Bombardier: 'All-embracing' $1bn buyout is good news for Belfast plant and workforce
Spirit AeroSystems Inc is a successful components contractor operating across the aerospace sector. It brings to Shorts-Bombardier a competitive reputation in advanced manufacturing.
The sale of Shorts was an anxious process. The new owners arrive with an ambitious agenda which gives Shorts opportunities to prove its ability to integrate successfully with them.
Bombardier came to Belfast at a time of crisis for Short Brothers.
The business of building planes such as the Skyvan and the SD3-30 had run its course and new product ideas were needed.
In the early years Bombardier made a success of its new Northern Ireland subsidiary and, following a helpful financial deal, Shorts was earning a modest profit.
In recent years attention was focused on what became known as the C Series: the plans by Bombardier linking Canadian and Belfast expertise to develop a new passenger aircraft aimed at a recognised market niche.
The C Series was longer in gestation than originally planned.
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The Belfast contribution in the manufacture of wings for the aircraft, using the application of lighter composites technology, gained Government support and, helped by a specially designed fabrication unit, was a critical contribution to the wider Bombardier project.
The C Series aircraft offered a specification that technically attracted possible buyers.
However, the slower than expected achievement of the necessary certification added to the development costs and, consequently, meant that Short Brothers, the Belfast subsidiary of Bombardier, was losing money.
The published accounts showed losses which in 2018 were nearly £33m on a turnover of about £680m.
The arrival of Airbus as developer of what became the renamed A series, or the A220, marked a critical turning point.
Shorts was contracted as a significant supplier to Airbus and the order book for this aircraft increased.
As the workload for the wing assembly plant improved, this eased the cash flow problems for Shorts but there still remained the inherited financial obligations, accepted as funds had been borrowed in the development stage.
Bombardier announced that it was seeking a buyer for its Northern Ireland and Moroccan businesses.
Now there is confirmation that Spirit AeroSystems has agreed a deal to buy the Bombardier interests for $500m plus accepting net pension obligations of $300m along with repayment obligations of Government grants of $290m. In total, a financial deal worth over $1bn.
Spirit AeroSystems has set out ambitions to extend the business range of activity in the plants owned by Shorts.
It describes this acquisition as being in line with Spirit's growth strategy of increasing the amount of work contracted to supply Airbus. Interestingly, the Spirit announcement goes on to comment that they look to develop a low-cost country footprint linked to growing their aftermarket business.
"The acquired business ... brings a world-class aftermarket business which more than doubles Spirit's geographic reach globally."
The Belfast plants now face both the opportunity to widen the range of products being developed along with the challenge to make it pay.
The deal to buy these Bombardier business assets will not be finalised until the first half of 2020.
At this stage no firm announcement has been made about the number of employees that the new business will need, and there may be business restructuring plans to be considered and implemented when the final details are confirmed.
This is a good news announcement. There were fears that a change of ownership might have been less all-embracing.
A successful launch of this project with high ambitions is now a responsibility of the new owners and, in co-operation, with the professional management team in Shorts.
John Simpson is an economist