Revelation wrote:TObound wrote:Just a reminder, a reduced projection of profits for the A220/CSeries program, doesn't mean it's not going to be profitable long term.
Bombardier is in a tough spot because they took on a lot of the liabilities of ramping up, while signing away a lot of the future profits to Airbus. If they stick it out, they will do quite well. If they sell now, they'll maybe be lucky to recover what they were putting into CSALP. But that's probably about it.
The thread isn't about the long term health of the program, it's about BBD reassessing their participation in the partnership.
Bloomberg ( https://www.bloomberg.com/news/articles ... 0-jet-deal ) suggests the whole company is on the brink due to the fact that the A220 partnership is not playing out the way the BBD projected:The deal with Airbus was an elegant solution. Though Bombardier received no upfront cash for ceding its controlling stake, it allowed Bombardier to offload the risk and additional costs of developing the A220. But the latest financial plan calls for more cash to support the ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program, Bombardier said in a statement Thursday.
With few other assets left to sell, Bombardier may struggle to keep everything going. One of its two remaining businesses -- rail equipment and private jets -- may have to go, Karl Moore, an associate professor at McGill University in Montreal, said in an interview with BNN Bloomberg.
“Then you become a pure play of either transportation on the train side, or business jets,” he said. “It’s a big dramatic move for sure but one that might be necessary to solve the cash flow issue. I think that’s the question they’re giving some serious thought to right now.”
BBD finds itself in an uncomfortable position. The elegant solution might not have been elegant enough...
Good find. Airbus gets luckier and the Beaudoin family's incompetence more tragic, by the day. I guess it comes down to which of their assets and investments can generate the cash they need now vs. return in the long run.
Their report shows $2+ billion in cash on hand. And the A220 liability was $350 million per year. I don't get why they'd consider this program the liability.
If I were them, I'd consider getting rid of the transportation division. Long term it's a losing proposition as the Chinese move aggressively into that sector.