Bombardier freezes salaries of 38,000 staff
Non-union workers take hit as profit lags
Bombardier Inc., whose delayed CSeries jet is weighing on profits, is freezing salaries for about 38,000 non-union workers in its aerospace and transportation units worldwide as well as the head office.
Employees who are covered under certain local contracts, about half of Bombardier’s 76,400 workers, will not be affected.
The company has been tightening its belt, announcing in January that it was eliminating 1,700 jobs at its aerospace division, mostly in and around its headquarters in Montreal.
It’s also reducing training budgets and restricting business travel, encouraging employees to use video-conferencing instead, according to Isabelle Rondeau, a Bombardier spokeswoman.
“Meeting our profitability goals is a priority,” Ms. Rondeau said in a telephone interview. “We’ve reached many milestones in the development of our new products, we have a substantial backlog, but now we have to deliver on our profit targets. That’s the context for these measures.”
Bombardier has been bedevilled by four postponements of its CSeries jet, which chief executive Pierre Beaudoin is counting on to generate $5-billion to $8-billion of additional annual revenue by the end of the decade and help the company almost double sales.
The accruing lateness of the jet’s commercial debut has inflated the program’s costs to $4.4-billion, $1-billion more than the company targeted when it decided to proceed in 2008. The plane will weigh on profit margins for the first two years after its commercial debut next year, executives said in February.
Earnings before interest and taxes at the plane making business will amount to about 5% of revenue this year, down from an earlier projection for a 6% margin, Bombardier said in its fourth-quarter earnings statement.
Following the earnings release in February, Moody’s Investors Service and Standard & Poor’s cut their corporate debt ratings on Bombardier one step to three levels below investment grade.
Bombardier is targeting the CSeries to compete with the smallest Airbus Group NV and Boeing Co. single-aisle models, the workhorses of the global airline fleet. Seating capacity on the CSeries will range from 108 to 160, a step up in size for the planemaker whose regional jets are its signature commercial aircraft.
Bombardier’s widely traded class B shares were virtually unchanged Friday, closing at $3.60 in Toronto trading. They have fallen 22% this year through Thursday.