Bombardier, Inc. (TSE:BBD.B) announced its decision to cut 7,000 production and non-production jobs including 2,000 contractors. The job cuts are part of its initiative to optimize its global workforce over the next two years.
The workforce reduction will allow the Canadian aircraft and train manufacturer to resize its organization in line with its current business need and to boost its competitiveness.
Bombardier reviewed its business thoroughly over the past year, which was the basis of its decision to cut jobs. The company previously stated that its production rates have been modified for some aircraft models due to macroeconomic conditions.
The company is resizing its manpower to match future workloads citing the reason that major aerospace development programs and projects in Transportation are ramping down as expected.
Bombardier also noted that its transformation plan is driving productivity across its entire organization.
Most of the positions affected by the job cuts are based in Canada and Europe, where the company’s aerospace and rail transportation activities are concentrated. The company said it will support affected employees by providing them with resources that they can use in their transition.
Bombardier plans to hire in certain growth areas
According to the company, the workforce reduction will be offset by a strategic hiring over this year until 2017. Bombardier plans to hire in certain growth areas including in its C Series aircraft program, which continues to increase production rate and to receive orders that generate new jobs at its facility in Mirabel, Quebec.
Bombardier President and CEO Alain Bellemare said, “Throughout 2016 and 2017, we will adapt our global manpower to current market conditions, while hiring to support growing segments, such as the C Series. These adjustments are always difficult. They are important to ensure that, with our 64,000 employees worldwide, we continue to create superior value for our customers, be more competitive, and deliver improved financial performance.”
The company will start eliminating jobs in the coming weeks, and expects to records around $250 million to $300 million in restructuring charges, which will be reported as special items when accrued.
“Bombardier is in a better place today and we are on the path to greater profitability. We are engaged in a rigorous process that will increase our earnings power and cash flow generation over the next five years,” said Bellemare.
Bombardier receives order for 75 C Series aircraft from Air Canada
Bombardier also announced Air Canada’s order for C Series aircraft. Both parties signed a Letter of Intent (LOI) for the sale and purchase of 45 CS300 aircraft with options for an additional 30 CS300 aircraft and conversion rights to the CS100 aircraft.
The Canadian aircraft and train manufacturer estimated that Air Canada’s order is worth approximately $3.8 billion based on the list price of the CS300 aircraft.
“With today’s landmark commitment from Air Canada for up to 75 CS300 aircraft, we are building positive momentum to successfully compete,” said Bellamere.
Bombardier already received order and commitment for a total of 678 C Series aircraft. The company’s stock price surged more than 22% to CAD$1.10 per share around 3:08 in the afternoon in Toronto.