(The Canadian Press circulated the following article on December 13.)
MONTREAL — Paul Tellier was dismissed as president and chief executive of Bombardier Inc. on Monday in a bombshell announcement that drove down the company’s stock to a record low.
The big industrial company announced that Tellier is departing “on good terms” and also leaving the company’s board with one year left in his contract. The move is part of a reshuffling of the top management of the troubled aircraft and rail car maker, including the return of chairman Laurent Beadoin to take charge, at least temporarily.
Despite Tellier’s deep restructuring of Bombardier since he took over in January 2003, the company’s shares continue in a freefall.
Common shares of the company, the world’s third-largest aircraft manufacturer and biggest rail equipment maker, crashed to a record low on the news of Tellier’s departure, plunging 65 cents or 25 per cent to $1.90, before rallying to $2.20. More than 42 million shares traded hands before noon.
Two directors also left the board, suggesting the sudden departure did not come without a dispute.
Executive chairman Beaudoin, 66, son-in-law to Bombardier’s founder, will take the CEO title and head a new office of the president that will include his son, Pierre Beaudoin, president of Bombardier Aerospace, and Andre Navarri, president of the Bombardier Transportation rail-equipment division.
“I leave with the satisfaction of having done what needed to be done as a first step before the corporation could focus on developing new avenues of value creation,” said Tellier, 65, one of Canada’s highest-profile corporate executives.
Tellier 65, also leaves the board, along with directors Michael McCain and Jalynn Bennett.
Analyst Steve Laciak said the departure of Tellier and two board members “implies to us that there was disagreement on some strategic issue,” possibly the fate of a new proposed regional aircraft or more asset divestitures.
Laciak, with National Bank Financial, had recommended the stock on Dec. 1 after it fell to record lows, despite many challenges the company faced, including the recent downgrading of its stock to junk status by the major bond rating agencies.
“We though Mr. Tellier could hold things together despite all these issues,” said Laciak. “He obviously wanted to take Bombardier in a certain direction and Mr. Beaudoin disagreed.”
Tellier cut thousands of jobs, closed rail equipment plants and sold the company’s founding business, recreational products such as snowmobiles. After the latest announced cuts are completed in 2006, the total workforce will shrink to 53,000 from 75,000 when Tellier took over nearly two years ago.
The company said the change was on the recommendation of the board’s human resources and compensation committee “based on Mr. Tellier’s stated preference to leave the corporation when his contract, which has only one year to run, expires.”
Tellier stated: “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 was named to the top job at Bombardier two years ago with a strong reputation for transforming CN Rail and taking the former Crown corporation private.
Beaudoin, whose family still controls Bombardier through multiple-voting shares, said Tellier was hired “as an agent of change and he has delivered.”
“Considering the evolution of the business and our challenges at this point, the corporation has come to an agreement with Mr. Tellier and I am pleased that we are parting ways on good terms.”
The office of the president “will provide continuity of leadership while the corporation assesses and implements its medium to long-term strategy,” the corporate statement said.
Bombardier’s biggest challenge is aerospace, as the 50-seat regional jet market which it created has matured, and there is tough competition for its 70-and 86-seat regional jet models. It is close to deciding whether to launch a new larger jet program, that would cost $2 billion US to bring to market.
Kate Warne, Canadian market specialist at the Edward Jones brokerage in St. Louis, agreed that the unexpected departure “suggests that there was something about the strategy that he was pursuing that the family didn’t like or that they wanted to change and I think that’s part of the reason the shares are down so much, and uncertainty over what the next direction is for the company as well.”