The heavily indebted Canadian train and aircraft manufacturer Bombardier is apparently on the brink. The Montreal-based company cut the last connections on Thursday to the smallest Airbus passenger plane, the A220, which had been developed by Bombardier.
The move will help “in our efforts to build our capital structure” and will complete the phase-out of commercial aircraft construction, said Bombardier CEO Alain Bellemare. The shares in the A220 go to the majority owner Airbus and the province of Quebec.
Huge mountain of debt
The train division based in Germany is also about to be sold: According to insiders, the board of directors of French rival Alstom met on Wednesday evening to decide on a bid for Bombardier’s largest division, which, according to media reports, is worth almost seven billion euros.
This leaves the traditional group, which had once started building snowmobiles, only the construction of business planes, which are primarily known under the “Learjet” brand.
Bombardier groans under a mountain of debt of CHF 9.7 billion. The group had already handed over the aircraft parts division (aerostructures) to the supplier Spirit Aerosystems for more than a billion in the autumn.
Not very profitable train orders
The biggest cut would be the sale of the train division to Alstom. After the failed merger with Siemens Mobility, the French made a new attempt to consolidate the industry. The alliance with Siemens, which was supposed to stand up to the Chinese industry giant CRRC, had failed due to opposition from the EU antitrust authorities.
Bombardier had also negotiated with Siemens before Alstom. A merger of the two could rather find the approval of the competition keeper, because Bombardier and Alstom are not so dominant in high-speed trains (TGV, ICE) and the Canadians are hardly represented in signaling technology.
The Zug division is considered to be the most valuable part of the group – although it too is struggling with operational difficulties that recently forced Bombardier to warn of profits. The order backlog was large at $ 35 billion, but many orders were not very profitable, BFM reported.
It’s about job security
Bombardier will receive up to $ 591 million from its previous partner Airbus for the remaining shares in the Airbus A220 program. In the future, 75 percent will belong to Europeans, 25 percent to the government of the Province of Quebec. Bombardier had given up the majority for a Canadian dollar a year and a half ago.
The complete exit saved the Canadians, according to their own statements, $ 700 million, which they would have had to pay for the ramp-up of production. However, Bombardier has to write down $ 1.6 billion on the A220 project. This also resulted in a net loss of $ 1.6 billion in 2019, with sales of $ 15.8 billion.
Thanks to the Airbus commitment, a good 3,300 jobs have been secured in Quebec – that is what the provincial government wants. Since Airbus joined, orders for the A220 have skyrocketed by almost two thirds to 658 aircraft. (SDA / gif)