> Chief Executive Officer Alain Bellemare said he did not expect the job cuts, which include 1,500 workers in Quebec and 500 in the rest of Canada, would affect the company's talks with the federal government over a $1 billion investment in its CSeries jet program.
"Hey Federal Government, we'd like you to help us out to the tune of a billion dollars, because we're such a big important employer here in Canada... also, we're going to slowly stop being such a big employer"
I don't think this is inconsistent at all. They're laying off mostly people in their rail division, which is based in Germany and doing poorly. They're asking for some government support for the aerospace group, which is based in Canada and doing ok, but facing lots of competition from Airbus and Embraer, which also receive government support.
I wonder why governments subsidize production of commercial airliners so much. There are no network effects or lock-in, so there is nothing to milk after you've gotten big, just more need for subsidies.
And jet fighters etc. are usually made by different manufacturers altogether, except for military freighters.
Er, there are huge network effects and lock-in. Maintenance and type certification mean that pilots and mechanics get locked into your type. That in turn means that airlines tend to try to buy from as few manufacturers as possible, so as they grow they're more likely to buy from the manufacturer they bought from last time.
There are of course self-sufficiency reasons too. If the West put an embargo in place against China for airliners, they'd be SOL. This is why they're trying to hard to make their own planes (and perhaps more importantly, engines).
Bombardier is one of the main anchors around which many major aircraft industry company are located. In turn those suppliers also help explain the Bell Helicopter Textron plant.
I'm thinking of companies like Safran Landing Systems (formerly Messier-Dowty), Pratt-Whitney Canada (one of, if not the, largest producer of turboprops and turboshafts engines), CAE (sims, avionic), Thales (avionic), Héroux-Devtek (landing gears), etc. Plus all the smaller subcontractors.
There is no Minimal Viable Product for commercial airliners. Either they fly with as close to 100% reliability as possible or almost no one will buy them. The cost to an airline of even a single crash is way more than they could ever hope to save by buying from some unknown maker. It's also a massively capital-intensive business.
It isn't impossible that new competitors will emerge but it will be a long difficult road.
The trend has gone the other way though. Companies like Wright, Curtiss, Martin Baker and Vought did complete aircraft but ended up doing subsystems. The aircraft and development projects have grown. The market has matured to a few big players. If you look at the A350 construction videos, you get a little glimpse of the massive investment required just for that part. New technologies like vacuum infused out of autoclave composites might simplify manufacturing a lot though. IIRC Sukhoi Superjet uses them.
Wright got into the business prior to its significant maturation, as I recall.
I suspect you could divide the industry at some arbitrary point and argue signifibant maturity by then. 1950, 60, or 70 depending on whether you're considering manufacturers, technology, or airframes, by and large.
Consolidation does seem to be a very strong trend, and one that may prove difficult to reverse.
National pride.
Looks good to constituents (high paying, high-tech blue collar jobs).
Profit (assuming Boeing eventually pays more in taxes than the value of the subsidies)
"I wonder why governments subsidize production of commercial airliners so much. There are no network effects or lock-in"
Huge lock-in :)
Aircraft manufacturers are all semi-nationalized they are 'too big' even for private capital to compete on - barriers to entry far too high and too much risk.
Airbus is literally an EU creation. Boeing lives on defence contracts.
So it needs 'a national team playing for it' kind of thing.
There are a lot of jobs, it's very long term, it's big money, involves a lot of tech and R&D so it's a good industry to have if you can get it going. But it doesn't get going without playing 'home team'.
>There are a lot of jobs, it's very long term, it's big money, involves a lot of tech and R&D so it's a good industry to have if you can get it going. But it doesn't get going without playing 'home team'.
You don't really have a choice on subsidies if you want a home-grown aerospace industry in the current climate. Other countries subsidize heavily.
In theory we have international agreements preventing such things, but there are a lot of ways to subsidize a company.
The layoffs mentioned here seem to be more related to the rail division than to aircraft manufacturing. The rail division which appears to have a lot of problems.
In 2014, while in college, I did a co-op rotation at the Bombardier Transportation facility in Pittsburgh, PA. The rail division may be based in Germany, but there's a sizable rail engineering contingent in Pittsburgh. I worked with a lot of good people and engineers there--I hope they do alright. Even in 2014 there was grumbling by the engineers about upper management, and I remember attending an "all-hands" meeting where a visiting executive talked of belt-tightening. In a fairly tone-deaf delivery, he spoke of limiting his own business-class international travel.
>In a fairly tone-deaf delivery, he spoke of limiting his own business-class international travel.
I am reliably informed that business travel sucks donkey ass, (almost) regardless of class. It's tone deaf because travel has positive connotations to most people, not because he's out of touch with reality. To a business traveler, economy class is adding insult to injury.
I am reliably informed (by Kayak) that the cheapest direct flight from JFK to Heathrow, one week from today, costs $901 in economy class on British Airways, while the cheapest business class ticket costs $5451 on Virgin Atlantic.
The saying "A fool and his money are soon parted" extends to corporations, too.
Yes and no. I remember back in the day an exec taking a Concorde flight from NYC to London to tell us that if we could all manage to save $5/day, there would be no layoffs... Yeah, he was wrong about that, but he would have gotten loads of airmiles...
I'm the same with my interactions with Bombardier. Every time I've come into contact with them in business, or through networking functions, I've noticed what a good group of people they've been.
It seems like they've been having financial difficulties for the last 10-20 years. It's almost like they are the Radio Shack of trains/plains/snowmobiles.
They have horrible management, which is where the "layoffs" should happen. They have great engineers, skilled craftsmen, workers, etc., but the upper ranks and board of directors are full of patronage and incest.
But since they're a Canadian company and we protect our own, they continue to win contracts because we're too conservative and risk-averse to allow new companies to be formed and let Bombardier lay people off. It's finally happening and I'm glad. It sucks that 7500 people are losing their jobs but they have valuable skills that will be more useful at Bombardier's existing competitors and future, not yet created competitors.
Here's hoping some more competition happens in the Canadian business world because it's woefully uncompetitive and tends towards oligopolies and monopolies.
Having said that, I do hope they pull through. There was a time when someone wanted to purchase their bus/train division. Not sure why they decided not to divest, might have been able to keep those jobs while improving procuct line-up and market reach.
There are hundreds of millions of people in North America. Why do people act like gaining or losing a couple thousand jobs is some kind of earth-shaking development?
I get that losing jobs sucks for the people involved, but sometimes I even see US jobs reports delivered as breaking news in national newspapers. Why?
Because a Fortune Global 500 high-tech company doesn't lay-off 10% of it's workforce very often. When they do it signals an underlying weakness in either the company, sector or economy and is thus newsworthy.
First, 7,500 is more than "a couple thousand", but even a couple thousand jobs has more impact than just the direct impact of "just a couple thousand jobs" -- unemployed people buy a lot less products and services than employed people - and they often need public assistance, so the public burden is even higher - loss of income tax plus welfare payments.
And while many of them will eventually get new jobs, it's going to take some retraining (not a whole lot of demand for train engineers these days), and time.
In the case of aerospace, the jobs are frequently high-skill, high-pay blue-collar. That type of job is quickly disappearing in N. America. So, even though the absolute numbers might be small for any given event, the sum of the losses has a noticeable impact on the economy.
>the sum of the losses has a noticeable impact on the economy
I get what you're saying, but...does it? If I look at global real GDP, we're going along, business as usual.
As the OP says, jobs are gained and lost on a much greater scale, monthly. There's a reason that jobs are being shed at this particular company, and it isn't because we no longer need transportation infrastructure. Bombardier is out, Tesla is in.
Pump the brakes there. The next time you ride the subway or take a commuter flight you won't be riding on a Tesla train car or aircraft. I get that the average HN visitor is enamored with Elon and Tesla, but c'mon now.
It is because people feel close of these kind of news because it can happen to them.
People do not like negative situation that they can visualize easily themselves into it. Losing a job is something that can happen to everyone, has a big impact. That is why it's in the news.
At least people should recognize the symmetry of hiring and firing. At some point, Bombardier hired each of those 7,500 people. Did this make the news? Were there HN posts praising the management for creating those jobs?
Still uselessly vague. Who is affected? How are they affected? How did you determine the effect is exponential as opposed to, say, logarithmic or linear?
There is a lot of value and scale at Bombardier. What is likely to happen is some private equity firm will form a syndicate and purchase the company - cut it into pieces, slash management, remove the fat etc. It will be a 3-5 year process.
Worth highlighting I am not saying this with disdain for the private equity industry. One of its intanigble benefits is that it serves as an agent of dramatic change for companies and industries - change that cannot spontaneously occur for public or government owned institutions (e.g. the post office). Will be interesting to see how this plays out long term...
Because canadians are risk-averse. Hence why only the banks have been continuing to make money; they even invest in each other to keep the risk-averse cycle going.
It's also due to, in the case of the Quebec government, nationalistic sentiment.
It's a difficult balance to strike - keeping and supporting high tech manufacturing, while trying to remain competitive. I think at the moment, the government intervention (blocking suitors and direct investment) is in fact doing more harm than good, but perhaps they know better - I have no knowledge of how competitive the C-Series really is or not.
The liberal party of Québec isn't very nationalistic, it's mostly that they have very deep ties to the Beaudoin family that has inherited Bombardier from their parents without having the competency to manage it. And our government is in the hand of corporations since we still have colonial institutions, so they spend our tax dollars on free loans that will never be paid back.
The canadians who want to invest in risky industries have more incentives to do so south of the border. Most of our population is within 100km of the american border, and it's pretty fucking easy to get a visa if you're about to invest money in the US.
Bombardier is a weird company. It's one of those huge conglomerations that is in multiple lines of business, like some of the Japanese consortiums. This article mentions their aerospace and rail lines, which I wasn't even aware of; their more visible business, as far as I know, is in ATVs, snowmobiles, and jetskis.
The snowmobiles et al aren't part of Bombardier-proper any more, that part of the business was sold-off back in 2003 to focus on the 'core' of transportation systems. They're made by BRP now ( Bombardier Recreational Products, technically, though they can't use the name ) who seem to be doing fine.
Bombardier is a running joke in Northern Ireland, where they bought Short Brothers[0] and shut-down a promising and well-advanced airliner project only to recognise that there was a market niche and launched the CRJ hastily streched from their Challenger business jet. And then a few years later, after selling over 1000 of them, discovered they owed per-hull royalties to Bill Lear ( of Learjet ) who held the rights to the original business jet design...
Every few years they lay-off hundreds of Belfast workers, then receive a big order and hastily recruit agency-supplied contractors who have no idea how to assemble an aeroplane. Guess what.. by the time they're up to speed, it's time for another lay-off because business is soft again.
[0] the industry-preferred partner for Shorts was Fokker, but uk.gov was interfering and preferred Bombardier
I, on the other hand, did not know they made things other than public transport vehicles such as planes and trains.
I'd say anyone who has travelled a modest amount on planes will have flown on one of their planes and most people will have used one of their trains if they've ever been to a large city (one might not realize that this is the case however).
Depends where you live. I don't ride the subway; they're impractical where I live. ATVs or snowmobiles are necessary for reaching many areas of my state not covered by the road system.
I initially thought that the number of bombardier jobs (as in, the guy who drops bombs from a plane) was being reduced by 7500. I was shocked there were that many.
And in a few years expect to read "Bombardier to Cut 7,500 Additional Jobs Through 2023." Such is life in a demand-limited economy, where the more companies cut jobs and pay, the more their profitability and the larger economy suffers, and the more they further cut jobs.
I remember the team I was in at the time being told in 2008 by a senior executive of the large industrial company I was at that the prevailing management consulting view on how to survive a recession was to "cut quickly and cut deep".
He then went on to explain that the management team were surprised at how quickly orders from customers were drying up.
Pointing out that if everyone was cutting quickly and deeply then it's hardly surprising that demand dries up seemed a potential career limiting move so I kept quiet.
Actually it was a very good place to work - lots of extremely smart people, which is probably why I remember the apparent failure (or unwillingness) to make that inference.
That's understandable. There probably isn't much they can do in that situation, it's a textbook prisoners dilemma.
I'm not sure what your experience was like, but I'd rather be told the truth than lied to. I understand that the directors of a company are people too, and they want to be seen as good people. In the long run, I respect people who told me a difficult truth much more than I respect the people who made it seem as if they were forced in to a particular course of action by forces beyond their control.
I suspect the willingness of upper management to explain the need for layoffs as "surprising", or beyond their control, is as much about thinking of themselves as good people. I'm sure they are fully aware they are compensated for their ability to direct the strategy of a company, and the people they are laying off generally had the least ability to change the direction of the company to prevent layoffs. If they were being fully truthful, the management structure should oftentimes be reducing their compensation first and laying themselves off.
That being said, I understand how ridiculous that expectation is. I just think it's insulting to everyone involved when a company fires the people least responsible for the current predicament, and lies while doing it. I'd respect a manager more who told me it was me or them, and they made the best decision for themselves.
laying off 1% of the workforce every 6 months for 2 years is crushing. The good people quit, morale is wretched. layoffs hurt. Usually coworkers are likeable if not friends, and they're suddenly screwed.
I don't know if it's good recession advice, but if a company has to make cuts, it's way way better do a little too much very quickly. It's weird for a month then things start getting back together.
I've never worked anywhere where upper management didn't take 50% pay cuts with layoffs. (i'm sure they were restored in 6 months or whenever the business restabilized). Actually that announcement probably kept a lot of people from just leaving after the layoff.
Maybe they were aware of it. There's still no way a small or even large company can change the dynamics at play. Government can sometimes change things by deficit spending on infrastructure, but that's a tough sell to voters somehow.
> Government can sometimes change things by deficit spending on infrastructure, but that's a tough sell to voters somehow.
Because it is not free market economic activity governed by real demand. It is just government officials deciding to use other peoples money to create demand in certain sectors.
If people in a community pooled their own money together to build a new bridge then you'd have economic activity that is created due to real demand and there would be a real incentive to make sure they are not overpaying or that their money is wasted.
But when the government does it you end up building natural gas filling stations in Afghanistan for millions of dollars servicing a total of 3 cars running on natural gas in that country which on top of that has to be rebuilt multiple times because the Taliban bomb it again and again.
> If people in a community pooled their own money together to build a new bridge then you'd have economic activity that is created due to real demand and there would be a real incentive to make sure they are not overpaying or that their money is wasted.
Isn't people in a community pooling their money together what a government is? Often the increase in property values alone is more than the cost of building the bridge, the difficulty is co-ordinating them.
Ideally yes, but practically it more often than not isn't, especially if it's the federal government that decides.
If governments owning and directing whole economic sectors truly was an efficient way to manage an economy then Socialism (government demand driving the economy) would've beaten Capitalism (private demand driving the economy) easily and by a long shot.
It didn't just fail being more efficient than Capitalism, it even consistently ended up impoverishing and corrupting any nation that tried implementing it.
because there is nothing more permanent than a temporary government solution. Also, see Econ Rap Video to understand that economy wide recessions are typically the work of government monetary policy.
When orders from customers are drying up then you've got to cut jobs while trying to keep the best talent, what else are you going to do?
It's irrational for a corporation, not matter how large it is, to keep all it's employees hoping that it will have such a great impact on the overall economy that it will create demand again.
Companies are always much weaker than global and national economic trends, they have to be reactive. If they are not they usually go out of business which is even worse than cutting some jobs.
Many industries have well defined boom-bust cycles that have little to do with consumer demand. I was at Boeing when their bust was happening during an overall economic boom, so it's even possible for that cycle to be out of sync with the greater economy.
Did their bust occur due to insufficient demand for their products at the time? (or at least projected future demand) It would surprise me if that wasn't the case.
Insufficient demand can happen for many reasons, some of them can be caused by poor decisions within the company, some of them can be caused by the overall economy.
Considering the significant push for high-speed train infrastructure in India (and the fact that train is the main mode of long distance travel for a majority of Indians), I'm also surprised that didn't focus more on India (or maybe they did and it didn't pan out, I don't know).
Bombardier should probably be split up into multiple smaller companies and taken off the public's $$$. I've paid taxes and I'm pretty sure most of my tax dollars are just getting thrown at Bombardier.
Passenger rail is subsidized where it does the most good (mainly the Northeast US) and ignored where it won't.
Rail traffic from CA (or WA or OR) to the east has to deal with this insignificant barrier also known as the Rocky mountain range. Passes through the Rockies are frequently as high as 4000 feet and feature exciting twists and turns. It isn't impassible to rail, but it doesn't lend itself to the type of high speed rail that can compete with air travel.
"Hey Federal Government, we'd like you to help us out to the tune of a billion dollars, because we're such a big important employer here in Canada... also, we're going to slowly stop being such a big employer"