Bombardier Freezes Salaries for 38,000 as Profit Lags

Bombardier Inc., whose delayed CSeries jet is weighing on profits, is freezing salaries for about 38,000 nonunion workers in its aerospace and transportation units worldwide as well the head office.

Employees who are covered under certain local contracts, about half of Bombardier’s 76,400 workers, won’t be affected. The company has already been tightening its belt, announcing in January that it was eliminating 1,700 jobs at its aerospace division, mostly in and around its headquarters in Montreal.

It’s also reducing training budgets and restricting business travel, encouraging employees to use videoconferencing instead, according to Isabelle Rondeau, a Bombardier spokeswoman, confirming the contents of an article that appeared today in Canada’s La Presse newspaper.

“Meeting our profitability goals is a priority,” Rondeau said in a phone interview. “We’ve reached many milestones in the development of our new products, we have a substantial backlog, but now we have to deliver on our profit targets. That’s the context for these measures.”

Bombardier’s widely traded Class B shares rose 0.4 percent to C$3.61 at the close. That left the stock down 22 percent this year, while the benchmark Standard & Poor’s/TSX Composite Index rose 5 percent.

Costs Rise

The company has been bedeviled by four postponements of its CSeries jet, which Chief Executive Officer Pierre Beaudoin is counting on to generate $5 billion to $8 billion of additional annual revenue by the end of the decade and help the company almost double sales.

The tardy commercial debut has inflated the CSeries program’s costs to $4.4 billion, $1 billion more than the company targeted when it decided to proceed in 2008. The plane will weigh on profit margins for the first two years after its commercial debut next year, executives said in February.

Earnings before interest and taxes at the planemaking business will amount to about 5 percent of revenue this year, down from an earlier projection for a 6 percent margin, Bombardier said in its fourth-quarter earnings statement.

Following the earnings release in February, Moody’s Investors Service and Standard & Poor’s cut their corporate debt ratings on Bombardier one step to three levels below investment grade.

Bombardier is targeting the CSeries to compete with the smallest Airbus Group NV and Boeing Co. single-aisle models, the workhorses of the global airline fleet. Seating capacity on the CSeries will range from 108 to 160, a step up in size for the planemaker whose regional jets are its signature commercial aircraft.

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