Bombardier dismisses Tellier from top post

Aviation International News » January 2005
November 2, 2006, 10:14 AM

After a two-year period that saw Bombardier lay off thousands of aerospace workers, divest itself of aviation and non-aviation assets, close a key service center (in Indianapolis) and consolidate business aircraft manufacturing, the company’s board of directors last month acted on the recommendation of its human resource and compensation committee to fire CEO Paul Tellier. The move came as part of a management restructuring that saw executive chairman Laurent Beaudoin, aerospace division president Pierre Beaudoin and rail division head Andre Navarri form a new three-member office of the president. Tellier, who assumed the CEO post from Robert Brown only two years ago, left the company a year before his three-year contract expired.

Laurent Beaudoin, Pierre’s father, has assumed the company’s CEO duties for the second time in his 41-year career with Bombardier. During a December 13 conference call Beaudoin said the decision arose mainly as a reaction to Tellier’s stated plan to leave the company once his contract expired, and that the board felt a perceived lack of stability could undermine “shareholder value.”

Last month Standard & Poor’s lowered the company’s credit rating to junk status and issued a “negative” outlook for Bombardier’s regional jet prospects. The company’s stock price has dropped by more than two-thirds since Tellier took over.

During his two-year tenure, Tellier brought drastic changes to the company’s portfolio and structure, including the sale of Belfast City Airport in Northern Ireland and its defense services and recreational products division. Tellier also closed factories, changed the company’s accounting methods, cut shareholder dividends in half and issued a $1.2 billion equity offering. Just last month the company sold its interest in Mexican freight car builder Greenbrier-Concarril and gained approval to de-list itself from the Frankfurt and Brussels stock exchanges.

If Bombardier continues Tellier’s restructuring plan, more than 20,000 workers will have lost their jobs between 2003 and the end of this year.

Last October, Bombardier announced that during the next 12 to 15 months it would consolidate all Learjet manufacturing, completions and deliveries in Wichita, and send all Challenger work to Montreal. Specifically, Learjet 40, 45 and 60 completions will move from Tucson to their assembly site in Wichita. Challenger completions, also done in Tucson, will move to Montreal, where those airplanes now undergo assembly.

“The corporation hired Mr. Tellier as an agent of change and he has delivered,” said the elder Beaudoin. “Considering the evolution of the business and our challenges at this point, the corporation has come to an agreement with Mr. Tellier and I am pleased that we are parting ways on good terms. We thank him for his contribution to the evolution of our corporation.”

On December 1 Bombardier announced plans to lay off more than 2,200 employees and cut next year’s CRJ200 production by another 20 percent. Only two months earlier and six months after it said it would lay off 3,000 aerospace employees, Bombardier announced a 25-percent cut in CRJ200 deliveries and a decision to slash another 2,000 jobs at its plants in Belfast and Dorval, Mirabel and St. Laurent, Canada. With last month’s regional jet production cuts, CRJ200 deliveries will fall from 98 to 54 during Bombardier’s next fiscal year, which starts January 31.

Not all went sour during Tellier’s term, as comparatively strong business jet sales helped the company turn a C$23 million after-tax profit during the second quarter and another C$10 million gain in the third quarter. Nevertheless, those modest victories did little to sway market sentiment, as stock prices continued to tumble.

“The next step [of Bombardier’s restructuring] is to develop and implement the strategic direction that will focus on increasing value for our shareholders,” said Beaudoin. “The committee concluded that it would not be advisable to confer the critical responsibility of building our long-term strategy to someone who has expressed his desire to leave the corporation in the near term.”

For 10 years before his appointment as Bombardier CEO, Tellier served as president and chief executive of the Canadian National Railway Company, overseeing its privatization and winning accolades from his peers, such as Canada’s Outstanding CEO of the Year for 1998, 2002 and 2003, according to the ninth annual survey of Canada’s Most Respected Corporations, conducted by Ipsos-Reid and sponsored by KPMG.

Under a plan approved in May last year by Bombardier’s board of directors, Tellier would have received a bonus of as much as C$10.5 million next year for meeting profit and sales targets.

Additional reporting by Gordon Gilbert.

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