Rail Caution A little caution could be in order. Of course, I've always been a big believer in Bombardier's longterm prospects, however, as I've suggested many times, less experienced investors should probably avoid this stock.
Don't buy it just because you think it's a big company with international sales that's certain to recover. Bombardier remains a high risk/high reward situation. Though I believe it will eventually reward patient, shareholders very nicely, this company can and probably will, shake out some of the staunchest of longs along the way.
Nothings certain. And Bombardier's success remains elusive.
On the other hand, management appears to be trying to do what's right in developing the kinds of products that aerospace and rail industries want and need.
CSeries will eventually succeed, even if it does encounter another set-back or two along the way. It's a good airplane, that airlines need. As I see this, it's more a question of how much it will succeed. In a worst case scenario, cost to Bombardier would be minimal since the plane already has some orders and considerable financing from various levels of government.
Bombardier remains the leader in business jets. The company's outlook should improve with its new relationship with Netjets, and a recovery in the lower end of this industry.
With rail it's a different story. Sales are down and Bombardier's relationship with Asian markets could be in trouble with the recent announcements of a shake-up in the Chinese Rail ministry.
And you have to wonder with so much apparent graft, how Bombardier was so successful in that environment. Keep in mind Siemens recently took a hit when its rail unit became ensnared in bribery scandals:
China to abolish rail ministry in anti-graft shake-up
Changes include bolstering a maritime body as China engages in island disputes with its neighbours
- Published: 14:25 March 10, 2013
Beijing: China is to effectively abolish its scandal-plagued railways ministry as part of a sweep of government reforms aimed at tackling inefficiency and corruption, a top official told parliament on Sunday. The changes include bolstering a maritime body as China engages in island disputes with its neighbours, and giving an economic development body more say over the one-child policy as the country faces a shrinking labour pool.
“The administrative system in effect still has many areas not suited to the demands of new circumstances and duties,” Ma Kai, secretary-general of the State Council, China’s cabinet, told the National People’s Congress parliament at its annual gathering in Beijing, according to a copy of his speech. Inadequate supervision had led to “work left undone or done messily, abuse of power and corruption,” he said, adding that some areas were insufficiently managed while others had “too many cooks in the kitchen”.
Analysts, though, expressed doubts about the effectiveness of the moves. David Goodman, a China politics expert at the University of Sydney, pointed out that reorganisation alone could not stamp out corruption. “They are very serious reforms,” he said, “but they are not going to attack that question of making officials more accountable and more responsible.”
Since taking office at the head of the ruling Communist Party in November, China’s incoming leadership has issued a barrage of promises to adopt humble ways and fight corruption, while state media have highlighted individual scandals. But any broad anti-graft measures would require taking on powerful vested interests, and the official news agency Xinhua said the State Council had restructured the government seven times in 30 years.
Beijing will switch control of the railway ministry’s administrative functions to the transport ministry and hand its commercial functions to a new China Railway Corporation. The rail system — which has cost hundreds of billions of dollars — has been one of China’s flagship development projects in recent years and the country now boasts the world’s largest high-speed network. But the expansion has seen a series of scandals and widespread allegations of corruption, with former railways minister Liu Zhijun, who was sacked in 2011, now awaiting trial on graft charges.
Public criticism In July 2011 a high-speed crash in the eastern city of Wenzhou killed at least 40 people, sparking a torrent of public criticism that authorities compromised safety in their rush to expand the network.
Meanwhile the body that oversees China’s one-child policy will be merged with the health ministry to form a new body, and nationwide population policy will now be handled by the National Development and Reform Commission, an economic planner. The move comes after China saw the first drop in its labour pool in decades — a consequence of the restrictions imposed on families in the late 1970s that now threaten to impact the country’s future growth. But outgoing premier Wen Jiabao told parliament last week that the policy would be maintained this year.
China will also bring its maritime law enforcement bodies under a single organisation, allowing greater coordination as the country is embroiled in a bitter row with Japan over disputed islands in the East China Sea. The State Oceanic Administration, which runs marine surveillance, will take over management of the coastguard from the public security ministry, fisheries patrols from the agriculture ministry, and customs’ marine anti-smuggling functions.
Chinese marine surveillance vessels regularly patrol what Beijing says are its waters around the Diaoyu islands, prompting accusations of territorial incursions by Tokyo, which refers to the outcrops as the Senkakus. Beijing is also at odds with several Southeast Asian countries, including the Philippines, over islands in the South China Sea. Goodman called the reforms sensible efforts to better address pressing issues such as demographic changes and disputes with neighbors, saying they pointed to the government seeking a “more sophisticated, more effective way of doing things”. But the restructuring would only bring about “government efficiency within the limits of what is possible,” he said.
“It doesn’t stop people behaving badly.”