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0/21/2016 | 11:44am EDT
Canadian plane and train maker Bombardier Inc will shed jobs for the second time this year, cutting about 7,500 positions over two years in a continued push to turn around its rail division.
The Montreal-based company, which has struggled in recent years with cost overruns in its aerospace unit, said on Friday about two-thirds of the cuts will be in Bombardier Transportation, the Berlin, Germany-based rail unit. The rest will be in aerospace.
Chief Executive Officer Alain Bellemare said he did not expect the cuts, which include 1,500 workers in Quebec and 500 in the rest of Canada, to affect talks with the federal government over a $1 billion investment in its CSeries jet programme.
"We understand these are difficult decisions ... but in the end what we are going to be left with is a leaner, stronger organisation," Bellemare said in an interview.
Shares fell 2.2 percent to C$1.74 at the open before recovering to C$1.77.
In February, the company said it was cutting 10 percent of its workforce, also over two years. Nearly half of those cuts are in its rail arm, which has a large staff in Europe. It had 70,900 employees as of the end of 2015.
The rail division has struggled to deliver on some high-profile public transit contracts, including in Toronto.
The company has faced stiff competition from China Railway Rolling Stock Corp (CRCC), formed by the 2015 merger of the country's two top trainmakers. In September, Bombardier said it would join forces with CRCC to bid on international contracts.
"There's a lot of questions around the health of some of their end markets," said AltaCorp analyst Chris Murray. "I think that there could be further changes, certainly we've had the discussion around would they be open to selling a certain division?"
CIBC analyst Kevin Chiang said the announcement indicated Bellemare has "free rein" to enact changes at the Quebec company, which is controlled by the Bombardier-Beaudoin family.
"A concern when (he) took over ... was whether he would be handcuffed by various stakeholders in making the necessary 'tough decisions'," he wrote in a note to clients. Bellemare became CEO in February, 2015.
In Northern Ireland, where about 5,000 Bombardier workers design and manufacture aircraft wings, fuselages and other parts and service planes, Economy Minister Simon Hamilton said he would fight to save local jobs, calling the development "a great shock."
Bellemare said Bombardier would also hire in growth areas: The CSeries family of narrow body jets and its Global 7000 business jet, which is expected to make its first flight next month. That will be a boost for the Global 7000, whose entry into service has been delayed two years.
Last month, Bombardier sliced in half the 2016 delivery forecast for its CSeries aircraft and said it expected full-year revenue at the lower end of its previously announced range.
Canada's second-largest pension fund, Caisse de depot et placement du Quebec, owns a 30 percent stake in the rail business, which it bought last November for $1.5 billion.
Canada's federal government is under pressure from Quebec to match its $1 billion investment in the CSeries programme.
"I think it has to be very clear that the decisions we are taking are not related to our discussions with the federal government," CEO Bellemare said. "We are doing this because we want to save jobs in Canada."
Bombardier expects recurring savings of about $300 million by the end of 2018 and will book restructuring charges of $225 million to $275 million as special items, beginning in the fourth quarter and through 2017.
(Additional reporting by Allison Martell and Matt Scuffham in Toronto; Editing by Gopakumar Warrier and Jeffrey Benkoe)
By Allison Lampert
