End of an Era for Bombardier

Kai Huang - 2B Computer
Posted on: July 10, 2019

On 25 June 2019, Bombardier Inc.
finalized a deal with Mitsubishi Heavy
Industries Ltd. to sell off the Canadian
Regional Jet (CRJ) program for $550
million USD, ending Bombardier’s
foray into the commercial aviation
market after three decades.

Under the terms of the deal,
Mitsubishi would assume about
$220 million USD in liabilities and
take on the maintenance, support,
refurbishment, marketing, and sales.
However, all manufacturing activities
remain with Bombardier for the time
being as they finish production of
the backlogged orders on behalf of
Mitsubishi. Though Bombardier is
left with almost $400 million USD in
liabilities representing part of credit
and residual-value guarantees, it gives
the company some breathing room
to focus operations on their more
profitable departments.

The CRJ program from Bombardier
had its fair share of controversy in
the news over the past couple of
years but initially made up the bulk
of Bombardier’s revenue. However,
Embraer’s recent partnerships with
Boeing have made their E175 narrowbody regional jets dominate the US
market where the majority of sales
are made. Bombardier realized last
year that their commercial jet program
simply wasn’t viable anymore, with
$755 million USD in losses in the
segment, compared to $1.2 billion USD
in earnings for their rail and business
jet divisions. The sale to Mitsubishi
comes with little surprise after Airbus’s
acquisition of a majority stake in
the program last year, indicating
Bombardier was preparing to get rid
of the program.

On the other hand, the deal is a
welcomed opportunity for Mitsubishi.
The company is hoping to break into the
elite group of jetmakers internationally.
With already $2 billion USD into their
regional jet program (known as the
MRJ) and setbacks related to aborted
test runs and cost overruns, they benefit
greatly from Bombardier’s experienced
engineers as well as a global sales and
support system. While a US carrier
last year cancelled an order for 40
MRJ’s, All Nippon Airways still has
an open order, set to take deliveries
starting in 2020.

The deal includes Bombardier ’s
service and support network based
on Montreal and Toronto as well as
service centers across the United
States. Mitsubishi has stated that the
1200 to 1600 workers in these positions
will be joining Mitsubishi once all
regulatory approval has passed, though
not providing any guarantees into
potential future layoffs. However, the
factory in Mirabel, QC will likely be
closed after the final production of the
CRJ completes, putting into question
the futures for the 400 production
workers.

Bombardier has remarked that
assembly-line workers and engineers
could likely keep their jobs by working
on various other projects including
those being jointly run with Airbus.

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