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Bombardier Shed Snowmobiles for Jetliners, Trains. Now, It’s Giving Up Both.

TORONTO— Bombardier Inc. BDRBF -10.08% tried to take on much bigger players in the global market for trains and commercial jetliners. Having shed both those businesses in as many weeks, it now plans to pare the debt that forced those retreats, and navigate a much smaller industry: business jets. The Canadian company said earlier this…

Bombardier Shed Snowmobiles for Jetliners, Trains. Now, It’s Giving Up Both.

TORONTO—

Bombardier Inc.


BDRBF -10.08%

tried to take on much bigger players in the global market for trains and commercial jetliners. Having shed both those businesses in as many weeks, it now plans to pare the debt that forced those retreats, and navigate a much smaller industry: business jets.

The Canadian company said earlier this week it would sell its train business—a maker of high speed trains and New York City subway cars—to French giant

Alstom SA,


ALO -3.18%

netting as much as $4.5 billion. It has promised to deploy that cash to significantly reduce $9.3 billion in long-term debt, much of which was borrowed to finance an ill-fated effort to break into the commercial plane market. It separately agreed to sell its remaining stake in that business last week to

Airbus SE.

Bombardier had been engaged in parallel talks to sell the business-jet unit, too, in case a train deal was derailed. Those talks, with

Textron Inc.,


TXT -0.92%

are now over.

“We had to reduce debt,” Bombardier Chief Executive Officer

Alain Bellemare

said in an interview. “We had two great businesses, and one had to go.”

After the Alstom and Airbus deals, Bombardier is left as one of several players in a much smaller industry, the roughly $20 billion global market for new business jets. It competes at the top end with

General Dynamics Corp.

’s Gulfstream and France’s

Dassault Aviation SA,

and with Textron and Brazil’s

Embraer SA

in the market for small and medium-size planes.

Bombardier makes the Challenger, Learjet and Global brands, and says it has a backlog of orders worth $14.4 billion. Growth in the sector is expected to be driven by demand for bigger jets that travel longer distances. Bombardier’s new Global 7500 ranks as the world’s largest and longest-range jet. Its Global 6000 made headlines earlier this year as the deluxe aircraft that ferried former auto executive Carlos Ghosn in his clandestine escape from bail in Japan.

The train divestiture is expected to reduce Bombardier’s annual revenue, which stood at $15.8 billion in 2019, by more than 50%. Its employee count is expected to shrink by more than 70% to 18,000.

The retrenchment represents the most profound pivot yet for the iconic Canadian company, which started off in 1942, in a small township east of Montreal as a manufacturer of passenger and commercial snowmobiles. It has reinvented itself, over almost a century, with international expansion and deal-making.

Bombardier was founded by Quebec inventor Joseph-Armand Bombardier, who rolled out the world’s first ski-steered snowmobile in 1937. His son-in-law,

Laurent Beaudoin,

took over in 1966 and steered the business through more than four decades of sales growth and acquisitions, many of them of industry castoffs. He snapped up North American and European train businesses through the 1970s, and then expanded into aviation in the 1980s.

Bombardier Shed Snowmobiles for Jetliners, Trains. Now, It’s Giving Up Both.

Tourists traveled in a Bombardier Snow Bus as they visited the Athabasca Glacier in Alberta, Canada, in 1952.



Photo:

Gene Lester/Getty Images

There were also divestitures. The company jettisoned its legacy product—the snowmobile—in 2003, when it spun off its recreational unit, which included the Ski-Doo snowmobile, to a group of investors that included the Bombardier family. A year later, Mr. Beaudoin set out to break into the manufacture of big commercial jets, a business dominated by

Boeing

and Airbus.

On paper, a fuel-efficient narrow body jet in the 100-seat range made sense. Airlines were gravitating to smaller planes that could more flexibly shuttle fewer passengers to more direct destinations. Neither Boeing nor Airbus had a jet small enough at the time to accommodate the booming regional market.

After a series of foreign takeovers of Canadian corporate giants, the collapse of Nortel Networks and the sharp decline of

BlackBerry Ltd.,

Bombardier held on to its mantle of a Canadian national champion. The Bombardier family, through multiple voting shares, continues to control the business.

Its global ambitions, though, began to falter several years ago, when Bombardier’s new commercial plane, called the CSeries, was plagued by cost overruns and delays. The reversals forced the company to significantly increase its debts and seek financial aid from the province of Quebec and the Canadian federal government. The financial woes deterred potential CSeries customers, and in 2017 Bombardier yielded control of the plane program to Airbus.

The company’s resources were also stretched by its launch of the Global 7500 business jet and production setbacks at is train unit.

“Things were piling one on top of the other, it was a very tough situation,” said Mr. Bellmare, who was appointed CEO in 2015. “People underestimated the challenge. We didn’t have the balance sheet to support this.”

While the CSeries sale improved Bombardier’s financial health, its global train business, which had generated enough profits to finance Bombardier’s expansion into business jets, was hitting obstacles.

Bombardier’s train orders surged about 50% in 2011 to $14.3 billion as the company was struggling with the CSeries program. Many of the new contracts added to Bombardier’s burden. They involved complicated work upgrading and automating aging networks, some of which still have operating issues because of mechanical and software problems.

“Bombardier sold us lemons,” New York City Comptroller Scott Stringer said in a statement last month after the city pulled hundreds of new subway cars from service because of malfunctioning doors. A Bombardier spokesman said the company has addressed the problem and the cars are back in service.

The company was also years late delivering street cars to Toronto and San Francisco. It has only delivered about half of the 60 cars ordered in 2011 for an intercity train in Switzerland. Deliveries were delayed by software and other automation challenges, the spokesman said.

“They bit off more than they could manage,” said

Cameron Doerksen,

an analyst with National Bank Financial.

Write to Jacquie McNish at Jacquie.McNish@wsj.com

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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