‘A bit deeper’ than expected

Continued from FP1

Restructuring charges of US$225 million to US$275 million will be recorded beginning in the fourth quarter and through 2017.

“When we launched our turnaround plan last year we committed to transforming our company; to reduce costs, to leverage our scale and to become more efficient in all our operations, and that is exactly what we are doing,” CEO Alain Bellemare said in a statement.

“While restructuring is always difficult, the actions announced today are necessary to ensure Bombardier’s long-term competitiveness and position the company to continue to invest in its industry-leading portfolio while also deleveraging its balance sheet.”

Bellemare was hired in early 2015 to help restore stability at Bombardier, which was struggling with delays, cost overruns and glacial sales of the CSeries. Since then, the smaller CS100 has begun commercial flights with its first customer, Swiss International Air Lines AG, and the larger CS300 is to enter service before the end of the year. Bombardier has racked up CSeries sales to two major customers, Air Canada and Delta Air Lines Inc.

However, the company is still struggling with delays in CSeries production due to problems at its engine supplier, as well as a slowdown in business jet demand and ongoing production problems at its transportation division. It also had a huge debt load of nearly US$9 billion at the end of June.

“I guess the bottom line is that given the (slow) demand for the CSeries and the pricing environment for jetliners these days, restructuring would appear to be inevitable. This is just a bit deeper than I’d expect,” said Richard Aboulafia, vice-president of analysis at Teal Group Corp., an aviation research firm.

Bombardier has received some assistance in the form of a US$1-billion investment in the CSeries program by the Quebec government and a US$1.5-billion investment in the company’s transportation business by the province’s pension fund, the Caisse de depot et placement du Quebec.

It requested another $1 billion from the federal government last November but that funding has yet to materialize despite continual protestations of support.

Transport Minister Marc Garneau said the layoffs won’t affect the ongoing negotiations. “Those discus- sions are continuing and there is nothing in today’s announcement that will change any of that,” Garneau told The Canadian Press.

The government has said that preserving Canadian jobs would be a condition of any financial assistance.

BMO analyst Fa d i Chamoun estimated that combined with the 7,000 job cuts announced in February, Bombardier is on track to realize US$550 million to US$600 million of recurring cost savings and boost its operating margin by nearly 300 basis points by 2018.

“We credit management for making these kinds of tough decisions that are needed to keep the transformation plan on track,” Chamoun wrote in a note to clients.

Bellemare told Bloomberg News that it’s too early to say whether Bombardier will need to cut further.

“We need to become a very agile and flexible organization. We need to drive productivity day in and day out. We need to look at our cost structure every day.”

Cowen and Co. analyst Cai von Rumohr stressed that the cuts appear to be part of Bombardier’s previously announced turnaround plan and “not a reaction to weak current business.”

Ho w e v e r, he said it “underscores tough business jet demand” and could increase the likelihood of a sale of Bombardier’s Learjet division to Textron Inc., which makes the Cessna.

Bombardier shares closed down 1.12 per cent at $1.76. cations Commission earlier that month.

BlackBerry CEO John Chen alluded to having three smartphones in the works before announcing that his company would shift its focus to software and stop designing its own phones. The DTEK60 would be the second of these devices. A third device with a keyboard will be out within six months, according to a BBC interview with one of BlackBerry’s top executives.

Chen previously confirmed the existence of the new keyboard device, but said he hadn’t decided whether to release it.

Going forward BlackBerry intends to sell its software and license its brand to handset manufacturers. It sold 400,000 devices in its most recent quarter, failing to break even in the division.