Bombardier Slices 5,000 Jobs, Sells Two Units -- WSJ

Date : 11/09/2018 @ 8:02AM
Source : Dow Jones News
Stock : Cae Inc. Ordinary Shares (CAE)
Quote : 20.08  0.0 (0.00%) @ 7:05AM

Bombardier Slices 5,000 Jobs, Sells Two Units -- WSJ

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By Robert Wall and Colin Kellaher 

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 (November 9, 2018).

The shake up of Bombardier Inc., a Canadian plane and train maker, gained pace Thursday with the company announcing another 5,000 job cuts and a decision to shed its turboprop plane-making and pilot-training units.

Bombardier has been under financial pressure for several years after a big bet to battle plane-making giants Boeing Co. and Airbus SE with a brand-new single-aisle jetliner ran into trouble.

The Montreal-based company said Thursday it would sell its business aircraft-training activities to CAE Inc. for $645 million. CAE said it agreed to pay an additional $155 million to Bombardier to monetize future royalty obligations under an authorized training-provider agreement.

Bombardier also said it agreed to sell for about $300 million its turboprop-aircraft programs and the "de Havilland" trademark to a unit of Longview Aviation Capital Corp., the parent of Canadian aircraft-maker Viking Air Ltd. The deal includes the Dash 8 Series 100, 200 and 300, along with the Q400 program operations at the Downsview manufacturing plant in Ontario.

The deals leave Bombardier, which once had ambitions to become a global aerospace powerhouse, as a maker of private jets, regional jetliners, plane parts and trains. Bombardier Chief Executive Alain Bellemare said Thursday the company was exploring strategic options for the regional plane business.

Shares in Bombardier were 14% lower midmorning after the company also cut 2018 free cash-flow guidance.

Founded in 1937, Bombardier in 2008 embarked on the CSeries to rival Boeing's best-selling 737 and the equally popular Airbus A320. Bombardier tried to sway buyers with a brand new, more fuel-efficient design. But airliner buyers were reluctant to order the plane, uncertain about its prospects. Technical setbacks caused development costs to skyrocket.

The company in 2015 gave up almost half its stake in the program, called the CSeries, in exchange for a $1 billion financial lifeline from the Quebec government.

But the financial situation failed to improve. Bombardier in February 2016 announced plans to cut about 7,000 jobs. Little more than six months later, it was forced to shed a further 7,500 positions.

The CSeries entered service that year. And Delta Air Lines Inc. agreed to place a landmark 75 plane order for the Bombardier plane. Boeing challenged the deal, accusing its Canadian rival of price dumping. Although Bombardier prevailed in legal challenges early this year, the trade battle during which the U.S. threatened the CSeries with massive important tariffs created additional uncertainty over the project.

A year later, Bombardier agreed to hand control of the CSeries program to Airbus. The plane maker based in Toulouse, France, formally took charge of the project in July, quickly renaming the jet family the A220. Bombardier, which holds a 31% stake in the partnership, agreed to cover losses on the program until around 2021.

Airbus quickly secured deals for the A220 from JetBlue Airways Corp. and a 60-plane order from a startup carrier being set up by JetBlue founder David Neeleman.

Bombardier said the latest round of job cuts should take place during the next 12 to 18 months and result in annualized savings of about $250 million by 2021. Bombardier says it has around 69,500 employees world-wide. The company said it would post a restructuring charge of roughly $250 million in 2019.

Mr. Bellemare added that the company now had greater financial flexibility and solid liquidity.

Robert Stallard, an analyst at Vertical Research Partners, said Bombardier was making progress fixing the company, though risks remain.

Write to Robert Wall at robert.wall@wsj.com and Colin Kellaher at colin.kellaher@wsj.com

 

(END) Dow Jones Newswires

November 09, 2018 02:47 ET (07:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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