(Reuters circulated the following article on December 13.)
MONTREAL — Paul Tellier stepped down as president and chief executive of Bombardier Inc. (BBDsvb.TO) on Monday, surprising investors and sending the train and plane maker’s shares down as much as 26 percent to a 10-year low.
Tellier’s departure, which analysts viewed as an ouster, comes one year before the end of his three-year contract at the world’s third-largest civil aircraft maker and No. 1 manufacturer of trains. Two independent members of the 14-person board also resigned.
Bombardier did not name an immediate successor to Tellier, who sold the company’s legacy snowmobile division, slashed its work force and announced plans for the $2 billion development of a new airliner seating 110 to 135 passengers.
Bombardier has had to chop output of its 50-seat regional jets on slack demand and deep financial troubles at key U.S. airline customers, and its European train operations have run into a moribund market for investment in rolling stock.
Laurent Beaudoin, 66, executive chairman at Bombardier and member of the family that controls the Montreal-based company, will assume chief executive responsibilities.
He will chair a new office of the president, joined by his son Pierre, who is president of Bombardier Aerospace, and Andre Navarri, president of rail unit Bombardier Transportation.
Analysts said Tellier’s resignation as CEO, as well as a director, appeared to stem from a boardroom battle, possibly over whether to proceed with the new C-Series passenger jet.
In Ottawa, Industry Minister David Emerson said he will ask cabinet this week for authority to negotiate subsidies for the new jet. Bombardier is seeking $700 million in government aid.
In a research report, National Bank Financial analyst Steve Laciak said the board disagreement may have been over the fate of the proposed new plane or on the issue of asset sales.
“We need to know more. This is obviously a negative development,” Laciak wrote. He suspended his “outperform” rating on the stock.
Bombardier’s subordinate voting shares dropped as much as C$1.87 on the Toronto Stock Exchange, rebounding to close at C$2.11, down 44 Canadian cents, or 17 percent. Volume topped 90 million shares, more than 10 times the 90-day average, making the stock the top TSX trader.
Bombardier said Michael McCain, chief executive of Maple Leaf Foods Inc. (MFI.TO), and Jalynn Bennett, president of a Toronto consulting firm, had resigned as board members.
The board accepted Tellier’s resignation on Monday morning after an agreement worked out over the weekend, company spokeswoman Dominique Dionne said.
“There were probably some very, very strong discussions, and probably these two members were not in agreement with the decision,” she said.
WANTED TO COMPLETE RESTRUCTURING
Tellier, 65, former CEO of Canadian National Railway Co. (CNR.TO), and once Canada’s top civil servant, was appointed to lead Bombardier in January 2003.
In a recent interview with Reuters, Tellier said he hoped to remain at the helm until the completion of a restructuring at Bombardier’s key aerospace and transportation units.
“His preference was to leave when his contract would be over next year,” Dionne said.
But on Monday, Bombardier said Tellier was leaving immediately.
“I understand the board’s concern that I would not be there for the long term to develop and execute strategies, and the need to reshape the management structure at this time,” Tellier said in a statement.
Standard & Poor’s Ratings Service warned that with Tellier’s departure, it may cut Bombardier’s already junk-rated debt even further, on concerns that include the potential for a derailing of cost-reduction initiatives.
“The departure of Tellier, as well as those of two independent directors, increases the already considerable influence of the controlling shareholder family,” S&P said.