Leading in unprecedented times

Dear colleagues,

This morning, we published our Q1 2020 results and hosted a call with investors and analysts. During the call, John Di Bert, Senior Vice President and Chief Financial Officer, and I provided an update on how the COVID-19 pandemic has impacted our business and the steps we’re taking to navigate through this crisis. I also shared my initial impressions and focus areas since rejoining Bombardier last month and highlighted the six priorities we’re focused on for the next 12 months. 

Here are the key messages from our call:   

First 30 days back at Bombardier: My initial impressions

While much has changed in the five years that I’ve been away, Bombardier remains a company defined by its industry-leading product portfolio and by thousands of smart, passionate and thoughtful employees who want to be part of a winning team. 

Since re-joining Bombardier, my primary focus has been on managing the business through the crisis. This includes daily leadership calls, an intense focus on managing costs and cashflows, as well as regular communications with employees, customers and key suppliers, confirming orders and resetting delivery schedules as we deal with the current reality.

I’ve also been immersing myself in all aspects of the business, deep diving into our major aviation programs and largest rail projects to better understand the risks, challenges and opportunities. 

And while the COVID-19 related travel restrictions and shutdowns have limited my ability to visit our operations, I’ve also had the opportunity to virtually meet with top leaders across the business and to set clear priorities for both the immediate and near-term future.

First among these priorities is continuing to proactively manage our businesses through the COVID-19 crisis to ensure our company’s long-term sustainability.                      

Managing our business through the crisis

As you know, when the crisis began to unfold, we acted swiftly to protect the health and safety of our employees, support government mandates to slow the spread of the virus and service our customers to the best of our ability. We also managed our operations to reduce costs and preserve cash and ensure sufficient liquidity to operate our business as we complete the ongoing divestitures necessary to address our balance sheet.

We are also negotiating a new $386 million equity injection from CDPQ in Transportation, providing additional flexibility as we manage through the crisis and reset our delivery schedules at BT. And, we continue to have ongoing dialogue with governments where we have major operations regarding additional support programs, should they be necessary to navigate through an extended crisis. 

Update on divestitures

Another priority for us is to complete the aerospace divestitures currently underway and supporting the regulatory approval and completion of the sale of Bombardier Transportation to Alstom to address our balance sheet challenges.

We expect the CRJ sale to MHI to close on June 1st. The Aerostructures sale to Spirit remains on track to close in the next couple of months. Collectively, these transactions will improve our cash position by over $1 billion when completed. They’ll also mark the completion of Bombardier’s exit from – and exposure to – the commercial aerospace market.

We also continue to make progress working with Alstom to complete the sale of our Transportation business. Our leadership and planning teams have remained in constant contact throughout the crisis and we currently don’t expect any delays to the original timeline as a result of the COVID-19 pandemic.

Financial impact of COVID-19

The pandemic will have a material impact on our financial performance and cash consumption. We saw a significant impact in Q1, with more to come in Q2, as a large part of our operations have been shut down for the past eight weeks and many international borders remain closed.

For the first quarter, the cash impact is estimated to be between $600 and $800 million. This reflects our inability to deliver aircraft following the government-imposed travel restrictions and border closings, production shut-downs at a number of our major manufacturing sites and lower than anticipated order intake at both Transportation and Aviation.

It’s clear that a new reality is upon us and it’s critical that we embrace this new reality very quickly. We’ll need to change how we operate, how we lead and how we move forward. That’s exactly what we’re doing to achieve a number of our priorities, including aligning Aviation’s production with the new market demand and making Transportation more predictable and consistent in its performance.                        

Resumption of operations 

From an operations perspective, we’re beginning the process of gradually resuming manufacturing activities at both Aviation and Transportation. 

As we do, our number one priority is the health and safety of our employees and communities. I’d like to take this opportunity to recognize and thank our site leaders and team members working around the clock to ensure that we have the right procedures and safeguards in place to protect the well-being of our employees around the world. 

Resuming operations is a tremendous undertaking. It involves restarting operations at dozens of facilities around the world, recalling thousands of furloughed employees, restoring disrupted supply chains and resetting delivery schedules with customers. We expect this process will occur over the remainder of the quarter, and it’ll likely generate some challenges along the way.

One thing I shared in my message to you last week and that I want to stress again: when it comes to restarting our operations and protecting the health and safety of our people, we need every single one of us to follow our protocols to the letter. There’s absolutely no room for compromise on this. I’m counting on all of you, and your colleagues are counting on you, too, to keep them safe.

Given the uncertainty ahead, we’ll continue to manage costs, defer capital expenditures and ensure that our production rates align with the current market demand and our customers’ ability to accept deliveries. Based on our current assessment and timeline for a gradual resumption and stabilization of operations, we expect business activity to hit a low point in the second quarter, before gradually recovering in the second half of the year. 

Thank you

I want to conclude this update by recognizing that these are very unusual and challenging times for all of us. I hope that you and your families are all doing well and remain safe.

I also want to acknowledge how impressed I’ve been with the commitment our employees have shown to one and other, to serving our customers and to supporting our communities during these challenging times. I thank you for your great work and positive attitudes in the face of adversity, as well as for the warmth and support you’ve greeted me with.

While the current environment is indeed very challenging, I’m optimistic about our future and excited to be leading a company with such a strong product portfolio and so many great people. 

I look forward to connecting with you again in the near future.

éric