Bombardier Inc.'s share price fell Wednesday after two rivals said Tuesday they'd merge their train operations and the U.S. announced a harsh tariff.
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Shares of Montreal-based Bombardier dropped nearly 14% when trading opened Wednesday on the Toronto Stock Exchange as the company grappled with multiple issues in its train and aircraft divisions. The stock recovered somewhat by midday to C$2.09, down about 8%.
A U.S. ruling to impose heavy tariffs on Bombardier's new CSeries passenger jets could further hurt sales that have been stalled since December. The U.S. International Trade Commission is adding a tariff that would triple the cost of CSeries jets sold in the U.S., after a complaint from Boeing Co that Bombardier was improperly underpricing the jets.
Another problem for the Canadian company is its core train division, which generates most of its profits but faces a sharply diminished global position as it struggles with production problems.
New York's transit authority did not include Bombardier in bidding during the summer for a subway car contract after past problems with delivery delays. Toronto's transit body is suing the company over similar issues
"We have done everything short of building the vehicles ourselves," said Andy Byford, CEO of the Toronto Transit Commission, which is suing Bombardier for late streetcar deliveries. The city has received only 43 of 148 new streetcars Bombardier was contracted to deliver this year. He said the new streetcars were stalled by multiple production problems, equipment flaws and turnover of a dozen senior Bombardier project managers in six years.
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"That screams to me that the project is in trouble," Mr. Byford said.
A spokesman for Bombardier said that although it "faces challenges," its train division has improved performance under new leadership and expects to deliver a total of 204 trains to Toronto by a 2019 deadline.
Bombardier initiated partnership talks with Siemens earlier this year in a bid to revitalize its train business as bigger competitors consolidate to dominate the sector, people familiar with the talks said. China's CRRC Corp. ranks as the world's largest train maker with more than $30 billion of sales.
After its talks with Bombardier stalled in August, Germany's Siemens turned to France's Alstom, announcing on Tuesday a merger of their train operations that will have combined revenue of $18 billion.
With sales of only $7.6 billion, Bombardier will be "at a competitive disadvantage" against much bigger global players, said Desjardins Capital Markets analyst Benoit Poirier.
Cameron Doerksen, an analyst with National Bank of Canada, said that although there has been a "coincidence of negative news in a very short period of time," he believes Bombardier is on track to restore profits and cash flow.
The company has slashed jobs and costs to reduce its net loss, which stood at $1 billion last year. Mr. Doerksen estimates the loss will shrink to $152 million at the end of 2017.
A spokesman for Bombardier said the backlog of orders in its train division increased 9% as of June over the same time last year. Demand for business jets has been weak in the past year, prompting a steady decline in the company's backlog over the past year.
Sales of Bombardier's CSeries jets have stalled since December, when it sold two planes to Tanzania. Mr. Doerksen said "there is definitely some anxiety" that there has been no jet sales this year.
Bombardier currently has orders for 360 CSeries aircraft. Fred Cromer, president of Bombardier's commercial aircraft division, said the company is in discussions with a variety of potential buyers.
"I am very upbeat on the prospect of orders in the near term," he said.
Write to Jacquie McNish at Jacquie.McNish@wsj.com
(END) Dow Jones Newswires
September 27, 2017 15:37 ET (19:37 GMT)