UTC’s Role in Bombardier’s Decision to Shed 14,500 Jobs

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Canadian commercial jet maker Bombardier announced Friday morning that it plans to cut an additional 7,500 jobs over the next two years. The company had already announced in February that it would shed 7,000 jobs. At the end of last year the company had about 70,900 employees.

Long delays in building its first commercial CSeries passenger jet, the CS100, set the first deliveries of the planes back about two years and hit the company’s bottom line to the tune of around $2 billion.

Problems with the CSeries include slow delivery of the Pratt & Whitney geared turbofan (GTF) PW1500G engine that is used on the CS100 and CS300. P&W is a division of United Technologies Corp. (NYSE: UTX), and UTC said in September that it will deliver just 150 of the GTF engines this year, 50 fewer than the 200 originally forecast. Through the first nine months of the year, P&W has delivered 80 of the engines.

Another version of the engine, the PW1100G-JM has caused delays in delivery of the Airbus A320neo as well. Qatar Airways has cancelled delivery of four of the 32 A320neos it had ordered and has signed a letter of intent to acquire 60 new 737 MAX 8s from Boeing Co. (NYSE: BA).

Nearly half the February cuts were made to Bombardier’s railroad division, which employs about 9,500 people in the United Kingdom, some 6,000 of which are located in Northern Ireland. Bombardier accounts for 10% of Northern Ireland’s manufacturing exports. Of the cuts announced Friday, the company said about 2,000 Canadian jobs will be eliminated.

According to a report at Bloomberg News, Bombardier CEO Alain Bellemare said that there would be a “significant offset” to the job losses because the company will be looking to hire more than 3,750 employees for what it terms “major programs.” The CSeries is one such major program, as is the Global 7000 business jet.

A Canadian pension fund has invested $1.5 billion in the company in exchange for a 30% stake in Bombardier’s rail business, and the provincial government of Quebec invested $1 billion in the CSeries project in exchanged for a 50% stake in that program. Bombardier is still in discussions for another $1 billion investment in the CSeries from the federal government.

Whether or not UTC will have to reimburse either Bombardier or Qatar Airways for lost sales has not been disclosed, but discussions on the topic must surely have begun.

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