MONTREAL -- Bombardier could announce layoffs and production rate decreases for its regional planes next week due to a dearth of new orders received over the past several months, industry analysts say.
The Montreal-based manufacturer could disclose a change Wednesday when it reveals the results for the second quarter of its fiscal year.
Bombardier officials have long said the company was waiting for decisions from campaigns with several airlines before making any such moves.
But order intake has been weak, with no orders announced in the quarter and only five in the prior three months.
Benoit Poirier of Desjardins Capital Markets said a production rate decrease will likely be announced in light of the current economic uncertainty and delayed purchasing decisions.
"We believe Bombardier is in a difficult position -- it wants to minimize the variability of its production rates due to the associated costs, but may not have other options," he wrote in a report.
The backlog for Q400 turboprops stands at 11 months while regional jets are 18 months. Bombardier's target for both aircraft types is 18 to 21 months.
In the longer term, the retirement of older regional jets could force Bombardier to raise its production next fiscal year, Poirier added.
Company and union officials couldn't be immediately reached for comment.
Cameron Doerksen of National Bank Financial says any rate decrease would likely be focused on regional jets, since Bombardier has already announced a slowdown for turbos later this year.
"We would not be overly surprised if Bombardier were to use the occasion of its second quarter report to announce a CRJ production rate cut," he wrote in a report.
Doerksen added the impact on forecasts would be small since the production rate is already relatively low and the margins are believed to be thin.
Bombardier is reportedly in the running for an order for 25 regional jets from Indonesia's Garuda.
The world's third-largest aircraft manufacturer faces tough competition for turboprop orders from ATR and for jets from Embraer.
Analysts expect Bombardier will report 10 cents per share in adjusted profits on US$4.5 billion of revenues for the period ended July 31. That would be up from seven cents on US$4.08 billion in the same period last year.
Business jet orders are expected to be "solid" in the quarter but could come under pressure in the third quarter because of declining confidence in the economy and unsolved sovereign debt issues.
Some manufacturers blamed European debt problems for last year's temporary lull in sales.
"Nonetheless, we believe this potential decline to be temporary as corporate profits -- a very good indicator of future business jet deliveries -- remain solid," Poirier said.
Source:
http://www.canadianbusiness.com
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