Briefing highlights
- Bombardier awaits countervailing ruling …
- … and potential Siemens-Alstom tie-up
- Markets at a glance
- Equifax CEO leaves after data breach
Bombardier in focus
With two key decisions looming, Bombardier Inc. shareholders could be flying on a wing and a prayer today.
First, the U.S. Commerce Department is expected to issue its preliminary ruling in Boeing Co.'s demand for countervailing duties on the Canadian company's C Series planes. There would be a separate anti-dumping decision early next month, unless delayed, and a final ruling on countervailing by the U.S. International Trade Commission in early 2018.
Boeing wants a countervailing duty of 79.41 per cent, alleging that Bombardier struck a deal with Delta Air Lines for C Series aircraft for less than it should have because it was effectively subsidized by federal and provincial governments.
The actual amount of money isn't known.
"While we are likely to see the determination of a countervailing duty [today], we would note that this is a preliminary decision and we continue to believe that BBD is well-positioned to win this case," said Desjardins analyst Benoit Poirier, referring to Bombardier by its stock symbol.
His reasoning behind that is that "(1) Boeing did not even compete for Delta's order, as it does not make an aircraft of Delta's specified size, (2) the high proportion of U.S. content in the C Series (50 per cent), and (3) the significant number of jobs that rely on Bombardier and the C Series in the U.S."
Of course, you've got to keep the political winds in mind, given President Donald Trump's strident trade agenda.
Also in the wings is a potential decision by Siemens AG, which is in negotiations on a rail unit merger with France's Alstom SA, having talked to Bombardier about a similar deal. This also could be unveiled today, Mr. Poirier said in a research note sent Monday and titled "Preliminary duties expected tomorrow - buckle up for some short-term turbulence."
As our European correspondent Eric Reguly reports, the French government is backing that marriage.
Not only would Bombardier have to deal with rail industry giant CRRC Corp. from China, it would also face a much bigger European competitor if the Siemens and Alstom businesses merge.
"This merger would create a business with combined revenues of US$18-billion and could put Bombardier Transportation (BT) at a competitive disadvantage, in our view, given its smaller size (BT recorded revenues of US$7.6-billion in (2016)," Mr. Poirier said.
"Bottom line, we believe that BBD shares could be under pressure [today] depending on the outcome related to the countervailing duty and the rail merger," he added.
"We would view any share price weakness as a buying opportunity for long-term investors, as we continue to believe BBD shares have the potential to reach C$5 per share by 2020 as management proceeds with its 2020 plan."
Bombardier said its policy is to not comment on its stock.
Read more
- Matt Lundy: Bombardier’s pivotal week: Five things you need to know
- Eric Reguly: Bombardier under pressure as France backs looming Siemens, Alstom rail tie-up
- Nicolas Van Praet: Bombardier eyes plan B amid dispute over C Series
- Daniel Leblanc: Trudeau threatens to block Boeing from federal contracts over Bombardier dispute
- Bombardier’s turnaround challenged by threats to rail and jet businesses
- U.S. set to rule on Boeing, Bombardier trade dispute
- Michael Byers: Beating up on Boeing is bad for Canada
Markets … need to be able to get past the Trump/Kim war of words
Kit Juckes, Société Générale
Markets at a glance
Read more