MONTREAL - Bombardier Aerospace (TSX:BBD.B) is looking to preserve its pool of talent by considering a federal program that supports job sharing in order to minimize the impact of additional layoffs the company announced Thursday.
Lack of new orders has forced the manufacturer to announced the layoff of 715 more workers at its Montreal-area facilities next year as it reduces production of its CRJ regional jets.
The union representing most of the workers claims it has been rebuffed in its effort to permit job sharing. That is until now.
"They have always refused, but for the first time there was an openness on their part to say we are willing to look at this," said David Chartrand, local president of the International Association of Machinists and Aerospace Workers Union.
Bombardier spokesman Marc Duchesne cautioned that the outcome of the effort is unclear since approval is required from employees and government.
"We want to keep our expertise in house as much as possible. If we can limit the layoffs this way we'll try it," he said in an interview.
The global airplane and train giant says it has been forced to increase layoffs because the tough economic and airline industry environment has made it difficult to gain new aircraft orders.
Thursday's announcement came two weeks after Bombardier president Pierre Beaudoin warned of impending jobs losses. The cuts are in addition to 4,360 layoffs previously announced this fiscal year for Bombardier's worldwide operations, including 1,740 in the Montreal area.
Duchesne said the layoffs flow out of the final decision on production rates for next year and the need to order parts.
The 715 layoffs include about 40 employees affected by the reduced output rate for the company's Bombardier 415 amphibious aircraft.
About 200 of the affected workers are administrative while the remaining 515 are unionized employees who can now exercise their rights to bump workers with less seniority. Such moves could have an impact on Bombardier employees who assemble the Challenger business jet.
Chartrand said employees on the shop floor were worried about potential job cuts in light of economic conditions.
"We aren't surprised that there are layoffs, but we are surprised by the size; we didn't believe there would be so many," he said.
Bombardier's production cut could spell problems for some suppliers with heavy ties to the CRJ program. But Sonaco Canada president Philippe Hoste believes the impact will be minimal on his company because it has used job-sharing to minimize layoffs.
The Montreal-based supplier of aluminum wing skins was forced to lay off 50 employees after Bombardier's earlier production cut. But job-sharing started last August has averted up to 40 more job losses.
Employees work four days a week and are paid up to $90 through the federal employment insurance program for each Friday the plant is closed.
Hoste said the job sharing gives the company flexibility to adjust to real production demands while preserving its workforce and reducing the need for costly training.
"It was also a very good example of solidarity because otherwise we would have been obliged to cut by probably another 20 per cent our head count in August," he said, noting that 92 per cent of workers endorsed the program.
Hoste said many suppliers have adopted similar measures but he's not sure it would be suitable with Bombardier's production flow.
Suzanne Benoit, CEO of aerospace think-tank Aero Montreal, said companies are also considering job-sharing to prevent highly skilled employees from switching to other industries.
Offsetting the challenge to suppliers is the possibility of gaining additional business as manufacturers transform their supply chain by giving a fewer number of preferred suppliers more work.
Thursday's announcement by Bombardier doesn't reduce production of business jets, which decreased earlier this year as the company forecast deliveries would fall by 25 per cent in 2009.
Analysts believe the company will further announce business jet production cuts, possibly Dec. 3 when the company discloses its third-quarter results.
While Bombardier's campaign to win new orders and minimize layoffs wasn't very successful, it doesn't mark the death of the CRJ, said Duchesne. Bombardier's latest market forecast calls for 5,800 planes over the next 20 years.
"So this niche remains very interesting over the long-term."
David Newman of National Bank Financial said the reduced production rate was widely expected.
"With few and nascent signs of tangible recovery in the commercial airline market at this juncture...we believe Bombardier's move was prudent," he wrote in a report.
The latest layoffs will begin in January 2010 and will last through the first two quarters of the next fiscal year and cost about US$10 million.
The company said it continues to invest in new aircraft programs, which include the CRJ1000 NextGen, Learjet 85 and CSeries aircraft programs. It is looking to recruit about 500 engineers for these projects.
On the Toronto Stock Exchange, Bombardier shares closed at $4.60, down 18 cents, or 3.77 per cent.