Toronto, Ont. – Bombardier President and CEO Paul M. Tellier announced a major restructuring initiative for the corporation's rail transportation business that will address “excess capacity” in its industrial operations.
The corporation proposes to reduce its rail operations workforce by 6,600 positions (18.5 percent of its total workforce). Furthermore, the initiative calls for seven production sites in five European countries to be closed over the next two years.
SITE CLOSURES AND WORKFORCE REDUCTIONS
Proposed general workforce reductions at sites around the world and site closures in Europe would impact 6,600 positions, 37 percent of which are “white collar” workers. These workforce reductions have already begun at some locations.
Bombardier Transportation currently operates 35 production sites in 15 European countries. It employs a global workforce of 35,600 people, 78 percent of which is based in Europe. The excess capacity issue was most acute in Europe, where all the site closures and 86 percent of the workforce reductions are intended to take place. In North America, actions to address overcapacity issues have already been initiated. Four sites located in Kingston, Ontario; Burnaby, British Columbia; Barre, Vermont; and Pittsburg, California ceased or suspended operations.
Sites identified for closure in 2004 are Amadora, Portugal; and Doncaster and Derby Pride Park in the United Kingdom. “We will maintain our manufacturing capability in the U.K with the Derby Litchurch Lane facility,” says Tellier.
Closures of facilities in Pratteln, Switzerland; Ammendorf, Germany; Kalmar, Sweden; and Wakefield in the United Kingdom are envisaged for 2005.
The cost of this restructuring initiative is estimated at $777 million, $457 million of which was recorded during the fourth quarter of fiscal year 2004, with the remainder to be recorded over the next two years.
Once fully implemented, Bombardier hopes the restructuring initiative will reduce transportation's costs by approximately $600 million annually
The proposed site closures are based on an in-depth assessment of global industrial locations which covered workload, operating efficiency, technical capability, prospects for future contracts and detailed economic evaluations.
An industrial site improvement program is also being launched at five European locations to further reduce manufacturing costs.
INDUSTRIAL SITE IMPROVEMENT PROGRAM
Five additional sites in Crespin, France; Aachen and Siegen, Germany; Bruges, Belgium; and Crewe, United Kingdom will take part in the initial phase of a global industrial site improvement program that will, over time, be rolled out to all manufacturing facilities. This program will focus on reducing inventory levels and production overhead, improving project management and increasing efficiency in site configuration.
Management is also targeting procurement and supplier base as areas offering significant opportunities for cost savings and efficiency improvements. The procurement integration program, launched earlier in 2004, will rationalize the number of suppliers the business utilizes, increase parts standardization, and centralize negotiation processes to achieve economies of scale wherever possible.
Earlier this year, Bombardier announced a new management team and organizational structure Bombardier Transportation. The Industrial Division has been disbanded. Manufacturing facilities and processes will now form part of the respective product divisions, thereby allowing each one to have direct responsibility for marketing, sales and engineering, as well as production.
“This restructuring initiative is part of a three-year strategy to bring back improved margins and profitability to this company,” said Tellier.
“Last April, in the first year, I announced an aggressive action plan that was designed to restructure the balance sheet, restore shareholder confidence, and get Bombardier back to profitability. We have made good on that plan and have met all of our commitments. Now, we are restructuring our businesses. A series of measures were introduced earlier at Bombardier Aerospace, and we are already seeing concrete results. Today's announcement focuses on Bombardier Transportation. The initiatives launched in the fourth quarter of fiscal year 2004 will set the stage for the third phase of our strategy—capitalizing on growth opportunities and maximizing shareholder value next year.”