Bombardier Hires EADS Executive as Rail Unit Sales Slump

Bombardier Inc. hired Lutz Bertling away from European Aeronautic, Defence & Space Co. to run its slumping train unit and replace the retiring Andre Navarri.

Bertling, 50, will take over June 3 as head of Bombardier Transportation, the Montreal-based parent company said today in a statement. Navarri, 59, will remain as strategic adviser to Chief Executive Officer Pierre Beaudoin until June 2014, when he will retire from the company.

Rail-unit revenue fell 17 percent to $8.14 billion in 2012, and profit slid to 3.6 percent of sales from 7.2 percent. The Berlin-based business produced 49 percent of 2012 sales at Bombardier, which said last month that it would have a one-year delay to 2014 in meeting its goal of boosting earnings before interest and taxes as a percentage of revenue to 8 percent.

“This is a surprise,” David Tyerman, an analyst at Canaccord Genuity in Toronto, said in a telephone interview. “Bombardier Transportation has had some issues in the last year but there were no indications Andre was getting ready to retire. It makes sense at some point that the baton would be passed, and maybe this is as good a time as any,” said Tyerman, who has a buy rating on the stock.

Division Cutbacks

Profit at Bombardier’s rail unit fell last year as the company incurred costs due to “specific issues” on contracts in France and Germany, Chief Financial Officer Pierre Alary said March 5 at a JPMorgan Chase & Co. transportation conference in New York.

“What really has to happen is for us to execute on our projects and not face the type of issues that have an impact,” Alary said.

Bombardier’s fourth-quarter results included $119 million in costs to cut about 1,200 jobs in the train division and close a plant in Germany. Bombardier announced the cutbacks with its third-quarter results in November.

Revenue at the train unit, excluding currency impacts, will probably climb less than 10 percent in 2013, Bombardier said Feb. 21.

Shares of Bombardier rose 2.2 percent to C$4.19 at the close in Toronto. The stock has gained 11 percent this year compared with a 3.6 percent gain in the Standard & Poor’s/TSX Composite Index.

‘Impressive Resume’

Bertling was CEO of Eurocopter, the EADS unit that makes helicopters. He previously worked for the former DaimlerChrysler AG’s Adtranz train unit. Bombardier acquired Adtranz from DaimlerChrysler in 2001.

The German-born Bertling “has an impressive resume and brings to the table a new set of experiences that are compatible with Bombardier’s aerospace divisions,” Fadi Chamoun, an analyst at BMO Capital Markets in Toronto, said today in a note to clients. “From our conversations with management, it appears that Andre had been very clear about retiring at 60 and, therefore, management was able to ensure a smooth transition,” said Chamoun, who has an outperform or buy rating on Bombardier’s stock.

Bertling’s resignation from Eurocopter will be effective April 30, EADS said in a separate statement. Guillaume Faury, 45, PSA Peugeot Citroen’s executive vice president of research and development, will replace Bertling at Eurocopter starting May 1, the company said.

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