(Morningstar.ca posted the following Reuters article by Charles Grandmont on its website on February 12.)
MONTREAL — Bombardier Inc. said on Wednesday it had named Pierre Alary interim chief financial officer, replacing Louis Morin, who is leaving the company, in the first major management shake-up since chief executive Paul Tellier took the helm of the transportation group.
“It’s Mr. Tellier’s decision. He wants to surround himself with a new team,” Bombardier spokeswoman Dominique Dionne told Reuters.
Morin’s departure is effective immediately and Alary is expected to keep the job until the search is completed for a new CFO at the world’s third largest maker of commercial aircraft and the No. 1 maker of railway rolling stock.
“It’s a process that should take several weeks,” Dionne said.
Alary joined Bombardier in 1998 as vice-president of finance for Bombardier Transportation. He was promoted to vice-president of finance for Bombardier Inc. on Nov. 1, 2002.
Ousting Morin from the CFO job he had held since April 1999 is the first major decision by Tellier since he replaced Robert Brown as the head of the troubled transportation group just last month.
One of Tellier’s stated goals when he announced he would join Bombardier was to address concerns over the complexity of the company’s financial statements.
That’s only a small part of the job he is facing, however, as Bombardier is caught in a severe downturn in the aerospace sector, compounded by financial problems at U.S. airlines, its key customers, and weak economic growth in the United States.
Bombardier laid off 2,000 employees or 5 percent of its aerospace workforce last August as it idled its business-jet plants because of weak demand.
Orders for its Canadair Regional Jets are also a source of concern with struggling U.S. airlines in the midst of restructuring in the aftershock of the Sept. 11 attacks in a bid to avoid a financial rout.
Many investors hope that Tellier can keep up his reputation as a turnaround artist now that he’s joined Bombardier.
Tellier made his reputation remolding Canadian National Railway Co. from a bloated federally owned corporation into a privatized and profitable railway, ranked the most efficient in North America.
A key part of his mission is seen to be putting some muscle back in Bombardier’s share price, which has fallen 66 percent from its year high of C$15.67. The stock jumped to C$6 the day Bombardier announced Tellier’s appointment, but it has since lost ground. The stock closed down 4 Canadian cents at C$5.07 on the Toronto Stock Exchange on Wednesday.
Analysts expect the stock to see-saw until Tellier offers a clear strategy for Bombardier, seen as Canada’s flagship industrial group.
The many uncertainties hovering over the company pushed Moody’s to cut its senior debt ratings by two notches last month.
Moody’s said Bombardier “retains a sound business position” in aerospace, but its operating and cash flow performance in this area will remain under pressure through 2003 or beyond. Rating cuts usually means an increase in borrowing costs.
Standard & Poor’s also warned last month it could lower Bombardier’s rating for similar reasons.
Both ratings agencies also have concerns over Bombardier’s plans to wind down its financing arm, Bombardier Capital. As well, The sale of some loan portfolios, especially in the business-aircraft segment, appears difficult given the weakening value of used aircraft in the current aerospace downturn.