global business in which its once core recreational products were
overshadowed, on a revenue basis at least, by its offerings in transportation, aerospace, and capital.
In every segment in which the company operated it was either number 1 or 2 globally. This was not
the case for the Transportation group (BT) in Europe, where in 2001 it sat in fourth place behind
Alstom, Siemens and Adtranz (AT). However, the AT acquisition presented the opportunity to vault BT
to the forefront of the industry. At a price tag of US$715 million (23% of AT’s 2000 revenue) AT was a
bargain and an opportunity worth considering for several reasons:
• Revenue Growth: Unlike all other Bombardier businesses, BT’s revenue was counter-cyclical so
growth in the sector would provide better balance to its overall revenue (Figure C1 in Appendix C).
With the addition of AT, BT’s annual rail-related revenue could grow to US$7.6 billion in 2001 (up
from US$2.2 billion in 2000) with a backlog of US$14.5 billion.1 While BT was a low margin
business it was a cash generator that helped to finance other Bombardier businesses.
• Geographic Expansion: AT had a presence in a broader range of European markets and the
region was viewed as the centre of technological development. Asia and South America utilized
European engineering and practices so AT provided BT better access to future markets.
• Completion of Product Portfolio: BT lacked propulsion system and train controls competence.
This had been mitigated by outsourcing to competitors and suppliers; however it was a
competitive weakness as was exemplified by AT’s exclusion from a key deal in the UK in 2000. AT
excelled in these areas, and provided immediate cost synergies and long term strategic strength.
Naturally the acquisition was not without its downside. There were many aspects of the deal that
warranted consideration:
• Acquisition Size: While BT had a successfully track record of acquisitions it had never integrated
a company of AT’s size. Based on 2000 figures, AT had nearly 40% more employees, just under 50%
more in sales, and operated in 60 locales. The differing company structures were also of concern.
• Financial Performance: AT posted net losses going back 4 years in spite of restructurings. Even
at a bargain purchase price, an unsuccessful integration could threaten BT’s income and cash flow.
• Due Diligence: AT was understandably reticent to let a competitor gain full access to its “books”
should the deal not complete, so BT’s diligence process was not comprehensive. Furthermore BT’s
European management had not participated in the deal; only amplifying the potential risks.
• Customer Loss: The acquisition could trigger the loss of customers or new contracts. Additionally, AT had earned a reputation for poor production and servicing that competitors could exploit.
A comprehensive plan would be required to realize the projected synergies, tackle the above noted
concerns, and - should the deal clear - anticipate and address regulator stipulations.
1“Bombardier Gets Adtranz for a Bargain”. http://findarticles.com/p/articles/mi_m1215/is_9_201/ai_65805853/
2 Integration
INTEGRATION
While management at BT faced several integration issues that included leadership style, work
environment and regulator stipulations (see Table B1 in Appendix B) the most pressing were defining
an organizational structure that best suited its new global fully integrated operations, executing cost
saving measures that addressed past inefficiencies and new opportunities, and developing a
combined culture that fostered growth for the company and success for its employees.
ORGANIZATIONAL STRUCTURE AND OPERATIONS
Through experience gained by successfully integrating many acquisitions BT had developed expertise
in product assembly and counted it (rather than manufacturing) as a core competency. Utilizing
external suppliers and employing a just-in-time delivery resulted in substantial time and inventory
savings. Accordingly, BT structured its operations primarily by geography, placing plants and
maintenance facilities in strategic countries where customers and suppliers could readily be accessed.
Under DaimlerChrysler AT underwent ongoing restructuring to wring out costs. The resultant
structure was a company organized by product segment and function oriented towards
standardization and modularization to save costs while still meeting the custom needs of global
customers (see Figure A1 and Table A2 in Appendix A). The structures raised compatibility issues.
The relative financial performance of the firms would naturally lead to the conclusion that BT’s
structure should be adhered to in the combined entity; however BT was now bringing new
manufacturing expertise, product scope and market presence under its banner and this required
some consideration in forming the best combined structure.
Complements and Overlaps
The core businesses of BT and AT were to some extent complementary. BT predominantly focused on
producing the mechanical elements of railway vehicles and excelled in the subway, trams and light
rail car segments. AT on the other hand possessed expertise in propulsion and signalling systems and
excelled in the inter-city and growing high-speed car segments (see Figure 1). Therefore, in many
markets there was no significant overlap in activities; in fact AT supplied propulsion technology to BT.
Services Propulsion and Controls
Total Transit Systems
Rail Control Systems
Rolling Stocks Fixed Installations
BT Strength Weakness Neutral N/A AT Combined
Figure 1: Individual and Combined Operational Competencies
There existed some overlap in activities that contributed to the value of the acquisition. BT and AT
offered their own branded products in the regional trains, trams and light rail segments, Also, AT
manufactured the mechanical parts of rolling stock.2 Since Fixed Installations were not consider a
strategic business by BT and should be either excluded from the acquisition or sold post closing.
2“Bombardier/Adtranz Merger Procedure”, http://ec.europa.eu/competition/mergers/cases/decisions/m2139_en.pdf
Combined Entity
Homogeneous products were simply
specific customer demands which varied by country. Furthermore
society was also decidedly country specific. Public policy, fuel prices,
affected travel behaviour and thus demand
strategies were required, an organizational design
appropriate for the combined entity
• Assembly and Service: Train assembly
JIT operations. AT’s facilities in South America and Asia will be integrated.
• Specialty Services: capital intensive and generic activities
plants in strategic regions to optimize the use of resources. These sites will
BT had a successful track record of integrating acquisitions into i
none were of the scale of Adtranz (see Table C1 in Appendix C). By contrast AT’s structure was in
constant flux, and as earlier noted not proven from a profit perspective.
Figure 2
With the anticipated favourable
forward and the fact that the majority of BT’s
its headquarters in Europe (likely Germany)
well for growth in emerging markets where EU standards were embraced.
Management
Given the proposed structure, in the lines of business
management should remain. In the
management should lead (pending the appropriate training in BT management
practices). Whereas AT management was responsible for a product or function across geographies,
they would have a similar responsibility
3 “Bombardier Sets…” http://www.allbusiness.com/company
Manuf./Assembly/Service
North America
Cont. EuropeSouth America
China
Integration
were simply not a reality of the Rail industry; cars had to be built to meet
specific customer demands which varied by country. Furthermore, the role of transportation
country specific. Public policy, fuel prices, and environmental sentiments
and thus demand for trains. Because country/region specific product
, an organizational design that reflected BT’s current structure was the most
(see Figure 2). The highlights of the structure
rain assembly would still continue in the noted regions, employing BT’s
. AT’s facilities in South America and Asia will be integrated.
capital intensive and generic activities will be concentrated in
to optimize the use of resources. These sites will support
BT had a successful track record of integrating acquisitions into its structure and processes; although
none were of the scale of Adtranz (see Table C1 in Appendix C). By contrast AT’s structure was in
constant flux, and as earlier noted not proven from a profit perspective.
2: Integrated Organizational Structure of BT
favourable trajectory of public transportation policy in Europe going
majority of BT’s revenue (52%) was generated on the continent,
its headquarters in Europe (likely Germany) is also recommended. This footing also positioned BT
well for growth in emerging markets where EU standards were embraced.
, in the lines of business where BT expertise
management should remain. In the cases where AT held the expertise (e.g.
pending the appropriate training in BT management
Whereas AT management was responsible for a product or function across geographies,
have a similar responsibility but with more narrow geographical ownership
http://www.allbusiness.com/company-activities-management/company-locations/6187771
Bombardier Transportation
Manuf./Assembly/Service
Atlantic Europe
Mexico and South America
Other Asia
Specialty
North America / Europe
Total Transit Systems
Propulsion
Bogies Cars
3 Integration
of the Rail industry; cars had to be built to meet
ole of transportation in
environmental sentiments
country/region specific product
BT’s current structure was the most
The highlights of the structure are as follows:
still continue in the noted regions, employing BT’s
will be concentrated in specialized
support BT globally.3
ts structure and processes; although
none were of the scale of Adtranz (see Table C1 in Appendix C). By contrast AT’s structure was in
ation policy in Europe going
on the continent, locating
also recommended. This footing also positioned BT
where BT expertise was stronger, BT
the expertise (e.g. propulsion) their
pending the appropriate training in BT management philosophy and
Whereas AT management was responsible for a product or function across geographies,
ownership.
locations/6187771-1.html
4 Integration
COST SAVINGS
The rail industry is an extremely competitive environment, characterized by overcapacity and pricing
pressure resulting from the rationalization needs faced by railroad operators, particularly in Europe.4
This reality was borne out in AT’s poor performance and the relatively low margins of Bombardier’s
transpiration business (5% in 2000). Consequently, immediate action needed to be taken to exploit
BT’s new scale, align AT’s practices with that of BT and “rightsize” the combined company to a cost
structure that makes sense given market demands and likely duplication of assets. The following key
measures should be taken to ensure BT improves profitability:
• Strategic Sourcing: Upon completion of the acquisition BT should immediately renegotiate
pricing with suppliers to take advantage of its new scale.
• Staffing: With AT, BT more than doubles its employees to 38,000, owns 42 plants, and has
operations in 23 countries. Given overcapacity and margins, management, staffing and facilities
will need to be rationalized across the company, but in particular in the earlier stated train
segments where there was overlap. The pace at which employees can be reduced will be
mitigated by EU regulator stipulations and prudent pacing given backlog, anticipated bumps
during the integration and managing of employee morale.
• Project Management: AT’s poor project and cost management practices amounted to almost 20
percent of expenses. BT’s expertise in these areas should be shared immediately; first in the
businesses where AT management will be leading and then throughout the operation. This
should be positioned as in an investment in skills training and not a judgement of past practices.
• Bid and Quality Management: AT’s growing revenues is an indication of it success in acquiring
business. However its inability to consistently build quality products, manage production and
support customers was not only damaging its reputation but rendering projects unprofitable.
Clearly AT could benefit from BT’s governance, manufacturing control and bidding systems.
CULTURE AND ENVIRONMENT
While under DaimlerChrysler, AT was not a strategic business, represented under 3% of revenue from
1997 through 2000 (see Table C1 in Appendix C) and was challenged by steady changes in ownership,
processes and values. By contrast, with the acquisition, AT became an integral part of BT, doubled
BT’s revenue, and was under a management regime noted for protecting jobs, investing in people
and open to adopting best practices from acquired companies. Given its operational struggles and
the immediate need to manage costs AT may not be a full benefactor of BT’s prior practices but this
stark contrast in ownership nonetheless provided the grounds for a successful integration.
Although BT’s European management was unfortunately not involved in discussions with AT,
the company’s prior acquisitions in Austria, Belgium, France and Germany (Table C2 in Appendix C)
mitigated some of the challenges that would normally be present in an international acquisition.
Addressing the following areas will be integral in enabling a successful merger:
• Bid Team: In order to manage any bids that happen during integration a bid team should be
formed with BT and AT staff, representing all areas of the business. This would present key AT
4 DaimlerChrysler 1999 Annual Report.
staff an opportunity to learn BT bid practices. Conversely, BT would benefit from AT’s expertise in
the areas where it had been traditionally weak
launching pad for further successful collaboration
• Management Philosophy: In order to increase buy
philosophies should be shared with
better attuned to its own employees and can avoid
IMPLEMENTATION PLAN
BT has 4 to 6 months before a decision from EU
task is to select an Integration Manager that will lead the due
integration indefinitely. The Integration Manager would ideally
heavily involved in prior European transactions
with the Transportation business). Figure 3 details key integration projects on a cost
Under the guidance of the Integration Manager and top management the
of an implementation plan, in priority order (further details provided in
Before the deal closes decisions regarding organization structure, facilities, management and staff
should be nearly complete. Following due diligence BT should be ready to implement these changes:
• Organization structure: Decisions regarding the organization structure
• Management: Placement of BT and AT management and
• Staffing: Layoffs and plant closing
Post acquisition focus should be on reducing costs and creating a culture of combined success:
• Due Diligence: BT diligence team
• Costing Cutting Measures: Strategic sourcing and project management training
• Bid Team: The cross-company bid team to address business opportunities during integration
• Goals and Vision: BT management to integrate AT managers and form shared vision
Low
$ B
en
efi
tH
igh
$ B
en
efi
t
Short Execution Time
Integration
staff an opportunity to learn BT bid practices. Conversely, BT would benefit from AT’s expertise in
had been traditionally weak. An early win as a combined entity
launching pad for further successful collaboration and gelling of staff at all levels
order to increase buy-in, BT management and manufacturing
with AT staff by its own managers. AT management is naturally
better attuned to its own employees and can avoid mistakes made by prior ownership groups
BT has 4 to 6 months before a decision from EU regulators is rendered. Given this timeframe
is to select an Integration Manager that will lead the due diligence process and manage post
integration indefinitely. The Integration Manager would ideally be based in Europe and
heavily involved in prior European transactions (more important given BT’s CEO Lortie’s unfamiliarity
Figure 3 details key integration projects on a cost
Figure 3: Integration Projects
Under the guidance of the Integration Manager and top management the following are highli
in priority order (further details provided in Table B1
Before the deal closes decisions regarding organization structure, facilities, management and staff
lowing due diligence BT should be ready to implement these changes:
Decisions regarding the organization structure
Placement of BT and AT management and reporting relationship
Layoffs and plant closing
acquisition focus should be on reducing costs and creating a culture of combined success:
diligence team must be able to hit the ground running on day one
trategic sourcing and project management training
company bid team to address business opportunities during integration
BT management to integrate AT managers and form shared vision
Long Execution TimeShort Execution Time
1. Strategic Sourcing
2. Project & Cost Mgmt.
3. Plant Closures
4. Staff Reduction
5. Bid Management
6. Customer Communication
7. Integration Team
8. Due Diligence
9. Organization Structure
10. Management Structure
11. Shared Goals and Vision
12. IT Integration
13. HR Integration
5 Integration
staff an opportunity to learn BT bid practices. Conversely, BT would benefit from AT’s expertise in
s a combined entity could be the
and gelling of staff at all levels.
BT management and manufacturing
. AT management is naturally
ownership groups.
is rendered. Given this timeframe BT’s first
process and manage post-
be based in Europe and have been
important given BT’s CEO Lortie’s unfamiliarity
Figure 3 details key integration projects on a cost-benefit basis.
following are highlights
Table B1 of Appendix B).
Before the deal closes decisions regarding organization structure, facilities, management and staff
lowing due diligence BT should be ready to implement these changes:
reporting relationships
acquisition focus should be on reducing costs and creating a culture of combined success:
on day one
trategic sourcing and project management training are quick wins
company bid team to address business opportunities during integration
BT management to integrate AT managers and form shared vision
1. Strategic Sourcing
2. Project & Cost Mgmt.
3. Plant Closures
4. Staff Reduction
5. Bid Management
6. Customer Communication
7. Integration Team
8. Due Diligence
9. Organization Structure
10. Management Structure
11. Shared Goals and Vision
12. IT Integration
13. HR Integration
6 Conclusion
CONCLUSION
The acquisition of Adtranz provided BT with access to complementary technologies that made them a
full-fledged integrated player able to compete across the entire product line and in all markets.5 That
being said, while Adtranz revenues were handsome it had not generated a net profit from 1997
through 2000 and, perhaps of greater concern, at best broke even operationally during the same
period in spite of several efforts by DaimlerChrysler to restructure and streamline (see Figure C2 in
Appendix C). Adtranz’s performance pointed to systemic problems that BT needed to address in
order to realize any post integration synergies.
As highlighted in the implementation plan above, the first priority is to choose the Integration
Manager and team so the 4 to 6 month window could be best utilized. The differing organizational
structures demand priority attention in order to best decide plant and staff rationalization and
position BT to manage growth. Although early cost cutting is contrary to BT’s typical integration
procedures it will be key given AT’s past performance.
While the integration plan is primarily inward looking consideration must be given to outward
parties like regulators, competitors and most importantly customers. BT’s favourable reputation
should place the deal in positive light amongst existing and potential customers. The increase in
market power will be of concern to regulators and BT must be willing to make concessions in order to
move forward. The acquisition of AT fundamentally changes the competitive landscape in the rail
industry globally; however BT will need to carefully integrate AT in order to realize its benefits.
5 “Bombardier Gets Adtranz for a Bargain”. http://findarticles.com/p/articles/mi_m1215/is_9_201/ai_65805853/
Appendix A: Stakeholders and Organizational Structure
APPENDIX A: STAKEHOLDER
STAKEHOLDERS
Stakeholder Perspective
BT CEO • Ensuring acquisition is smooth• Protecting reputation as • Little experience in BT transportation business
BT Management • Job security • Smooth and quick Integration
BT Employees • Job security
BT Shareholders • Growth • Share price increase
AT Management • Job security • Perception of skills
AT Employees • Job security • Stable ownership
EU Regulators • Job protection • Anti-trust
Competitors • Increased market power
BT/AT Customers • Instability • Delayed orders • Quality
ORGANIZATIONAL STRUCTURE
Figures A1a and A1b
In restructuring plans dated back to 1998 AT adopted a strategy common in the automotive and
airline industries by reconfiguring
product lines, for local, regional, an
standardization and modular components,
costs by up to 30%. The future aim was that 60
Bombardier Transportation
Geoography
North America Atlantic Europe
Cont. Europe Mexico
China
Total Transit Systems
Appendix A: Stakeholders and Organizational Structure
A: STAKEHOLDERS AND ORGANIZATIONAL STRUCTURE
Actions
Ensuring acquisition is smooth Protecting reputation as “turnaround” specialist Little experience in BT transportation business
Build Integration Team lead by a BT manager based in Europe
uick Integration
Decide on resultant management structure early in the pre-merger phase
Decide on org. structure and staff levels early
Purchasing AT helps to balance revenue streams (less dependence on cyclical Aerospace group)
Keep AT management in place where BT expertise does not exist
Keep AT staff in place where BT expertise does not exist. Invest in training where applicable.
Plant closures and layoffs will need to be in line with regulator stipulations and company needs
Increased market power of BT/AT Consolidation should reduce potential price wards; but BT should cut out costs in case
BT must integrate quickly and communicate customers in order to fend off the potential loss of customers
Table A1: Stakeholders
a and A1b: Current Organizational Structure of BT and AT
In restructuring plans dated back to 1998 AT adopted a strategy common in the automotive and
its rail vehicle product line into seven distinct "platforms," or
product lines, for local, regional, and intercity transport. The platforms, which incorporate
standardization and modular components, were part of a "market-driven" strategy
costs by up to 30%. The future aim was that 60-80% of its vehicles would be derived from these
Market/Functional
Total Transit Systems
Adtranz
Product/Trains
High Speed Subway
Cars Car Bodies
7 Appendix A: Stakeholders and Organizational Structure
ATIONAL STRUCTURE
Build Integration Team lead by a BT manager based in
Decide on resultant management structure early in
structure and staff levels early
Purchasing AT helps to balance revenue streams (less dependence on cyclical Aerospace group)
Keep AT management in place where BT expertise
Keep AT staff in place where BT expertise does not . Invest in training where applicable.
Plant closures and layoffs will need to be in line with regulator stipulations and company needs
Consolidation should reduce potential price wards; but BT should cut out costs in case of price battle
BT must integrate quickly and communicate customers in order to fend off the potential loss of
Structure of BT and AT
In restructuring plans dated back to 1998 AT adopted a strategy common in the automotive and
its rail vehicle product line into seven distinct "platforms," or
d intercity transport. The platforms, which incorporated
driven" strategy intended to reduce
80% of its vehicles would be derived from these
Function
Bogies Drives
Car Bodies
Appendix A: Stakeholders and Organizational Structure
pretested, standardized and modularized designs. Customers would then be able to tailor vehicles to
their specific needs through choices in exterior appearance and interior configurations.
FACILITIES
Austria
Australia
Belgium
Canada
China
Czech Republic
Denmark
Finland
France
Germany �
Hungary
Indonesia
India
Italy
Malaysia
Mexico
Norway
United Kingdom
United States
Poland
Portugal
Romania
South Africa
Spain
Sweden
Switzerland
Taiwan
Thailand
Table A2
OPERATIONS
Figure A2: Current BT Activities in the Railway Transportation Segments
6“Adtranz: Restructuring Based on Seven Product
Services
• Good reputation
• Cost efficient
Propulsion and Controls
•No in-house expertise
•Outsourced
Total Transit
Appendix A: Stakeholders and Organizational Structure
ested, standardized and modularized designs. Customers would then be able to tailor vehicles to
their specific needs through choices in exterior appearance and interior configurations.
Production Maintenance Other
BT AT BT AT BT AT�
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Table A2: Current BT and AT Facility Locations
Current BT Activities in the Railway Transportation Segments
roduct Lines”. Railway Age, 00338826, Apr98, Vol. 199, Issue 4
Total Transit Systems
Rail Control Systems
•No in-house expertise in switching and communications
Rolling Stocks
•No in-house expertise in locomotives
•Expertise in assembly
8 Appendix A: Stakeholders and Organizational Structure
ested, standardized and modularized designs. Customers would then be able to tailor vehicles to
their specific needs through choices in exterior appearance and interior configurations.6
AT
Current BT Activities in the Railway Transportation Segments
00338826, Apr98, Vol. 199, Issue 4
Fixed Installations
•Bombardier not in b/c non-strategic and different from other segments
9 Appendix B: Issues, Projects and Timeline
APPENDIX B: ISSUES, PROJECTS AND TIMELINE
ISSUES
Issue Area Issue Proposed Solution Pros Cons
Financial Best way to leveraged new size of BT
Strategic Supply Cheaper materials, immediate cost synergies
Top line or bottom line approach to acquisition
Top Line Generates wins, feeling of success amongst new BT
Harder to achieve
Bottom Line • Staffing • PM management • Better bidding • Sourcing
• Easier to achieve, low hanging fruit like Overhead
• AT has posted a net loss the last 4 years, must be addressed immediately
• Often means cutting overhead, could hurt morale if timing and approach not right
• Heavy cost in cutting staff in Germany due to labour laws
Tailoring integration to balance revenue and cost initiatives
Execute top and bottom line solutions proposed above
Early Integration
Handling bids early in the integration. How to achieve success.
Use AT’s process Poor record of bid/contract management
Use BT process BT structured process highly effective
Build new quick response team
Opportunity for early wins and team building
Work environment
Focussing management on operations (i.e. getting it right) and not finger pointing at AT
Use GE approach and have a Integration Manager and Business Lead
Create an environment conducive to conducting thorough due diligence
Communicate to AT staff early the benefits of BT ownership (as exemplified by prior acquisitions)
Operations How and when should BT manufacturing philosophy be integrated into AT
Use GE approach – deliver through AT management and not have BT dictate
• Increase in acceptance
Instilling a project management culture
Indoctrinate AT on BT’s PM processes since they are non-existent or ineffective at AT
• Opportunity for AT employees to learn new/refresh skills
• Immediate costs savings at AT
Staffing Minimize tension and maximize teamwork with personnel changes on the way
How should personal changes be made
What senior management staff from BT or AT should be kept
How should the decision on senior staff be made?
Organization Reconciling the differing organizational structures
Use BT’s • Role of transportation was really country specific. Public policy, fuel prices, green movement affected travel behaviour. As a result country/region specific product strategies were required. (e.g. US trains ‘incompatible’ with European)
• BT had successful track record of
10 Appendix B: Issues, Projects and Timeline
Issue Area Issue Proposed Solution Pros Cons
integration as is
Use AT’s
Change both • BT was already weird in geo split and functional split
• Change could be viewed as positive by AT
• Change both orgs may set smooth integration back (operationally)
Location of Headquarters
St. Bruno, Quebec BT had successful track record of integration as is
Berlin • Europe generates more revenue • Trajectory of public policy in
Europe positive for BT going forward
Other European city • Same as above • Nobody is preferred
BT and AT employees need to both adjust/relocate
Other North American city
• Nobody is preferred • Trains less important from a cultural/public policy perspective
• High cost of shipping overseas to majority of customers
• backlash from EU
Leadership What leadership style should be employed by CEO
Directive May be necessary to make the need cost changes quickly
Could create an toxic environment
Participative Including AT management in key positions and in key decisions increases buy-in
Regulators Market share/power May need to sell of non-strategic businesses
Employment Try and relocate staff where possible. Otherwise provide fair severance
Suppliers Keep existing suppliers for a defined period of time
Competition Customer retention Communicate to customers the benefits of the “new” BT. Get a transition team in place early.
Table B1: Integration Issues
11 Appendix B: Issues, Projects and Timeline
TIMELINE
Figure B1: High Level Implementation Plan
6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Pre-Acqusition
Choose Integration Manager and Team
Form Due Dilligence Team / Execute
Form and Implement Org. Structure
Assign and Transition Management
Decide on Staffing/Adjust Levels
Customer Acquisiton and Retention
Form Bid Team / Manage early bids
Communicate new BT to customers
Cost Cutting
Strategic Sourcing
Plant closures and consolidation
Project and Cost Management Training
Cultural
Form shared goals and vision
IT
IT integration strategy
Implement IT integration plan
Human Resource
Harmonize HR policies
Implement HR Plan
Performance Checks
3 months
6 months
12 months
18 months
Overall PlanTiming (months)
Pre-close Post-close
APPENDIX C: BACKGROUND INFORMATION
FINANCIAL PEFORMANCE
Figure C1: Bombardier Segment Growth Rates
In euros 1997
Daimler Revenue 117,572
Revenue (% of Daimler) 3,262 (2.7%)
Operating Profit -444
Net Profit -308
Rationale In anticipation of increasing pricepressure and with continued overcapacity, particularly in Europe, Adtranz sped up its restructuring programs in order to lower its cost base and to improve its competitiveness.
Table C1: Adtranz Revenue and Income
-150%
-100%
-50%
0%
50%
100%
150%
1992 1993 1994 1995
Appendix C: Background Information
ND INFORMATION
Bombardier Segment Growth Rates (source: case materials)
1998 1999 2000
131,782 149,985 162,384
3,316 (2.5%) 3,587 (2.4%) 3,900
-644 N/A 0 (from case)
-632 N/A (posted a loss)
N/Aloss)
In anticipation of increasing price pressure and with
particularly in
dtranz
programs in order
cost base and to
competitiveness.
Adtranz recorded a significant loss in 1998 because in previous years it had taken on contracts at prices that did not covercosts and suffered from technical problems. Comprehensive structural changes were made to increase sustainable earning power. streetcars, underground trains, regional and inter-city trains all the way up to locomotives.
Operating improvements at Adtranz were partially offset by further burdens from the restructuring measures initiated during the year
Positive Operating profit resulting from restructuring
Adtranz Revenue and Income (source: Daimler Annual Reports)
1995 1996 1997 1998 1999 2000 2001
12 Appendix C: Background Information
2000
162,384
3,900 (2.4%)
0 (from case)
N/A (posted a loss)
Positive Operating profit resulting from restructuring
Transportation
Aerospace
Recreational
Capital
Other
13 Appendix C: Background Information
BOMBARDIER ACQUISITION HISTORY
Rail Transportation - Key Acquisitions
Year Target Details Notes
1971 Lohner Werke (Austria) First international acquisition. Tramway manufacturing.
1976 MLW Worthington (Canada)
1984 Alco Power (U.S.)
1988 BN Constructions Ferroviaires et Métalliques (Belgium)
1989 ANF-Industrie (France) US$23.5 million Supplier of railcars and coaches to French rail industry
1990 Procor Engineering (Britain) Passenger and freight cars
1992 UTDC (Canada) US$34 million Light Rail Mass Transit -Purchased from Ontario Gov’t
1992 Constructura Nacional de Carros de Ferrocarril (Mexico)
US$27 million (plus US$54 million in debt)
Railyway rolling stock
1995 Waggonfabrik Talbot (Germany)
1998 Deutsche Waggonbau (Germany) Rail transportation equipment
2001 DaimlerChrysler Rail Systems Adtranz (Germany)
US$715 million 22,000 employees Manufacturing in 23 countries
Locomotives, rolling stock, controls, propulsion
Table C2: Bombardier Transportation Acquisition History