Montreal-based plane and train manufacturer Bombardier Inc. is pushing ahead with its plans to build an aircraft plant in Russia, despite stepped up sanctions aimed at Russian business.
Bombardier chief Pierre Beaudoin told analysts and reporters on a conference call Thursday that talks are progressing with state-owned industrial and defence conglomerate Rostec, aimed at setting up a plant to assemble Q400 turboprop planes in Russia.
“Commercial discussions are continuing between us and Rostec,” Mr. Beaudoin said. “We are working hard to get an agreement.”
A key issue, he acknowledged, is what sanctions will be in place once a deal is arrived at. While the current sanctions would not interfere with the construction of a plant, he said, “this is a situation that evolves every day… When and if we get to an agreement, we will have to consider the overall environment and the sanctions at that time.”
Russian authorities have already approved production of the Q400 in a special economic zone in Ulyanovsk, a city about 900 kilometres southeast of Moscow.
Bombardier does other business in Russia. Its rail unit has a strong presence in the signalling market, and it sells business aircraft there. Those businesses are functioning relatively normal, Mr. Beaudoin said, except for business aircraft where “the market is weak in Russia right now.”
On the conference call, Mr. Beaudoin clarified the situation surrounding the flight testing of its crucial new C-Series narrow-bodied jet, which was grounded in May after an engine failure.
Flight testing will resume “within weeks,” he said, and the program will not see any significant delays. The aircraft will still be ready for delivery by the second half of 2015, as planned, he said.
As for the reorganization the corporate structure and job cuts announced last week, Mr. Beaudoin said he made the changes because he was “dissatisfied with the execution” of the aerospace group, which is being split into three divisions. This will make them more “agile and flexible,” he said, and reduce overhead costs by about 15 per cent. Aeorspace president Guy Hachey is also leaving the company, a move Mr. Beaudoin said was Mr. Hachey’s “personal choice.”
There will be a special charge because of the reorganization this year, Mr. Beaudoin said, although he would not be specific on the numbers, or say at which company locations the 1,800 layoffs would take place.
In the second quarter, Bombardier’s total revenue rose 10.4 per cent to $4.89-billion (U.S.), although net income fell 14 per cent to $155-million, or 8 cents per share.
Aerospace revenue rose 11.4 per cent to $2.51-billion in the quarter, while the transportation business saw a 9.4 per cent increase to $2.36-billion.