WICHITA, Kansas – Bombardier Inc. announced today the pause of its Learjet 85 business aircraft program resulting in layoffs in 620 layoffs in Wichita.
The company says the pause is due to weak demand for the Learjet 85 aircraft. They add it reflects the continued weakness of the light aircraft category since the economic downturn.
Bombardier will also write down the value of its Learjet 85 program, resulting in a pretax charge of about $1.4 billion.
The world’s third-largest maker of commercial aircraft will also record US$25 million for severance in its first quarter of 2015.
Additionally, Bombardier will reduce its workforce by approximately 1,000 employees at its sites in Querétaro, Mexico, and Wichita. The layoffs will affect 620 workers and will leave about 1,850 workers in Wichita.
“Obviously, if we have work for these workers that do a great job for us, we will call them back. It has to do with the production level of the Lear 70/75. But, I’d like to remind you that most of these 1,000 layoffs or 620 in Wichita are related to the development program, not the production itself,” said Pierre Alary, Bombardier Senior Vice President and Chief Financial Officer.
The company adds that Wichita and Querétaro sites remain critical facilities.
“We are going to monitor the market, of course, and see when it picks up,” Isabelle Rondeau, Director of Communications for Bombardier said. “But it is a pause — we really believe in that aircraft. It has great potential, but, of course, we will wait until we have a market increasing.”
But Richard Aboulafia, an aviation analyst with the Teal Group, called Bombardier’s contention that it was suspending the plane because of market conditions “utter nonsense,” noting that other business jet manufacturers are doing well. Part of the problem is that the Learjet 85 is a composite aircraft, rather than a metal one, and the business jet market does not necessarily reward composites.
Mayor Carl Brewer spoke to the public about the layoffs and he said that the news was “disturbing”. Tim Goodpasture, Office of Urban Development said the city’s agreement does not have anything to do with the Learjet 85 program.
Wichita’s locations serves as the final assembly location for the Learjet 70 and Learjet 75, the Bombardier Flight Test Center as well as a Service Center.
Brewer said that there are many resources in the city, including United Way, that will work to help those who have been laid off and Brewer hopes other local companies in the aviation business will hire them.
Goodpasture said that Learjet promised to create 450 new jobs by 2017 and is still on track to meet the goal, despite the layoffs. The city has a good working relationship with Bombardier and will work together to get through it.
The latest layoffs follow a string of workforce reductions across the company in the past year. In July, Bombardier announced it was cutting 1,800 jobs worldwide as it restructures operations. And in January 2014 Bombardier announced a workforce reduction of about 1,700 employees and contractors at facilities in the United States and Canada, including 550 in Wichita at that time.
In 2012, the city of Wichita agreed to sell industrial revenue bonds and approved tax abatements to help the company diversify and expand, making way for its new Learjet 85. Bombardier’s $52.7 million expansion featured a flight test center, a center for engineering and information technology, as well as new facilities for paint and production flight testing and a new delivery center.
“We are certainly concerned for every job in Wichita, and we are going to work diligently to retain as many as we can,” machinists spokesman Bob Wood said after the layoff announcement. “If the plane starts selling again, then those jobs come back. That is what we bargained for.”
Bombardier finished the day on the Toronto Stock Exchange at $3.09, which is down $1.05, losing more than 25 percent of its value.
Below is a statement from Commerce Secretary Pat George on Learjet’s announcement:
“I am disappointed by this development and hope that the pause in the program is as brief as possible. Commerce stands ready to assist all workers affected by this announcement. We will work with our partners to utilize every available workforce program and service that can help impacted Learjet employees with reemployment.”
The Workforce Alliance of South Central Kansas said that they have plenty of aviation jobs available in Wichita. To search for those jobs, visit www.workforce-ks.com here. United Way also said that those laid off can call 211 to get information on what programs are available for those workers.
FLASHBACK VIDEO | In 1999, Bombardier announced that the “Continental” would be bringing new jobs to Wichita.