Bombardier to sell Belfast, Morocco factories in bid to consolidate aerospace business - The Globe and Mail

Bombardier Inc. said it will sell its aircraft component manufacturing factories in Morocco and Northern Ireland as the Canadian plane-and-train maker pushes ahead with a bumpy turnaround effort now in its fourth year.

Bombardier will seek buyers for the businesses as it moves to consolidate its broader aerospace activities under one group called Bombardier Aviation, the Montreal-based company said Thursday in a news release detailing first quarter earnings. That means all of its current aerospace businesses, including the units that build luxury jets and regional jets as well the remaining component manufacturing operations in Montreal, Mexico and Texas, will fall under one umbrella led by current luxury jet head David Coleal.

“[This] is the right next step in our transformation,” Bombardier Chief Executive Alain Bellemare said in a statement. “The consolidation will simplify and better focus our organization on our leading brands, Global, Challenger, Learjet and the CRJ. It will also allow us to better support our customers and generate value for shareholders.”

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The move highlights Mr. Bellemare’s effort to reduce costs and position Bombardier for the future by selling parts of the business he sees as having the least growth potential. The component manufacturing unit is a profitable business for Bombardier but continued uncertainty surrounding the United Kingdom’s exit from the European Union has possibly weighed in his thinking.

The Northern Ireland plant is located in Belfast and employs about 3,600 people. The plant in 2017 won a contract to build new thrust reversers for engine nacelles for Airbus’s A320 airliner.

The decision to sell the Belfast factory stunned the city.

“Today’s announcement will come as a shock to the entire Bombardier workforce in Northern Ireland,” the Unite Trade Union said in a statement. “The U.K. government must stand ready to ensure the retention of jobs and skills at these sites. Bombardier is simply too important to the Northern Ireland economy to allow anything less.”

The development comes as Bombardier prepares to meet investors at its annual meeting in Montreal Thursday morning. Shareholders have in recent days expressed concern that Mr. Bellemare can keep his five-year plan to fix the company on track given trouble with deliveries on big rail contracts.

Several institutional investors have also come out in favour of a proposal to end the company’s dual class share structure, which has been in place for 40 years. The company has said it has no intention to drop the system.

Bombardier shares fell sharply last week after the plane maker issued a surprise profit warning, slashing both first-quarter and full-year financial targets because of the rail trouble. It remains unclear whether the company is sticking with its previous goal to build a multinational that will generate US$750-million in free cash flow and earnings before interest, taxes, depreciation and amortization of US$2.25-billion on revenue of US$20-billion by 2020.

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The train business is key to Mr. Bellemare’s turnaround effort, making up most of current revenue. The company was nearly driven into bankruptcy under the weight of heavy investment costs for new plane development programs including the C Series airliner. That plane program has since been sold to Airbus.

Bombardier reported first quarter earnings that are largely in line with preliminary results announced last week.

Adjusted core earnings climbed by US$1-million to US$266-million in the three months ending March 31, while revenue fell 13 per cent to US$3.5-billion. Free cash flow usage was $1-billion for the quarter.

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May 02, 2019 at 06:37PM