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Analysis of Bombardier:
Bombardier took on its present form in 1976 when MLW-Worthington, a
manufacturer of locomotives, acquired Bombardier Ltd., a manufacturer of snow
tractors and snowmobiles. The company was renamed Bombardier Inc. in 1978. The
company has been active ever since in the acquisitions of various aerospace and
transportation companies around the world.
Nature of the Business
Bombardier conducts business in five main areas: transportation
equipment, aerospace, defense, motorized consumer products, and in financial and
real estate services. The total revenues increased by 20% from $5.9 billion to
$7.1 billion over the last year.
To be able to see the extent of Bombardier\'s operations it is best to
look at each manufacturing group separately.
Aerospace is Bombardier\'s most important industry. It accounted for 47%
of sales and 33% of profit in 1995 and makes Bombardier the fourth largest
civilian airplane manufacturer in the world. Bombardier\'s customers are spread
out over the globe. They range from government and private commercial airlines
to wealthy individuals and corporations in need of private jets. The products
that are driving the growth in this division are the RJ, the Global Express, and
the Lear-45. De Havilland, which was recently purchased with help from the
Ontario government, produces the Dash-8 series of airplanes. The Dash-8 has had
its production rate increased to 48 planes a year with about 81 on order.
Modified versions of the Dash-8 are in the works that could enable an even
bigger increase in production. Bombardier has cut costs and increased the
profit margin at de Havilland to improve profitability. Bombardier will likely
exercise the option to buy the remaining 49% from the Ontario government. The
outlook for the success of the RJ is very good, although most of its sales rely
on a small number of companies, these companies are pleased with the RJ\'s
performance to date. Bombardier\'s entrant into the long-range market is the
Global Express that has ďabout 60 ordersĒ on the table, but needs 100 to break
even at a price of $34 million. It is experiencing strong competition from
Gulfstream, which produces a plane that is targeted for the same market as the
Global Express. Bombardier has been successful in turning around the troubled
Learjet operations and now expects Learjet to expand its aircraft production
with the introduction of the Lear-45, which already has 90 orders on hand. The
Canadair 50 seat regional jets are continuing to be turned out at a rate of 60
per year. Overall the Aerospace industry has strong growth potential, provided
that Bombardier sticks to its successful niche marketing strategy. Bombardier
is competing with some of the biggest companies in the world. Boeing, McDonnell
Douglas, Lockheed Martin, and Raytheon are all counted as the opposition.
This industry is responsible for 22% of sales and 22% of profits for
1995. The nature of this group is cyclical. Bombardier manufactures subway
cars, high speed trains, passenger cars, and a variety of other equipment, which
is primarily sold in the North American and European markets. Bombardier has
made many acquisitions in this industry that are usually acquired at a loss.
These acquisitions along with the huge loss in the Eurotunnel contract has made
it difficult for Bombardier to show it\'s real profitability in this industry.
Revenues have increased by 20% since 1994. Bombardier has 28% and 12% of the
North American and European markets respectfully. The outlook for expansion in
the North American market is encouraging with the contract with Am-Trac to
supply high-speed trains and equipment for use in the United States. Recent
developments in Mexico has led to an increase in demand for railway cars in that
country. As well, the acquisition of Waggonfabrik Talbot will give Bombardier a
strong foothold in the European market that already accounts for 60% of sales.
One area of concern is that Bombardier\'s competitors in this industry are
becoming stronger. The merger between Asea Brown Boveri (ABB) and Damhler-Benz
has created a strong competitor. The reemergence of Morrison Kundsen has also
increases the competition in this area. The fact that more and more
transportation authorities are being privatized and will need to adapt their
fleets to meet consumer preferences creates a positive outlook. To accomplish
these adaptations these companies will have to renew their 1000\'s of vehicles.
Motorized Consumer Products.
The biggest products in this group are the Sea-Doo and Ski-Doo
recreation vehicles. This group accounted for 23% of sales and 38% of profit.
High profit margins have helped Bombardier achieve success in this market.
Sales in the Sea-Doo area have increased by 20% last summer making Sea-Doo the
leader in the personal water craft market. The increase in Ski-Doo\'s sales has
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Financial ratios, Stock market, Investment, Fundamental analysis, Corporate finance, Bombardier Inc., Priceearnings ratio, Earnings per share, Dividend policy, Preferred stock, Earnings growth, Bombardier Dash 8
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