Britain’s Serious Fraud Office has opened an investigation into Bombardier Inc. over suspected bribery and corruption, adding to the adversity facing the plane maker as it prepares to scale back its business further to adapt to still-shaky market conditions.
The probe is related to contracts and orders from Garuda Indonesia, the flag airline of the Southeast Asian country, the fraud office said in a statement on its website Thursday. It said it would provide no further comment because the investigation is continuing.
Bombardier confirmed the investigation and said it has launched its own review of the matter, conducted by external counsel. No charges have been laid against Bombardier or its employees in connection with the affair, the company said.
“This is unfortunate,” Bombardier chief executive Éric Martel told reporters on a conference call after the company’s third-quarter earnings report Thursday. He said while probes by authorities so far have centred on sales made to Garuda by Airbus SE and British-based engine maker Rolls-Royce Holdings PLC, the fraud office informed the company several weeks ago that it wanted to investigate Bombardier because it also sold aircraft to the Indonesian carrier.
“They reached out to us. We were not aware of any issues internally,” Mr. Martel said. “We’re being very open. We’re co-operating with the investigation. We’ll provide the information they need and we’ll see how this situation progresses.”
The inquiry presents a new wrinkle in Mr. Martel’s effort to reshape Bombardier into a single-business maker of private jets in the months ahead. The company has sold off all its commercial aircraft manufacturing capability to Airbus, Mitsubishi Heavy Industries Ltd. and Longview Aviation Capital Corp., and plans to unload its train business to Alstom SA in a crucial transaction scheduled to close next year.
Bombardier shares ended the day up 1.7 per cent in trading on the Toronto Stock Exchange, closing at 30 cents.
The Indonesia probe is one of a number of legal files outstanding for Bombardier.
The company also faces a continuing police investigation in Sweden and an audit by the World Bank related to a 2013 contract for the supply of rail signalling equipment to Azerbaijan Railways. A Swedish Court acquitted a Bombardier employee three years ago of bribery in relation to that contract, but the case is likely to go to appeal.
The U.S. Department of Justice contacted the company earlier this year requesting documents and information about that contract, Bombardier disclosed in a regulatory filing Thursday. The company said that based on the information it has, there is no evidence to suggest that any criminal activity involving Bombardier took place.
In the filing, Bombardier also provided some additional context about the Serious Fraud Office probe. It said that in May, 2020, the Indonesian Corruption Court convicted the former chief executive of Garuda Indonesia and his associate of corruption and money laundering in connection with five procurement processes involving different manufacturers, including the 2011-12 acquisition and lease of Bombardier CRJ1000 aircraft by Garuda Indonesia.
Bombardier launched an internal review of the Garuda transactions shortly after that conviction, the company said. It said it understands that the Serious Fraud Office’s investigation involves the same transactions.
Garuda currently operates 18 Bombardier CRJ1000 regional jets among a fleet of 142 planes, according to its website. Bombardier announced a purchase agreement with the airline in February, 2012, during a news briefing at the Singapore air show.
At the time, Garuda agreed to buy six CRJ1000 planes and took an option on another 12 aircraft. The total value of the deal was US$1.32-billion, according to Bombardier’s news release.
The development comes as Mr. Martel readies a new strategic plan for Bombardier in the weeks ahead based on the results of an analysis of its operations and projected finances as a standalone business jet maker. The company needs to make major adjustments to improve profitability as a much smaller manufacturer, he said, adding Bombardier expects to deliver 100 to 125 jets a year going forward given the current level of demand.
“Our cost structure today is much too large for the size of the business that we’ll have,” Mr. Martel told reporters, adding Bombardier factories have become too costly. “This will definitely mean layoffs,” he said. “What I can’t say today is where or when.”
Bombardier on Thursday reported a net profit of US$192-million in its third quarter, reversing a net loss of US$91-million in the same quarter last year. Revenue totalled about US$3.53-billion, down 5 per cent from a year ago.
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