Bombardier to list rail unit; sees cuts in business jet output

Thu May 7, 2015 5:28pm EDT
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By Allison Lampert and Allison Martell

MONTREAL/TORONTO (Reuters) - Bombardier Inc outlined plans on Thursday to list a minority stake in its rail unit as it reported a quarterly profit that topped market expectations but also warned it may cut production of its profitable Global business jets.

The company expects to launch an initial public offering of the rail division in the fourth quarter with the main listing likely to be in Germany, where the business is headquartered.

Reuters reported in April that Bombardier was looking to raise cash from the rail business, Bombardier Transportation, as it grappled with cost overruns in its aircraft business. It acquired a large chunk of the business through its purchase of Adtranz from DaimlerChrysler in 2001.

The company warned it may reduce production of its largest business jets, the Global 5000 and Global 6000, because of weak demand.

While earnings from business jets were steady in the first quarter, net orders dropped to 19 from 46 a year earlier. On a conference call, Chief Executive Alain Bellemare said the weakness was in the Global large-jet program.

"We've got a significant presence in Russia, in China, in Latin America, and these markets have been softer than we would like," Bellemare said. The company said it is assessing the impact of the change on its workforce.

Bombardier also signaled that its long-delayed CSeries medium-range passenger jet could go into service even later than it last forecast. It still expects the plane to be certified by the end of 2015, but said entry into service would be in the first half of 2016.

Bombardier had long forecast the CSeries would enter service in 2015, but in February Bellemare said that could slip a few weeks into 2016 depending on customer decisions.   Continued...

Bombardier Inc.'s Alain Bellemare (L), president and chief executive officer, speaks with Pierre Beaudoin, executive chairman of the board, prior to the company's annual general meeting in Montreal, May 7, 2015. REUTERS/Christinne Muschi