Bombardier shares plunge after it lowers guidance, once again

Bombardier Inc. shares nosedived after it lowered its financial forecasts for the second time this year due to persistent challenges in its rail division, a move that left analysts questioning the latest assurances from the plane and train manufacturer after a series of disappointments.

The Montreal-based company said Thursday it needs to invest an additional US$250 to $300 million in its train division in order to complete five major projects that have already been delayed significantly. As such, it expects to burn through $500 million in cash in 2019, at least twice as much than previously predicted when it lowered its guidance in April.

Bombardier’s stock price dropped more than 16.30 per cent on the Toronto Stock Exchange on Thursday to end the day at $1.90.

The cash injection is the latest strategy in a series of attempts to right the transportation division, which underwent a change in leadership in February. Chief executive Alain Bellemare credited the division’s new president Danny Di Perna for devising the plan after conducting a six-week assessment of its entire operations.

“It took us a bit of time to understand fully what needed to be done,” Bellemaire said on a conference call with analysts, adding he fully supports Di Perna.

“Let me assure you that we fully understand what needs to be done and we’re taking the right actions,” he said.

Between $50 and $75 million will go directly toward the five difficult projects, particularly in the U.K., Switzerland and Germany.

Almost all of the trains are built and nearly complete, Bellemare said, but Bombardier needs to hire software engineers and increase production capacity in order to get the jobs done. The rest will fund costs of disruption such as inefficiencies in overhead and customer settlements.

Still, executives admitted there is still some risk the challenges could bleed into 2020, the last year of Bombardier’s five-year turnaround plan.

“Using a baseball analogy, this nine-inning transformation looks like it’s in extra innings,” Credit Suisse analyst Robert Spingarn said on the call.