In a garage in rural Quebec, in 1937, J. Armand Bombardier invented the snowmobile, the device upon which an empire was based. It was a marvelous little way to get around in winter, particularly in farm areas where there were no paved roads, enabling veterinarians to journey to help stricken animals, and the snowmobile became synonymous with snow, and with Canada.
Before long, Bombardier became the gold standard for means of transport other than the Ski-Doo, on surfaces other than snow or ice. There were trains, planes, military transport equipment and before long, Bombardier was a major player on the world transportation and world equity stages. It became a Fortune 500 company, with sales of all its products in the hundreds of millions of dollars.
Now, its stock languishes below the three-dollar mark Canadian, another example of a glamour-puss losing her looks.
Catering to the rural market – much as Henry Ford did with the tractor before he stumbled on the horseless carriage – J. Armand Bombardier founded L’Auto-Neige Bombardier Limitée in 1942. Before the 1940s were out, the Quebec government passed a law governing snow removal on rural roads, forcing the company to adapt to survive. Indeed, Bombardier started building a truck with interchangeable skis and wheels for the lumber industry.
But the snowmobile gained a second life when, in 1959, J. Armand perfects what he calls the Ski-Doo, a personal snow craft that catches on and became something of the cornerstone of the new company.
Founding father J. Armand Bombardier was only 57 when he passed from the scene in 1964, and it was left to his successors, primarily his son-in-law Laurent Beaudoin, to take the next steps into the future. It is under Beaudoin that the company experienced explosive growth, starting in the 1960s when he took the company public on the Toronto and Montreal Stock Exchanges, continuing into the 70s, with its first mass transit contract in Montreal.
The 1980s brought a mass transit contact from the New York subway system, and a foray into the aerospace industry, with Bombardier’s purchase of Canadair, the leading Canadian aircraft manufacturer of Challenger widebody business jets and the CL-215 amphibious firefighting aircraft. Similar deals were made with European rail lines to broaden Bombardier’s reach.
By the 1990s, Bombardier was the world’s leading civil aircraft maker, and concluded the decade by bringing out the ATV, a brand-new all-terrain vehicle designed for two riders.
Bombardier also branched out into the financial services line, under its Vermont-based Bombardier Capital (BC) banner, offering lending, leasing and asset management services throughout North America. During the 2001 recession, the loan arm of BC was restricted to existing customers, focusing on lending to retailers and general downsizing. Shortly after, Moody’s Investors Services downgraded BC’s credit worthiness from “moderate” to below investment grade. Finally, in 2005, BC sold off its inventory finance division to GE Commercial Finance.
Also, until recently, Bombardier was a major defence contractor in Canada. As fortunes changed for the company, Bombardier had to sell off its Military Aviation Services division to SPAR Aerospace. As well, in 2003, the company’s Recreational Products division (BRP) was sold back to the Bombardier family for $875 million Canadian, and since then, Bombardier Inc. (TSX: BBD.A), has focused more on what the company does best – providing quality snowmobiles and other recreational vehicles for a still-solid market.
In 2006, the Bombardier ATV was re-branded as Can-Am, taking the old name of the line of dirt bikes it produced in the 1980s. Its Ski-Doo and Lynx brands are still among the most popular names for snowmobiles in the world.
Let it be stressed: this worldwide company is not wearing rags and patches; third-fiscal-quarter revenues – announced in October - increased by eight per cent to $4.6 billion Canadian. Earnings before financing income, financing expense and income taxes (EBIT) grew by $114 million to $315 million Canadian, compared to an EBIT of $201 million last fiscal year. Net income increased by $154 million, reaching $245 million, compared to $91 million for the same period last fiscal year.
But neither is Bombardier ignoring the recession. This month, it announced it was cutting its aircraft deliveries for the upcoming fiscal year by 10 per cent, in both the business and commercial departments. Also, with reduced production rates for Learjet and Challenger jets, the workforce is being cut by more than 1,300 or 4.5 per cent.
On the other hand, production rates have been stepped up for Bombardier’s Q400 turboprop, and new aircraft programs such as its CSeries, Learjet 85 and CRJ1000 NextGen are progressing to the point where the company is recruiting more than 800 workers for these new aircraft programs.
(Bombardier was in the news during February – again, not for the reasons it would wish – when one of its Q400 passenger aircraft crashed near Buffalo, New York, killing 50 people on board and on the ground. Investigations centered on the amount of ice the craft had on its wings shortly before it began its sudden descent, forcing the company to defend the safety record of its planes. At press time, the probe was still ongoing.)
Investors who share the optimism that new aircraft programs will pan out according to the company’s goals will want to bear this trend in mind: BBD’s price for its Class A shares has taxied in recent years, having hit a recent peak between $40 and $45 Canadian in the spring of 2000. The price reached its 52-week summit last June, at $9.00, before settling below $3.00, where it currently stands. Whether investors make their way back to the tarmac, once the uncertainty settles in equity markets, and once concrete answers emerge from the crash investigation, only time will tell.
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