Bombardier’s Struggles To Remain Competitive

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Cuts 3,000 Jobs In The Face Of Weak Sales …

Citing ongoing challenges facing the aviation industry, Bombardier Aerospace recently announced it will lay off 3,000 employees over the next 12 months. The cuts will be concentrated at the company’s facilities in Montreal, Toronto and Belfast, Northern Ireland. “In view of challenging market conditions, we have a responsibility to take aggressive actions to continuously improve our competitive edge and align our production rate with market demand,” explained Pierre Beaudoin, Bombardier Aerospace’s president and chief operating officer, in a statement released on March 4. The company said it will continue to invest in customer service and to support in-service aircraft.

… While Its 2003 Outlook Is Lowered …

With the job cuts and overall sales slump, Bombardier doesn’t expect to meet its financial targets for fiscal 2003, which ended Jan. 31. In a news release distributed on March 5, the company said its revised outlook is based on preliminary results. The company now sees earnings of 40-45 Canadian cents a share for the year, and free cash flow of just more than C$800 million. It said its previous guidance was for earnings of 81 Canadian cents a share before special items, or 70 Canadian cents after such items. Its free cash flow target was C$1.3 billion. The company noted that it can’t provide a revised estimate for earnings per share after special items, as it is finalizing its consolidated financial statements. In response to this amended outlook, Bombardier indicated it was considering adopting more conservative accounting methods for its aerospace business; however, it did not elaborate on what accounting changes may be in the works.

… And Ponders Selling Land In Wichita …

While Bombardier cuts costs and revamps its accounting process, the company is also pondering the partial sale of its Wichita property. Officials from various levels of government are trying to entice the manufacturer to stay or expand in Wichita. According to The Wichita Eagle, one option calls for local governments to buy a portion of Bombardier’s Wichita property and lease it back to the company over a period of 10 to 15 years. The company would benefit from reduced taxes and an improved cash position. The money would be repaid through rent payments over the life of the agreement and could require an up-front investment of as much as $10 million to $12 million, the newspaper reported. The Bombardier plant is located next to Wichita’s Mid-Continent Airport on the city’s west side, with some of the facility sitting on land owned by the airport. The plant, its land and its equipment are valued at $52.1 million, according to the Sedgwick County appraiser’s office. But only $24.8 million of that is taxed. The rest is tax-exempt because it was either financed with industrial revenue bonds or sits on airport property, the appraiser’s office said. Under the sale and lease-back idea, ownership of the land would revert to Bombardier at the end of the lease period.

… As Ogden Courts the Company

While Wichita tries to court Bombardier for property, Ogden, Utah, is also trying to entice the manufacturer to its home turf. The Utah Legislature passed House Bill 316, which provides tax incentives for aerospace companies moving to Utah, including partial rebates on new taxes generated. This in turn has opened the door for Bombardier Aerospace to consider opening a facility at the new Ogden Gateway Center Business Park at the Ogden-Hinckley Airport. The Standard-Examiner newspaper reports Ogden Mayor Matthew Godfrey, other city officials and Bombardier are still in negotiations. At the same time, however, the city is courting multiple aerospace companies. Time will tell who will be first to set up shop in Ogden.

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