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Bombardier mulls cuts in jobs, private jets as it plans rail IPO
[MONTREAL] Bombardier Inc is again considering job cuts among options to reduce costs as business-jet sales slow and the maker of planes and trains begins work on an initial public offering for a minority stake in its rail unit.
The widely traded Class B shares rose the most in two-and- a-half years as Chief Executive Officer Alain Bellemare laid out details of his turnaround plan Thursday. Bombardier also disclosed the first operator of its delayed CSeries jet, Deutsche Lufthansa AG's Swiss, to resolve questions over the model's 2016 debut.
A new round of job reductions would deepen the pullback begun last year, when Bombardier eliminated 3,500 aerospace positions before suspending work on its newest business aircraft, the Learjet 85, in January. While Mr Bellemare didn't give details, his announcement signaled that he plans to heed investor demands for improved earnings with a view to reviving a sagging stock price.
"It's clear that we have to work on our cost structure," he told reporters after the company's annual meeting in Montreal. "We see that compared with our peers there is a lot of room to improve. We have to take the right actions to improve the profitability of the company. This is an important and urgent priority for me." While job cuts are one of the "tools" at Bombardier's disposal, they aren't the only option, Mr Bellemare said. Supplier expenses will also be looked at, he said.
"There are multiple ways that you can reduce cost," he said. "We want to make sure that we look at it from all angles, that we tackle every single piece of costs in the organization."
Bombardier reported first-quarter earnings excluding one- time items of 9 cents a share, topping the 6-cent average of 16 analyst estimates compiled by Bloomberg, as deliveries of commercial and business aircraft increased.
The results are the first under Bellemare, who took over Feb 12 with a mandate to restore profitability after CSeries cost overruns dragged Montreal-based Bombardier to its first annual loss in almost a decade in 2014. He has brought in new executives, ordered a strategic review of the train division's future and boosted liquidity.
"Confidence grows that the company's new management has regained solid fundamental momentum," Nicholas Heymann, a William Blair & Co. analyst, said in a note to clients. He rates the stock as outperform.
The portion of the Berlin-based rail unit to be sold in the IPO will be "relatively low," Mr Bellemare said on a conference call. He declined to estimate potential proceeds from the IPO.
"Let me be very clear, Bombardier Transportation is not for sale," Mr Bellemare said. "We like this business and it will remain part of Bombardier Inc." The division's shares will probably be listed in Germany, Bombardier said, and its results will be consolidated in those of the parent company. Holding an IPO also will preserve "flexibility should the corporation wish to participate in future rail equipment industry consolidation," Bombardier said.