Solutions to Bombardier & Mitsubishi Lawsuit Challenges

Bombardier filed a suit against Mitsubishi Aircraft (MAC) late in 2019, claiming stolen trade secrets from ex-employees that left Bombardier's (BBD) C Series program and joined the MRJ program. Bombardier, we understand, has evidence to back its claims. To whit: Yesterday Mitsubishi filed a counterclaim against Bombardier. MAC claims that Bombardier is "engaged in illegal anticompetitive behavior with the intent to impede the development and certification of the Mitsubishi Regional Jet (MRJ) aircraft." MAC goes on to claim that "the present litigation constitute an effort by Bombardier to impede the progress of the development of the MRJ and ultimately, to delay the MRJ from entering the market. What are the facts? Bombardier does not have to impede progress or otherwise delay the MRJ's market entry. MAC has done an excellent job of that itself. The program is severely delayed. Bombardier does not have to work hard at keeping the MRJ90 out of the market because US scope clause achieves that. If MAC were to argue their MRJ70 is scope compliant, then simple economic reality will stymie the aircraft. The MRJ70 is compromised in seat capacity - it cannot offer a three-class LOPA and reach 76 seats which is what the E-175 and CRJ900 offer. Lawsuits only make money for attorneys. It is in neither companies interests to go through the legal process. Is there a way to make these cases go away? Yes, there is and this is an "out of the box" thought shared with us. It is a fact that the CRJ is selling very slowly - too slowly for Bombardier. Moreover, Bombardier is losing $6m per delivery. It is no surprise that Bombardier would like to either claw back savings from the supply chain or shutter the program. Chorus in Canada and Air Canada have both signaled their intent to order more CRJ900s. Similarly, US regionals with orders for MRJ90s are likely to buy CRJ900s because they see that MRJ90 won't work and the MRJ70 is also going to be limited. These airlines do not want to only buy from Embraer as that gives the OEM monopoly power. Ergo, the CRJ900 will get more orders. MAC is not going to sell aircraft in the US market unless they deeply discount the MRJ70, to an extent that is likely to get Mitsubishi Heavy concerned. The MAC parent company recently doubled up its investment in the MRJ program. Their patience will run out. MAC has another challenge outside the US. It has near zero MRO support. Who will buy an aircraft, especially a highly sophisticated one with limited support? One only has to look at the lessons airlines learned from the 787, A320neo and MAX to know that product support is as important as the asset itself. MAC sits between a rock and a hard place. Bombardier also has unattractive options. So what happens if Bombardier offers its global CRJ network and its certification knowledge to MAC? This gives MAC what they need, and considerably cuts the risk on the MRJ program. In return for this, MAC gives Bombardier a stake in the MRJ program. MAC could use a strong partner because its erstwhile partner, Boeing, has a new friend in Brazil - one that will do whatever they can to hobble the MRJ further. (Imagine Embraer's reaction to Mitsubishi's interest in bidding for E2 work?) Bombardier then is happy to see scope clause eased to allow the MRJ90 into the market and compete vigorously with the E175-E2, which is only going to see EIS around 2022. Bear in mind the precedent of the Airbus deal with Bombardier on C Series. Look how well that turned out for both sides. Orders are coming in. A serendipitous outcome is to call the lawyers off because together these firms are better off in both the short and long run. It is an "out of the box" thought. But it has merit according to several industry leaders we shared the idea with.

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