Bombardier Transportation generated revenues of $US 7.6bn in the 2016 financial year with Ebit of $US 396m and an Ebit margin of 5.2%. Order intake was $US 8.5bn in 2016, with a book-to-bill ratio of 1.1, and the order backlog stood at $US 32.7bn on June 30 2017. This compares with combined revenues of around $US 18bn, adjusted Ebit of $US 1.4bn and an order backlog of nearly $US 72bn for Alstom-Siemens Mobility. The new entity is still dwarfed by market leader CRRC which, with annual revenues of around $US 35bn, is larger than Alstom, Bombardier and Siemens Mobility combined.

Not all the pressure on Bombardier is coming from its three largest competitors. Hitachi has significantly expanded its activities in Europe both organically and through the acquisition of AnsaldoBreda and a major stake in Ansaldo STS. Stadler Rail has steadily extended its customer base to become a leading player in the market for main line passenger trains, pushing into the CIS countries, North America, and Britain. With little activity in its domestic Spanish market, CAF has vigorously pursued international opportunities. CAF’s order backlog amounted to nearly €6bn at the end of June 2017, most of which was accounted for by international orders spread across more than 50 countries.

The ascendency of CRRC and smaller suppliers has been accompanied by weakening growth in the market for rail equipment. According to SCI Verkehr’s most recent Worldwide Market for Railway Industries study, which was published in September 2016, 2.3% annual growth is forecast for the period to 2020, with growth of just 1.3% in the OEM market. At the same time, operators are increasingly demanding solutions that optimise lifecycle costs through digitisation. Keeping up with these demands means investment in research and development.

Bombardier is midway through a five-year turnaround programme, which seeks to stabilise both its aviation and rail businesses. The company sold a stake in its C Series aircraft programme and in 2015 Canadian pension fund Caisse de Dépôt et Placement du Québec (CDPQ) agreed to acquire a 30% stake in Bombardier Transportation for $C 1.1bn in a move which valued the rail unit at $C 5bn.

In October 2016 Bombardier announced a series of initiatives to “ensure competitiveness and improve margins” as part of the turnaround plan, which seeks to generate recurring savings of around $US 300m across the group by the end of next year.

This involves streamlining administrative and non-production functions, and creating “centres of excellence” for design, engineering and manufacturing activities in both the aerospace and rail sectors.

Bombardier Transportation will cut around 2200 jobs in Germany, with a further 650 positions set to go in Switzerland and 160 in Belgium. The company’s Management and General Works Council agreed on September 25 to move forward with implementation of the strategy at its German plants.


Alongside this restructuring, talk of a tie-up with a major competitor has refused to die down. Bombardier has said that it does not want to be a bystander in a consolidating rail industry and speculation of a potential merger with Siemens has persisted since CNR and CSR combined to form CRRC in 2015. Between April and July this year, rumours swirled in the financial press that the Siemens and Bombardier were close to an agreement on the formation of two joint venture companies.

“We have multiple options that we are pursuing,” Bombardier CEO Mr Alain Bellemare said in a call with analysts on July 28. “We will do what is right to keep on growing the great franchise.”

Evidently talks between the two companies ultimately came to nothing and Siemens found a suitor in its French rival. So where does this leave Bombardier? Mergers inevitably bring a period of upheaval - especially for large enterprises - and there are many short-term challenges to overcome before the real benefits can be unleashed. Alstom and Siemens will be in the midst of that challenge as Bombardier emerges from a period of transition.

Bellamare anticipates that the restructuring programme will give the group an Ebit margin of 7-8% on revenues of $US 25bn by 2020. With its financial vitality restored, and a more flexible and responsive company structure in place, Bombardier should be well placed to compete with its giant rivals and more able to adapt to any changes the market might see in the 2020s.