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Bombardier reviewing strategic options, says CEO

In addition to Quebec’s billion-dollar bailout, Bombardier will reportedly ask feds for at least $350 million


 

Bombardier workers look at the CS300 aircraft after it was unveiled at a news conference at its assembly facility in Mirabel, Quebec

MONTREAL – The $1-billion lifeline Bombardier is getting from the Quebec government will go a long way toward helping the troubled plane and train maker, but it’s just one of several initiatives aimed at shoring up the company’s financial position, says chief executive Alain Bellemare.

In addition to working on the sale of a minority stake in its railway division (which analysts estimate would bring in US$1 billion to US$2 billion), the company is considering other strategic options, including the sale of non-core assets and exploring ways to trim costs from programs like the Q400 turboprop.

Related: Why the Bombardier bailout isn’t that risky a proposition

Bellemare was loathe to provide details about what is being considered, including whether joint ventures like the CSeries deal with the province are contemplated for other programs.

The CEO said he’s “super sensitive” about discussing options after “very unfortunate leaks” of the company’s approach to Airbus about selling a stake in the CSeries.

“I will continue to look at strategic options across the board. We will continue to look and they need to make good business sense and create value for customers and for shareholders,” he said in an interview in the company’s downtown Montreal boardroom.

Reports suggest the company approached the federal government for at least $350 million in assistance. The new Liberal government said it will consider the request after it is sworn into office on Wednesday.

Bombardier (TSX:BBD.B) says it will focus on making its programs more competitive by cutting costs. He pointed to efforts that were rejected by its Toronto unionized employees that would see the manufacture of some parts for the Q400 moved to low-cost countries like Mexico or China.

Although the Q400 does well in North America with customers like WestJet Encore, Porter Airlines and Air Canada, it is too pricey for markets like Asia. Rival ATR dominates while Bombardier’s market share is just 25 per cent.

“It’s a great aircraft (but) it’s too costly and we need to bring the costs down so we can bring the price down,” Bellemare said.

And he wouldn’t rule out job cuts as the company turns the focus to improving efficiency and operational performance.

“We are going to look at what does make sense to make the business strong moving forward and from that we will derive the conclusion that is needed.”

David Chartrand of the International Association of Machinists and Aerospace Workers said cost-cutting and transfer of work to low-cost countries is an unfortunate reality of the aerospace industry.

“Every single program is always under threat,” he said, adding that the key is to offset the transfer of work with research and development and higher-value jobs.

Analysts expect Bombardier will have enough cash to fund its programs in the coming few years, but hope to see detailed plans at the Nov. 24 investor day about improving margins.

“Solidifying the CSeries is important, but better margin and cash performance from the other business segments are also critical to support a higher valuation in the stock,” wrote Cameron Doerksen of National Bank Financial.

Seth Seifman of JP Morgan called the deal with Quebec a “meaningful” step forward, but only one of many that is required.

He said the key will be getting orders from blue chip customers, including United Airlines, which is reportedly looking at ordering 100-seat aircraft if pilots approve a new contract.

Bombardier shares were up nine cents or 6.77 per cent at $1.42 Friday on the Toronto Stock Exchange.


 
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Bombardier reviewing strategic options, says CEO

  1. Whichever way you look at it, the CSeries aircraft must be saved. It’s as simple as that.

  2. They told me two Ridings were ill. In the early 80’s, the steel industry lobbied for more wages. They got them and a 20 year decline began. This lead to an insecurity complex. Apparently they didn’t retrain and re-educate because of an entitlement mentality from too much Union involvement; and you shouldn’t over-unionize what is supposed to be a competitive manufacturing industry (except when WMD related). They bought their homes which is why their is no housing (apartments) here. I’m not sure why there isn’t much trickle down, and I was denied a response as to why Longeuel hasn’t suffered same fate with aluminum coating industry (don’t know enough metallurgy yet, I’d guess is further down the value creation chain than is steel making). The rate of mental illnesses of their kids is 200% higher (they’ve said want something to do such as community centres open at night). I’d guess this is a downside of a metropolis: you can just move and commute. Wpg in addition to having history, a history founded on bringing a train and the RCMP to lawlessness, and two WWIIs, is isolated enough you have to rebuild. The university should be 100th in the world, but isn’t (200th). So, perhaps the biocluster should study the nearby mental illness, and as with the Fraser Valley, become the country’s mental health hub? Quebec with aging population maybe to. The inferiority complex causes to attack others, rather than bettering one’s self.
    So perhaps Bombardier should indeed cut some wages? Regarding the Hydro utility, of staying public enough to buy Quebec’s hydro in the future, funding transit, and the debt, cutting down the debt was seen by them to be of primacy (so indeed privatize). They said the UK lost Victorian influence because of colonialism. Leaving us the world’s role model. I’m supposed to study one or two universities and make them the role models to be copied. They said only the bravest and toughest Wpg infantry were given a WWI pep-talk…I’d like to see the CSA funding raised to $1B/yr, and infrastructures build across the country, especially where medicine meets space. To me, that is Bombardier’s future. They said connected cars allow a disease to spread, but that it makes filtering/changing the air easier. They’ve suggested internal thermograms as a biz idea, and I think such body heat (fever) sensors would be a good federal subsidy.

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