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Why Mitsubishi Heavy May Want Bombardier’s Money-Losing CRJ Regional Jet Line

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Bombardier may be close to completing its exit from the airliner business, confirming Wednesday morning that it’s holding talks with Mitsubishi Heavy Industries to sell its once-mighty CRJ regional jet line. For Mitsubishi Heavy, which has struggled to make the climb from an aircraft component supplier to a jet maker, the deal may be less about the money-losing CRJ than acquiring its extensive service network.

Tokyo-based Mitsubishi Heavy is years behind schedule on the MRJ, a twin-engine regional jet that was initially expected to be launched in 2013 with Japanese airline ANA. With certification of the 90-seat version believed to be on track for 2020, acquiring the competing CRJ program would solve the knottiest remaining problem for Mitsubishi: product support and maintenance, says Richard Aboulafia, an aerospace analyst with Teal Group. “They have no experience at that, and no infrastructure,” he says.

The sale talks were first reported by The Air Current.

Montreal-based Bombardier created the regional jet market in 1989 when it launched the CRJ, which was a stretched, 50-seat version of the Challenger business jet that it had acquired a few years prior when it first got into aerospace by buying the struggling aircraft maker Canadair from the Canadian government. With jet fuel cheap in the 1990s, U.S. airlines snapped up the CRJ to replace propeller-driven planes on short-haul routes serving smaller cities. Bombardier has sold 1,950 CRJs, but sales slowed in the early 2000s as oil prices climbed and airline consolidation shrank route networks.

Bombardier had 51 outstanding orders for the aging airframe as of March 31, a backlog that should be worked through by 2020. Bombardier refreshed the CRJ in recent years with a new cabin design, but its seventies-vintage General Electric engines are inefficient by modern standards, and it’s not clear if the plane could be retrofitted with newer ones.

What’s kept sales trickling along has been the persistence of so-called “scope clauses” in U.S. airlines’ labor contracts with their pilots, which restrict the major carriers from contracting with regional airlines for flights of planes above 76 seats and a maximum takeoff weight of 86,000 pounds. With the MRJ, Mitsubishi made a losing bet that the scope clauses would be relaxed by the time it came into service: the MRJ90 is too big to be used in the U.S. now. Embraer made the same miscalculation with its new E2 regional jet line.

Mitsubishi has been working on a 70-seat version, but that project is reportedly going through a redesign that could delay it until 2023.

United and Delta pilots are negotiating new contracts, and American and Southwest’s agreements are up in 2020, but it’s unclear whether the airlines will be able to win relaxation of the scope clause restrictions.   

It’s also unclear whether Mitsubishi would want to keep producing the CRJ, scope clauses or no, given its unprofitability. The company could choose to fulfill current orders and wind it down, says Aboulafia.

Beyond the CRJ maintenance network, Mitsubishi could benefit from adding experienced engineers from the Bombardier program who could aid in developing the MRJ and in the complicated regulatory certification process.

Bombardier filed a lawsuit against Mitsubishi in October, alleging that former Bombardier employees had supplied it with trade secrets that would help the MRJ gain certification.

A sale of the CRJ line would be the sunset of an era of ambition for Bombardier, a snowmobile maker that expanded into rail in the 1970s and aviation in the 1980s with a series of acquisitions, but stumbled badly earlier this decade with an attempt to challenge Airbus and Boeing by developing a 100- to 130-seat jet, the CSeries, that almost bankrupted the company.

CEO Alain Bellemare, who came aboard in 2015, has sold off assets and raised new debt and equity to pare Bombardier’s heavy debt load, aiming to slim the company down to its strongholds in business jets and trains.  

In 2018, Bombardier gave away a majority share in the CSeries to Airbus, which has rebranded it the A220. Airbus has the option to buy full control in 2025. This week Bombardier closed the sale of its Q Series regional turboprop line to Longview Capital, and last month it announced that it would sell an aerostructures factory in Morocco and its Northern Ireland unit, which developed innovative composite resin technology used to make the wings for the A220.

For the CRJ program, Bombardier could fetch a similar price to its sale of the Q Series, which netted $250 million, says analyst Christopher Murray of AltaCorp Capital, and a deal could allow it to offload other contingent liabilities.

Bombardier shares rose 8.9% Wednesday morning to 2.14 Canadian dollars on the Toronto Stock Exchange. The stock tumbled 20% in late April after the company cut its 2019 sales and profit outlook due to delays and quality issues on multiple contracts at its rail unit. Bombardier said during its first-quarter earnings call last month that it would no longer commit to previously announced financial goals for 2020, including raising sales to $20 billion.

-Jeremy Bogaisky;Forbes Staff

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Pioneer For Women In Construction Thandi Ndlovu has died

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The cover of the August (Women’s Month) edition of Forbes Africa beautifully captures the essence of the woman I interviewed only a few weeks ago. Gracious, soft-spoken, brimming with life and energy. Dr Thandi Ndlovu impressed the entire Forbes crew on that afternoon cover shoot with her broad smile, and open yet powerful demeanor.

It is with great sadness that Forbes Africa heard of the accident that took her life on Saturday the 24 August 2019.

READ MORE |COVER: Feisty And Fearless Pioneers Thandi Ndlovu & Nonkululeko Gobodo

She had given so much to South Africa and its people – through the apartheid years and during the 25 years of democracy, literally building a better future, first through her medical practice at Orange Farm and then through her company, Motheo Construction Group and the scholarships for tertiary education granted by her Motheo Children’s Foundation.

That sunny winter’s afternoon, I asked her if she, at the age of 65, was considering retirement, and she laughed. A lively, amiable laugh. She told me she was healthy and strong and easily worked 12 to 13 hour days.

READ MORE | WATCH | Making Of The Women’s Month Cover: Thandi Ndlovu & Nonkululeko Gobodo

She loved hiking, and has climbed Kilimanjaro twice, reached the base camps of Mount Everest and Annapurna in Nepal. At the time of the interview, she was training to climb Machu Picchu, the famed ruins in Peru’s mountains.

One of her biggest passions was to make a difference in people’s lives and to motivate people to achieve the best they could. The other was to redress the racial tensions that still remained in South Africa.

Dr Thandi Ndlovu, South Africa is poorer for your passing.

-Jill De Villiers

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Facebook Joins Other Tech Giants In Employing Journalists To Curate News

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Facebook is hiring a small team of journalists to help curate breaking news and repair its strained relationship with news publishers, the social media giant announced Tuesday.

The company says it will employ journalists to select breaking news and top stories that will appear in its soon-to-be-launched feature called News Tab, rather than using algorithms to determine what is shared with its vast network of users.

With the move, Facebook is part of a growing trend in the tech industry. Apple, Google, Twitter, LinkedIn and Snapchat have all employed journalists to help their companies sort through the news and cozy up to news organizations.

READ MORE | Facebook Recommits To A More Personalized Dating App, Your Privacy

Apple, for example, has used some form of human curation since its subscription Apple News app launched in 2015. In June 2017, the company hired former New York magazine executive editor Lauren Kern as the app’s editor-in-chief. Twitter has also employed some form of human news curation since 2015. 

Even with a team of in-house journalists, companies like Twitter continue to struggle in the fight against misinformation. On Monday, Twitter announcedit will no longer accept advertising from state-controlled media, in large part as a response to the discovery that China ran a misinformation campaign to combat Hong Kong protesters.

Facebook, facing similar scrutiny for the same Chinese misinformation campaign, said that employing journalists will help “surface more high quality news.”

“Our goal with the News tab is to provide a personalized, highly relevant experience for people,” Campbell Brown, Facebook’s head of news partnerships said in a statement sent to Forbes. “The majority of stories people will see will appear in the tab via algorithmic selection. To start, for the Top News section of the tab we’re pulling together a small team of journalists to ensure we’re highlighting the right stories.”

READ MORE | Google, Facebook, Twitter Fail To Live Up To Fake News Pledge

Facebook says the team will take into account user controls, pages and publisher as well as the news that users interact with or share, and other unnamed signals from its vast network to personalize content. 

The company has been under pressure to mitigate its misinformation problem since it was revealed in 2016 that Russian operatives carried out a misinformation campaign in a “sweeping and systematic fashion” on the network, as it was described by special counsel Robert Mueller in his investigation into Russian interference in the 2016 presidential election.

The Mueller Report found that Russia spent $1.25 million per month on digital advertisements in an effort to sow discord in the U.S. and influence the presidential election. On Monday, Facebook came under fire for taking money from China to spread disinformation about Hong Kong protests.

The social media giant remains an important part of many Americans lives, much more than its rivals Twitter and Snapchat. According to Pew Research, about 69% of American adults use Facebook, and of those who use it, about 74% visit the site once a day. By comparison, only one in five U.S. adults (22%) use Twitter.

According to a survey conducted in 2018, about four in ten (43%) U.S. adults get at least some news from Facebook.

READ MORE | How To Use Twitter To  Boost Your Business

In January 2017, Facebook hired Campbell Brown, a former television news anchor, to lead its news partnerships team. She remains a key figure in easing the tension between large national news outlets—those who have historically provided an endless trove of free content for the social media giant—and the company.

Publishing executives have slammed Facebook for siphoning advertising revenue away from traditional news publishers while also demanding that those same companies provide content for free. Following years of backlash, the social media company is now trying to work with publishers to create a more even relationship.

Facebook’s news partnership program involves deals that are potentially worth millions of dollars. The Wall Street Journal reports that several news outlets including the Washington Post, Bloomberg, Dow Jones, and the New York Times have discussed receiving as much as $3 million per year to license news content.

The News Tab, which has not been publicly viewed, is being positioned in stark contrast to the company’s Trending Topics news section, which shut down in 2016 following increasing pressure from users.

In 2016, the tech website Gizmodo published an article alleging contractors hired to curate the now-defunct Trending Topics feed were actively suppressing conservative news stories. In a letter to Congress, Facebook said, “We could not reconstruct reliable data logs from before December 2014, so were unable to examine each of the reviewer decisions from that period,” thus suggesting that it may have very well suppressed conservative news when the tool first launched.

-Michael Nuñez; Forbes

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Walmart Sues Tesla Over Solar Panels That Allegedly Caught Fire

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Topline: Walmart is alleging in a lawsuit that Tesla solar panels caused fires on the roofs of seven Walmart stores, and is accusing Tesla of breach of contract, gross negligence and failure to comply with industry standards. 

  • Walmart claims that Tesla installed faulty solar panels that eventually spontaneously combusted and caught fire at seven Walmart stores around the country.
  • The lawsuit alleges that Tesla inspectors didn’t notice defects that were visible to the naked eye, used cable connectors that weren’t compatible with one another and failed to see that loose and hanging wires were present at multiple sites.

READ MORE | Jeff Bezos And Elon Musk Want To Get To The Moon—They Just Disagree On How To Get There

  • Walmart says in the lawsuit it believes the failures were the result of rushed installation because Tesla’s solar division “adopted an ill-considered business model that required it to install solar panel systems haphazardly and as quickly as possible in order to turn a profit, and the contractors and subcontractors who performed the original installation work had not been properly hired, trained, and supervised.”

Tesla did not immediately respond to a request for comment from Forbes.

Key Background: Tesla got into the solar business after it acquired SolarCity in 2016 for $2.6 billion. But production of its residential solar panels under Tesla has been mired with delays and plunging sales. 

Just this week, CEO Elon Musk announced a revamped pricing plan in an effort to boost the slowing business. The new pricing model allows residents in six states to rent solar power systems starting at $50 a month ($65 a month in California) instead of buying them up front.

Further Reading: Read the full lawsuit here.

-Rachel Sandler, Forbes


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Crazy Aviators: The Eerie Similarities Between Billionaire Howard Hughes And Elon Musk

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