Transportation giant Bombardier Inc., is reorganizing its operations into four divisions in a move that causes 1,800 job losses and the retirement of Bombardier Aerospace president Guy Hachey, who held overall responsibility for the struggling C Series airplane program.
The Montreal-based company is shifting from its two units of Bombardier Aerospace and Bombardier Transporation – each of which reported to chief executive officer Pierre Beaudoin – to four units that will report directly to Mr. Beaudoin.
However, the move effectively means the breakup of Bombardier Aerospace into three divisions.
Aerospace will be broken into business aircraft, commercial aircraft and aerostructures and engineering services divisions, the company said in a statement late Wednesday.
“The new aerospace organizational structure will enable us to be more agile and flexible in addressing customer needs while increasing our focus on growth areas,” Mr. Beaudoin said in the statement. The new aerospace division will focus on the design and development of complex composite and metallic structures for all aircraft.
Bombardier spokeswoman Isabelle Rondeau said the reorganization will result in the layoffs of about 1,800 “indirect” functions such as finance and human resources, or 4.8 per cent of Aerospace’s global work force of more than 37,000.
“We are changing the structure because the financial performance and execution have not met expectations and we want to have a lighter structure,” she said. “It’s really spread everywhere. Bombardier Aerospace worldwide, so it’s not just Montreal.”
The reorganization comes as the company tries to get the C Series back in the air after an engine fire grounded the new plane and halted flight testing. Bombardier is scheduled to deliver the first of the new narrow-bodied planes – with between 100 and 149 seats – to customers in the second half of 2015, but so far has missed several deadlines both for delivery and getting the plane in the air. Its new Learjet 85 business jet has also been delayed.
One key focus of Bombardier is on cash flow, as it spends money to develop the two planes with no deliveries to generate revenue, RBC Dominion Securities analyst Walter Spracklin said in a note to clients Wednesday.
“With further development issues, slow progress in the flight test program, and a lack of a firm order ramp, we continue to see elevated development and sales risk,” Mr. Spracklin wrote.
Capital spending on the C Series is high this year and further delays could extend that high level and increase the total costs of the program, which now exceeds $4-billion.
The delays in development of the plane and a strong response by Airbus Group NV and Boeing Co., which dominate the segment Bombardier is trying to enter for the first time, have led to a slow growth in the order book and a failure to land contracts with many major airlines.
Bombardier did sign some new letters of intent and conditional orders at the Farnborough International Airshow last week, and one carrier converted two options to buy planes into firm orders.