Bombardier cuts 1,700 jobs to save cash after jet delays
By Susan Taylor
TORONTO (Reuters) - Canada's Bombardier Inc (BBDb.TO: Quote) said on Tuesday it will cut 1,700 aerospace jobs, or more than 4 percent of the unit's staff, as it pushes to preserve cash after costly setbacks in the development of two new jets.
Montreal-based Bombardier, which plans to eliminate 1,100 jobs in Canada and 600 in the United States, said it needs to reduce expenses while making major investments in its new CSeries commercial and Learjet 85 business jets.
Shares of the company, which has delayed the launch of its $3.9 billion CSeries four times and last year pushed back the delivery of the Learjet 85 to mid-2014, were down about 3 percent to C$3.98 on Tuesday.
"It's hard to believe that they'd be laying off this level of people without the financial necessity of doing it," said Richard Aboulafia, vice president of aviation consultancy Teal Group. "In other words, this speaks to a real issue in terms of raising more money to complete the (CSeries) program."
Bombardier, which had approximately C$4 billion ($3.64 billion) in cash and equivalents in October, will announce its fourth-quarter results and outlook on February 13.
In a copy of the memo to staff, seen by Reuters, the company warned stricter spending controls were needed to ensure it can "consistently meet our budget throughout 2014."
"Cash has once again risen to the top of investor concern," RBC Capital Markets analyst Walter Spracklin said in a note, citing the CSeries delay and C$1.7 billion in debt maturing in 2016. Cash concerns were confirmed last week, he added, when rating agency Fitch downgraded Bombardier.
"You can look good to people who provide you with cash by bringing in orders. And if you can't do that, you desperately cut costs," Aboulafia said. "That's not a happy picture." Continued...