Bombardier Is Heading For A Crash Landing, set to cut 7000 jobs as revenue falls in 2015

Bombardier announced Wednesday the elimination of 7,000 positions, including 2,000 contractors, representing 10% of its global workforce, in order to improve its financial situation. Nearly half of the redundancies will be made in Canada: 2830 jobs will be lost in the country, including 2,400 in Quebec. Other job cuts will take place mainly in Europe, including the UK, where Bombardier has aerospace and railway operations.

The layoffs, which will last two years, will affect 3,200 employees of the railway division, 2500 employees of aerostructures activities and engineering services, 800 employees of engineering and product development (aircraft) and 500 employees business aircraft. However, Bombardier will hire new workers in growth areas, particularly the C Series. Air Canada pledged Wednesday to buy 45 aircraft of this family of aircraft, a contract worth 3.8 billion US at list price. “We will assess the situation and do everything to limit layoffs,” said in a statement the president of Local 712 of the International Association of Machinists and Aerospace Workers, Yvon Paiement, evoking relocation possibilities and training programs.

The job cuts will result in restructuring charges of 250 to 300 million US, Bombardier said. The announcement of the order of 45 aircraft C Series and 7000 job cuts largely overshadowed the results of Bombardier and Air Canada. Bombardier ended the year 2015 with a loss of 5.3 billion US, mainly due to write-downs related to Series C (3.2 billion US), the Learjet 85 (1.2 billion US) and CRJ1000 (243 million US). Yearly income were $ 18.2 billion US, down 10% from US $ 20.1 billion in 2014. In the fourth quarter, the net loss amounted to 677 million US when she reached 1.6 billion US in 2014.

Quarterly revenues amounted to US $ 5 billion, below analysts’ expectations. However, Bombardier has used less cash than feared market. In 2015, Bombardier delivered 199 business aircraft and 76 commercial aircraft, down slightly from 2014. But the side orders, the fall was marked. The aircraft manufacturer has contracts for 51 commercial aircraft in 2015 against 153 in 2014. In the business aircraft segment, Bombardier has removed 24 net orders of his book in 2015 while in 2014, the company had won 129. This year, Bombardier expects to deliver 150 business jets and 95 commercial aircraft. The prospects for 2016 Bombardier generally disappointed analysts.

The company expects revenues of oscillating between 16.5 and 17.5 billion US, while the market expected on average 18.2 billion US. In terms of operating income, Bombardier is between 200 and 400 million US, far from the 488 million US projected by analysts. By cons, Bombardier joined the market by building on use of its cash between 1 and 1.3 billion US. The company also said it would have to spend $ 2 billion more in the C Series before the program does not generate positive cash flow in 2020.

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