Bombardier Inc. is shaking up its senior management ranks after the executive in charge of its rail business quit following a turbulent tenure during which he faced allegations of employee corruption and stumbles on several high-profile contracts even as financial performance improved.
Laurent Troger, who helmed Bombardier’s train unit for the past three years, informed the company of his intention to resign and pursue other opportunities, the Montreal plane and train maker said in a statement Thursday. He will be replaced immediately by Danny Di Perna, a manufacturing expert who joined Bombardier last year and was steering its aerostructures business, the company said. Mr. Di Perna’s move means aerostructures will also see a new boss.
The changes come at a critical time for Bombardier as it works through problems with several rail contracts that have delayed payments and affected cash flow after a major restructuring. The company is expected to provide an update on these issues during its fourth quarter earnings call next week. Executives with the Berlin-based rail business, known as Bombardier Transportation (BT), are also trying to get a feel for the options on mergers and partnerships after the European Commission’s decision to block a tie-up between France’s Alstom SA and Germany’s Siemens AG.
“[BT] has not yet been completely fixed but it’s on its way,” said Michael Willemse, senior research analyst at Taylor Asset Management, which owns Bombardier shares. “If they reiterate guidance next week, I think that will calm a lot of anxiety that seems to be in the stock right now.”
Bombardier shares gained nearly 5 per cent in Toronto trading Thursday, closing at $2.15. The company has lost half its market capitalization over the past six months amid broader market anxiety, particularly over heavily indebted corporations. The decline accelerated when Bombardier unexpectedly cut its cash flow forecast during its Nov. 8 earnings report, a roughly US$600-million miss the manufacturer blames on delays in train deliveries and expects to start making up this year.
Bombardier chief executive Alain Bellemare picked Mr. Troger, a company veteran who previously worked for Alstom, to lead BT in late 2015 after the departure of Lutz Bertling. He was given the task of reshaping the rail business to achieve higher and more predictable profitability and reverse the company’s reputation as a chronic underperformer.
By many measures, he succeeded. He drastically reshaped the unit by cutting thousands of jobs at various assembly facilities and improving contract execution while booking more projects that use existing designs. The order book grew 13 per cent under his watch, to US$34-billion, while margins on earnings before interest and taxes jumped to about 8.5 per cent from 5.5 per cent.
By other measures, he did not. The company’s problems delivering rail equipment continue to frustrate customers in places such as Toronto, Switzerland and France. Mr. Bellemare is banking on the train business to generate half the US$20-billion in companywide sales he is aiming for by 2020.
There are also unresolved ethics issues.
Mr. Troger’s resignation comes as a high-stakes audit by the World Bank continues into how a Bombardier-led consortium won a US$340-million deal six years ago in Azerbaijan. Railway industry sources told The Globe and Mail that the audit, which began in mid-2017, is close to completion.
If the audit concludes that corruption played a role in how Bombardier won the contract – which was 85 per cent funded by the World Bank – Bombardier could be barred from bidding on any future World Bank projects. That would be a massive blow to the company as a whole, and particularly its railway unit, which has based its growth strategy on developing markets such as India, China and Brazil, where the World Bank is a major player.
The Azerbaijan project is also the subject of an investigation by Sweden’s National Anti-Corruption Unit, which in 2017 published some of its evidence in a Stockholm court.
“An outside appointment may be the welcome change that is needed at BT given the problems that have dogged the segment for many years now,” Scotiabank analyst Turan Quettawala said in a note. “However, it may also cause some execution risk at a time when BT needs to deliver on its [free cash flow] commitments.”
Mr. Troger did not respond to a request for comment Thursday. He told employees in an internal memo that he was proud of what the unit achieved and that “it is now time” to hand over the reins to a new leader.