A.38 -


HL Bombardier predicts healthy rise in sales

Byline: Adam Corelli


DD 06/15/89

SO Ottawa Citizen (OTT)

Edition: Final


Page: F19

Category: NEWS


LP --- Bombardier predicts healthy rise in sales --- TORONTO _ Bombardier Inc.'s acquisition of Short Brothers PLC Inc. and other recent coups will help triple annual sales to $4 billion by 1992, says Bombardier chairman and chief executive Laurent Beaudoin. Its Belgian subsidiary, BN Constructions Ferroviaires et Metalliques, has just received a $59-million contract to supply 32 motorized vehicles for the Brussels subway system.

TX And in a recent interview, Beaudoin said the Montreal-based company's Canadair division will sell more than 200 regional jets by year-end. But stock-market analysts say the payoff won't hit Bombardier's bottom line until the year ending Jan. 31, 1993. Before the profits roll in, Bombardier must resuscitate Short Brothers, which it's buying from the British government for a mere $60 million. The Belfast company is a perennial money-loser that has long been troubled by labor strife. Now, the predominantly Protestant labor force of 7,000 works for a company from Catholic Quebec, a potential conflict that could explode if Bombardier needs to cut jobs. However, Beaudoin said that improved management techniques and new equipment will spur a Short Brothers turnaround, and that both the new owner and the subsidiary's workers share the same goals. ''We haven't come to an understanding with the unions yet,'' conceded Beaudoin, ''but we are having discussions with them which have been very, very open, and they're receptive.'' As with its 1987 purchase of the former Crown corporation Canadair, Bombardier has received major concessions from the British government. In the deal announced last week, Britain agreed to inject $1.5 billion into Short Brothers to restore its economic viability. Margaret Thatcher's government will also provide grants totalling $160 million for new capital investment over the next four years, another grant of $36 million for employee retraining and a further $36 million to pay for Short Brothers' participation in the Canadair regional-jet program. ''It's a very positive deal for Bombardier,'' said Fred Larkin, an analyst at Bunting Warburg Inc. in Toronto. The Belfast company also has about $2 billion in orders on its books and annual sales of $500 million. It produces components for the world's major aircraft makers, including Boeing, Fokker NV, British Aerospace and Airbus. The acquisition should dovetail with Bombardier's regional-jet project. Canadair has scrambled to find the hundreds of engineers it needs to participate in the $275-million development program for the new plane, which will be a stretched version of Canadair's successful business jet, the Challenger. They may find the talent at Short Brothers, which gives Bombardier access to 200 engineers. The takeover will also remove a potential competitor because Short Brothers was planning to develop its own regional jet, the FJX. And it gives Canadair access to new production capacity. The Montreal company plans to contract out 60 per cent of the regional-jet project, much of which should go to Short Brothers. Beaudoin said that an additional 40 regional-jet orders have been placed _ 20 by British Airways and 20 by Italy's Alisarda * Airlines, which is controlled by the Aga Khan. Several other major orders, he added, are in the works. Beaudoin attributes the increase to a bandwagon effect among airlines, which want to get orders in early. He said Canadair's original goal _ selling 400 regional jets _ is now very conservative, though he won't offer a higher estimate yet. And he expects the regional-jet program will add $1 billion in annual sales to Bombardier by 1993. Jon Reider, an analyst at Richardson Greenshields in Montreal, said Bombardier will benefit over the next five years as overcrowded cities around the world replace and build new transit systems. In North America, Reider said, there are 16,000 rail cars in service, most of which are more than 25 years old. This year, Bombardier is expected to bid on $1 billion worth of new transit vehicles for the United States. A bid to supply transit cars to Taiwan could be worth up to $1 billion. Over the next few months, Bombardier executives must hammer out the fine details of the Short Brothers acquisition and make sure the regional-jet program is on track. The deal with the British government, in fact, still needs approval from the European Commission. But Bombardier-watchers are confident. ''I think you are looking at a stock that will go well beyond $14,'' Reider says of last Friday's stock price. ''Our mid-range target is $18 over the next eight to 12 months.''

ILLUSTRATION: Regional jet stretched version of successful Challenger @Art: P @Art: Regional jet stretched version of successful Challenger

Back to Aga Khan Press Clippings Index