January 13, 2016 - 10:38 AM
MONTREAL - Bombardier is looking to reap higher profits by reselling US$1.75 billion worth of business jets whose orders were cancelled as part of an overhaul of its global sales efforts.
The Montreal-based planemaker said Wednesday that the firm orders for 24 mainly larger planes and options to purchase 30 others were cancelled after it initiated a restructuring of sales agreements with some unidentified customers.
The company also announced Wednesday that it will directly sell the Challenger and Global business jets to customers in the Middle East and North Africa after ending a nearly 40-year sales and distribution relationship with TAG Aeronautics.
The work will be fully integrated into Bombardier's five-member sales team based in the Middle East.
Together, the strategic changes will result in a US$278-million pre-tax charge, about half of it non-cash, in the fourth quarter, the company said.
"These are Bombardier-led decisions and a Bombardier-led strategy to fundamentally change how we sell and produce business aircraft to make sure that we increase our profitability by 2020," spokesman Mark Masluch said in an interview.
Division president David Coleal added in a news release that Bombardier's sales team was "well equipped to increase our position in the marketplace."
"Ultimately, we expect our current industry-leading backlog to become even stronger," he said.
Bombardier (TSX:BBD.B) vowed in November to make strategic changes to deliver a financial turnaround by 2020.
It expects overall revenues will grow five to six per cent annually to exceed US$25 billion by 2020, with earning margins more than doubling to between seven and eight per cent.
Bombardier has been making adjustments as its financial position has been strained by the over budget and delayed CSeries commercial jet program. It has also cut about 1,750 jobs due to a slowdown in the production of Global aircraft and cancelled its Learjet 85 program.
News from © The Canadian Press, 2016