Bombardier to book writedowns, get cash from Quebec: sources
By Andrea Shalal and Allison Lampert
WASHINGTON/MONTREAL (Reuters) - Bombardier (BBDb.TO: Quote) on Thursday will announce a deal with the Quebec government to invest in the struggling CSeries jet program, and write down the value of that project and the mothballed Learjet 85 program by more than $4 billion, sources familiar with the matter said.
The Montreal-based company, which reports earnings on Thursday, has been looking at a wide range of options to help it fund the long-overdue and over-budget CSeries narrowbody jet, which is slated to enter service next year. Talks with Airbus Group SE (AIR.PA: Quote) fell apart earlier this month.
The plan is for the Quebec government to fund half the final development costs on the new jet through a joint venture with Bombardier, according to the sources who asked not to be identified as they were not authorized to discuss the matter.
The sources would not say how much money Quebec planned to invest in the joint venture. A Bombardier spokeswoman and Quebec's economy minister Jacques Daoust declined to comment.
In a note to clients on Tuesday, Sterne Agee analyst Peter Arment wrote that CSeries program development costs have already topped $5 billion and he expects another $2 billion in cash will be required to finish certification and absorb the ramp-up in production in the first three years.
That would mean Quebec would potentially front $1 billion or more in order to fulfill its side of the deal.
Shares of Bombardier, the world's only manufacturer of both trains and planes, rose 11 percent to close at C$1.61 on Wednesday. Bombardier and its Brazilian rival Embraer S.A. (EMBR3.SA: Quote) vie for title of the world's third-largest civil aircraft maker behind Boeing Co (BA.N: Quote) and Airbus.
Bombardier suspended the development of its Learjet 85 business aircraft in January, citing weak demand. It is likely to confirm on Thursday that it plans to mothball the program permanently and book further charges in this regard, said the sources. Continued...