A Bombardier Perspective on Doing Business in China

Andres Friedman

Analyste principal, Stratégie et développement d’affaires

Chaîne d’approvisionnement

BOMBARDIER AERONAUTIQUE

March 2006

2

Bombardier in China

Business Environment in China

Lessons Learned

Company Overview

3

Bombardier

Corporate office based in Montréal, Canada

Workforce of some 59,550 people worldwide as at

January 31, 2005

Revenues of $15.8 billion US for fiscal year ended

January 31, 2005

More than 95% of revenues generated outside Canada

Listed on the Toronto Stock Exchange (BBD)

4

Bombardier’s manufacturing facilities

Australia

Austria

Belgium

Brazil

Canada

Czech Republic

Denmark

France

Germany

Hungary

India

Italy

Mexico

Norway

People’sRepublic of China

Poland

Spain

Sweden

Switzerland

United Kingdom

United States

A worldwide presence

5

Bombardier regional aircraft

Bombardier* Q100/200* Bombardier* Q300* Bombardier* Q400*

Bombardier* CRJ200* Bombardier* CRJ700* Bombardier* CRJ900*

* Trademark(s) of Bombardier Inc. or its subsidiaries.

6

Bombardier business aircraft

* Trademark(s) of Bombardier Inc. or its subsidiaries.

Bombardier*Learjet* 40

BombardierChallenger 800

Bombardier*Challenger* 604

BombardierLearjet 60

BombardierGlobal 5000*

Bombardier* Global Express*

BombardierLearjet 45

BombardierChallenger 300

BombardierLearjet 45 XR

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Transportation, a full spectrum of railway solutions

* Trademark(s) of Bombardier Inc. or its subsidiaries. ** Trademark(s) of third parties.

FLEXITY* Outlook (Linz, Austria)

Light Rail Vehicles

MOVIA* - Guangzhou Metro Line 2 (China)

Metros Commuter Trains

Regional Trains

Voyager** DEMU (UK)

Intercity Trains

ICE** 3 EMU (Germany/Netherlands)

High-speed Trains Locomotives

Low-floor freight wagon

Freight Wagons

Electrostar* EMU (UK)

Interregional Trains

EMU M-7 (New York, USA)

Double-Deck Coache(Germany, Denmark, Israel, Luxembourg)

TRAXX* F140 AC (Switzerland)

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Total Transit Systems

Transportation, a full spectrum of railway solutions

* Trademark(s) of Bombardier Inc. or its subsidiaries.

Mitrac* TC 1000 Traction Converter for Medium Power Application

Propulsion and Controls

Wayside Equipment

Rail Control Solutions

Fleet Management (London, UK)

Services

Bogies

Monorail (Las Vegas, USA)

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Bombardier in China

Business Environment in China

Lessons Learned

Corporate Overview

10

Bombardier in China

Rail transportation

4 business offices• Beijing, Shanghai, Guangzhou,

Hongkong

3 joint ventures• Metros (Changchun)

• Inter-city cars (Qingdao)

• Propulsion (Changzhou)

Strong market presence• Beijing, Shanghai, Zhengzhou,

Shenyang, Guangzhou

Aerospace

2 business offices• Beijing, Hong Kong

Existing supply relationships:• Xian Aircraft Corp.

- CL-415 components

• Shenyang Aircraft Corp.- Q-Series doors

Strong market presence• No. 1 in regional aircraft

- 35 aircraft with 7 operators

• No. 1 in business aircraft- 44% of installed base

2,100 employees

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Bombardier Transportation in China - Locations and employees

QingdaoQingdao

ShanghaiShanghai

Hong KongHong Kong

BeijingBeijing

ChangchunChangchun

ShenyangShenyang

GuangzhouGuangzhou

Bombardier Transportation China Representative Office

Bombardier Transportation China Representative Office

CBRC Joint Venture 合资企业： CBRC Established: in 1996 成立于 1996

年

CBRC Joint Venture 合资企业： CBRC Established: in 1996 成立于 1996

年

BSP Joint Venture 合资企业： BSP Established: in 1998 成立于 1998 年

BSP Joint Venture 合资企业： BSP Established: in 1998 成立于 1998 年

Bombardier Transportation China Representative Office

Bombardier Transportation China Representative Office

Bombardier Transportation ChinaRepresentative Office

Bombardier Transportation ChinaRepresentative Office

Bombardier Inc. Representative Office

Bombardier Inc. Representative Office

Bombardier CPC Propulsion System Joint Venture(BCP)

庞巴迪 BCP 牵引系统合资企业Established: in 2003 成立于 2003 年

Bombardier CPC Propulsion System Joint Venture(BCP)

庞巴迪 BCP 牵引系统合资企业Established: in 2003 成立于 2003 年

ChangzhouChangzhou

Bombardier Railway Transportation Equipment (Shanghai) Co. Ltd.

Established: in 2003

Bombardier Railway Transportation Equipment (Shanghai) Co. Ltd.

Established: in 2003

Bombardier Transportation Engineering Service (Beijing) Co. Ltd.

Established: in 2005

Bombardier Transportation Engineering Service (Beijing) Co. Ltd.

Established: in 2005

Bombardier Transportation Railway Equipment (Qingdao) Co. Ltd.

Established: in 2005

Bombardier Transportation Railway Equipment (Qingdao) Co. Ltd.

Established: in 2005

IPO (Shanghai) IPO (Shanghai)

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Hong KongHong Kong

BeijingBeijing

Bombardier Aerospace in China

Xi’anXi’an

Dash 8 Q100/200/300 DoorsSous-contract (SAC)

depuis 1986

Dash 8 Q100/200/300 DoorsSous-contract (SAC)

depuis 1986

ShenyangShenyang

Bombardier Aerospace Beijing Office

Bombardier Aerospace Beijing Depot

Bombardier Aerospace Beijing Office

Bombardier Aerospace Beijing Depot

CL215/415 Parts sous-contracts(XAC)

depuis 1980

CL215/415 Parts sous-contracts(XAC)

depuis 1980 Bombardier Aerospace Flexjet Asia pacific

& BBAD bureau de vente

Bombardier Aerospace Flexjet Asia pacific

& BBAD bureau de vente

ShanghaiShanghai

Bombardier Aerospace Shanghai Regional Aircraft Customer Support Office

Bombardier Aerospace Shanghai Regional Aircraft Customer Support Office

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Bombardier in China

Business Environment in China

Lessons Learned

Corporate Overview

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Still transitioning from a

planned to a market economy

State sector is still important

Still a political aspect to many

large purchasing decisions

Central Government

approvals necessary for large

projects

Personal relationships remain

very important

Unique Environment

Economic growth

Emerging consumer society

Installed industrial base

Commitment to modernize and

improve = sales opportunities

• Industry

• Infrastructure

• Military

Many new and/or improving

suppliers – (Global Sourcing)

Unique Opportunities

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Xuzhou – Lanzhou (1400km)

Qingdao – Taiyuan (770km)

Beijing – Harbin/Dalian (1860km)

Beijing – Shanghai (1300km)

Intercity Transport Systems (2000km)

Beijing – Shenzhen (2230km)

Hangzhou – Shezhen (1600km)

Hangzhou – Changsha (880km)

Nanjing – Chengdu (1900km)

Notes

Dedicated Passenger Line

Existing Line

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China Urban Transit Market Overview

Existing

Beijing Shanghai Guangzhou

Shenzhen Nanjing

Wuhan

DalianHong Kong

Chongqing Changchun

Tianjin

Under Construction

Shenyang Xi’an Qingdao Suzhou

Hangzhou

Planning

Harbin Anshan Shijiazhuang

Chengdu Changsha Wenzhou

Kunming

Xiamen

Macau

State Criteria for Urban Metro Project

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Bombardier Aerospace is exploring several partnership opportunities in China

Bombardier is considering sourcing major aero structures from suppliers in China• Cost optimization

• Supplier development for future programs

• Better positioning for eventual market access

For example, active discussions are being held with the Shenyang Aircraft Company (SAC), which already supplies components to Bombardier, Boeing and Airbus

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Challenges and considerations:Ability to manage a fast and flexible supply chain

Supplier capability• Manufacturing at a high production rate

• Meeting western certification standards

Transportation environment• Inbound/outbound logistics

Business environment• Customs and other regulatory procedures

• Import/re-export of sub-components

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Bombardier in China

Business Environment in China

Lessons Learned

Corporate Overview

20

Some things we’ve learned

China: a big market opportunity, a big sourcing opportunity

China is not just for low-tech, high labour-content products

The Canadian Embassy and the Bureau du Québec à Beijing can be very helpful

• Understanding the market, making introductions, securing government interest/approval for your project if required

Importance of knowing basic Chinese history, culture, and business practices

Importance of “personal” relationships

• Chinese do business with the person first, then the company

Importance of understanding hierarchies and decision-making power

Three most important things: patience, patience, patience

A Bombardier Perspective on

Doing Business in China