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September 2013

New Flyer's Soubry Embraces Company's Bold Future

Paul Soubry joined New Flyer as president/CEO in 2009. Prior to New Flyer, he worked for 24 years with StandardAero as a marketing assistant in 1984, before leaving the company as its president/CEO.

METRO Magazine recently visited with Soubry at New Flyer’s St. Cloud, Minn. plant to discuss what has been a busy year for the company, beginning with the $115 million investment from Brazil-based Marcopolo S.A. in January, and most recently, the acquisition of both Orion Parts and North American Bus Industries (NABI) as well as the introduction of a new mid-sized bus through a joint venture with Alexander Dennis.  

As we approach your five-year anniversary as President/CEO, discuss some of your initial goals and how you have been able to accomplish them.
We have been trying to find a way to make sure we all feel like we are working together in alignment. That was the single biggest issue, so investing in everything beyond just the product was a really big part of gaining the confidence of the workforce.

If you walk around [the facility here in St. Cloud], I am sure you will find unhappy employees, but we are trying to take a perspective that it is a team sport. Nobody can do it themselves, and we have got to find a way to work with each other and rely on each other, transparently. Metric on the boards on the shop floor is not for me to walk around and look at whether we are above or below the target, it is for the team to see how we are doing, what can we do differently and how we might be able to work as a squad to get the job done. Four and a half, five years later, have we accomplished everything we want to? Absolutely not. But, we have come a long way in terms of common views: the definition of success. We have made progress in the transformation of the culture here at New Flyer. We have also made progress on the capital structure and are able to look our customers in the eye and say ‘we have been here since 1930, and we are going to be here for another 100 years.’

We are dead serious about making sure we have longevity, profitability and sustainability, because the buses we sell, whether it’s for 12-year or 20-year duty cycles, they are going to rely on us to be around for product, parts and training support for a long time. Those are the things that we feel most gratified about. We survived the economic realities of funding cuts and challenges with our customers. We were lucky enough to have a backlog at the time that allowed us to be able to weather the storm. We have been absolutely affected from both profitability and some of the operational issues, but boy, we are in a much better position than we were five years ago, in terms of the health of the overall business.

What do you think is New Flyer’s biggest challenge?
The single biggest issue for us is surety of schedule. We just came out of a very difficult economic time — customers were not sure if they would have the funding, they were parking buses, they were unsure if they were going to replace their fleets. Now, we are seeing a rather high amount of bid activity, which is good. We are seeing contract activity as an industry, but we know our business is cyclical so we can’t get too excited because it does go up and down. But, what the last couple of years have done has forced us to take on smaller size contracts; contracts with shorter production windows or pre-production windows that are forcing us to make engineering choices faster, to supply stuff faster and so forth. That compression of cycle is what causes anxiety in the workforce as far as in efficiency. It is not a matter of not being able to source the material or to get the people in training, it is ensuring that our business is robust enough to be able to respond and react to those kinds of things.

Regardless of Orion going away or NABI being bought, there is still a lot of competition, so there is a really high competitive intensity, and there is pressure on New Flyer and all of us to find ways to improve cost, weight and noise — the three bad words in the industry. We are really continuing to work as a company to find a way to improve our competitiveness. It would be simple for people to say we should just start offshoring, but A, that’s not practical, and B, we must live inside the Buy America rules. We are talking about taxpayer dollars, and we have to ensure a proper economic return for those investments. We are going to continue to work on being as competitive as hell. I don’t care how big or small we are, we have to find that price/value equation where we can make money and customers are happy with the product.

Discuss the impact of the Marcopolo investment.
Marcopolo is an impressive company. It is a company that is publically traded, but also controlled by the founder, Paulo Bellini, and his family. We started talking to Marcopolo at the end of 2011, early 2012, and basically, we mutually spent a year getting to know each other. Marcopolo had been doing stuff in Latin America, Asia, Russia and Mexico, and there was a clearly defined strategy to get into North America. We were interested in teaming with them in some way, shape or form because of all the things they bring — they understand different types of buses and operating environments and have tremendous experience in sourcing, design, and R&D. The single biggest issue for us was making sure the culture was consistent. If we were going to sell a portion of our business and get in bed with somebody like that, we needed to think the same way, treat people the same way, talk the same way strategically, and it was really fun to get to know the people there.

Finally, Marcopolo decided its strategy was to make a 20% investment, and we quite liked that. We had the benefit of the backing of a very large strategic that knows buses and their technical complexities. We had the benefit of teaming with somebody that was coming to North America. We had the benefit of teaming with somebody that had a product portfolio we could look through that might make sense in our company. They have also been really good to us in terms of letting our teams go down and look at how they do things, such as sourcing and engineering, or what their R&D methods are. So, when a customer looks at New Flyer, or now, NABI, and sees that we have a company like Marcopolo behind us and a corporate structure that is very well received by the marketplace, it really shows we have some stability as a business.

In the chain of events following, we had the benefit of using the first tranche of Marcopolo’s investment to acquire Orion’s parts business. Selfishly, we wanted to increase the size of our parts and aftermarket businesses, but we also had customers asking us if we were going to take this on. The logic was most of the Orion customers also operated New Flyer buses and they felt like they were exposed as to who would provide spare parts support. We worked closely with and convinced Daimler that their customers are looking at us and we were not going to let them down. As a result, the whole issue of coming together, looking ahead and synchronizing cross-reference databases to be better buyers of parts, better planners of parts, and therefore, be more price and cost effective for customers, was exciting.

Then of course, the NABI situation was a unique one. We had literally spent more than three years trying to acquire NABI. We felt the combination of NABI’s products, customers, manufacturing, locations and parts business with what New Flyer had only added stability for the long term. Again, you had customers who had NABI fleets worrying about the long-term viability of that business, and we think we bring stability to it. We also think they bring a competitive angle to New Flyer. NABI can price at different points; go after different types of competitions; and has stainless steel capability and some design expertise, which New Flyer didn’t have previously. We really think it will be a good marriage.


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