Bombardier is still extremely competitive despite losing Montreal rail bid, expert says

Bombardier (Bombardier Stock Quote, Chart, News: TSX:BBD.B) may have been outbid on the contract for electric trains in Montreal, but the company’s international presence is still huge, says expert Michel Nadeau, Executive Director of the Institute for Governance, who argues that the company is getting its fair share of contracts in the lucrative European transportation market.

Bombardier has been making headlines with its claim that it may be forced to lay off workers in Quebec as a result of losing a substantial contract to supply trains for the planned Metropolitan Express Network, said to be the largest public transportation initiative for Montreal in over 50 years.

A spokesperson for the company, Eric Prud’homme, has said that the situation is now “five after midnight” for some 300 workers at its facility in La Pocatière, Quebec, who are currently finishing up an order for 468 Azur cars for the Montreal Metro. Once that order is completed in November, Bombardier says it may have to lay off half of its 600 La Pocatière employees.

But the Metropolitan bid is just one of many contracts for the company, says Nadeau, who argues that as the number three rail transportation business in the world, Bombardier is not in a position to ask for preferential treatment from the Quebec government.

“Bombardier Transport is an international corporation based in Berlin, where their major markets are in France and Germany,” says Nadeau, in conversation with BNN. “They tried to get this contract in Quebec … and they failed, so it was extremely difficult for them to say that we can ask for privilege [in Quebec] because in France and in Germany where Alstom and Siemens are major players, Bombardier is getting a fair share of the rail market, which is much more important than North America to Bombardier Transport.”

“The book orders for Bombardier are above $34 billion, so they’re extremely competitive,” he said.

The company recently released its fourth quarter earnings and full year results for 2017, showing strong results in what is being called year two of a five-year turnaround plan for Bombardier. The earnings report showed an EBITDA before special items of nearly $1 billion and a free cash flow increase of 76 per cent to $872 million during Q4, exceeding analysts’ expectations. Shares in Bombardier Inc. (TSX:BBD.B) are up 30 per cent since the start of 2018.

“2018 will be a pivotal year for Bombardier,” said President and CEO, Alain Bellemare, in a press release. “We are moving out of our investment cycle and into a strong growth cycle,” he said.

Asked whether the announcement shows poor corporate governance on the part of Bombardier, Nadeau says that the company is just telling it like it is.

“It’s part of the reality,” says Nadeau. “Bombardier is saying, ‘We’re going to complete their [Azur rail car contract] but we’ll have to lay off workers because we have no other contracts elsewhere. They’re playing the game, but they are telling the truth … It’s not blackmail, it’s not a bluff, it’s the reality