Bombardier Inc. (IW 1000/220) will cut an additional 7,500 jobs -- more than 10% of its workforce -- as the maker of trains and airplanes accelerates a restructuring plan after taking on billions of dollars of debt developing its marquee jetliner.
Restructuring charges of $225 million to $275 million will be reported as special items starting in the fourth quarter and continuing through 2017, Bombardier said in a statement Friday. The company expects the program to yield savings of about $300 million a year by the end of 2018, saying it would ensure competitiveness and improve profit margins.
The plan marks the second major employment cut in eight months by Chief Executive Alain Bellemare, who was hired in February 2015 with a mandate to restore profitability. He’s working to overcome cost overruns and a delay of about two-and-a-half years on the $6 billion C Series aircraft program, which was developed to rival products made by Boeing Co. and Airbus Group SE.
“When we launched our turnaround plan last year we committed to transforming our company,” Bellemare said in the statement. “And that is exactly what we are doing.”
He also reaffirmed his confidence in Bombardier’s strategy and its ability to achieve short-term goals as well as the objectives of a 2020 turnaround plan.
The job cuts will take place over the next two years, and Montreal-based Bombardier didn’t immediately provide details on where they would occur or which programs would be hurt most severely. In February, Bellemare unveiled plans to cut 7,000 jobs over two years and about 60% of that reduction had been achieved by the end of June. The manufacturer of planes and trains had a total workforce of about 70,900 as of Dec. 31.
The employment reductions will be partially offset by some new hiring to support the ramp-up of key programs such as the C Series and the Global 7000 business jet, Bombardier said without providing details. The company will “streamline” administrative and non-production functions and create centers for design, engineering and manufacturing in both its aerospace and rail businesses.
After canceling the Lear 85 business jet, Bombardier raised $2.5 billion this year by selling stakes in the C Series and the company’s train unit to the Quebec government and the province’s largest pension fund manager.
Bombardier had $8.96 billion of long-term debt at the end of June and $4.4 billion of accessible liquidity -- a figure that climbed to $4.9 billion on Sept. 1 after Quebec completed a $1 billion investment in the C Series. The company’s next maturity occurs in 2018 on $1.4 billion in bonds.
Cash Infusion from the Feds?
The manufacturer formally sought $1 billion in federal aid last year, and the two sides have yet to reach a deal. Canada is considering different ways to provide a cash injection, with Innovation Minister Navdeep Bains saying last week it’s now a matter of how -- not if -- an aid package can be delivered.
The planemaker reduced its forecast for C Series deliveries on Sept. 6, citing delays at engine supplier Pratt & Whitney, a unit of United Technologies Corp. Seven of the new aircraft are now slated to be handed over this year, down from an earlier plan of 15, Bombardier said.
By Frederic Tomesco