Bombardier brings Japanese-owned supplier MHI Canada Aerospace in-house

Bombardier Inc. BBD-B-T is buying the assets of MHI Canada Aerospace Inc. from Japan’s Mitsubishi Heavy Industries Ltd. MHVYF as it weighs a potential increase in private jet production rates in the months ahead.

The agreement will see Bombardier take over the operations of one of its key suppliers and bring its roughly 750 employees in-house, according to details provided Tuesday. The purchase price and other terms were not disclosed, suggesting the transaction is not material.

MHI Canada operates a 270,000-square-foot manufacturing facility and a 70,000-square-foot logistics center in Mississauga. The site is focused on Bombardier’s Global 5500/6500 and Challenger 3500 jets, handling wing assemblies, fuselage sections, and flight control installations for those aircraft.

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Bombardier chief executive officer Éric Martel and his team are currently weighing a jump in aircraft production rates to capitalize on strong demand for private jet travel, a decision that’s expected early next year. The CEO has said he’ll only make a significant increase if it’s sustainable in the longer term and if the supply chain can support it.

Integrating MHI Canada into its own operations would bolster that effort by giving the plane maker company greater control over the supplier while broadening its own manufacturing capability. The transaction is expected to close by the end of the year.

Bombardier is coming off a strong second-quarter earnings report in July that saw it beat analyst forecasts and post its lowest level of long-term debt in more than 15 years. Free cash flow, which is the money a company generates after covering operating expenses and capital expenditures, reached US$228-million for the quarter while the value of orders booked but not yet delivered was US$21.8-billion.

Moody’s subsequently upgraded Bombardier’s credit rating.

MHI Canada began when Japanese industrial giant Mitsubishi Heavy Industries launched a consortium of independent contractors in 1996 that worked on products originating from Japan. Operating within Bombardier’s manufacturing facility, the company was officially incorporated in 2006.