Arthur J. Villasanta – Fourth Estate Contributor
Montreal, Canada (4E) – The decision by Canada’s leading aerospace firm, Bombardier, Inc, to fire 5,000 employees and sell two of its units triggered a sharp fall in its stock price and outrage among company employees.
Beset by a monstrous net debt pile worth US$9.5 billion at end-September, the struggling Canadian firm is aiming to resuscitate revenues and profit as part of a five-year restructuring program. And in support of this painful program, Bombardier yesterday announced it will sell two of its subsidiaries for US$900 million and cut 5,000 jobs.
Its intent is to focus on its core transportation and business jet units in a bid to slash its costs by C$250 million annually by 2021. The job cuts will save US$2550 million. Bombardier said the cost savings from the restructuring program will be realized by 2021.
Bombardier has borrowed heavily to fund research and development of new aircraft, including the ill-fated decision a decade ago to expand beyond the regional aircraft market. Earlier this year, Bombardier sold a majority stake in its money-losing CSeries jet to Airbus. It will also make extensive changes to its business operations.
Bombardier is selling its turboprop program to a subsidiary of Longview Aviation Capital and its business aircraft flight and training activities to CAE Inc
Under CEO Alain Bellemare, Bombardier cut thousands of jobs in 2016, but hired workers for key programs like those in its Global 7500 business jet operations.
“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. We will continue to be proactive in focusing and streamlining the organization, and disciplined in the allocation of capital.”
The company forecasts 2019 revenue to increase by 10 percent to US$18 billion or more, driven by a boost in deliveries of its Global 7500 business jets.
For the quarter ended Sept. 30, Bombardier reported US$267 million in earnings before interest and taxation, compared with US$133 million year-on-year. Its 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
Bombardier shares plunged 14 percent at C$2.64 Thursday after the company’s third-quarter results disappointed investors. Bombardier also cut cash flow guidance for 2019.
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