Bombardier Inc. (IW 1000/220) said Chairman Pierre Beaudoin will relinquish executive duties while continuing to lead the board, partly bowing to a public uproar over pay practices after major investors withheld support for his re-election.
The company didn’t immediately explain the practical impact of the shift. Beaudoin intends to give up his executive responsibilities effective June 30 if approved by the board, Bombardier said Thursday in a statement.
The move falls short of the changes sought by Bombardier’s largest outside shareholder, Caisse de Depot et Placement du Quebec, which criticized the board for a “lapse of governance” on compensation and pushed for an independent chairman. That sparked a groundswell of opposition to Beaudoin by Canadian pension funds after Bombardier raised pay while cutting thousands of jobs and relying on taxpayer support for a $6 billion jet program.
Beaudoin’s family controls the Montreal-based company through a special class of multiple voting shares.
The manufacturer used $593 million in free cash flow in the first quarter, better than the $809 million that was the average of analysts’ estimates compiled by Bloomberg. Cash use a year earlier was $750 million. The company also reaffirmed its full-year financial guidance.
“Doing what it said it would do is building credibility,” Walter Spracklin, an analyst with RBC Capital Markets in Toronto, said in a note to clients. Cost-cutting efforts are taking hold and “we believe investor confidence will continue to improve as this management team executes and delivers on its targets.”
Chief Executive Officer Alain Bellemare is working to recover from two years of shrinking revenue and three straight annual losses. With Bombardier’s shares falling to a 26-year low in 2016, Bellemare announced about 14,500 job cuts to contend with cost overruns and a delay of more than two years in developing the C Series jetliner.
Bombardier said it broke even on an adjusted basis, exceeding the loss of two cents a share average analyst estimate. Revenue of $3.58 billion trailed the $3.85 billion estimate.
Investments in the period included about $275 million mainly for the Global 7000 and $340 million on working capital mostly for a production ramp-up of the C Series jetliner and various rail-equipment projects, Bombardier said in a slide presentation posted on its website.
Bombardier had $3.87 billion of available short-term capital resources as of March 31. The figure includes $2.89 billion in cash and cash equivalents and $980 million in available revolving credit facilities.
Canada’s federal government agreed in February to provide C$372.5 million (US$272 million) in support for the C Series and the Global 7000 business jet program after more than a year of discussions. The federal assistance gave Bombardier an additional cushion, while falling far short of the $1 billion in aid the company had initially sought. Quebec invested $1 billion in the C Series program last year.
By Frederic Tomesco