MONTREAL – Bombardier says massive cost-cutting, mainly from two painful rounds of job reductions, has put the embattled company on the runway to generate stronger profits and achieve its five-year turnaround plan.
“We still have a lot of work ahead of us but Bombardier today is a much better and stronger company than it was a year ago,” CEO Alain Bellemare said Thursday.
He said an initial move earlier in February to cut 7,000 jobs is 80 per cent completed and a second wave last month to eliminate 7,500 positions or more than 10 per cent of its global workforce by the end of 2018 is gaining traction.
The latest job losses for the aircraft and rail equipment company are to be partially offset by more than 3,700 new hires as it ramps up production of the CSeries plane, the new Global 7000 business jet, and transit cars.
The Montreal-based company (TSX:BBD.B) has seen its profitability and shares plummet as it struggled to develop the CSeries, the largest commercial jet that Bombardier has ever made.
Bellemare said the changes made so far will improve operating margins more than originally forecast at its aerospace and railway divisions.
“Looking ahead to 2017 we feel that we’re in a good position,” he told analysts.
Bombardier’s net loss was reduced to US$94 million or four cents per share for the three months ended Sept. 30. That’s down from a year-earlier loss of nearly US$4.9 billion or $2.20 per share, when Bombardier wrote down the value of the CSeries program and one of its Learjet business jet programs.
Since then, the Quebec government has invested US$1 billion to acquire a 49.5 per cent stake in the delayed and overbudget CSeries aircraft program. Bombardier has delivered three CS100 aircraft to Swiss Air Lines and is set next month to deliver the first larger CS300 jet to Air Baltic.
Bellemare said the performance of the aircraft is the best he’s seen in 20 years of working on aerospace projects.
That included the Pratt and Whitney engines, whose production issues have forced Bombardier to cut CSeries deliveries to seven this year, down from the previous estimate of 15. The company still expects to deliver 30 to 35 planes in 2017 and perhaps catch up on missed shipments from this year.
Bombardier’s revenue was US$1.31 billion, down 16 per cent from $1.56 billion in the third quarter of 2016, following a planned reduction in business aircraft sales and the deferred recognition of some revenue in its rail division.
The adjusted loss was US$10 million or less than a cent per share for the quarter, better than the adjusted loss of three cents forecast by analysts.
Bombardier used less cash than expected during the quarter and saw margins improve in all of its operating segments.
While the business jet market remains challenging, especially in the smaller jet market, Bellemare said a 2015 reduction in the production rate of Global 5000s is helping to boost margins.
“We saw that coming and adjusted our production rate very early, earlier than anyone else in the industry and as a result I think we are in a much better place.”
Still, Bellemare said further fine-tuning in the manufacturing rate of business aircraft may be required in 2017, but nowhere near as significant as last year’s decision.
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