(The Montreal Gazette posted the following article by Francois Shalom on its website on February 19.)
MONTREAL — The appointment yesterday of André Navarri to head Bombardier Inc.’s rail operations augurs well for the underperforming division, analysts said yesterday.
The 50-year-old Navarri spent 20 years at Bombardier’s main competitor, Alstom SA, becoming president in 1996 of the company’s rail-transport arm.
His appointment as president of Bombardier Transportation takes effect Sunday, and is the latest in a string of appointments putting Bombardier president Paul Tellier’s stamp on the company – the previous one being Wolfgang Toelsner as chief operating officer of the rail division. Navarri will be his boss and will report directly to Tellier.
Perhaps not coincidentally concerning Navarri’s appointment, the Alstom rail operations under his stewardship posted a profit margin before interest and taxes of nearly six per cent. That is the minimum profitability level which Tellier has said many times he wants Bombardier Transport to reach, up from the current 4.5 per cent.
Cameron Doerksen, who follows Bombardier for Dlouhy Merchant Group, said he’s heartened that Navarri’s experience and achievements fit almost exactly the portrait of Bombardier’s ideal candidate. “He has significant experience running international operations and running a rail business.”
Particularly significant, added Pierre-Yves Terrisse of Desjardins Securities, is Alstom’s track record during and after his tenure.
“In 2000, his last year there,” Terrisse said, “Alstom’s (earnings before interest and taxes were) 5.6 per cent (of revenues). Last year (three years after Navarri’s departure), they had dropped to one per cent.”
He “led this business to the leading position in the sector,” Bombardier acknowledged of the French company, which designed and built the TGVs (train à grande vitesse) in France. But Bombardier overtook Alstom in size when it bought German train-maker Adtranz, becoming the world’s biggest rail-equipment manufacturer.
Navarri’s business life hasn’t been unblemished, though. After leaving Alstom in 1999, he became chief executive officer of Valeo SA, a major French car and truck-parts manufacturer with 68,000 employees and more than 200 facilities in 26 countries.
But he lasted only 10 months. He was sacked by the board, which blamed him for fiddling with long-term strategy while failing to respond quickly enough to a sharp industry downturn.
But Doerksen said it’s unclear whether he can be blamed entirely for that, or if he was used by the Valeo board as a scapegoat.
One thing is clear, though: his mandate will be straightforward.
“His mission?” Terrisse said. “He’ll have to close plants, cut staff, cut the number of suppliers, improve the supply chain and generally realize economies everywhere.”
Bombardier will probably have to close six plants, mostly in Europe, where there is substantial overlap and duplication in product lines and services, Terrisse said.
Tellier is currently shuttling back and forth to Europe weekly to try to restructure the division which he said focused too much on growth at the expense of profitability, implicit criticism of Pierre Lortie, who on Nov. 25 abruptly left the post Navarri will fill.
Bombardier spokesperson Dominique Dionne said that Navarri was short-listed after a search led by Bombardier human-resources vice-president Carroll L’Italien and a European headhunter’s firm turned up 12 names, later winnowed to seven.
“He was interviewed by (Bombardier board member) Jean Monty, (chairperson) Laurent Beaudoin, (aerospace head) Pierre Beaudoin, M. Tellier, of course, our CFO, Jean Alarie, and Carroll L’Italien and the choice was approved unanimously by the board (Tuesday) evening.”
The market was not impressed by the announcement, though. Shares lost 26 cents to close at $6.65 each.
Doerksen said that the “problem is the market is perhaps expecting a huge improvement” overnight.
“But the reality is that this turnaround will take not a matter of months but years. I have faith in the operational improvement, but it will take time.”