(The Canadian Press distributed the following article by Allan Swift on June 10.)
MONTREAL — Paul Tellier, who became chief executive of troubled Bombardier Inc. five months ago, will have a lot on his shoulders as he meets shareholders for the first time at the corporation’s annual meeting Tuesday.
Investors in the manufacturer of aircraft and rail equipment, used to steadily rising returns for many years, will be anxious to know what Tellier can do for stock values which have plunged to a fraction of what they were just a year ago.
Chairman Laurent Beaudoin, heir to the family-controlled company, named Tellier to replace Robert Brown last December as the company appeared to go into a tailspin due to the world aviation slowdown.
Tellier, granted more than one million stock options when he took on the job in January, with a salary of $1.9 million, has already taken bold steps to turn around the company.
One of these surprise decisions was to put up for sale the recreational productions division, maker of the famous Ski-Doo snowmobile on which the company was founded by inventor J. Armand Bombardier.
The Bombardier family, led by Beaudoin, son-in-law to the founder, has assembled partners to make a bid on the division.
Tellier also announced 3,000 job cuts in the aerospace sector.
Analysts applauded the moves, but the stock market has not responded.
Bombardier common stock (TSX:BBD.B) closed Monday at $4.05, unchanged on the day and down from the $5.45 it rose to when Tellier’s hiring was announced in December.
Montreal shareholder Flavio Codarin, who bought in at $25 three years ago, said Monday he intends to demand how the new chief executive failed to see Bombardier’s looming problems as Tellier sat on its board for the past five years.
Codarin said he doesn’t have much faith that Tellier can turn the company around.
Analyst Steve Laciak at National Bank Financial notes that Bombardier is facing a new and unexpected challenge – the rising Canadian dollar. It exports a large portion of its products to the United States from Canada.
Laciak’s 12-month target on the stock is down to $3.25.
“Manufacturing will not be a good place to invest in 2003,” Laciak said in a commentary.
On Monday Bombardier confirmed Pierre Alary as chief financial officer and senior vice-president, four months after Alary had taken the job on an interim basis.
He replaced Louis Morin, who left the company after 20 years in mid-February.
Ex-CEO Brown, a former civil servant like Tellier, received $5 million in compensation on leaving the company, including consulting fees for two years, according to the pre-meeting proxy circular.