Bombardier warns of cost-cutting, layoffs

MONTREAL -- Bombardier is planning yet another round of cost-cutting and says layoffs are likely in Toronto and Montreal as it seeks to boost profits to address shareholder frustrations and adjust to weaker demand for business jets.

"We recognize there are a lot of challenges ahead us of but we are taking firm, clear and quick actions to improve the situation," new CEO Alain Bellemare told shareholders after being peppered with criticism of the transportation company's weak stock price and decision to suspend its dividend.

Bellemare said a priority is to improve overall profitability -- something his predecessor Pierre Beaudoin also pursued by shedding thousands of jobs around the world and freezing non-union salaries.

Layoffs are one tool that could be wielded, but he said the company is also looking at reducing other expenses including supplier and development costs.

The large Global business jets withstood the economic slowdown of a few years ago that affected sales of smaller Learjets. But lower energy prices and political turmoil in key emerging markets such as Russia, China and Brazil have resulted in less demand for its largest business planes.

Consequently, Bombardier (TSX:BBD.B) plans to reduce production of the Global 5000/6000 planes, resulting in an undisclosed impact on jobs. About 4,500 workers are employed at the Toronto assembly facility and Montreal completion centre.

Bombardier also announced it is prepared to set up its rail division late next year as a separate publicly traded company while retaining majority ownership.

There has been public speculation for months that Bombardier Transportation could be sold as part of a strategic review announced after its Montreal-based parent installed a new leadership team.

But Bellemare said such concerns are unfounded.

"Let me be very clear: Bombardier Transportation is not for sale," he said.

Bellemare said the move to spin off the rail division that accounts for about half of Bombardier's overall business will "crystallize the value" of the division that some analysts peg at up to US$5 billion. He said it would continue to be controlled by Bombardier Inc.

Bombardier's net profit slipped 13 per cent to US$100 million in the first quarter. Earnings excluding one-time costs rose to US$170 million (nine cents per share), up from US$151 million (eight cents per share) a year earlier and four cents higher than an estimate from Thomson Reuters. Revenues were essentially unchanged at US$4.4 billion.

Bombardier shares gained 10 cents or 4.2 per cent at C$2.48 in Thursday afternoon trading on the Toronto Stock Exchange.