MONTREAL – Bombardier announced Thursday that it’s cutting 1,750 employees in Montreal, Toronto and Ireland over the coming months — and at least one analyst suggests more layoffs could loom on the horizon because of weak demand in other aircraft segments.
The Montreal-based manufacturer of planes and trains has slashed thousands of jobs in the past couple of years, including at least 4,550 aerospace and support positions since last July.
With none of its operations adequately profitable, industry analyst David Tyerman of Canaccord Genuity said Bombardier’s hiring of strategic advisers to review its commercial aircraft operations suggests more cuts or other changes are to come.
They’re likely to involve the CRJ regional jet and Q400 turboprops. There’s also uncertainty about the future of the small Learjets.
“I’m personally looking to see what are these guys are going to do to improve the businesses and it’s conceivable that head count reductions are part of that,” he said in an interview.
Alain Bellemare, Bombardier’s new CEO, acknowledged the pressure he’s under to turn things around, telling shareholders last week that profits are inadequate.
However, a company spokesman declined to say whether additional job cuts are in the cards.
The bleak news had the federal government on the hot seat on Parliament Hill on Thursday as Employment Minister Pierre Poilievre fended off attacks from the opposition, repeatedly saying the Conservatives have created 1.2 million jobs since the recession.
“Good jobs have been lost because of government inaction,” Liberal MP Judy Sgro said during the daily question period. “The minister continues to sell his phony 1.2 million jobs line, but unemployed families know better … The Conservatives’ track record is clear. They have abandoned the manufacturing sector and the Canadians it employs.”
Prime Minister Stephen Harper, meantime, was in Windsor, Ont., providing details of a previously announced initiative that will allow manufacturers to write off equipment more quickly under proposed tax rule changes. He said the measure will help manufacturers create jobs.
Officials in Quebec and Ontario said they regretted the latest job losses at Bombardier, but added they mask the thousands of jobs created by the company since 2007.
Quebec Economic Development Minister Jacques Daoust said the government is open to providing the leading aerospace manufacturer with financial support to weather the latest challenges.
His Ontario counterpart, Brad Duguid, said he remains confident that Bombardier “will continue to be a strong global force within the aerospace sector.”
Bombardier is expected to save about U$135 million a year from the reduction. Up to 1,000 of the lost jobs will be in Montreal, where Bombardier has its main operations, while 480 positions are on the chopping block in Toronto and another 280 in Belfast.
The cuts will begin in June and continue until the first quarter of 2016, said the company, which employs more than 70,000 people, about half in its aerospace division.
“This is a difficult but necessary decision,” Eric Martel, president of the business aircraft division, wrote Thursday in an email to employees.
He said the company will try to limit the impact through retirements and by transferring as many employees as possible to other aircraft programs.
Bombardier (TSX:BBD.B) signalled the move affecting union, non-union, office and contract employees last week when it announced a production decrease in its Global 5000 and Global 6000 aircraft to reflect conditions in some markets such as Latin America, China and Russia. It said layoffs are just one tool to reduce costs, along with savings from suppliers and elsewhere.
The reductions announced Thursday will touch nearly 36 per cent of the 2,800 Global aircraft jobs in Montreal, where the plane interiors are installed and the finishing touches are completed before delivery.
Toronto’s final assembly facility currently employs 1,750 workers. Belfast, which supplies aerostructures and does engineering work, has more than 1,000 people working on Globals.
Walter Spracklin of RBC Capital Markets said the magnitude of the workforce reduction was “somewhat surprising” given the early signs that the business jet market may be reaching its low point.
“Nevertheless, we view it prudent for Bombardier to bring production in line with current/recent demand,” he wrote in a report.
Martel told employees that despite the short-term uncertainty in key international markets, the company is well-positioned to be the market share leader in the aerospace sector.
Bombardier is continuing to develop Global 7000 and 8000 business jets that will better compete with new aircraft from Gulfstream, its chief rival. However, analysts say some customers may be waiting to order the new Globals, whose entry into service is feared to delayed like the CSeries.
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