The Canadian aircraft manufacturing company Bombardier Incorporated announced Wednesday that it will cut back its workforce by 7,000 employees over a two-year period. Bombardier is a subsidiary of Bombardier Inc., and competes with Brazilian rival Embraer for the title of the third largest aircraft manufacturer after Boeing and Airbus. It is headquartered in Dorval, Quebec, Canada. The move comes as Canada’s unemployment rate rises to 7.2%, the largest gap with the US rate in 14 years. Bombardier Inc. also builds trains, but has struggled to expand the market for its CSeries commercial jet program despite sinking billions of dollars into the passenger Jet’s production.
Meanwhile, Canada’s job growth rate in the past year is deemed well below the rate needed to keep up with population growth. The country has only added 0.7% new jobs over the past 12 months, missing the estimated 0.9 to 1 per cent needed to keep up with the population. Alberta’s rate is above the national average for first time in 28 years while Canada’s national rate is currently 2.3 points higher than that of the U.S. The ongoing crash in crude prices is partly blamed for the loss of jobs.
In an increasingly rare victory for the company, a spokesman for Bombardier said on Wednesday it had signed a letter of intent with Air Canada (AC.TO) for up to 75 CS300 aircraft for as much as $3.8 billion based on the list price, according to a Reuters report published Wednesday. The company based in Montréal now has 678 total orders and commitments for the CSeries, including 243 firm orders, well behind the volume necessary to consider the CS 300 a cost-effective project. Intense competition from Boeing Co. and Airbus Group SE has kept Bombardier’s sales lower than analysts anticipated for the quarter and the company has forecast lower-than-expected revenue for 2016.
Bombardier Inc. says the layoffs come from a total employee pool of about 64,000 and are part of a $250 million-$300 million restructuring write-off for 2016. The cuts come mostly from the company’s aerostructures, engineering services and transportation divisions; the majority are employees in Canada and Europe and layoffs are scheduled to begin within weeks. However, with the new order from Air Canada, the company expects the C-Series program which employs 3450 people worldwide will continue to grow over the next few years, including adding jobs at its plant in Mirabel, Québec.
Bombardier has experienced a steady decline in its stock value which has lost more than 65 percent in the last year. The drastic stock market decline saw the company propose a reverse stock split earlier this week that would reportedly consolidate its shares to hedge against losses. This comes after shares traded below C$1 in January, the lowest rate recorded in 25 years. The company did not announce a ratio for the reverse stock split, instead saying it would be decided at a later date. The initial targeted post-consolidation would likely produce a share price of C$10-C$20 per class A share or class B subordinate voting share, according to the company.