In hopes of finally shedding its research-and-development skin and turning a profit, natural-gas engine technology company Westport Innovations (TSX:WPT) hired auto industry veteran Nancy Gougarty as its new president and chief operating officer last month.
The choice to hire Gougarty, whose career has spanned 35 years and includes numerous executive positions in the United States and China, was heralded by Westport as a move toward “product delivery.”
Gougarty has worked with General Motors and TRW Automotive Corp., a multibillion-dollar Shanghai-based manufacturer of airbags, seatbelts and other vehicle safety products.
“Nancy will play a key role in implementing our strategic priorities … and driving Westport’s financial success with her experience in operations and international product sales,” Westport CEO David Demers stated in a press release.
In an interview with Business in Vancouver, Gougarty echoed Demers’ sentiments. She stressed that her background in manufacturing will help Westport progress to “industrialization” and “execution.”
World transportation markets are increasingly converting to natural gas products, and Gougarty said Westport needs to ensure it can capitalize on that shift.
For instance, there is more infrastructure available locally – there are 11 natural gas fuelling stations in British Columbia, seven of which are in the Lower Mainland – which may help domestic sales. In addition, North American natural gas prices are lower than both gasoline and diesel.
Gougarty added that Westport, founded in 1995, has also inked deals with companies such as Cummins Inc. (NYSE:CMI) in the U.S. and Weichai Power Company Ltd., China’s largest maker of heavy-duty engines.
The joint-venture agreements with Cummins and Weichai have produced a range of natural gas engines used in buses and trucks in the U.S and China, respectively. In both cases, Cummins and Weichai manufacture the engines while Westport provides the technology. As a result of the Cummins deal, more than 34,000 natural gas engines are in service.
In addition to the joint venture agreements, Westport manufactures its own line of natural gas engines.
But despite the international deals and perceived shift in acceptance of natural gas vehicles, 2013’s second quarter was tough for Westport. The company, which has never been profitable, reported a net loss of $33.9 million. Its 2012 second-quarter net loss was $6.1 million.
And Pavel Molchanov, a Houston-based senior equities analyst with Raymond James, predicts there are more Westport losses to come. Molchanov told BIV that turning a profit is not imminent for Westport regardless of the personalities the company hires.
The adoption of natural gas engines by trucking companies, transit authorities and other transportation businesses is driving the market now. But while market adoption is gaining some traction, Molchanov said the North American market has been slower to accept the technology.
“So the industry here is doing this on its own time. Large fleet operators are making these changes based on their timetables, which can be rather slow. That is not a criticism of Westport, that’s just the reality of the marketplace.”
Molchanov predicted that Westport will inch toward positive cash flow by the end of next year.
