Bombardier halts plane, rail production in Canada
Shutdown to last through late April, forcing 12,400 workers on unpaid leave
Bombardier Inc. is temporarily halting production at its Canadian plants, sending 12,400 employees on unpaid leave as the plane maker suspends its 2020 financial forecast due to the COVID-19 pandemic.
The company said Tuesday it is stopping all non-essential work in the country, including aircraft and rail production in Quebec — where 9,000 workers are heading home — and Ontario.
The shutdown was set to start Tuesday evening and continue until April 26.
Bombardier, which carries a hefty debt despite multiple asset sales over the past five years, has cut all discretionary spending and “is pursuing additional measures to enhance liquidity,” chair Pierre Beaudoin said in a statement.
The Montreal-based firm, reduced to a single revenue stream after announcing the sale of its rail division to French train giant Alstom SA last month, may face falling demand for new business jets amid the broader economic slowdown triggered by the novel coronavirus outbreak.
The sale, made to help pay down Bombardier’s $9.3 billion (U.S.) in debt, once again shrank a company that a year ago boasted three major divisions — commercial aircraft, trains and business jets.
“It’s hard to see demand for new business jets holding up,” Financial Bank analyst Cameron Doerksen said in a phone interview Friday.
The COVID-19 crisis is dragging down corporate profit and equities markets, which both correlate strongly with demand for private planes, said Richard Aboulafia, an aviation analyst with Teal Group in the Washington area.
Last week, Financial Bank lowered its delivery forecast for Bombardier business jets to 145 planes from 154 this year and to 120 planes from 150 for 2021.
The backlog for the Global 7500 — Bombardier’s new, ultralong-range business jet listed at $73 million apiece — remains healthy, with the aircraft sold out through 2022.
“The bigger issue is going to be the supply chain, because they’re very complicated pieces of equipment with hundreds if not thousands of suppliers,” AltaCorp Capital analyst Chris Murray said, noting the ripple effect of plummeting travel demand for manufacturers.
Looming on the horizon are debt maturities of $1.48 billion and $1.7 billion due in 2021 and 2022 respectively.
About 60 per cent of the $9.32billion total debt is due within five years.
The $8.2-billion deal with Alstom and other recent transactions will leave Bombardier with net proceeds of between $4.2 billion and $4.5 billion after deducting the Caisse de Dépôt et Placement’s equity position, as well as adjustments for debts and other liabilities, Bombardier said in February.
The deal is expected to close in the first half of 2021 if it can move through European Union regulatory hurdles.
Meanwhile, delays and “some volatility” continue to plague several “large, challenging” rail contracts, Alain Bellemare said last month, shortly before his ouster as CEO announced on March 11.
Bombardier shares have hit new lows over the past week, hovering between 38 cents and 50 cents (Canadian) at their cheapest price in decades.
In the Montreal area, the affected factories sit in Mirabel, St-Laurent, Dorval and PointeClaire, and east of Quebec City in La Pocatière.
Executives as well as workers are forgoing pay, Bombardier said Tuesday. Board members have also agreed to forgo compensation for the remainder of the year.
Bombardier’s now suspended outlook from last month had projected revenue growth to $15 billion (U.S.) from $13.7 billion in 2019. The company also forecasted margins for earnings before interest and taxes of 3.5 per cent. Both figures fell below analyst expectations.