Awkward Moment for Bombardier, Inc.
Bombardier, Inc. (TSE:BBD.B) is seeking to outsource hundreds of Canadian jobs, even as the struggling aerospace manufacturer seeks a billion-dollar bailout from Canada’s federal government.
According to The Globe and Mail, the transport giant wants to shift component assembly for its Ontario-built “Q400” turboprops to facilities in Mexico and China. Sources close to the matter say this move would eliminate approximately 200 jobs in Toronto, where those parts are assembled now. (Source: “Bombardier still aims to outsource jobs as it seeks bailout from Ottawa,” The Globe and Mail, March 21, 2016.)
Workers at the Toronto plant rejected a similar proposal last year. However, management has not dropped the idea; executives are still pushing to cut costs by exploiting cheaper labor costs overseas.
Such a move could be a problem for Prime Minister Justin Trudeau. Bombardier has asked for a US$1.0-billion investment from the federal government. Such a move, the management argues, could give the company time to return to profitability and save thousands of good-paying manufacturing jobs.
Outsourcing throws a wrench in that argument. Bombardier has found itself at the center of a heated debate on the merits of a public handout. If taxpayer funds are used to build manufacturing facilities abroad, it could put bailout talks in jeopardy.
While the optics look bad, Bombardier has already subcontracted much of its aircraft parts production overseas. The company has sourced most of its components for the Q400 from China since 2006. Management has also ramped up output at its aerospace plant north of Mexico City, which produces much of the electrical components for the company’s business and commercial aircraft.
Bombardier stock investors will have to carefully watch unfolding labor talks. The company needs union approval before shifting any production overseas. About 70% of workers rejected the outsourcing proposal last October. However, the entire Q400 program and more than 1,000 jobs, management warns, could be at risk if costs are not reduced.