Montreal-based Bombardier, an aerospace and transportation giant in the industry, announced on Thursday that it was slashing 5,000 jobs from its global workforce.
In a news release reporting its third quarter financial results, the company said the reduction in staff will take place across the organization over the next 12 to 18 months, “leading to annualized savings of approximately $250 million at full run rate, which we expect by 2021. Bombardier anticipates recording a restructuring charge in 2019 of approximately the same amount as special items.”
It has also launched an enterprise-wide productivity program.
The company said it reached definitive agreements for the sale of non-core assets and the monetization of royalties, which is expected to generate approximately $900 million in net proceeds, increasing financial flexibility as it approaches the final deleveraging phase of its turnaround plan.
“With our heavy investment cycle now completed, we continue to make solid progress executing our turnaround plan,” said Alain Bellemare, president and chief executive officer of Bombardier Inc., in a statement.
“With today’s announcements we have set in motion the next round of actions necessary to unleash the full potential of the Bombardier portfolio. During the earnings and cash flow building phase of our turnaround, we will continue to be proactive in focusing and streamlining the organization, and disciplined in the allocation of capital. I am very proud of what we have accomplished, and very excited about our future.”
For the quarter, Bombardier’s revenues reached $3.6 billion, representing three per cent organic growth year over year.
“Bombardier also announced today the sale of a number of non-core assets, in line with its strategy of focusing on growth opportunities in its transportation, business aircraft and aerostructures segments. The company entered into definitive agreements for (i) the sale of the Q Series aircraft program and de Havilland trademark to a wholly owned subsidiary of Longview Aviation Capital Corp. for approximately $300 million; and (ii) the sale of Business Aircraft’s flight and technical training activities to CAE and the monetization of royalties for approximately $800 million,” it said.
“Both transactions are expected to close by the second half of 2019, following the usual regulatory approvals. Net proceeds from the transactions are expected to be approximately $900 million after the assumption of certain liabilities, fees, and closing adjustments.”
It said its new enterprise-wide productivity program includes two actions. First, with the heavy aerospace investment phase successfully completed, Bombardier will right-size and redeploy its central aerospace engineering team. Key engineering team members will be redeployed to the business segments, with the largest group moving to business aircraft, to ensure they have all the necessary capabilities for future business jet development programs.
“Bombardier will also establish a new advanced technologies office (ATO), which will be led by François Caza, who has been appointed Bombardier’s chief technology officer. The ATO will focus on systems design and engineering, including applying experience from Bombardier’s aerospace programs to its rail transportation business,” it said.
“In addition to right-sizing and redeploying central engineering, Bombardier has launched a company-wide restructuring initiative focused on optimizing production and management processes, flattening management structures and further reducing indirect costs.”
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.