A Bombardier Perspective on Doing Business in China

A Bombardier Perspective on Doing Business in China Andres Friedman Analyste principal, Stratégie et développement d’affaires Chaîne d’approvisionnement BOMBARDIER AERONAUTIQUE March 2006

Company Overview Bombardier in China Business Environment in China Lessons Learned 2

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) 3

A worldwide presence Australia Italy Austria Mexico Belgium Norway Brazil People’s Republic of China Canada Poland Czech Republic Spain Denmark Sweden France Germany Switzerland Hungary United Kingdom United States India Bombardier’s manufacturing facilities 4

Bombardier regional aircraft Bombardier* Q 100/200* Bombardier* Q 300* Bombardier* Q 400* Bombardier* CRJ 200* Bombardier* CRJ 700* Bombardier* CRJ 900* * Trademark(s) of Bombardier Inc. or its subsidiaries. 5

Bombardier business aircraft Bombardier* Learjet* 40 Bombardier* Challenger* 604 Bombardier Learjet 45 Bombardier Challenger 300 * Trademark(s) of Bombardier Inc. or its subsidiaries. Bombardier Learjet 60 Bombardier Challenger 800 Bombardier Learjet 45 XR Bombardier Global 5000* Bombardier* Global Express* 6

Transportation, a full spectrum of railway solutions Light Rail Vehicles FLEXITY* Outlook (Linz, Austria) Regional Trains Double-Deck Coache Metros Commuter Trains MOVIA* - Guangzhou Metro Line 2 (China) EMU M-7 (New York, USA) Interregional Trains Intercity Trains Electrostar* EMU (UK) Voyager** DEMU (UK) Locomotives Freight Wagons TRAXX* F 140 AC (Switzerland) Low-floor freight wagon (Germany, Denmark, Israel, Luxembourg) High-speed Trains ICE** 3 EMU (Germany/Netherlands) * Trademark(s) of Bombardier Inc. or its subsidiaries. ** Trademark(s) of third parties. 7

Transportation, a full spectrum of railway solutions Total Transit Systems Monorail (Las Vegas, USA) Propulsion and Controls Services Fleet Management (London, UK) Rail Control Solutions Wayside Equipment Bogies Mitrac* TC 1000 Traction Converter for Medium Power Application 8 * Trademark(s) of Bombardier Inc. or its subsidiaries.

Corporate Overview Bombardier in China Business Environment in China Lessons Learned 9

Bombardier in China Rail transportation § 4 business offices • Aerospace § Beijing, Shanghai, Guangzhou, Hongkong • § § 3 joint ventures Metros (Changchun) • Inter-city cars (Qingdao) • Propulsion (Changzhou) Strong market presence • Beijing, Shanghai, Zhengzhou, Shenyang, Guangzhou • § Beijing, Hong Kong Existing supply relationships: • • § 2 business offices Xian Aircraft Corp. - CL-415 components Shenyang Aircraft Corp. - Q-Series doors Strong market presence • • 2, 100 employees No. 1 in regional aircraft - 35 aircraft with 7 operators No. 1 in business aircraft - 44% of installed base 10

Bombardier Transportation in China Locations and employees Bombardier Inc. Representative Office CBRC Joint Venture 合资企业：CBRC Established: in 1996 成立于1996年 Changchun Shenyang Bombardier Transportation Engineering Service (Beijing) Co. Ltd. Established: in 2005 BSP Joint Venture 合资企业： BSP Established: in 1998 成立于1998年 Beijing Bombardier Transportation Railway Equipment (Qingdao) Co. Ltd. Established: in 2005 Qingdao 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 Changzhou Bombardier Transportation China Representative Office Bombardier Railway Transportation Equipment (Shanghai) Co. Ltd. Established: in 2003 IPO (Shanghai) Shanghai Guangzhou Hong Kong Bombardier Transportation China Representative Office 11

Bombardier Aerospace in China Bombardier Aerospace Beijing Office Bombardier Aerospace Beijing Depot Shenyang Dash 8 Q 100/200/300 Doors Sous-contract (SAC) depuis 1986 Beijing Bombardier Aerospace Shanghai Regional Aircraft Customer Support Office Xi’an Shanghai CL 215/415 Parts souscontracts (XAC) depuis 1980 Hong Kong Bombardier Aerospace Flexjet Asia pacific & BBAD bureau de vente 12

Corporate Overview Bombardier in China Business Environment in China Lessons Learned 13

Unique Environment § Unique Opportunities Still transitioning from a § Economic growth planned to a market economy § Emerging consumer society § State sector is still important § Installed industrial base § Still a political aspect to many § Commitment to modernize and large purchasing decisions § improve = sales opportunities • Industry approvals necessary for large • Infrastructure projects § Central Government • Military Personal relationships remain very important § Many new and/or improving suppliers – (Global Sourcing) 14

Xuzhou – Lanzhou (1400 km) Qingdao – Taiyuan (770 km) Beijing – Harbin/Dalian (1860 km) Beijing – Shanghai (1300 km) Intercity Transport Systems (2000 km) Beijing – Shenzhen (2230 km) Notes Hangzhou – Shezhen (1600 km) Dedicated Passenger Line Existing Line Nanjing – Chengdu (1900 km) Hangzhou – Changsha (880 km) 15 36

China Urban Transit Market Overview Existing Beijing Shenzhen Wuhan Shanghai Guangzhou Hong Kong Nanjing Chongqing Tianjin Dalian Changchun Under Construction Shenyang Xi’an Qingdao Suzhou Hangzhou Planning Harbin Chengdu State Criteria for Urban Metro Project Anshan Shijiazhuang Changsha Kunming 16 Wenzhou Xiamen Macau

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 17

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 18

Corporate Overview Bombardier in China Business Environment in China Lessons Learned 19

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 20

A Bombardier Perspective on Doing Business in China