Bombardier Hires Outside CEO, Announces New Financing Plan

By Raymond Jaworowski, Forecast International

Former UTC executive Alain Bellemare has been named the new president and chief executive officer of Bombardier Inc.  Bellemare has also become a member of the company’s Board of Directors.  Laurent Beaudoin retired as chairman of the board after more than 50 years at the helm of the corporation, though he remains on the board with the title of chairman emeritus.  His son, Pierre Beaudoin, has stepped aside as president and CEO and has become executive chairman.

Bellemare is the first person outside the Beaudoin family to serve as Bombardier president and CEO since former railways executive Paul Tellier left those positions in 2004.  Members of the Beaudoin and Bombardier families own the majority of Bombardier’s Class A shares, thus effectively controlling the company.

At UTC, Bellemare had been president of Pratt & Whitney Canada, president of Hamilton Sundstrand, and, most recently, president and CEO of UTC Propulsion and Aerospace Systems.  Since stepping down from the latter position this past January, he has served as a consultant to UTC.

Bellemare takes over day-to-day command at Bombardier during a time of uncertainty for the Canadian company, especially in the firm’s aerospace business.  In perhaps its most highly publicized program, Bombardier is developing the CSeries, an all-new family of 108-160 passenger jetliners.  By spanning such a wide seating/capacity range, the CSeries is being positioned by Bombardier to compete in essentially two different markets.  The CSeries provides Bombardier with a needed counterweight to regional jets from its Brazilian rival Embraer, and it also enables Bombardier (for the first time) to encroach upon the lower end of the narrowbody market currently dominated by Airbus and Boeing.

However, the ambitious CSeries project has been hit by cost overruns and is surrounded by rumors of impending schedule delay.  Meanwhile, Bombardier is developing two new business jet models, the Global 7000 and Global 8000, that are intended to compete with Gulfstream’s groundbreaking (and already in service) G650 ultra-long-range executive jet.

This past January, Bombardier announced a “pause” in development of another new business jet, the all-composite Learjet 85 mid-size jet, due to weak demand.  Also in January, Bombardier signed an agreement to sell its Military Aviation Training business to CAE.  The transaction, which is expected to close later this year, includes responsibility for the NATO Flying Training in Canada (NFTC) program that trains military pilots for Canada and various other countries.

At the same time that it announced the management shake-up, Bombardier also announced a new financing plan in a bid to strengthen the company’s balance sheet.  Bombardier said that, depending on market conditions, it will issue approximately $600 million in new equity, and access capital markets for up to $1.5 billion in new long-term debt capital.  To complement this plan, the company said that it will explore various initiatives to reduce debt, such as “certain business activities’ potential participation in industry consolidation.”  This could involve the sale of certain of the company’s assets.

Bombardier also said that its free cash flow would be more appropriately applied to bolstering its financial structure and investing in its core programs and businesses.  In line with this commitment, the company suspended the declaration of dividends on its Class A and Class B shares.

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