Bombardier looking for federal help after Quebec's $1B bailout

The $1-billion lifeline Bombardier is getting from the Quebec government will go a long way toward helping the troubled plane and train maker, but it's going to take a lot more to shore up the company's financial position.

Reports say Quebec has asked new federal government to match investment in Bombardier

Alain Bellemare, president and Chief Executive Officer Bombardier Inc., said the company is looking at various cost-cutting and strategic measures to make up for massive losses in Q3. (Ryan Remiorz/Canadian Press)

The $1-billion lifeline Bombardier is getting from the Quebec government will go a long way toward helping the troubled plane and train maker, but it's just one of several initiatives aimed at shoring up the company's financial position, says chief executive Alain Bellemare.

In addition to working on the sale of a minority stake in its railway division (which analysts estimate would bring in between $1–2 billion), the company is considering other strategic options, including the sale of non-core assets and exploring ways to trim costs from programs like the Q400 turboprop.

The CSeries is the biggest commerical airline Bombardier has ever made meaning it will have to go head to head with new aircraft just released by Boeing and Airbus that use the same quiet engine. (Bombardier )

Bellemare was loath to provide details about what is being considered, including whether joint ventures like the CSeries deal with the province are contemplated for other programs.

The CEO said he's "super sensitive" about discussing options after information was leaked about Bombardier's approaching Airbus about selling a stake in the CSeries.

"I will continue to look at strategic options across the board. We will continue to look and they need to make good business sense and create value for customers and for shareholders," he said in an interview in the company's downtown Montreal boardroom.

Reports suggest the company approached the federal government for at least $350 million in assistance; the Globe and Mail and Toronto Star reported that the Quebec government asked the incoming federal government to match its investment in Bombardier. Meanwhile, the new Liberal government said it will consider the request after it is sworn into office on Wednesday.

Moving some manufacturing to Mexico or China

Bombardier says it will focus on making its programs more competitive by cutting costs. He pointed to efforts that were rejected by its Toronto unionized employees that would see the manufacture of some parts for the Q400 moved to low-cost countries like Mexico or China.

A Bombardier Q400 jet sits in a hangar at the Bombardier facility in Toronto. The CEO of the company says some manufacturing may be moved to Mexico or China. (Aaron Vincent Elkaim/The Canadian Press)

Although the Q400 does well in North America with customers like WestJet Encore, Porter Airlines and Air Canada, it is too pricey for markets like Asia. Rival ATR dominates while Bombardier's market share is just 25 per cent.

"It's a great aircraft (but) it's too costly and we need to bring the costs down so we can bring the price down," Bellemare said.

And he wouldn't rule out job cuts as the company turns the focus to improving efficiency and operational performance.

"We are going to look at what does make sense to make the business strong moving forward and from that we will derive the conclusion that is needed."

David Chartrand of the International Association of Machinists and Aerospace Workers said cost-cutting and transfer of work to low-cost countries is an unfortunate reality of the aerospace industry.

"Every single program is always under threat," he said, adding that the key is to offset the transfer of work with research and development and higher-value jobs.

Stock price improves after announcement

Analysts expect Bombardier will have enough cash to fund its programs in the coming few years, but hope to see detailed plans at the Nov. 24 investor day about improving margins.

"Solidifying the CSeries is important, but better margin and cash performance from the other business segments are also critical to support a higher valuation in the stock," wrote Cameron Doerksen of National Bank Financial.

Seth Seifman of JP Morgan called the deal with Quebec a "meaningful" step forward, but only one of many that is required.

He said the key will be getting orders from blue chip customers, including United Airlines, which is reportedly looking at ordering 100-seat aircraft if pilots approve a new contract.

Bombardier shares were up nine cents or 6.77 per cent at $1.42 Friday on the Toronto Stock Exchange.

With files from CBC News


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