|
 Montreal-based Bombardier, which plans to eliminate 1,100 jobs in
Canada and 600 in the United States, said it needs to reduce
expenses while making major investments in its new CSeries
commercial and Learjet 85 business jets.
Shares of the company, which has delayed the launch of its $3.9
billion CSeries four times and last year pushed back the delivery of
the Learjet 85 to mid-2014, were down about 3 percent to C$3.98 on
Tuesday.
"It's hard to believe that they'd be laying off this level of people
without the financial necessity of doing it," said Richard Aboulafia,
vice president of aviation consultancy Teal Group. "In other words,
this speaks to a real issue in terms of raising more money to
complete the (CSeries) program."
Bombardier, which had approximately C$4 billion ($3.64 billion) in
cash and equivalents in October, will announce its fourth-quarter
results and outlook on February 13.
In a copy of the memo to staff, seen by Reuters, the company warned
stricter spending controls were needed to ensure it can
"consistently meet our budget throughout 2014."
"Cash has once again risen to the top of investor concern," RBC
Capital Markets analyst Walter Spracklin said in a note, citing the
CSeries delay and C$1.7 billion in debt maturing in 2016. Cash
concerns were confirmed last week, he added, when rating agency
Fitch downgraded Bombardier.
"You can look good to people who provide you with cash by bringing
in orders. And if you can't do that, you desperately cut costs,"
Aboulafia said. "That's not a happy picture."
Orders for Bombardier's commercial and business jets fell 19 percent
in 2013, in what the company called a "challenging year for
aviation," while business jet deliveries lagged forecasts due to
Learjet delays.
"There's definitely reason to be concerned," said Stonecap
Securities analyst Scott Rattee. "The layoffs confirm ... they are
very concerned about their cash position."
Bombardier said there is no specific cost-savings target associated
with the job cuts, which Bombardier spokeswoman Haley Dunne said
will affect both permanent and contract employees and both union and
non-union staff.
[to top of second column] |
Cormark Securities analyst David Newman estimated annual savings
from the job cuts at about C$125 million.
The company, which notified employees about the cuts in an internal
memo on Tuesday morning, said aerospace jobs will be eliminated in
sectors including manufacturing, engineering, sales and support.
"This is all with the goal of assuring our long-term success," Dunne
told Reuters. "It's just part of the overall continued focus we're
putting on managing our costs prudently so that we can support our
investments."
Of the 1,700 jobs, 300 had already been cut in December, Dunne said,
adding that Bombardier would try to match employees whose jobs were
being eliminated with a "few hundred" positions it is currently
trying to fill.
Bombardier's aerospace unit has 22,200 of its 38,350 global
aerospace employees in Canada and 5,700 in the United States.
Operations in Montreal will see the bulk of the 1,100 job cuts,
Dunne said. A Wichita, Kansas newspaper reported that 550 jobs were
being cut at Bombardier's Learjet plant there.
"The cuts come as an absolute surprise, we were shocked in fact,
cause things are going pretty good at the workplace," said Roland
Kiehne, president of the Unifor local that represents some 2,000
unionized workers at Bombardier's aerospace manufacturing site in
Toronto.
($1 = 1.0979 Canadian dollars)
(Additional reporting by; Solarina Ho
and Euan Rocha in Toronto; editing by Jeffrey Benkoe, Peter
Galloway, Jeffrey Hodgson and Nick Zieminski)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
