Bombardier to reduce workforce by 7,000 positions
Published Wednesday, February 17, 2016 6:29AM EST Last Updated Wednesday, February 17, 2016 6:06PM EST
MONTREAL -- Bombardier is implementing one of the deepest job cuts in its history by eliminating 7,000 positions -- including more than a third in Canada -- though it took pains Wednesday to instead train the public spotlight on a large CSeries plane order with Air Canada.
The layoffs represent close to 10 per cent of Bombardier's global workforce and are expected to take place over the next two years, the Montreal aerospace giant said.
CEO Alain Bellemare said he believes the efforts to cut costs will help revive Bombardier, which has appealed for federal aid as it struggles to sell its signature CSeries passenger jet.
"Today I feel we have done our homework," Bellemare said in an interview. "We are at the right place and I feel good about our ability to turn Bombardier around given these actions."
About 3,200 of the 7,000 jobs to be eliminated will be at Bombardier Transportation, the company's rail division. The losses will include 2,830 positions in Canada, including 2,400 mainly in Montreal, with the rest in Ontario.
The layoffs will be partly offset by hiring in certain areas, particularly as production of the CSeries ramps up, Bombardier said. Layoff notices are expected to be issued in the coming weeks and completed by next year.
Amid the bad news, Bombardier ended its nearly 18-month sales drought for the CSeries with a letter of intent with Air Canada for the purchase of 45 CSeries 300 planes, with an option to buy up to 30 more.
Air Canada CEO Calin Rovinescu said the airline signed the letter of intent after months of evaluation and heated negotiations with Bombardier.
"This was 100 per cent a commercial deal," Rovinescu said.
Bellemare said the agreement with Air Canada will be a catalyst in convincing other large global carriers to place orders for the CSeries.
"It would be a big endorsement from any large airline carrier but having it from your own base ... is a big deal. I cannot underestimate the positive impact that this will have on the program."
In a separate but related development Wednesday, Air Canada announced that Quebec has agreed to drop its lawsuit against the airline in exchange for a commitment to have heavy maintenance work on its planned fleet of CSeries planes carried out in the province for at least 20 years.
The CSeries is Bombardier's new generation of aircraft for commercial airlines, in development for more than a decade as an alternative to smaller models of passenger jets built by rivals Boeing and Airbus. The aircraft is about two years behind schedule and at least US$2 billion over budget.
Bombardier said it hopes Ottawa will come through on its request for financial assistance for the CSeries, just as the Quebec government has done in providing US$1 billion in support.
The federal government said Wednesday it was still reviewing the request.
Bombardier also announced Wednesday that it lost US$5.34 billion for 2015, including a US$677 million loss in the fourth quarter.
The company said it is also planning to reduce the number of shares it has outstanding. It plans a special shareholder meeting to get approval for a reverse stock split that would aim to exchange outstanding shares for a smaller number of consolidated shares, with a price in the range of C$10 to $20 each.
On the Toronto Stock Exchange, Bombardier's shares surged Wednesday by 21 per cent to close at $1.09. Last month, its stock fell below the $1 mark on the TSX for the first time in 25 years.