Early last month, while Bombardier’s Wichita and Canadian business jet production and assembly facilities remained closed during an unprecedented, four-month plant shutdown that started in late December, the aerospace unit revealed that 3,000 employees–10 percent of its worldwide employment force–will be laid off over the next 12 months.
Specifically, 1,200 workers will be let go in Belfast, Northern Ireland, and 1,800 combined in Toronto and Montreal. These layoffs are in addition to the 2,000 cuts announced last October. Under a new deal, Bombardier workers in Wichita escape the latest swing of the ax.
“In view of challenging market conditions, we have a responsibility to take aggressive actions to continuously improve our competitive edge and align our production rate with market demand,” explained Bombardier Aerospace president and COO Pierre Beaudoin. Putting a positive spin on the matter, Beaudoin said that along with the “most diversified line of innovative products, Bombardier Aerospace will emerge stronger as the premier manufacturer of the world’s finest aircraft.”
Announcement of the job cuts followed just one day after Bombardier disclosed that the slump in business jet and regional airliner sales adversely affecting virtually
all manufacturers has dragged the company’s latest fiscal year earnings significantly below its forecast. Previously, the company forecast earnings of 81 cents per share and a cash flow of $1.3 billion. New estimates put earnings at just 40 cents a share and a cash flow of $800 million.
The Montreal-based company said it was also considering adopting a more conservative accounting policy for its aerospace programs, “which could entail significant non-cash write offs.” Bombardier declined at press time to specify what accounting changes it is contemplating, but if they are adopted the audited financial statements for the year ended Jan. 31, 2003, earnings per share are expected “to be materially lower than the stated range.” Cash flow would not be affected, the company said.
The earnings report and the possible accounting changes were announced less than a month after recently appointed Bombardier president and CEO Paul Tellier dismissed Louis Morin as the company’s CFO. A Bombardier spokes- man said there was no connection between Morin’s dismissal and Bombardier’s plan to change its accounting methods.
In December Bombardier abruptly replaced president and CEO Robert Brown with Tellier, 63, a Bombardier director since 1997 and president of Canadian National Railway for the past decade. Brown, 57, became president and CEO of Bombardier in February 1999 after serving for nearly three years as president and COO of Bombardier Aerospace. Tellier is credited with transforming the formerly government-owned Canadian National into one of the most efficient railways in North America.
Wichita Wages Frozen
Facing a possible plant closure and subsequent layoffs, Bombardier’s Wichita machinists union agreed– just two days before Bombardier revealed its massive layoff plan–to a salary freeze and to shoulder more health-care costs. In exchange for the concessions, Bombardier agreed to retain in Wichita, until October 2006, production of the Learjet 60, including its parts manufacturing, fuselage and wing assembly work.
Minor design changes are included in the revised contract, but it does not cover future derivatives or replacement aircraft. Bombardier also promised to keep open the Wichita flight-test center and service center until late 2006. Still up in the air is a decision about which of the six Bombardier Aerospace manufacturing facilities will produce the Learjet 40 and 45/45XR and Challenger 300, which are all currently assembled in Wichita.
While the wage freeze helped the Wichita workers in this case, Bombardier has already eliminated about 900 jobs in Wichita over the past 18 months.
The temporary production cutbacks and layoffs at Bombardier Aerospace started last November and contributed, in part, to the Canadian manufacturer delivering just 108 business jets last year, nearly 41 percent fewer aircraft than last year’s 182. Under the hiatus, production in Canada of the Challenger 604 was reduced over a four-month period, while work on the Global Express was curtailed for up to two months. In Wichita, production of the Learjet 45 and 60–suspended for four months beginning in December–is scheduled to resume this month.
In addition, Bombardier started last November to lay off some 6 percent of its aerospace workforce, or nearly 2,000 employees, including 20 percent from management ranks. Bombardier said at that time the Challenger 300 and Learjet 40 development programs and entry-into-service schedules would not be affected by these cutbacks, but the Challenger 300 certification target has slipped from the fourth quarter of last year to the second quarter of this year. Additionally, Bombardier plans to sell its corporate jet financing business.
As it announced the 3,000 additional job cuts, Bombardier also said it was lowering production rates on both regional airliners and business jets, but didn’t provide any specifics.
Despite the cutback, Bombardier Aerospace’s Beaudoin promised customers that the company will “continue to invest in customer service and to support in-service aircraft.”
