TORONTO — When Prime Minister Brian Mulroney of Canada appointed Paul M. Tellier as chief executive of the Canadian National Railway in 1992, Mr. Mulroney recently recalled, his instructions were simple: “Go down there and clean the place out.”
Mr. Tellier, at the time Canada’s most senior civil servant, did just that, transforming Canadian National from a bloated government bureaucracy into one of North America’s most admiredand efficient publicly traded railroad companies, reports the New York Times.
On Jan. 13, Mr. Tellier will take up a similar challenge at another fabled but troubled Canadian company: Bombardier, which makes vehicles that range from commuter jets and passenger trains to powerboats and snowmobiles.
Those who know Mr. Tellier said they had little doubt that Bombardier, based in Montreal, is in for the same treatment that he administered to Canadian National.
At Canadian National, he cut thousands of jobs, sold nonrailroad businesses and introduced tight schedules. Canadian National, which hauls only freight, is one of two national railroad companies in Canada. But with a widening network in the United States, it calls itself North America’s railroad.
“Six months from now, Bombardier will be another company from what it was two months ago,” said Douglas Young, who was Canada’s transport minister when Canadian National was privatized in 1995, and who works as a lawyer in Ottawa. Big changes are coming, Mr. Young added, and “I don’t think Paul will dilly-dally.”
Mr. Tellier, a 63-year-old fitness fanatic and skier who also rides a BMW motorcycle, has chosen not to give interviews.
But when Bombardier announced his appointment on Dec, 13, he said on a conference call that “there is no way that the shareholders can accept the current performance.”
Bombardier’s stock price has slid more than 75 percent in the last two years. [On Monday, its widely traded Class B shares closed up 6 cents, at 5.29 Canadian dollars ($3.35) on the Toronto Stock Exchange.]
Mr. Tellier, who has been a director of Bombardier since 1997, has been sparing with details of his plans. Bombardier, which started 60 years ago as a snowmobile maker in rural Quebec, is the world’s third-biggest aircraft builder, after Airbus and Boeing. Mr. Tellier believes that the company “needs to be re-energized.”
It will not be easy, analysts contend. Mr. Tellier faces “sizable and plentiful” challenges at Bombardier, said Steve Laciak, an analyst with National Bank Financial in Toronto.
The aerospace division, for example, which makes the popular CRJ commuter aircraft, the Learjet and Global Express corporate jets, received orders for just 43 aircraft in the third quarter, down from 205 a year earlier.
The rail division is embroiled in a 1.4-billion-Canadian-dollar dispute with DaimlerChrysler over Bombardier’s acquisition of a German railcar manufacturer last year.
Adding to the company’s problems — and further depressing its stock price — is a deficit of 1.6 billion Canadian dollars in its pension fund, and a large portfolio of risky debt at a unit that finances sales of products.
Cameron Jeffreys, an analyst at Credit Suisse First Boston in Toronto, wrote in a recent report that Bombardier would probably take large charges on some of its businesses, missing its profit targets for the fiscal year to Jan. 31. He added that he believed that credit rating agencies were set to downgrade Bombardier’s debt and that the company might be close to breaching some of its debt covenants.
Dominique Dionne, a Bombardier spokeswoman, said the company would not comment on its financial condition until Mr. Tellier took over. She noted, however, that the company said in its third-quarter report that its debt-to-capital ratio improved. She added that the company also said that a priority was to improve free cash flow.
Aspects of Bombardier’s corporate governance have also come under fire from analysts. Changes in accounting methods, for instance, have made it difficult to compare present and past performance. Members of the Bombardier family own only 20 percent of the equity, but control about 60 percent of the voting stock.
While Mr. Tellier cannot do much about sagging demand for new aircraft, those who know him say that Bombardier will probably benefit from his energy, discipline and toughness.
A lawyer by training and a graduate of Oxford University, Mr. Tellier led the federal departments of Indian affairs and of energy before Mr. Mulroney named him clerk of the privy council and secretary to the cabinet, the most senior job in the Canadian civil service, in 1985.
Mr. Mulroney said in a telephone interview that he was impressed by Mr. Tellier’s “unflinching loyalty and integrity, but a degree of brashness and toughness, which ensured that he was never pushed around by anyone.”
Several people who know Mr. Tellier said he was generous toward employees who won his respect, but ruthless with those who did not.
At Canadian National, “he didn’t suffer fools at all, he could be pretty intimidating,” said Anthony Hatch, an independent railroad analyst in New York.
One person who has worked with Mr. Tellier said that, “with Paul, it’s up or out.”
Besides steering Canadian National through privatization in 1995, Mr. Tellier has spearheaded the acquisition of two regional railroads in the United States, which have made the Canadian company the only railroad in North America with a network extending from the Atlantic to the Pacific Oceans and the Gulf of Mexico.
In July 2000, Canadian National and the Burlington Northern Santa Fe Corporation of Fort Worth called off a merger plan after regulators imposed a 15-month moratorium on such deals. Mr. Hatch said the collapse of the merger could be seen as Mr. Tellier’s one failure at the railroad. “The timing was wrong, but I’m not sure how much was lost.”
Canadian National has 20,000 fewer workers, 800 fewer locomotives and 22,000 fewer freight cars than it did a decade ago, but it hauls more freight now, and is more profitable. Last month, Mr. Tellier announced that another 1,150 jobs, or 5 percent of the remaining work force, would be laid off to maintain productivity in the face of escalating labor costs and sagging grain traffic.
“Being aggressive is not what you would have expected from C.N. in 1995,” Mr. Hatch said. “By 2000, that was absolutely what you had to expect.”
But Edward Neufeld, a retired Canadian National director, said that while Mr. Tellier was “always very forceful,” he was also “very respectful.”
“There were people on the board from whom he could learn a lot,” Mr. Neufeld said, “and he understood that.”
Buzz Hargrove, president of the Canadian Auto Workers union, recalled being angry a few years ago after Mr. Tellier settled a labor issue without consulting the union. Mr. Tellier flew from Montreal to Fort Myers, Fla., where Mr. Hargrove was vacationing. The two men met at the airport and resolved their differences.
“He’s a man of integrity,” Mr. Hargrove said. “I don’t agree with him, but I do appreciate his willingness to challenge people.”
Mr. Hargrove’s union is currently in a dispute with Bombardier over the outsourcing of 700 jobs at an aircraft plant in Toronto. “I can’t imagine him endorsing what Bombardier management have done to us,” Mr. Hargrove said.
Mr. Tellier has often said that his one regret at Canadian National is that he did not move fast enough. His first task at Bombardier, he said on the day of his appointment, would be to focus on the balance sheet. He then plans to spend two or three weeks visiting as many units as possible.
After that, he said, “if there are decisions to be taken, I will take them.”