This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 28, 2017).
Bombardier Inc. was licking its wounds on Wednesday, a day after two rivals said they would merge their train operations and the U.S. announced a tariff on its passenger jets.
Shares of the prominent Canadian manufacturer plummeted when trading opened on the Toronto Stock Exchange Wednesday, and finished the day down 7.8% at 2.12 Canadian dollars ($1.71).
Sales of Bombardier's new CSeries passenger jets have stalled out this year, and the decision by the U.S. International Trade Commission certainly won't help. The body is imposing a tariff that would triple the cost of CSeries jets sold in the U.S., acting on a complaint from Boeing Co. that Bombardier was improperly underpricing the aircraft.
Another problem for the Montreal-based company is its train division, which generates most of its profits but faces a sharply diminished global position as it struggles with production problems.
Bombardier initiated partnership talks with Siemens AG earlier this year, according to people familiar with the talks, in a bid to revitalize its train business in the face of growing competition, notably from China. After those talks 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.
China's CRRC Corp. ranks as the world's largest train maker with more than $30 billion of sales.
Production problems have hobbled Bombardier. New York's transit authority didn't include it in bidding this summer for a subway-car contract after past problems with delivery delays. Toronto's transit body also is at odds with the company.
"We have done everything short of building the vehicles ourselves," said Andy Byford, chief executive of the Toronto Transit Commission, which is suing Bombardier for late streetcar deliveries. The city has received only 43 of 148 streetcars promised this year. Mr. Byford said the contract has been plagued by multiple production problems, equipment flaws and turnover among senior Bombardier project managers.
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.
A company spokesman said that overall the backlog of orders in its train division as of June was up 9% from a year earlier.
Bombardier's aircraft lineup includes business jets, but that market has been weak in the past year, contributing to a steady decline in the company's backlog ahead of the arrival of a new high-end aircraft.
The company has orders for 360 CSeries aircraft, said Fred Cromer, president of Bombardier's commercial aircraft division, adding that he is "very upbeat on the prospect of orders in the near term." But the last CSeries sales were in December, when two planes were sold to Tanzania. Cameron Doerksen, an analyst with National Bank of Canada, said "there is definitely some anxiety" over the lack of sales.
Meanwhile, Bombardier has slashed jobs and costs after booking a net loss of $1 billion last year on $16.3 billion in revenue. Mr. Doerksen says the company is getting back on track. He expects Bombardier's loss to shrink to $152 million this year.
Write to Jacquie McNish at Jacquie.McNish@wsj.com
(END) Dow Jones Newswires
September 28, 2017 02:47 ET (06:47 GMT)