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Bombardier’s turnaround derailed
Shares plunge after the
plane and train maker
cut its financial outlook;
analysts say it may be
forced to sell assets
NICOLAS VAN PRAET MONTREAL
SEAN SILCOFF OTTAWA
Bombardier Inc. slashed its fi-
nancial estimates for 2019 again
on the back of continuing strug-
gles with its train business and
said it might pull out of a joint
venture with Airbus SE, deepen-
ing investor concern that its
turnaround is veering off the
rails and raising the possibility
that the company is headed for a
breakup.
Bombardier said in a state-
ment Thursday it is “actively
pursuing options to strengthen
the balance sheet and enhance
shareholder value,” and “solve”
its capital structure. The urgency
of the language used by the
Montreal-based plane and train
maker Thursday suggests a
breakup and sale of all or part
the company is on the table, two
analysts said.
Bombardier shares plunged as
much as 36 per cent to $1.14
Thursday on the Toronto Stock
Exchange – the biggest intraday
drop on record, according to
Bloomberg data – before closing
at $1.22.
Bombardier bonds also fell
sharply. Bonds issued in March,
2019, and maturing in 2027 fell
6.2 per cent, taking them below
par and marking their biggest
decline in price since they were
issued 10 months ago.
“That’s bad and perturbing
news and it changes the world,”
said Charles Lemonides, founder
of ValueWorks LLC, a New York-
based investment management
firm that holds Bombardier
shares. “The market has lost pa-
tience in this company and this
management.”
Bombardier will not be look-
Magna names new president, seen as possible next CEO
ERIC ATKINS TRANSPORTATION REPORTER
Auto parts maker Magna International
Inc. has promoted technology chief Swamy
Kotagiri to president, signalling that the en-
gineer who has overseen some of Magna’s
most advanced projects could be the next
occupant of the chief executive officer’s
role.
Aurora, Ont.-based Magna made the an-
nouncement of Mr. Kotagiri’s promotion
on Thursday morning as it issued a forecast
for the coming three years.
Magna forecast lower 2020 sales and
Kew Media investigates ex-CFO as auditor pulls financials
ANDREW WILLIS
If television production company Kew
Media Group Inc. were to make a TV show
out of what’s played out in its head office
over the past three months, it would be
classified as horror.
Toronto-based Kew was founded in 2015
by a pair of experienced entertainment ex-
ecutives, chairman Peter Sussman, a pro-
ducer on the CSI crime series during his
days as an executive at Alliance Atlantis
Communications Inc., and chief executive
officer Steven Silver. Their niche is creating
COMPANIES
ALPHABET .............................................. B3
AMAZON.COM ....................................... B3
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BARRICK ................................................. B5
DETOUR GOLD ....................................... B3
SPORTS
B13-18
■ GLOBE AN D MAIL .
S&P 500 NASDAQ
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A Bombardier train is seen at Gare Saint-Lazare railway station in Paris. The Quebec-based manufacturer has been experiencing problems within its
rail unit, including malfunctioning cars in New York and regulatory issues in Switzerland. LUDOVIC MARIN/AFP VIA GETTY IMAGES
scrapped its partnership with ride-hailing
firm Lyft Inc. to co-develop self-driving
technology as it said it would instead focus
on developing assisted-driving technology.
The company blamed the stronger U.S.
dollar, the sale of its fluid pressure and con-
trols business, and estimated lower light-
vehicle production in Europe for its lower
sales outlook.
Mr. Kotagiri, who was educated in India
and the United States, has been with Magna
since 1999, and previously worked at Gen-
eral Motors.
Magna said Mr. Kotagiri will work with
CEO Don Walker on Magna’s overall strate-
and distributing programs that range from
cooking shows to prison documentaries
for conventional TV networks and stream-
ing services.
But of late, the company has faced a
string of negative developments, the latest
of which came on Wednesday when audi-
tor Grant Thornton LLP withdrew Kew’s fi-
nancial statements for the past three years
after determining it could not rely on in-
formation it received from the company’s
former chief financial officer, Geoff Webb.
On Wednesday, Kew also said it expect-
ed to miss regulatory deadlines for filing
2019 financial results because of an investi-
TRAD E
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B6
RO B CARRICK
Why it’s better to set aside savings than pay down the mortgage
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ing to issue equity with its share
price so low, leaving it with few
options if it wants to dramatical-
ly improve its balance sheet,
JPMorgan analyst Seth Seifman
said in a research note.
“Raising capital through asset
sales is the only alternative we
can think of and for this to be
meaningful, it may include one
or both of Bombardier’s two
main businesses: business jets
and trains.”
That view was echoed by ana-
lyst Cameron Doerksen of Na-
tional Bank, who wrote the only
gy, research and development initiatives
and new projects. He will continue to be re-
sponsible for the power and vision divi-
sion, a segment that includes automated
driving, electric and hybrid drivetrains and
electronics systems.
On his LinkedIn website profile, Mr. Ko-
tagiri says he moved to the U.S. from India
in 1993 to study mechanical engineering at
Oklahoma State University. “I still remem-
ber arriving in the U.S. with $40 cash in my
pocket, enough money to cover my first se-
mester’s tuition and the bag on my back,”
he wrote.
MAGNA, B6
gation of Mr. Webb’s actions and Grant
Thornton’s decision to withdraw its state-
ments. Spokespersons for Kew and Grant
Thornton declined further comment.
The auditor’s move came after Kew dis-
closed in mid-December that Mr. Webb,
who joined the company in 2017, had left.
Kew said certain reports that Mr. Webb pro-
vided to its lenders and auditors contained
inaccurate financial information, includ-
ing its working capital. At the time, Kew al-
so said its board had formed a special com-
mittee to review the company’s strategic
alternatives, including a potential sale.
KEW, B6
GO L F
TEN N IS
Fucsovics at Australian B17
GCAN 10-YR
1.55%
+0.02
way for Bombardier to make a
significant dent in its US$9-bil-
lion debt is to sell one of its two
remaining divisions. He said he
believes the company’s private
jet business is the more likely
candidate because it could fetch
a good price (an estimated
US$6.6-billion) and because un-
like trains, it is more cyclical and
therefore not a good stand-alone
business.
Bombardier ended the fourth
quarter with US$2.6-billion in
cash.
BOMBARDIER, B6
Has the TMX
board learned
from its CEO’s
departure?
RITA
TRICHUR
OPINION
T
MX Group Ltd., Canada’s
largest stock exchange op-
erator, is hunting for a new
chief executive officer. Let’s hope
its board of directors does a better
job vetting candidates this time.
Its announcement that Lou Ec-
cleston is taking early retirement
following an investigation of his
conduct left a lot to be desired. Al-
though the third-party probe
found “no evidence” that he en-
gaged in sexual harassment or
sexual misconduct at TMX, it did
uncover bad behaviour.
But TMX wasn’t transparent
about those findings. About 20
people reported instances of bul-
lying and toxic behaviour by Mr.
Eccleston, The Globe and Mail re-
ported last Friday, citing current
and former employees.
Worse still, the company has
said little about how it would pre-
vent a similar crisis in the future.
Instead of outlining concrete
steps to improve its risk manage-
ment and corporate governance,
TMX praised Mr. Eccleston’s “out-
standing efforts” as CEO in its
press release. Make no mistake,
Mr. Eccleston created reputation-
al and legal risk for TMX. Regula-
tory filings suggest he’s entitled to
walk away with at least $9.5-mil-
lion in deferred compensation.
TRICHUR, B4