Bombardier boss refuses to hit panic switch despite turbulence
Pierre Beaudoin insisted Bombardier is focused on long term despite recent job cuts, program suspension
DAVOS, Switzerland—The head of embattled plane and train maker Bombardier Inc. said there is no need to panic despite the sharp drop in the company’s share price since trimming its financial outlook and announcing 1,000 job cuts this month.
Pierre Beaudoin, speaking at the World Economic Forum in Davos, Switzerland, said he understands the concerns of analysts and investors but insisted that the Montreal-based firm is focused on the long term, with revenues from new development programs including the CSeries commercial passenger jet about to begin rolling in.
“We must be patient in our business,” Beaudoin said. “We invest a lot before (getting) the first revenues. In any long-term projects, there are ups and downs.”
Bombardier’s shares have plunged to near a six-year low since announcing that development of its Learjet 85 business jet was being put on hold, resulting in the loss of 1,000 jobs in the United States and Mexico.
That raised concerns about whether it has enough cash for its key aerospace development programs, including the CSeries, set for delivery later this year, and the Global 7000/8000 business jet.
Cash flow from its aerospace division will drop to US$800 million from prior estimates of between US$1.2- and US$1.6 billion, it said.
The shares have lost 30 per cent of their value in less than a week.
Several analysts say management’s credibility has taken a hit and it has run out of excuses about not being able to meet its own financial forecasts despite restructuring the aerospace division last summer and proceeding with waves of job cuts that trimmed its overall workforce by 2,900 last year.
For Beaudoin, a member of the family that effectively controls the company through its multiple voting shares, the changes are simply part of the “challenge … to establish a long-term vision.”
Despite declining cash flow, Beaudoin closed the door to potentially selling one of its three aerospace division sectors in an effort to replenish the company’s coffers.
“It’s not in the cards,” Beaudoin said. “Bombardier has access to US$3.8 billion in cash.”
Beaudoin says the recent bad news doesn’t put more pressure on the company vis-a-vis the objectives of the CSeries as well as the time frame in regard to the first deliveries of the new commercial aircraft.
Test flights have resumed since an engine failure grounded the CSeries between May and September 2014, and the first CS100 should be delivered in the second half of 2015, Beaudoin said, refusing to speculate on the implications of another delay.
Without commenting directly on the stock movement, the grandson of Bombardier’s founder said the company’s order backlog, which exceeds US$70 billion—including nearly half in its railway division—should help reassure investors.
Beaudoin said Bombardier’s proposal to assemble Q400 turboprop aircraft in Russia remains shelved due to the economic situation, which has deteriorated rapidly in recent months due to the fall in crude oil prices.
In October 2014, Bombardier announced it was suspending negotiations with the Russian company Rostec on a proposed assembly plant valued at $3.4 billion.
First announced in 2013, the timeline of the project was constantly pushed back, especially in the wake of the economic sanctions imposed on Russia in the wake of the Ukrainian crisis.
“We don’t consider for the moment that it’s the right time to start an assembly line,” Beaudoin said. “There is a good potential (and) we will continue to monitor the situation.”
Beaudoin said he planned to take advantage of his visit to Switzerland to set the record straight with clients, airlines and banks that do business with the Canadian company.
“I think it’s always good to have the opportunity to sit in front of our customers and to the various banks that support us,” Beaudoin said, adding he understands there are questions given the company’s forecasts.
“The ball is in our court, it is for us to deliver.”