Bombardier shakes up management ranks once again

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Bombardier Inc. chief executive Alain Bellemare is shaking up senior management, raising hopes he will quickly put the company back on course during one of the most difficult periods in its history.

Two months into the job as CEO, Mr. Bellemare is replacing the company's chief finanancial officer as well as its head of commercial aircraft. The plane and train maker, which has struggled with delays and cost overruns with its key C Series jet, has also hired outside strategic advisers to conduct a review of its passenger-plane business.

"It's a pretty good sign that the CEO wants to make dramatic changes across the board," said Patrick Horan, a principal at Agalith Capital in Toronto, which holds a position in Bombardier among roughly $100-million in assets under management.

"It's probably going to have a positive circular effect on earnings and the stock price."

As part of the changes announced Thursday, Bombardier said Pierre Alary, who's been Bombardier's CFO since 2003, will retire. He'll stay on until a replacement is found.

Mike Arcamone, a former General Motors Co. executive who joined Bombardier in 2012 to lead the effort to develop the new C Series airliner, is also leaving the company immediately. The larger commercial aerospace unit was a poor financial performer during his tenure, losing $140-million before interest and taxes last year, Canaccord Genuity analyst David Tyerman noted.

Mr. Arcamone has been replaced by Fred Cromer, an industry veteran who was most recently president of International Lease Finance Corp. Founded by billionaire Steven Udvar-Hazy, ILFC is considered one of the top names in aircraft leasing worldwide.

The moves mark the first major senior leadership changes under Mr. Bellemare, who now has an opportunity to put his mark on the company by forming his own team with fresh mandates, RBC Dominion Securities analyst Walter Spracklin said. Mr. Bellemare was recruited as CEO as Pierre Beaudoin relinquished daily operational control of the company to become executive chairman. Investors had been pressing for a change at the CEO level following a series of missed financial targets and setbacks for its C Series plane.

"These changes will instill a fresh perspective at Bombardier, driving execution, alignment and intensity across the entire company," Mr. Bellemare said in a statement.

Bombardier said it has also hired Plane View Partners and its chairman, Henri Courpron, as strategic advisers. Mr. Courpron is a former senior executive at Airbus. His mandate is to conduct an "extensive review" of Bombardier's commercial aircraft operations, with the goal of improving overall performance, Bombardier said.

Critics have said that with six aircraft families in addition to its train operations, Bombardier is still stretched too thin given its financial resources. The company just concluded a capital refinancing worth $2.4-billion that analysts say should see it through the final development of the C Series.

But its plane-making business remains challenged, particularly the unit that sells to commercial airlines. The company's two regional aircraft programs, CRJ regional jets and Q400 turboprops, have lost ground on orders to rivals in recent years and are money-losing at the current production run rate, according to BMO Capital Markets analyst Fadi Chamoun.

Meanwhile, Bombardier's new C Series airliner has been beset by a two-year delay and is $2-billion over its initial budget. Although there is wide agreement that the plane will be best in class in many measures when it enters commercial service as expected in early 2016, concern lingers over the aircraft's order book, which stands at 243 firm bookings.

It's been a challenging 12 months for Bombardier over all. The plane maker dropped its dividend earlier this year and suspended work on a revamped Learjet as part of a push to focus resources on its most critical development programs. Since January, 2014, the company confirmed it has laid off 4,700 full-time employees and contractors in its plane-making business alone, representing about 10 per cent of its permanent aerospace staff.

One worry about the C Series has been over the shakiness of an order by Russian lessor Ilyushin Finance Co. (IFC), which is subject to the effects of sanctions imposed by Canada and other Western democracies on Russia. IFC warned this week it is reconsidering its existing firm order for 32 of the larger CS300 jets. The company also has options on 10 more C Series planes.

IFC is growing impatient with the delays that have pushed back delivery of its planes, spokesman Andrey Lipovetsky said. The cost of the deal has also climbed as Russian firms face tightened access to financing in the wake of sanctions, he said.

The Canadian government has shut off access to cheaper export-bank financing for Russian companies. Export Development Canada spokesman Phil Taylor said EDC has received guidance from the government to not provide support for transactions in Russia. He said EDC held very preliminary talks with IFC but that no deal was made.

Bombardier maintains it can find a solution to IFC's concerns, noting there is a "firm agreement" in place to buy the planes and time before the jets are delivered.

"There are some financing challenges and that was anticipated," Bombardier aerospace spokeswoman Marianna de la Berrera said. "We do have contacts and there are third-party solutions that we could discuss with them in terms of bringing players to the table."

It's important that Bombardier's optimism "be supported by the board of directors of EDC," Mr. Lipovetsky said. He said IFC is keeping all options open in considering the situation.

"A lot of Bombardier's eggs were in the Russian basket," U.S. aerospace consultant Rolland Vincent said, noting a separate joint-venture agreement to build turboprops in the country is also on ice. "One geopolitical event and the whole [Russian] strategy is subject to review."

Bombardier is controlled by its founding Bombardier-Beaudoin family through super-voting shares.