Bombardier Thanks Canada For $1 Billion Bailout By Firing 7,000 People

Tyler Durden's picture

Back in October, Quebec put taxpayers on the hook for a $1 billion bailout of planemaker Bombardier, which was having one hell of a hard time creating a buzz around its CSeries commercial jet program.

Bombardier has been around for nearly 8 decades and employs more than 40,000 people in the province. The company’s role in the provincial economy is “incalculable,” Quebec’s Economy Minister Jacques Daoust said last year. “How can I let them go?” he asked.

For its money, Quebec would get a 49.5% stake in a new business that will own the assets and liabilities of the CSeries commercial jet program, which isn't exactly going well. In exchange, the company promised to manufacture the aircraft in the province for at least 20 years. “How confident is Quebec that this will fan out for the economy and taxpayers? That’s what we don’t know,” Paul Boothe, a former senior Canadian official who was the federal government’s lead negotiator with the domestic units of GM during bailout talks in 2009 said at the time.

Well, now we do know. On Wednesday, Bombardier announced it’s cutting 7,000 jobs as part of a “global workforce optimization.

“Impacted positions are mostly based in Canada and Europe,” the company said this morning, after reporting results that missed estimates on both the top and bottom line. Here’s the breakdown:

So obviously that sounds bad, but don't worry because the job losses will be "partially offset" by hiring in "certain growth areas." Like the CSeries program. Which is "growing" so fast that the company had to take a $1 billion bailout from the provincial government to shore it up.

"Production rates for some models have been modified," Bombardier goes on to say, in an attempt to explain the layoffs, "due to macroeconomic conditions." For those who don't read a lot of quarterly reports, that's a polite way of saying this: "demand is really, really soft."

The company says the CSeries program has "generated new jobs at the Bombardier facility in Mirabel, Québec," although the number of new jobs isn't specified nor does the company indicate what the net job creation (or, more likely, "job destruction") will be in Canada after the "optimization" is implemented. 

As for the company's 2016 outlook, revenue guidance looks well short of estimates at $16.5-17.5 billion (consensus was $18.2 billion), while FCF usage is generally in line at between $1 billion to $1.3 billion, although if it comes in at the high end, that will be close to the highest analyst estimate. The company burned $1.82 billion in 2015. Here's the full guidance breakdown:

On the bright side, Bombardier and Air Canada announced today that they've signed a Letter of Intent for the sale and purchase of 45 CS300 aircraft with options for an additional 30 CS300 aircraft, including conversion rights to the CS100 aircraft. 

Oh, and the company is going to try a reverse split to make it seem like its shares aren't worthless.

So there you go Canada, Bombardier thanks you for the $1 billion you gave it. Any time you want to fork over some more money in exchange for thousands of layoffs, make sure to let the company know. They'll be happy to oblige.

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Cognitive Dissonance's picture

The bailout was conditional upon Bombardier cutting expenses. You didn't think upper management was going to be cut....did you?

Bombardier was in serious trouble and is considered a Canadian national asset. Before this bailout Bombardier went hat in hand to several suitors looking for a merger, including with Airbus, their direct competitor with their latest entry into the single aisle 70-90 people commercial jet market. That plane, by the way, has been sucking cash as its development has been constantly delayed.

Peter Pan's picture

I would actually agree to a bailout of Bombardier on the understanding that the $1 billion included the sum total of all the politicians' retirement fund monies.

After all, what is good for the goose is good for the gander.

VinceFostersGhost's picture

 

 

Wow.....they have crony capitalism in Canada too?

bunnyswanson's picture

Canada's version of AIPAC is CIDNAP.

Antifaschistische's picture

hold on just a damn minutes....are you telling me, that billion dollar bailouts aren't really for the "little guy"!!  but rather for the corporate VIPs!!

...if Bombardier is basically a government owned company now, then it's VIPs should make wages in line with Canadian Government employees.   

DownWithYogaPants's picture

1 Billion dollhairs just does not buy that many employees.   I would expect layoffs if they are getting bailed out.

Although these CEO's tend to be RCO ( Ruling Class Oligarchy ) toadies and should not be bailed out I don't generally assume companies being bailed out are going to go on any hiring sprees.  Their business model is broken at least temporarily.

847328_3527's picture

Canada's getting some of dat "Change you can believe in" treatment.

BeaverCream's picture

Fucking rats are everywhere.

arby63's picture

It's much like cancer--it spreads. I suspect the entire globe is already terminal.

CPL's picture

It's more like a rot.  Nice thing about rot once it's properly decays it provides the fertilizer for the next crop of new, health and strong businesses....until they eventually suffer from the same garbage we all see today.

Okienomics's picture

I was feeling all warm and fuzzy about rot until you added the ...

Huh Reeeally's picture

Sadly, yes, we continually waste money on grants and loans to any business that can prove they have a failed business model or needs a new sports arena. Reality does not apply in these cases.

If you want a good laugh then do a search on Montreal Corruption, almost sounds like Chicago.

DownWithYogaPants's picture

Well French is a Latin language and as far as I've seen the Latin countries have corruption that makes Germanic countries look like amateurs. ( currently in Brazil and they are epic.... ) 

Canadian Renegade's picture

Speaking of sports arenas. Rexall place in Edmonton where the oilers are currently playing cost $17 million in 1973. The new arena being built is 600 million and last I heard the taxpayer is on the hook for the entire cost if the building becomes unprofitable to the co-owner Daryl Katz.

CPL's picture

Yup, try working the contractor space to deliver and build crap for GoC.  They are next to fucking impossible to get out of long term contracts through shared services Canada.  Only company that's more of a considerable clusterfuck would be ISM decade long service contract arrangements managed by IBM (entire company of sales people and IP lawyers).  Not kidding, of all the contracts I've had to go combing through to get projects in place or answer back to RFP's they've got a 2000% mark up on some of their guys running around.

Protip:  Bombardier btw makes their bacon not in planes or skidoo's.  They make their bacon with consulting and IT pimping.  Those 7000 are probably contractors that are in one of their service delivery or managed services offerings, aka 'disposable' contractors.  They would never touch their primary loss leader in selling planes no one buys.  If it sounds like a demented business model.  It is.

JRobby's picture

Crony capitalism is everywhere weather you are considered a "capatilist" system or "socialist" system.

7,000 jobs is just a drop in the bucket of the shit show to come

Al Tinfoil's picture

The people behind Bombarier are "well connected".

DownWithYogaPants's picture

Yah think?  

Yikes these bailouts are going to become a ritual of power.

ATM's picture

That ain't capitalism in any form. It is fascism.

Cognitive Dissonance's picture

The CS100/300 is a direct competitor to the Boeing 737MAX and Airbus 320neo, several thousand of which have been ordered. The CS100 has only a few hundred on order and is very very late to market and way over budget.

This is the equivalent of Tesla going up against Ford and GM for the mass market instead of a niche segment of the market......as Tesla is attempting to do. Tesla has a direct advantage called an all electric vehicle tax credit, something Bombardier doesn't have.

The CS100/300 is an all new from the ground up plane designed from the beginning to be extremely efficient. The 737MAX and 320neo are re-engined and re-winged versions of their older models. David and Goliath.

oddjob's picture

The entire aviation industry is one big giant tax credit. These purchases are tax write-offs for the uber Rich and faceless corporations.

bania's picture

Now, use that $1B to buy back stock. That'll show then!

Kirk2NCC1701's picture

Looks like another Blue Light Special for CHINA/INDIA to swoop in and scoop up a deal/steal in their talons.

Then, while on Montreal, why not scoop up the remaining PM at Kitco? How naive can you be?

Oh Canada, who stands in guard for thee now?

Space Animatoltipap's picture

In an Animal Farm these things are simply ... "next topic, please".

NoDebt's picture

Private plane manufacturers are really feeling the pinch from new trasporter beam technology.  It's hard to compete with an airplane that only goes 500 MPH when the banks can just zap money in and out of an account at the speed of light.

Of course, transporter beam technology causes financal cancer with prolonged exposure but nobody cares about that right now.

CaptainMoonlight's picture

All these CEOs sending work and jobs overseas after their host country bails them out need a head cutting.

Kirk2NCC1701's picture

FACT: Foreign countries like China and India, who are busy growing their own aerospace companies, force buying terms with an ever growing offshore content, which is nothing more than a slow and  systemic Tech Transfer Program. A Trojan Horse.

Why do you think that Canada (Bombardier, CAE, SPAR) has so many East Indians working in its aerospace industry? To "help out"?

Dumb white people.

VWAndy's picture

Ask me to train my replacement? You will end up with the dumbest fucktard you will ever see.

ATM's picture

Do you weant to be paid back? 

Not that it really matters because these bailouts are just another form of too big to lose any money. The rish can't be expected to lose money on Bombardier. They need to have their wealth protected.

The bureaucrats sell the idea that bailing out a failed business is good for the "economy" good for "jobs" and good all the way around.

What they always fail to mention is the opportunity costs of throwing good money after bad. Losers should lose and winners win. And the market should decide who is who, not some fucked up little communist bureaucrat in Ottowa, DC or Montreal.

VWAndy's picture

More fiat magic. Yippy!

_ConanTheLibertarian_'s picture

7000 folks will be bombardiered out

Bangin7GramRocks's picture

As a parting gift, each displaced employee will receive a new Blackberry smartphone with realistic clicking keyboard and a free barrel of tar sands oil.

DontFollowMyAdviceImaDummy's picture

So this is the Canadian-equivalent of a NFL team that hoodwinks a town into getting the taxpayers to pay to build them a new stadium where the claimed financial trickledown gains never make it outside of the stadium except for the hotels for 8 weekends a year.

Antifaschistische's picture

but, but, the NFL teams would NEVER be able to sign $50 million quarterback deals, and $25 million dollar linebacker deals, etc...if they had to pay for their own place to play!!    steal from the poor.....give to the rich.  That's just the way the game works today.   And, of course...to complete the fascist circle, allow 'corporations' and 'businesses' to deduct all their spending at these games as business 'expenses' to LOWER their tax liability.   Because...of course such a benefit would NEVER be considered executive compensation.

Holleyman's picture

All is well in Canada, there should be 100% unemployment by the time shiny pony is done in 2020.

FrankDrakman's picture

Yes, but we'll all be so happy, basking in BC bud after the Dauphin legalizes pot, that we won't notice we're not working!

Also, we are.. um.. er.. are you going to finish that doughnut?

PavlovPup's picture

Yes and the smart money was getting in on the dipensary's ground floor. Great money to be made, and the smartest are already charging goods and services tax pre emptively for when they are regulated not tollerated.

 

FrankDrakman's picture

I was in one of the new ones in downtown Toronto last week. All I had to do was SHOW them a prescription bottle with my name on it and a photo id. $34 CDN (that's like $1.85 US, right?) for an eighth of an ounce. (3.5g) The Goji was awesome. 

Kirk2NCC1701's picture

Canada's Brain Drain is well known: those who don't go to the US for more pay, lower taxes, warmer climate and more career opportunities (e.g. Wm. Shatner), end up giving away their tech and "secret sauce" to their offshore clients (China, India).

Thanks to their weak-minded and spineless bosses, who confuse "being Nice" with being gullible schmucks. "Be nice". Good one. LMAO.

yogibear's picture

China's aviation manufacturing should fix this even further.

They have their ARJ21 and C919 (soon for sale).

 

LOL, this looks like the Boeing dreamliner. They must have the same plans slightly modified.

After all Boeing provided them with all the technology. 

http://www.popsci.com/china-and-russia-join-forces-build-new-jumbo-jet

 

DownWithYogaPants's picture

I'm not so sure I'd like to fly on a Chinese jet.   Heck the pilot would be flying along and all of a sudden a small plastic part will break off in his hand and rather than fix the damned thing it makes more economic sense to just buy a new one.  

Pilot "We breaky plastic tang"

Mechanic "Hu talk about robo stewardess?"

Pilot "Other tang!"

 

That C919 looks like an almost direct Boeing 737 ripoff.

Jstanley011's picture

"Quebec’s Economy Minister Jacques Daoust said last year. 'How can I not *fuck the taxpayers up the ass*?' he asked."

The answer is, of course, he can't not do it. He's a politico. Might as well ask a shark to quit swimming and drown.

Emergency Ward's picture

He whispered it in French which made it pleasing to the ears of his followers.

dogismycopilot's picture

Air Canada just ordered 45 C 300s....I guess that's the upside. http://www.marketwired.com/press-release/air-canada-orders-45-c-series-j...

While every country should have its own aviation industry and aerospace manufacturer, Quebec., should have driven a harder bargain in this deal....fucking Bombardier execs are laughing all the way to the bank. Stupid fucking Quebecians. 

I must admit, I've seen the Swiss CS100 in person and it is a good looking plane...how these things fly and if the composite work is any good remains to be seen. I suppose Trudeau will use them them to airlift over some 'refugees' to Canada and they will probably get detroyed on the flight over, eh?

Bopper09's picture

Not the first time we've had to bail out Air Canada.

buzzsaw99's picture

don't worry about bellemare. he got plenty.

RamzaBehoulve's picture

Seriously, how many times does it to happen for governments to stop bailing out failed businesses? When one fails, another will rise!

Infield_Fly's picture
Infield_Fly (not verified) Feb 17, 2016 9:24 AM

Nortel, RIM/Blackberry and now Bombardier.

 

Another Canadian high tech failure.

 

Stick to maple syrup, coffee, donuts and goobermint make work projects Canada.  You can't hurt yourself this way.

johnnycanuck's picture

Nortel was a damn shame, RIM with production based in NA mostly had a good run in a highly competitive field and Bombardier has been a dependant of the Taxpayers of Canada every since it branched out from making Snowmobiles.  To it's credit though, unlike much of what Investment Bankers pass off as grade A investments, it does have tangible assets that actually produce something of value to ordinary people, not just the money changers..