A management shakeup, cancellation of certain dividends and a stated intention to raise $2.1 billion in capital are the latest steps for Bombardier to calm an increasingly worried market as it attempts to improve liquidity.

Last month Bombardier brought in former United Technologies executive Alain Bellemare to steer the company as Pierre Beaudoin shifts to the chairman’s role, replacing his father, Laurent Beaudoin, who had been at the helm for 50 years and is now chairman emeritus.

Bellemare, most recently president and CEO of UTC Propulsion & Aerospace Systems, brings knowledge of large-scale development programs, and he is already familiar with Bombardier’s own CSeries, which uses PurePower geared turbofans made by UTC’s Pratt & Whitney. He also steered the integration of UTC’s largest-ever acquisition, Goodrich.

Bellemare departed UTC and his position was eliminated last month, just a few months after former UTC CEO Louis Chenevert had left the company. Bellemare’s departure provided an opportunity for Bombardier, Pierre Beaudoin told analysts.  “We’ve known each other for years. We have a good relationship,” he said.

Pierre Beaudoin said he will remain active in the company, working closely with Bellemare and maintaining responsibility for mergers and acquisitions and company financing.

While typically a normal succession, the change was announced against the backdrop of a new financial plan that seeks to raise $600 million in equity, $1.5 billion in new debt facilities and the exploration of “potential participation in industry consolidation to reduce debt.”

Learjet 85 Most Vulnerable of Commercial Programs

The management change also follows the plan, announced in January, to shelve the Learjet 85 program, incurring a $1.4 billion fourth-quarter charge and the loss of 1,000 jobs.

The moves are evidence of continued restructuring for Bombardier, which last summer ousted Bombardier Aerospace president Guy Hachey, along with several other senior executives, and restructured the Bombardier Aerospace Group into three divisions: Commercial Aircraft, Business Aircraft, and Aerostructures and Engineering. That announcement, which also detailed plans to lay off another 1,800 workers, gave rise to questions whether Bombardier was positioning the group to shop one or more of the units. Analysts further noted that the reorganization spotlighted Bombardier’s weakening liquidity position.

Also last summer, Bombardier gave indications that the Learjet 85 program might have a cloudy future, saying it needed to prioritize its busy research and development (R&D) plate. The company invested nearly $2 billion in its research and development programs last year, and it could stretch its resources only so far.

Bombardier has already sunk billions into the delay-plagued CSeries, and the future of its Commercial Aircraft unit hinges on seeing that program to fruition. The Global 7000/8000 program has potential to be the most lucrative of the business jet programs and occupies what has been the sweet spot of an ailing business jet market. Bombardier has not announced order totals or backlogs for the 7000/8000, but the program has attracted large fleet orders, including contracts from major operators NetJets and VistaJet.

That left the Learjet 85, a 10-passenger, 3,000-nm midsize that was to be the company’s largest, most expensive and first composite Learjet. Undertaking its first mostly composite airplane became an ambitious project for the manufacturer, particularly after the original supplier, Grob, went into insolvency.

Bombardier brought the work in-house and embarked on building a new level of expertise, a process that set the program back years. The aircraft flew for the first time in April last year, and was conducting flight-tests as recently as January. But the manufacturer was already well behind schedule for deliveries to the aircraft’s primary customer, the formerly Bombardier-owned Flexjet. Further, its place in a more difficult segment of the market and the thinner margin potential made the Learjet 85 the program most vulnerable to revised priorities.

Moderating ‘Cash Burn’

Bombardier blamed the market for its decision. “Given the weakness of the market, we made the difficult decision to pause the Learjet 85 program,” Beaudoin announced in January. The manufacturer reiterated that statement in February, saying, “The pause follows a downward revision of Bombardier’s business aircraft market forecast, primarily due to the continued weakness of the light aircraft category since the economic downturn.” The company’s business aircraft order book might support that contention. Net orders for Bombardier business jets fell from 305 aircraft at the end of 2013 to 129 last year. Book-to-bill fell to 0.6 last year, short of the Bombardier target of one.

Deliveries tell another story, climbing to 204 last year from 180 in 2013. Learjet contributed to that increase, up by five aircraft in the year. Bombardier executives have also stated that sales for the Learjet 70/75 have made gains, and they forecast that deliveries of their business jets will reach 210 this year.

When asked about the order book, Beaudoin appeared unconcerned. “Look at the overall backlog. Look at the amount of orders we’ve accumulated through time,” he said. Beaudoin also denied that Flexjet had canceled its order for the Learjet 85, saying the company is in negotiations with the fractional operation on potential replacements.

Analysts quickly dismissed the idea that the cancelation was market driven.  Richard Aboulafia, vice president of analysis at the Teal Group, called the 85 “another CSeries casualty.” Referring to the delays and costs overruns associated with the CSeries, Aboulafia added, “What a carnivorous program that has turned out to be.”

He later characterized Bombardier’s assertion to be “as egregious as I’ve seen in this business. For an industry whose health depends on customer confidence, calling the market ‘weak’ is just bad corporate citizenship. Healthy companies don’t kill programs that are this far along in development. Ergo, BBD is not a healthy company.”

The Aerospace group, not unexpectedly given the Learjet 85 program charge, lost $1.3 billion for the fourth quarter and $995 million for the year. Aerospace margins were at 1.6 percent. In all, the Aerospace group laid off 3,700 workers last year.

“Cash burn continues to be a concern,” warned Sterne Agee analyst Peter Arment, given the needs of the CSeries and Global development costs. “With working capital and capital expenditure requirements in the first half of 2015 exceeding $1.5 billion, liquidity could become an issue by mid-year.”

After Bombardier announced the Learjet 85 “pause,” J.P.Morgan predicted the company would seek to raise between $1.5 billion and $2 billion, noting it had $2.4 billion in cash on its balance sheet at the end of the year, an “inadequate” amount given the company’s average cash burn during the first nine months of the year over the past four years.

The Way Forward

The company is planning a special shareholders meeting to increase the number of shares to “realize the capital raising plan.” While it moves to expand its loans and equity, it is also looking at consolidation possibilities. Beaudoin was not specific as to whether this meant selling or buying. 

“It’s not that there is a business segment meant for sale,” he said. “It’s more there is key opportunity today and we think we should participate if the conditions are right.”

When Bombardier first warned of a potentially cloudy future for the Learjet 85, analysts questioned whether that foretold a cloudy future for Learjet in its entirety or whether the unit might be for sale. But when asked directly whether Learjet is up for sale, Beaudoin said no. 

Bombardier is pushing forward with the CSeries, and the flight-test program is closing in on 1,000 hours. Bombardier says it anticipates certification of the first of the CSeries, the CS100, later this year with the CS300 following six months later. The company, meanwhile, began Global 7000 assembly late last year. Bombardier has long given 2016 and 2017 as the respective entry-into-service dates for the Global 7000 and 8000.

The company reported that “development is progressing as planned, with the majority of the production drawings already released” and said suppliers have begun to assemble components for the remaining flight-test aircraft. But the company is not revealing much more than that, with no announced first-flight target.

Aboulafia warns that the 7000/8000 schedule “generously gives Gulfstream five years alone in the market” with its G650, allowing the Savannah, Ga. competitor to grab the top spot in the business aircraft market. He went as far as to predict that because of this, coupled with the “Lear 85 disaster, BBD likely will never reclaim its number-one business aircraft market position.” As for the CSeries, Aboulafia suggests that collaboration with China might be a solution.