MONTREAL — Paul Tellier is leaving Canadian National Railway to become president and chief executive of Bombardier Inc., one of the world’s biggest makers of airplanes, recreational vehicles and rail equipment, the Canadian Press reported.
“Bombardier needs to be re-energized and I’m looking forward to that challenge,” said Tellier, 63, as shares in the multinational transportation equipment company jumped 14 per cent in massive trading on the news.
The executive shakeup at two of Canada’s best-known companies comes as the Montreal-based firms head in opposite directions. CN earned more than $1 billion in profits last year and has grown through acquisitions into a major continental rail company under Tellier’s leadership.
Bombardier, on the other hand, has been battered by the airline industry slump in the wake of the Sept. 11 terrorist attacks and expects difficult times over the next two years as air carriers scale back aircraft purchases. Bombardier has already cut thousands of jobs to become more efficient, but still faces a squeeze on its aircraft manufacturing division and Bombardier Capital unit.
Tellier wouldn’t comment on whether layoffs or a restructuring will be necessary at any of Bombardier’s operating divisions, which include rail, aeropsace, recreational vehicles and financial services.
“By the end of the second or third week of the job, I will have collected a lot of valuable information . . . and then if there are some decisions that need to be taken, I will take them,” Tellier told a news conference.
No specific reason was given for the sudden resignation of Bombardier chief executive Robert Brown. The 57-year-old Brown joined Bombardier in 1987 and had been president and CEO since 1999.
Bombardier chairman Laurent Beaudoin said Brown “asked to be relieved of his functions” and the company’s board accepted his resignation Thursday.
Beaudoin, a former Bombardier chief executive and a son-in-law of the company’s founder – Armand Bombardier – will serve as Bombardier’s CEO until Tellier takes up his new responsibilities Jan. 13.
Tellier, a Bombardier board member, said he was approached about replacing Brown several weeks ago and decided to accept the new positions “less than 48 hours ago.”
Bombardier stock (TSX:BBD.B) gained nearly 14 per cent, rising 71 cents to to $5.81 with nearly 31 million shares traded, more than four times the company’s average. CNR shares backtracked by $1.30 to $67.56 with nearly 450,000 shares traded.
Hunter Harrison, an American who has been with Canada’s largest railway since 1998, will succeed Tellier as CN’s president and chief executive.
CN chairman David McLean said the company was “ready for Paul’s decision to leave” but Harrison told a news conference after the announcment that he was surprised when Tellier told him earlier this week of his plans to leave.
“I’m still a little bit in shock, to be honest with you,” Harrison said, although he agreed the board had done a lot of planning for a successor to Tellier and he was prepared to eventually take over if offered the job.
“The shock was more the timing than being offered the position,” he said.
Still, Harrison said repeatedly that he and Tellier had worked “hand-in-hand” and that he had no plans to make major immediate changes at the railway’s operations, management team, strategy or financial guidance.
“Externally, I don’t think you will see a difference,” Harrison said. “I think the changes that will happen will be very few and they will certainly be more internal than what can be seen externally.”
Harrison, 58, takes over as CEO at CN on Jan. 1. He was president and chief executive of Illinois Central Railroad from 1993 until it was taken over by CN in 1998.
He assured reporters that CN’s headquarters and that he would re-establish a residence in Montreal. He has been living in Chicago, Illinois Central’s head office.
Tellier led CN to profitability in moves that included a one-third reduction in its workforce to about 24,000 after the former Crown corporation was privatized in the mid-1990s.
Last month, he announced CN will cut another 1,146 jobs – mostly in Canada – due to a disastrous harvest in Western Canada that caused grain shipments to plummet.
Bombardier, which has about 80,000 workers around the globe, has been forced to downsize since September 2001 because of problems afflicting major airline customers.
Tellier said he wants to tackle a “perception” that Bombardier’s financial statements are too difficult to read, affecting how the financial community and shareholders view the company’s performance.
He also pledged to improve “corporate governance” at Bombardier, following Ontario Securities Commission and Toronto Stock Exchange recommendations for improved transparency in company reporting.
Tellier held top-level federal civil service jobs, including clerk of the Privy Council, before taking over at CN in October 1992, overseeing its privatization and turnaround into one of North America’s most efficient railways.
At Bombardier – with revenue last year of $21.6 billion, compared with CN’s $5.7 billion – Tellier takes over a company whose aerospace business is afflicted by the global downturn in the airline industry. Bombardier also is the world’s largest maker of rail equipment, after acquisitions engineered by Brown.
Tellier “is one of the country’s most respected business leaders,” Beaudoin said. “I am very pleased that he has agreed to take up the challenges Bombardier must meet today in a complex environment that also offers good growth prospects.” Analysts were caught off-guard by the news.
One noted that Brown’s departure comes after Bombardier’s stock price fell from more than $14 in June to just over $3 in October.
“There had been some rumblings about (Brown’s departure) being a possibility for six months, given the stock price performance,” said Richard Stoneman, who follows Bombardier for Dundee Securities.
“These sorts of things are not abnormal in the world – it’s only in politics where leaders last 10 years.”
Stoneman added that Tellier “comes with a sterling reputation” after the turnaround of CN.