08-02-2015, 10:46 AM
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Bombardier's rail division is being divested, at least in part. Clearly, their senior management team disagrees with you. What you are suggesting is rational. However, Bombardier's dual class share structure makes rational corporate governance problematic.
Bombardier's shares are dual class, the Beaudoin family has made their interest clear to remain in aviation. Nothing any class B shareholder can do or vote for will change that. Bombardier will burn cash to the tune of hundreds of millions (>$800 million last quarter) in order to launch their new line of jets.
The proof will be in the pudding. We shall see if Bombardier invests additional resources (as you say above) to mitigate rail division issues and deliver on time. Or if they will (as my analyst feed says) take the $5 million penalty on the TTC contract and just proceed to deliver late, as they continue to focus on aviation.
(08-01-2015, 03:42 PM)tomh009 Wrote: As a CEO, you don't cut the parts that would endanger positive cash flow. The rail division has positive cash flow -- and cutting into manufacturing operations (as opposed to constraining future product development, for example, would endanger the money they can get from the rail division IPO.
For the IPO, it would make more sense to add some incremental resources to the rail division to make sure there are no further delivery delays. For example, temporarily adding 100 people to troubleshoot and resolve problems with deliveries would increase payroll costs by only 0.3% but could have a far greater impact on the IPO proceeds.
Bombardier's rail division is being divested, at least in part. Clearly, their senior management team disagrees with you. What you are suggesting is rational. However, Bombardier's dual class share structure makes rational corporate governance problematic.
Bombardier's shares are dual class, the Beaudoin family has made their interest clear to remain in aviation. Nothing any class B shareholder can do or vote for will change that. Bombardier will burn cash to the tune of hundreds of millions (>$800 million last quarter) in order to launch their new line of jets.
The proof will be in the pudding. We shall see if Bombardier invests additional resources (as you say above) to mitigate rail division issues and deliver on time. Or if they will (as my analyst feed says) take the $5 million penalty on the TTC contract and just proceed to deliver late, as they continue to focus on aviation.