|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's range||133.72 - 136.90|
|52-week range||95.25 - 139.32|
|Beta (5Y monthly)||1.23|
|PE ratio (TTM)||27.69|
|Earnings date||13 Feb 2020|
|Forward dividend & yield||1.65 (1.24%)|
|Ex-dividend date||15 Apr 2019|
|1y target est||120.82|
(Bloomberg Opinion) -- There’s a fine line between a fudge and a workable compromise. In Britain’s handling of Huawei Technologies Co., Prime Minister Boris Johnson has just about managed to secure the latter.The U.K. has brushed off the U.S.’s complaints and decided to allow its telecoms operators to install equipment made by “high-risk vendors” — read: Huawei — in their networks. But the government drew a line, excluding it outright from sensitive core parts of the network and capping its gear’s presence in the non-sensitive parts at 35% of the total.Outwardly, President Donald Trump won’t like the solution. But if the U.S.’s loudest protestations about security concerns were genuine, and not in fact an effort to stymie Chinese economic influence, then it should be able to stomach the compromise. American concern has focused on the risk of Huawei building backdoors into networks that can be readily exploited by Chinese state-sponsored actors. After all, China passed a law in 2017 obliging companies to assist the state with espionage efforts. And while no such backdoors have yet been found, that isn’t proof that they don’t exist.QuicktakeHow Huawei Landed at the Center of Global Tech TussleBut at the same time, a great deal of capital, both political and actual, has been invested in the promise of fifth-generation networks. Globally, revenue from the so-called Internet of Things will quadruple to $1.1 trillion by 2025, industry body the GSMA estimates. With about a third of the $50 billion global telecoms equipment market, Huawei has become the biggest player, with some of the best technology and lowest prices. Banning it would have ramifications for the pace of the 5G rollout.That is why the U.K. approach is a pragmatic one. It’s allowing Huawei products into the radio-access network — essentially the antenna and base stations — but keeping it out of the core: the server hubs that direct data around the network. Network security focuses on three pillars: confidentiality, integrity and availability. The first one focuses on ensuring that bad actors can’t see your data. The second is about making sure no-one is altering data during transmission. And the third is about guaranteeing network access when it’s needed.By those criteria, the U.K. decision seems to eliminate most, though not all, of the risk. If there are indeed backdoors into the parts of the network using Huawei gear, then they will likely only have access to data from that 35% of the network using it. It should still be possible to keep the equipment out of sensitive networks, such as those running the power grids and police communications. Indeed, France won’t let operators use Huawei antenna in Toulouse, for instance, where the airplane giant Airbus SA is based. BT Group Plc was already stripping Huawei gear out of its existing core networks. It likely would have been hard to secure lucrative government contracts without doing so.At any rate, telecommunications firms’ cybersecurity efforts will be on heightened alert where the slice of their operations that do still contain Huawei products is concerned. It might be easier to spot disturbing anomalies. If a base station is siphoning off gobs of data to somewhere in Asia, that will be more noteworthy than if it’s coming from the core network. As the distinction between core and edge networks blurs in the move toward full 5G, Huawei’s role must be managed even more carefully.Johnson had three sets of interests to navigate: the Americans threatened to cut off intelligence sharing with Britain in response; China’s ambassador warned a Huawei ban would have “substantial” repercussions for investment in the U.K.; and Britain’s own network operators — Vodafone Group Plc., BT, O2 (part of Spain’s Telefonica SA) and Three (owned by Hong Kong-based CK Hutchison Holdings Ltd.) — also had their say.The stakes are higher for these companies than for their U.S. peers, who are already prevented from using almost any Huawei products. That’s because they’re poorer. AT&T Inc. and Verizon Communications Inc. enjoy average revenue per customer of close to $50 a month. In the U.K., Vodafone gets just 14 pounds ($18.22), according to Bloomberg Intelligence.British carriers are therefore much more cost sensitive. Knocking Huawei out of the running in the radio-access network would have left a duopoly of Nokia Oyj and Ericsson AB, giving the suppliers a huge amount of pricing power. Samsung Electronics Co. is accelerating into the industry, but its gear is often even pricier. And U.S. suppliers such as Juniper Networks Inc. and Cisco Systems Inc. compete more effectively in the core network.The European Union looks set to issue guidelines that imitate the U.K. approach. The U.S. may not like it, but Johnson was never going to keep everyone happy.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The deal, believed by anti-corruption experts to be the largest ever in a bribery case, ends an almost four-year crisis that led to a sweeping management overhaul and delayed plans to redeploy the plane giant's cash surplus. If approved by courts, the deal is expected to allow Airbus to avoid criminal charges that risked banning the company from public contracts in the United States and European Union - a massive setback for one of Europe's top defense and space firms. The European planemaker has been investigated by French and British authorities for suspected corruption over jet sales dating back over a decade.
(Bloomberg Opinion) -- Whenever it’s seemed like Airbus SE might steal a march on Boeing Co., something has come along to throw a spanner in the works. A decade ago Airbus was consistently delivering more planes than its arch-rival but its competitiveness was eroded by the strong euro and the nightmare of building the ill-fated A380 superjumbo.Until the two recent fatal crashes involving the Boeing 737 Max, it seemed like a similar story. While both companies had brimming order books, Boeing’s cash flow was going through the roof and Airbus was bedeviled by production difficulties on new commercial aircraft and technical troubles involving the A400m military transporter. A long-running World Trade Organization dispute with Boeing tilted in the Americans’ favor. Worst of all, Airbus found itself under investigation by U.K., French and U.S. authorities over allegations it paid bribes to win aircraft orders and violated arms export laws.Tuesday’s news that Airbus has reached tentative agreement about a settlement of those cases ends a big management distraction and a cloud over the company’s investment case. The alleged payments to middlemen are a stain on Airbus’s history. The good news is that following a management clear-out, the manufacturer is well positioned to move on from this dark period.There’s no clarity yet on the fines Airbus will end up paying; investors have long assumed they’ll run into the billions. But with almost 18 billion euros ($19.8 billion) of gross cash at the end of October, and a big cash inflow expected in the fourth quarter, Airbus will have no trouble paying the bill.The A400m continues to be a burden on cash flow and Airbus is still having production difficulties, this time involving the A321 passenger jet. Even so, with the 737 Max still grounded and Boeing facing a backlash from regulators and customers, the duopoly is starting to look very unbalanced.Airbus trounced Boeing last year on orders and deliveries, and 2020 isn’t shaping up any better for the Americans. Reports that Boeing’s new boss Dave Calhoun wants to rethink his company’s plans for a new mid-market aircraft should allow Airbus’s long-range A321XLR to lock up more orders.To be sure, a wounded rival is dangerous thing. Boeing could yet decide that the best way to leave behind the 737 Max ignominy is to build a completely new single-aisle aircraft, which would oblige Airbus to follow suit. Yet the almost 50% increase in Airbus’s share price since the start of 2019, reflects hopes it will be able finally to press home its advantage and lift cash returns to shareholders. The shares rose another 3% on Tuesday, valuing the company at 107 billion euros ($118 billion).A decade ago Airbus was worth just 11 billion euros. While it’s long been Boeing’s equal in technical innovation, in profitability and cash terms the European plane-maker seemed a tortoise to Boeing’s hare. After the 737 Max disasters we can see the corners Boeing cut to engineer that success, from squeezing suppliers to browbeating regulators. Airbus can afford to reward shareholders without being so aggressive.Paying bribes to win business is deplorable; selling a fundamentally unsafe aircraft is worse. Both companies have lessons to learn but Airbus’s wounds are closer to healing.To contact the author of this story: Chris Bryant at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The budget carrier is in active talks with the planemaker on compensation for 737 MAX-related costs, Singh told the Reuters Global Markets Forum, adding he expected a payment from Boeing to compensate some of the lost profit and he wants to give the U.S. firm "every possible opportunity" to recover before turning to rival Airbus.
LONDON/CHICAGO (Reuters) - Boeing Co's new chief executive has sent the aerospace giant back to the drawing board on proposals for a new mid-market aircraft, effectively shelving in their current form plans worth $15 billion-$20 billion that had been overtaken by the 737 MAX crisis. A decision on whether to launch a New Midsize Airplane (NMA) seating 220-270 passengers, which seemed imminent barely a year ago, had already been postponed as Boeing gave all its attention to the grounding of the smaller 737 MAX after two fatal crashes. A Boeing spokesman said Calhoun had ordered up a new study on what kind of aircraft was needed.
PARIS/LONDON (Reuters) - Airbus' shares hit record highs on Wednesday, after U.S. arch rival Boeing warned of further delay in returning its grounded 737 MAX airliner to service, while Boeing customers and suppliers fell on the news. Boeing said on Tuesday that it did not expect to win approval for the 737 MAX to return to service until mid-year. Airbus was up by 1.85% at 138.9 euros at 1215 GMT, the top performer on France's benchmark CAC-40 index after hitting a record high 139.32.
(Bloomberg Opinion) -- Canadian transportation champion Bombardier Inc. is running out of road. Its shares lost more than one-third of their already much diminished value last week after another disastrous profit warning.The trains and private jet manufacturer may be forced to exit its commercial aerospace joint venture with Airbus SE because of a shortage of cash; a writedown looms when the group reports 2019 results next month. In the meantime, it’s looking at ways to accelerate repayment of its $10 billion debt pile, which suggests a breakup might be on the cards. Bombardier has held talks about a combination of its rail businesses with French rival Alstom SA, Bloomberg reported on Tuesday, adding that this is one of several options being considered.On the other side of the Atlantic another storied industrial conglomerate, ThyssenKrupp AG, is suffering a comparable crisis. The German steel and car-parts maker has put its prized elevator division up for sale to help with its massive debt and pension liabilities.When their respective restructurings are completed, these vast and politically important employers will be shadows of their former selves. ThyssenKrupp has already been booted from Germany’s benchmark Dax index, while Bombardier’s on the cusp of becoming a penny stock (again).So how did they get into such a mess and why haven’t they managed to extricate themselves, despite years of restructuring and several false dawns? In both cases, hubris, shoddy governance and poor project management have played a role in their downfall. The fate of the two companies was sealed around a decade ago when they bet the farm on high-risk growth strategies — and lost. Bombardier signed off on the C-Series, an ambitious attempt to break Airbus and Boeing Co.’s lock on the commercial aerospace market. The small, fuel-efficient jet won rave reviews but orders were disappointing and delays caused costs to balloon to about $6 billion and debt to pile up. Bombardier made things worse by trying to bring several new business jets to market at the same time. Weak sales forced it to abandon development of the Learjet 85 — resulting in a $2.5 billion writedown — and to cede control of the C-Series to Airbus for the humiliating sum of one Canadian dollar.ThyssenKrupp’s original sin was sinking about 12 billion euros ($13.3 billion) into a pair of steel plants in Brazil and the U.S. to try to keep pace with the acquisitive ArcelorMittal SA. Poor construction work and a faulty business plan led to massive losses from which ThyssenKrupp has never really recovered.Woeful governance had a hand in both corporate disasters. Bombardier has a dual-share structure that gives the founding Bombardier-Beaudoin families majority voting control even though they own a much smaller fraction of the share capital. Pierre Beaudoin served as chief executive officer from 2008 until 2015 — during which time his father, Laurent, remained chairman — but he didn’t do a very good job. Pierre is now the chairman.ThyssenKrupp’s anchor shareholder, the Krupp Foundation, presided over a management culture that prized fealty and the preservation of corporate perks, including the company’s hunting grounds, but failed to prevent compliance breaches. Recent boardroom fireworks at the German giant (two chief executives and a chairman have departed in quick succession) suggest it remains dysfunctional.In their attempt to stop the rot, ThyssenKrupp and Bombardier have followed a similar script. Scrap the dividend, sell underperforming assets, slash thousands of jobs and cut costs. But the cash flow needed to cut debt has never consistently materialized and things have got worse.In 2019 ThyssenKrupp burned through 1.1 billion euros of cash and it expects to consume even more in 2020, risking a breach of banking covenants. Bombardier burned about $1.2 billion in cash last year, far in excess of the roughly break-even target it set at the start of the year.A problem for both companies has been estimating the cost and completion date of large projects. It’s one reason why ThyssenKrupp’s industrial plant construction unit — once a decent source of cash flow from large customer prepayments — has become a bottomless money pit (the unit is now up for sale). At Bombardier, several high-profile train projects have run late and over budget. Bombardier must pay penalties for late delivery.Judging by their balance sheets, both companies appear to be in trouble. ThyssenKrupp has just 2.2 billion euros in net assets, while Bombardier’s liabilities far exceed its reported assets.However, unlike Bombardier’s, ThyssenKrupp’s bonds still trade well above par and its 7.4 billion euros market capitalization is almost four times that of the Canadian company. That’s because ThyssenKrupp still has something of value to sell: The elevators unit could fetch more than 15 billion euros if management decides to part with all of it (the sale process is ongoing and ThyssenKrupp might opt to keep a majority stake).Bombardier doesn’t face an immediate cash crunch thanks to the proceeds of recent asset sales and no big debt maturities this year. But having already offloaded its ageing Q400 turboprop aircraft line and its Belfast wing factory, it’s not exactly overburdened with stuff to sell to meet future liabilities.Neither of Bombardier’s two remaining core divisions, trains and private jets, is worth as much as ThyssenKrupp’s elevators. In 2015 Bombardier sold a 30% stake in its rail division to the Quebec public pension fund, valuing the whole unit at $5 billion. The business aviation division would probably fetch more.For both businesses, the difficulty with flogging more silverware is that what’s left over probably won’t generate much profit.The moral of these twin corporate calamities is simple: If tens of thousands of people depend on you for employment, don’t bite off more than you can chew. And make sure the higher-ups know what’s going on.To contact the author of this story: Chris Bryant at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Who said Davos doesn’t make a difference? As world leaders, business executives and cheerleaders for the planet descended on the Swiss resort for the annual World Economic Forum, one diplomatic victory was being chalked up on the sidelines: A presidential truce between Donald Trump and Emmanuel Macron over France’s plan to tax tech companies, which the U.S. says discriminates against its national champions.After threats of retaliatory trade tariffs on both sides, Macron took to Twitter to declare a “great” discussion with Trump that would lead to a “good agreement” on de-escalation. Trump retweeted that assessment, responding in the affirmative with “excellent!” But it’s hard to see much worth celebrating yet.What this truce amounts to isn’t exactly clear, for one thing, and it’s certainly not being trumpeted in the way that Trump’s “beautiful monster” of a phase-one deal with China was last week. Avoiding an escalation of tariffs is obviously a good thing. But Trump has already leveled so many trade threats at France and the European Union — driven by hatred of the trade surpluses they run with the U.S. — that it’s hard to feel excited at the prospect of one less gun barrel. If Trump actually ends up retracting his specific threat to hit $2.4 billion of French products with tariffs, that still doesn’t automatically guarantee protection for Airbus aircraft or German cars.It’s also not clear what Macron has gifted Trump in order to get de-escalation onto the agenda. According to the Wall Street Journal, France may have simply offered to “pause” its tech tax until a worldwide solution is agreed upon by the Organization for Economic Co-operation and Development — where support from the U.S. is obviously crucial. That’s not as huge a climb down as it initially seems: Paris could feasibly suspend the collection of digital tax payments due in April without scrapping the principle or the structure of its tax, as my Bloomberg News colleagues write elsewhere. But it still looks like Trump’s threats have paid off on one level.If the original sin is that today’s tech giants — Google parent Alphabet Inc., Facebook Inc., Amazon.com Inc. — aren’t paying their fair share in tax, we seem to be veering a long way from absolution. Things would be different if Europe could set aside its differences and agree on the fundamental good that a digital tax across its 28 members (soon to be 27) would bring. Brussels estimates global tech firms pay an average tax rate of 9.5%, compared with 23.2% for bricks-and-mortar peers. But the EU is divided on the need to overhaul the data economy, with low-tax jurisdictions like Ireland and the Netherlands resisting a common levy on digital firms.The Trump administration has shown itself adept at exploiting these divisions. France’s move to go it alone with a digital tax was politically popular, but fiscally weak. It is only expected to bring in 500 million euros ($555 million) a year, a digital drop in the ocean of France’s approximately 80 billion-euro deficit. Despite being fundamentally righteous, it allowed Trump to poke the soft underbelly of European unity by training his tariff weapon on Paris — and confronted the Macron administration with the prospect of pain for key exporters. The U.S. trade deficit with France was $16.2 billion in 2018.The pressure is now on to get consensus among more than 135 countries in the OECD-led push for an agreement on how to tax digital profits. It’s a solution favored by the likes of Apple Inc.’s Tim Cook, which speaks to how companies prefer the predictability of global solutions over patchy national ones. But until such a solution is actually agreed, it will be hard to celebrate this latest Franco-American “truce.” It has allowed France and Europe to save face by avoiding the reality of a new trade confrontation with Trump as he fights for re-election. It has offered tech firms a way to save money. But it hasn’t really saved the world from the threat of more trade wars. Davos can’t achieve everything.To contact the author of this story: Lionel Laurent at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Presidents Emmanuel Macron and Donald Trump agreed to a truce in their dispute over digital taxes that will mean neither France nor the U.S. will impose punitive tariffs this year.Macron said on Monday he had a “great discussion” with Trump on the issue, without giving details.“We will work together on a good agreement to avoid tariff escalation,” he said on Twitter.“Excellent!” Trump said in a reply to Macron’s post, without providing additional information. Trump is en route to Davos, Switzerland, for the World Economic Forum.A White House readout of the call was notably more muted, saying only that the “two leaders agreed it is important to complete successful negotiations on the digital services tax” and “discussed other bilateral issues.” And neither a White House spokesman nor officials with the U.S. Trade Representative’s office would confirm that the U.S. president had called off his announced tariffs.Still, the possible respite may defuse transatlantic tensions that had been building between Washington and Brussels along another potential trade war front. Last week, Trump signed a cease-fire with China in phase one of a broader deal aimed at balancing trade between the world’s two largest economies.The European Union is an even bigger U.S. trading partner than China and supply chains between the two economies, particularly in automotive and financial services industries, are intertwined in ways that would make a tit-for-tat tariff dispute even more harmful to the world economy.Macron’s government still hopes to find a solution that fits within discussions at the Organization for Economic Cooperation and Development’s work on the issue, according to a French official who asked not to be identified in line with government rules.European finance ministers meeting in Brussels Tuesday will discuss progress of the OECD talks. While the OECD is still working on its proposal for taxing tech companies around the world, France pushed ahead with its own levy last year that hit U.S. internet giants like Google, Apple Inc. and Amazon.com Inc.“We now have an agreement between the two presidents to avoid any tariff escalation and avoid any trade war,” French Finance Minister Bruno Le Maire told reporters in Brussels before the meeting. “It’s remains a difficult negotiation -- with digital tax, the devil is in the details and we need to resolve the details.”Paris and Washington have discussed the possibility of France suspending the collection of the digital tax payments due in April as long as the U.S. refrains from imposing new tariffs, French officials said. But that wouldn’t constitute a withdrawal of the levy, they added. For its part, the French government denies its national tax is discriminatory and warned that the EU would retaliate if the U.S. imposed additional levies.The U.S. has said that the French tax discriminates against American technology companies, citing Section 301 of a 1974 American law that Trump has thus far reserved to justify tariffs against China. That opened the door to the U.S.’s threat to hit $2.4 billion of French goods with tariffs in retaliation.Among the French products targeted with duties of as much as 100% were luxury items like wine, cheese and makeup. One American wine merchant called it the biggest threat to the industry since Prohibition a century ago.For its part, the French government had warned that the EU would retaliate if the U.S. imposed additional tariffs.The dispute was another headache for European trade officials scrambling to expand their policy arsenal as the U.S. takes aim at a rules-based system for global trade that Trump argues is outdated and tilted against America. It also coincided with a change in leadership at the European Commission, the EU’s executive arm.EU trade commissioner Phil Hogan visited Washington last week for the first time in the job, partly to plead for talks rather than tariffs in disagreements like the French digital tax. At stake, he said, was transatlantic trade in goods and services valued at more than $3 billion a day.“Sounds like a fairly healthy relationship to me,” Hogan said Thursday in the U.S. capital. “So why put tariffs on these EU products to make them more expensive for your people?”The truce follows weeks of discussions between Treasury Secretary Steven Mnuchin and Le Maire, who were scheduled to meet Wednesday in Davos, Switzerland, the alpine resort town where government officials and business leaders gather during the winter to discuss whatever is ailing the global economy.The dispute has ramifications outside France as other countries try to come up with ways to generate revenue from the digital economy. Mnuchin told the Wall Street Journal that the U.K. and Italy will face American tariffs if they proceed with similar levies on foreign tech firms.U.S. and EU trade relations started to sour in 2018 when the Trump administration invoked national-security considerations to impose tariffs on steel and aluminum from Europe. As a U.S. military ally, the EU was infuriated and promptly retaliated with levies on iconic American brands such as Harley-Davidson Inc. motorcycles and Levi Strauss & Co. jeans.A subsequent U.S. threat to wreak significantly more economic damage by targeting the European auto industry with duties on the same security grounds led to a hastily agreed truce and a pledge by both sides to work toward reducing industrial tariffs across the board.Since then, the Trump administration has refused to start the tariff-cutting negotiations unless Europe includes agriculture in them. Also, it imposed levies on EU products in retaliation over government aid to Airbus SE that was deemed illegal by the World Trade Organization, and disabled the WTO’s appellate body,The EU, meanwhile, is pressing ahead with a plan for tariffs against the U.S. in a parallel WTO case over unlawful subsidies to Boeing Co.Trump, scheduled to speak Tuesday in Davos at the World Economic Forum’s annual meeting, on Sunday reiterated his frustration with Europe as a trading partner.“Europe has had tremendous barriers to us doing business with them. All those barriers are coming down. They have to come down,” he told a conference of farmers in Austin, Texas. “If they don’t come down, we’re going to have to do things that are very bad for them.”He added, “Europe was, in many ways, more difficult -- and is more difficult -- than China.”(Updates with possible French concession in the 11th paragraph)\--With assistance from Jonathan Stearns, Justin Sink and Chelsea Mes.To contact the reporters on this story: Ania Nussbaum in Paris at email@example.com;William Horobin in Paris at firstname.lastname@example.orgTo contact the editors responsible for this story: Ben Sills at email@example.com, Brendan Murray, Wendy BenjaminsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
A subsidiary of Airbus , the world’s largest planemaker, is preparing to launch a financial product aimed at helping its airline customers hedge against risks to revenue, officials said. Skytra Ltd, a fully-owned subsidiary, plans to launch listed financial futures and options on exchanges this year that will represent airlines revenue and help the industry manage risks more efficiently. Airlines typically hedge their fuel costs and foreign exchange exposures but the Skytra exchange is the first of its kind for the industry.
Bombardier, which sold control of the A220 program to Airbus in 2018 for a token Canadian dollar as part of broader efforts to improve its financial footing, said the venture needed more investment and might be subject to a writedown during fourth-quarter results next month. Bombardier also said it is "reassessing" its minority stake in the A220 jet program, which will require additional cash to ramp up production.
(Bloomberg) -- Bombardier Inc. fell the most on record after warning of disappointing fourth-quarter sales and revealing that it may exit a joint venture with Airbus SE that makes the A220 jetliner, potentially triggering a major writedown.A ramp-up in A220 production will require additional cash investment, pushing back the break-even point and generating lower returns across the lifetime of the project, Bombardier said in a statement Thursday. The value of the A220 joint venture is likely to be diminished and the amount of any accounting charge will be disclosed with full 2019 results next month, the company said.The potential end of Bombardier’s involvement in the A220 program is combining with new stumbles in the company’s rail business to undermine a once-great name in manufacturing -- just when investors thought they were poised to reap the rewards of a difficult turnaround effort. Walking away from the A220 would close the book on Bombardier’s involvement in an aircraft program in which the company invested more than $6 billion.“The joke continues. Anyone involved with the story has a gun to their head,” said John O’Connell, chief executive officer of Davis Rea Ltd., who doesn’t hold Bombardier shares or bonds. “This company has been a disaster my whole career and I’m almost ready to retire.”Bombardier plunged 30% to C$1.25 at 12:56 p.m. in Toronto after sliding as much as 39% for the biggest intraday tumble on record. That dragged shares to the lowest level in almost four years.The company’s 7.85% bonds due 2027 fell 6.2 cents, the most on record, to 96 cents on the dollar, yielding 8.6%, according to Trace data. The $1.5 billion in notes due 2025 dropped 3.9 cents to 98.1 cents on the dollar to yield 8%, the highest since Oct. 31.Disappointing SalesBombardier, which is refocusing its operations on rail equipment and business jets, said fourth-quarter sales would be $4.2 billion, trailing the lowest analyst estimate in a survey by Bloomberg.The results were dragged down in part by new challenges in the company’s faltering rail division, which generates about half of sales. The business got a black eye this month when New York removed 300 Bombardier-made subway cars from service because of door glitches. For the fourth quarter, the manufacturer said it would take a $350 million accounting charge because of problems in London, Switzerland and Germany.The timing of milestone payments also clipped results late last year, Montreal-based Bombardier said. So did the delay of some deliveries of the Global 7500 business jet into the first quarter of 2020.Liquidity remains strong, with year-end cash on hand of roughly $2.6 billion, Bombardier said. But the company is considering alternatives to accelerate debt reduction and strengthen its balance sheet. Full results are scheduled for Feb. 13.“The final step in our turnaround is to de-lever and solve our capital structure,” Chief Executive Officer Alain Bellemare said in the statement. “We are actively pursuing alternatives that would allow us to accelerate our debt paydown.”Trouble is, Bombardier may be running out of sizable assets to sell to meet its cash needs, said Bloomberg Intelligence analyst George Ferguson.“Bombardier needs to get its rail business -- the earnings and cash-flow driver -- on track, while restructuring its aviation division in a soft business-jet market,” he said in a report.Commercial-Jet RetreatThe potential end of Bombardier’s involvement in the A220 program would cap the company’s broader retreat from commercial-plane manufacturing.Bombardier ceded control of the A220 last year to Airbus for no upfront cash. The plane -- originally known as the C Series -- won praise for its fuel-efficient engines, composite wings and large windows. But the program ran more than two years late and about $2 billion over budget, and Bombardier had trouble finding buyers in an industry dominated by Airbus and Boeing Co.Airbus said it would continue funding the A220 program “on its way to break-even.” The European aerospace giant owns a 50.01% stake in the regional jet, with Bombardier retaining 31% and state-backed Investissement Quebec holding some 19%.The jet added 63 orders in 2019, with 105 currently in service and a backlog of close to 500 planes. Airbus will begin producing the A220 on a second assembly line this year at its factory in Mobile, Alabama.Bombardier agreed last year to sell a plant in Belfast, Northern Ireland, that makes wings for the A220. The buyer, Spirit AeroSystems Holdings Inc., is seeking to boost its exposure to Airbus programs after suffering as a supplier to Boeing’s grounded 737 Max.The Canadian company also agreed to sell its regional-jet program to Mitsubishi Heavy Industries Ltd.To contact the reporters on this story: Siddharth Philip in London at firstname.lastname@example.org;Paula Sambo in Toronto at email@example.comTo contact the editors responsible for this story: Anthony Palazzo at firstname.lastname@example.org, ;Brendan Case at email@example.com, Christopher Jasper, Tony RobinsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
China's Xiamen Airlines, a long-time Boeing operator, is looking to bring 10 Airbus A321neo aircraft to its fleet, as the carrier grapples with the financial impact from the 737 MAX grounding and persistent trade uncertainties. The carrier, a subsidiary of state-owned China Southern Airlines , is inviting leasing companies to bid to supply these jets, which are to be delivered from the second half of 2021 to 2023, the Chinese airline said in a statement on its website. The announcement deals another setback to the U.S. manufacturer, whose best-selling model Boeing 737 MAX remained grounded for about 10 months, following two fatal crashes that killed a total of 346 people.
Airbus said it remains committed to funding the A220 jetliner after Canadian minority partner Bombardier issued a profit warning and cited the need for extra cash investments in the loss-making programme. Bombardier said earlier it was reassessing its ongoing participation in a venture controlled by Airbus that runs the programme, which Airbus bought from Bombardier in 2018.
(Bloomberg Opinion) -- The billionaire bromance between Donald Trump and France’s richest man, Bernard Arnault, has surely been one of the more unexpected consequences of the U.S. president’s global trade war. Back in October, Trump lavished praise on the king of luxury — calling him by turns an artist, a great businessman and a gentleman — after LVMH Moet Hennessy Louis Vuitton SE opened a handbag factory in Texas. The symbolism was rich, considering Trump had just days earlier removed leather goods from a list of European products worth $7.5 billion that were hit with higher U.S. import tariffs. Trump wasted no time in spelling out the link: “I can’t tax him, because he moved to the United States.”The mood has cooled since then. Leather handbags and luxury items worth $2.4 billion are now back on the U.S. president’s hit list as part of potential tariffs targeting France, which the White House says is discriminating against U.S. firms such as Apple Inc., Facebook Inc. and Amazon.com Inc. with a new digital-services tax. The U.S. has also threatened more tariffs targeting the European Union related to the long-running dispute over aircraft subsidies between Boeing Co. and Airbus SE. Brussels has dispatched its top trade official this week to try to calm tensions, but there’s every chance the spat could worsen. For a president fighting impeachment and campaigning for re-election, French wines and German cars are tempting political targets.That has put Trump-whisperers like Arnault in an awkward position. While by no means the chief culprit of the EU’s trade surplus with the U.S. that Trump so hates, luxury products sold by LVMH such as wine and spirits are France’s key export sector after aerospace. The U.S. market brings in about 24% of the group’s revenue, almost as much as France and Europe put together. Shrewd re-jigging of the supply chain, and the luxury industry’s ability to pass on price increases to its well-heeled buyers, have so far helped keep the wolf from the door. LVMH’s pledge to create 1,000 jobs in Texas, even if a “Made In the USA” label leads to upturned noses, has made Trump less likely to want to penalize the company with luxury levies. He’s also less likely to oppose Arnault’s proposed $16 billion acquisition of iconic U.S. jeweler Tiffany & Co.It’s not just LVMH: Airbus, one of Trump’s favorite punching bags and the biggest brand in European aerospace, pulled off a similar feat. Its local presence in Alabama has spared the aircraft it produces in the U.S. from the 10% EU tariffs (and likely deterred Trump from pricier duties). Considering France is being singled out for harsher punishment, the fact that Paris-listed LVMH and Airbus are among the top five best-performing euro-area blue-chip stocks since Trump arrived in the White House will comfort French President Emmanuel Macron.But how much longer can moving resources into the U.S. keep delivering results? Airbus is scrambling to continue ramping up production in Alabama, where its investment now totals $1 billion, but that hasn’t been enough to silence the threat of higher tariffs. For the luxury-goods sector, not everything “Made in France” can be “Made in the USA.” LVMH is clever enough to sell locally-made U.S. sparkling wine in funky single-serve bottles, but it will never be the same as champagne. European corporate takeovers of U.S. targets, while rising, are vulnerable to Trump’s unpredictability.Europe’s top multinationals may have also been helped by the fact that Trump’s focus so far has been primarily on China. Being a secondary target hasn’t been too bad for the EU: Tit-for-tat tariffs between China and the U.S. actually saw France get a total export boost to both countries worth an estimated 0.3% of GDP, according to Nomura research. (For Germany it was 0.1%.)It’s clear that exporting high-value items that are difficult to substitute, such as aircraft or luxury goods, is a natural defense against trade wars; Airbus was also helped by Boeing’s troubles. But China may now be receding into Trump’s rear-view mirror following the signing of a phase-one trade deal. If Europe takes its place as Trump’s chief concern, things will be different. While European investment into the U.S. increased by $226.1 billion in 2018, to $3.0 trillion, the U.S. trade deficit with the EU also hit a record that year. Tariffs on German cars — which would be far harder to pass on to consumers than for a bottle of Dom Perignon, or an A320 airplane — remain an ugly prospect, even after an increase in their local U.S. production over the past decade.Europe’s CEOs will be praying the EU can convince the White House that an escalation in tariffs would hurt American jobs, saddle the consumer with higher prices and deter hiring and investment. If that’s not enough, then maybe the next delegation the EU sends should include Arnault and the gift of a few handbags — Made in USA, of course.To contact the author of this story: Lionel Laurent at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. 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