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Reuters Nivedita Bhattacharjee and Allison Lampert November 8, 2018
Shares plunge as investors react to plan to focus on transportation and business jet units
Bombardier Inc said on Thursday it would sell two of its units for US$900 million and cut about 5,000 jobs as the Canadian plane and train maker reins in costs and focuses on its core transportation and business jet units.
Shares were down 14 per cent at 2.74 Thursday morning.
Bombardier is in the middle of a five-year restructuring program aimed at growing revenue and profit. Earlier this year, it sold a majority stake in its money-losing CSeries jet to Europe’s Airbus.
Under Chief Executive Officer Alain Bellemare, the company cut thousands of jobs in 2016, although it has also hired workers for key programs like its Global 7500 business jet.
Bellemare is working towards reducing Bombardier’s net long-term debt of US$9 billion.
The latest round of cuts account for about 7 per cent of its total workforce.
“With today’s announcements we have set in motion the next round of actions necessary to unleash the full potential of the Bombardier portfolio,” he said.
Montreal-based Bombardier is selling its turboprop program to a subsidiary of Longview Aviation Capital and its business aircraft flight and training activities to CAE Inc.
It also announced broad changes to its business operations, including redeploying its central aerospace engineering team and setting up a new team that will be tasked with applying learnings from its aerospace programs to its rail transportation business, the company said.
While the job cuts will save Bombardier about US$250 million at full run-rate, the various other changes are all aimed at “optimizing production and management processes, flattening management structures and further reducing indirect costs,” the company said.
The cost savings will be realized by 2021. The company said it forecast 2019 revenue to increase by 10 per cent to US$18 billion or more, driven by a pickup in deliveries of its Global 7500 business jets.
“We will continue to be proactive in focusing and streamlining the organization, and disciplined in the allocation of capital,” Bellemare said.
For the quarter ended Sept. 30, Bombardier reported US$267 million in earnings before interest and taxation, compared with US$133 million in the same period a year earlier, which were restated due to accounting changes.
The company’s net profit of US$149 million compared with a net loss of US$100 million last year when the company was making heavy investments in various segments including planes. Adjusted earnings per share of 4 cents beat the average analyst estimate of 2 cents a share as per I/B/E/S data from Refinitiv.
© Thomson Reuters 2018