Bombardier closing seven rail plants, cutting 6,600 jobs

Railway Age, April, 2004

In a sweeping restructuring of its rail division, Bombardier, Inc. is cutting 6,600 jobs, about 18.5% of Bombardier Transportation's work force, and closing seven European plants. The cost of the downsizing is estimated at $C777 million ($US580 million) over three years. When the plan is fully implemented Bombardier expects to save $C600 million a year.

Production already has stopped or been suspended at four North American locations: Barre, Vt.; Pittsburg, Calif.; and Kingston and Burnaby in Canada. This year Bombardier will close plants at Amadora, Portugal, and Doncaster and Derby Pride Park in Britain. Scheduled to shut down next year are facilities in Prattein, Switzerland; Ammendorf, Germany; Kalmar, Sweden; and Wakefield, Britain.

At a news conference late last month, Bombardier Inc. President and CEO Paul Tellier commented, "We are beyond the days where we had to have plants in every state in Germany and every province in France to get contracts." He said Bombardier Transportation currently operates 35 production sites in 15 European companies, where 85% of the work force reductions will take place.

(Railway Age's sister publication in Europe, International Railway Journal, had this observation: "There has been huge over-capacity in the rail vehicle manufacturing industry for many years, particularly in Europe. The numerous mergers and takeovers largely failed to address this number until quite recently. Adtranz tried but failed to reduce the number of plants it had, and Bombardier inherited the problem when it took over Adtranz in 2001.")

Bombardier also said that since 65% of its costs are in materials, the restructuring initiative includes "new arrangements with suppliers to better coordinate materials procurement." Tellier said this program "will rationalize the number of suppliers the business utilizes, increase parts standardization, and centralize negotiation processes to achieve economies of scale wherever possible."

The restructuring had been expected, but details were not released until Bombardier issued its earning report for the fiscal year that ended Jan 31, 2004. Bombardier recorded a charge of $C457 million of the $C777 million restructuring cost in the quarter that ended Dec. 31.

The company--which in addition to Bombardier Transportation includes Bombardier Aerospace and Bombardier Capital--had total FY 2004 revenues of $C21.3 billion, and ended the year with a backlog of $C45.9 million.