Bombardier’s secret weapon in China

In a business environment known for dirt and profligacy, Jianwei Zhang, the president of Bombardier China, a unit of the Canadian transportation and aerospace giant, is an ascetic. He regularly keeps two brands of cigarettes in the inside pockets of his suit jacket—one a premium brand he offers clients and government officials, the other the cheap cigarettes he smokes himself. He often eats one meal a day. Invited to banquets to meet with officials, Zhang is known not to touch his plate. “You eat, I’ll talk,” he’ll say. Such meetings are too rare to waste on food.

When customers offer to have a company car pick Zhang up at the airport, he declines, preferring taxis. He even cabs it to the government ministries where he conducts so much of his business, a choice of ride that presents challenges at entrances, where guards stop cars with unknown licence plates. After presenting his Canadian passport, he must hoof it across stately Stalinist courtyards, an often long and lonely walk.

He has been known to pace outside these buildings, too, bracing against the cold and puffing on a cigarette, to stake out a recalcitrant bureaucrat whose ear he must bend. “It’s that persistence—to some degree, you could call it ‘passive aggression’—that gets people to pay attention to him,” one retired Bombardier China executive, Paul Jensen, says.

In the context of China’s railway business, notorious for corruption, that all means a lot. Zhang’s only vice, it appears, is an appetite for very long days. “My life is very simple,” he says. “My family says, ‘You’re married to Bombardier.’ ”

Zhang, 56, has steered the company through treacherous territory since his return to China in 1999 after more than a decade living in Canada and, in the process, made it one of the most successful foreign companies here—first by securing Bombardier’s place in China’s booming rail sector, and then taking command of its Chinese aerospace operations. Bombardier China is “like my baby,” he says. And whether it’s building planes, trains or tramways, China holds the promise of huge rewards for Bombardier. To reap those benefits, Bombardier’s man in China must negotiate the hardships of rapid change, stiff competition and near-ubiquitous graft. So far, Zhang has managed to do all that and more—an odd accomplishment for a guy who grew up in the bosom of the Communist party, and who once wanted nothing more than to become a Canadian university prof.

In October, Bombardier revealed that a hitherto undisclosed conditional buyer for its new CSeries aircraft is CDB Leasing, a Chinese firm. The deal could ultimately be worth more than $2 billion, and raises hopes for more Chinese sales of the narrow-bodied, transcontinental jets. Zhang downplays his role in sealing that deal, but not much happens for Bombardier in China without his involvement. The conditional Chinese sales are welcome news for the company’s aerospace division, given a long series of unhappy bulletins from that side of the business: The company flew its CSeries jet for the first time in September after—count them—nine months of delays. Much depends on the jet’s success: Bombardier hopes it will almost double its annual revenue by the end of the decade, and it represents the first time the firm will be competing directly with Boeing and Airbus.

Bombardier partnered with China’s AVIC Shenyang Aircraft Corp. to build the CSeries’ fuselage. China, where air travel is poised to grow in a big way, will be a significant, if not crucial, market for the aircraft, and Zhang knows it. “For rail transportation, we’re already recognized as the most successful foreign company in the field,” he says. “My ambition is to be recognized also as the most successful foreign company in the field of aerospace in China.”

Behind Zhang’s success and clean image is a man whose personal story reflects the history of contemporary China in remarkable ways. Many observers attribute his good fortune to the old contacts he was able to tap after returning to China. But Zhang knew no one. “He’s not one of the gilded princelings,” says Jensen.

Born in rural China—his father a university professor, his mother a farmer’s daughter—Zhang thrived within the various youth wings of the Communist party. He worked as a labourer during the Cultural Revolution, then got voted “class chief,” semester after semester for four years, at Tianjin University. In any other case, this would be the biography of a young man being groomed for an illustrious career in China. But in 1987, Zhang’s stellar performance in the required exams led him to go to Montreal as a budding academic. He’d been scheduled to study at an English university; he landed instead at HEC Montreal, the French-speaking management school affiliated with Université de Montréal. He stayed long enough to learn French and earn a Ph.D.

Zhang did not want to go into business. His ambition was to be a prof. He accepted a job at Bombardier in 1995 as a sort of academic experiment, then never left. When Bombardier asked him to open an office in Beijing in 1999, he did not want to go, nor did his family (he has two daughters). They’d made it to Canada—why go back? He accepted, intending to stay only a couple of years, and immediately set about establishing Bombardier as a formidable rail presence there.

Since then, Bombardier and its Chinese partners have routinely secured massive intercity rail orders—the $4-billion sale of high-speed trains in 2009, say, or its high-altitude rail cars destined for Tibet, a deal worth $281 million. Those successes have largely been overshadowed by the company’s aerospace woes. One CIBC analyst has called Bombardier China’s transportation division the “forgotten industry.” Yet, at the same time, Bombardier has also quietly slipped into the tramway market in China, a country where there are as many as 260 cities with 300,000 people or more—the threshold for the sort of tram projects Bombardier has already been successful executing in Europe. Earlier this year, CSR Puzhen, a Bombardier partner, snagged an order for 15 state-of-the-art trams in the Chinese metropolis of Nanjing. That order followed a similar Bombardier tram win in Suzhou, a city of more than 10 million people near Shanghai.

The dollar values here are relatively small, but it’s the promise of more and bigger business in the sector that gets Zhang excited. Last year, the National Development and Reform Commission, a government agency charged with steering economic growth in China, announced approvals for 25 urban rail transit projects and feasibility studies, all in a single day. “Twenty-five!” Zhang repeats. Not as sexy as the firm’s ongoing high-speed rail business, maybe, but public transit in China “might ultimately be a bigger business than the bullet train,” says Jensen.

Not that there haven’t been challenges on the rail side. First, there was the incredible speed at which China—under the leadership of Liu Zhijun, the country’s energetic former head of the ministry of railways—pursued the construction of its bullet-train network. Starting in 2003, Zhijun set out to build more than 12,000 km of high-speed railway, more than existed in the entire world. A post-2008 stimulus effort upped that target to 16,000 km by 2020.

China’s railway sector also had a reputation for conspicuous consumption among the bureaucrats tasked with overseeing it; like a character pulled from a Scorsese gangster film, Shuguang Zhang, the ministry’s chief deputy engineer, wore a fur coat accentuated by a white scarf. “Officials in state firms in China and in the government appear to have lifestyles that far exceed their official salaries,” says Charles Burton, a former diplomat at the Canadian embassy in Beijing who now teaches political science at Brock University. “Chinese business culture requires that, to be successful, you have to provide gifts to officials of the Chinese state who are critical to the success of your operations.”

That culture of corruption led to corner-cutting. In 2011, a high-speed accident outside the city of Wenzhou killed 40 people and injured scores more when a train travelling at 300 km/h slammed into another train made by Bombardier Sifang, a joint venture between Bombardier and the state-owned CSR Sifang. The collision had nothing to do with Bombardier—its train had been immobilized after a bolt of lightning struck a signalling component, setting into motion a string of tragic circumstances that served to highlight the weakness of the system’s safety measures.

News of the crash rippled through China’s blossoming social media networks with a speed and freedom that was new to the country, and helped focus public attention on mismanagement and subpar safety standards within the bullet-train program. Many of these difficulties arose because the ministry was simultaneously an operator, owner and regulator of the network. In response, the government broke it up in March, establishing a new private company responsible for managing the railway network and building infrastructure. In July, Zhijun, the former minister, received a suspended death sentence for accepting $10.5 million in graft.

Bombardier sidestepped the scandal entirely. “You see nothing about Bombardier—zero,” Zhang says. The company won its orders because of its superior technology and its attentiveness to its customers, and not the way it managed its relationships with officials, he adds. He points out that he never uses intermediaries in his dealings with the government.

Zhang, famous for connections throughout the railway sector, is tight-lipped about how much he knew of these shady dealings. “I was surprised,” he says of what emerged about Zhijun. “I knew he worked very hard. And he was very tough in negotiations. Very tough.”

It was in that tough environment, defined by China’s uncompromising demands for its rail system, that Zhang made his bones in China. When he arrived, Bombardier had no offices here, and Zhang worked from his older daughter’s room, setting up a desk there and staying up at night, discussing operations with his colleagues in Montreal. His daughter told him he was keeping her up. Months later, after he’d moved to his own office, she came to his door, unable to sleep. The railway business had become her lullaby.

Business-wise, things have changed since those early days. Back then, foreign companies would arrive in China and stay in five-star hotels, broadcasting an image of wealth and prowess. Today, the Chinese stay in the same hotels. Bombardier used to worry mainly about competition from foreign companies. “Now it’s the Chinese,” Zhang says.

So complex and cutthroat is China’s rail business that firms frequently become friends and enemies at the same time. CSR is Bombardier’s partner and a major competitor. One of CSR’s affiliates has partnered with the Japanese firm Kawasaki, a Bombardier nemesis. Chinese rivals will often begin work on an order before actually winning it. “They take bigger risks than western companies,” says Zhang. “If you can’t accept it, you have to leave.” Zhang now feels he must remain. How could he abandon his baby, after all?