Bombardier Inc. is slashing 1,000 jobs in Mexico and the U.S. at its Learjet 85 facilities and warning of lower profitability and cash flow than originally targeted for 2014.
The jobs being cut are in Querétaro, Mexico, and Wichita, Kan.
The Montreal-based plane and train manufacturer said on Thursday it is putting the Learjet 85 business-jet program on “pause” as orders for the new light aircraft have not come in as initially anticipated.
The company plans to book a $1.4-billion (U.S.) pre-tax special charge in the fourth quarter of 2014 mainly related to the impairment of the Learjet 85 development costs.
Bombardier will record a severance provision of about $25-million in the first quarter of 2015.
Earnings before financing expenses, financing income and income taxes (EBIT) before special items in the aerospace division are expected to be about 4 per cent compared with previous guidance of 5 per cent.
At the rail unit, EBIT is now expected to be 5 per cent versus 6 per cent.
Cash flow from operating activities at aerospace is expected to be $800-million, compared with $1.2-billion to $1.6-billion previously announced.
“Given the weakness of the market, we made the difficult decision to pause the Learjet 85 program at this time,” Bombardier president and chief executive officer Pierre Beaudoin said.
The company will be able to better focus on development of its all-new C Series commercial airliner and Global 7000 and 8000 business jet line, he said.
“Both programs are progressing well.”
Bombardier has experienced difficulties with both its Learjet 85 and C Series programs.
Last June, it laid off more than 200 staff and contract workers in the U.S. and Mexico due to delays in Learjet 85 flight testing.
The Learjet 85 was originally slated to have its first flight in late 2013, but that was held off until April, 2014.
Last May, a C Series engine failed during ground testing. Flight testing has since resumed and Mr. Beaudoin has reiterated a target date for entry into service before the end of 2015 but some analysts believe that will not happen before 2016.
The C Series program has become a drain on Bombardier’s finances. Development costs have ballooned to $4.5-billion from $3.5-billion to $3.9-billion.
The Learjet 85 is a 10-passenger jet using mostly composite components. There have also been delays in the rollout of two upgraded Learjets, the 70 and 75.
The workforce cutbacks announced Thursday are the second major scaling back of operations in a year.
In January of 2014, Bombardier laid off 4 per cent of its aerospace workforce – about 1,700 jobs – amid a slump in aircraft sales and C Series production delays.