Navigating through the COVID crisis while setting the foundation for long-term success

Dear colleagues,

This morning, we published our Q2 2020 results and hosted a call with investors and analysts. During the call, I highlighted the tremendous work our employees around the world are doing to help us successfully manage through the COVID-19 crisis and protect Bombardier’s long-term future. 

I also explained that we begin the second half of the year with our global operations safely and successfully resumed and our production rates and workforce realigned to current market conditions and customer requirements. We’ve also improved our liquidity position with solid cash management and a new secured credit facility, providing additional flexibility as we work to address our balance sheet challenges and close the sale of Bombardier Transportation and our aerostructure business.

While we are cautiously optimistic about some of the early positive trends we are seeing in our industries, we expect the next few quarters will be challenging and difficult to predict. During this uncertain period, we must continue to focus on the things that our within our control: protecting our people, serving our customers to the best of our ability and achieving our six near-term priorities.

Thank you

When I came back to Bombardier at the beginning of April, I certainly didn’t expect my first quarter to be so challenging, with the COVID-19 pandemic affecting nearly every aspect of our operations, our end markets and our financial performance. The first half of 2020 also marked a number of historic lows for our industries, including the sharpest decline in passenger rail traffic ever and business jet usage falling to levels far worse than during the financial crisis or after 9/11.

During this time, our number one priority was, and is, the health and safety of our employees. I am extremely proud of how our team responded and I want to thank our employees around the globe for their support and dedication to the company, to each other and to our customers.

I also want to highlight how quickly you’ve embraced the six near-term priorities that I set when I started. I am seeing signs of change throughout our organization and I appreciate the ongoing, open and transparent dialog occurring. I am confident that, together, we will continue to make strides towards achieving these critical objectives.

Managing our business through the crisis

We made significant progress on our first priority of proactively managing the business through the pandemic to secure our long-term sustainability. This included taking swift actions to reduce costs and preserve cash as our operations were temporarily shut down. We also aligned our operations with new market conditions and customer requirements by resetting our production rates. Today, we’re operating at our targeted rates – in all, 51 of our manufacturing sites and across our service centre network.

As we see some early signs of stabilization across the industries, we’re focused with cautious optimism. Our significantly better than expected cash usage in the second quarter, combined with our new billion-dollar credit facility, provide us with additional flexibility, allowing us to continue to execute on our priorities during the ongoing pandemic.

Making our rail business more predictable

Making our rail business more predictable remains a top priority, and the additional write-downs we had to take in the second quarter highlight the urgency of achieving this goal. 

As I conduct my own deep-dive reviews of our large legacy projects, it’s clear that we became a build-and-retrofit operation – either because of late issue identification; a lack of clear accountability or because we cut engineering resources too deeply in certain areas to meet misguided headcount targets.  As a result, we incurred significant cost overruns and customer penalties. 

Going forward, we need to continue to address the remaining challenges in our legacy projects while also making the right structural changes for the future. This includes going back to the basics and ensuring we have the right project management tools and processes in place to proactively manage the business. Our goal is clear – eliminate rework and build trains right the first time to fully leverage past investments and unlock the value of BT’s backlog.

Aligning our aviation business to current market conditions

During the second quarter, we successfully resumed all Aviation operations and were able to deliver 20 aircraft, including 5 Global 7500s, exceeding expectations. We also took the difficult step of announcing a workforce adjustment to realign our production to the current COVID-impacted market conditions.

Today, we still see 2020 business jet deliveries industry-wide down approximately 30% to 35% year-over-year. Longer-term, the emerging trends are encouraging. Business jet traffic is recovering at a much faster rate than commercial traffic. Pre-owned inventory levels remain healthy. Cancellations are very limited. And, new interest in private air travel is generating sales activity.

From an aftermarket perspective, our service centres remain full and are operating at normal capacity. Longer-term, we remain committed to pursuing aftermarket growth opportunities as we complete our transition to a pure-play business jet company and expect higher business jet utilization rates due to new demands for private air travel.

Divestitures update

We continue to make steady progress on our fifth priority of completing the aerospace divestitures currently underway and supporting the regulatory approval and completion of the sale of Bombardier Transportation to Alstom.

In the second quarter, we closed the sale of the CRJ program to MHI as expected. We also expect the sale of our aerostructure business to Spirit to close later this fall. Last week, we achieved a significant milestone when the European Commission provided conditional approval of the sale of BT to Alstom, clearing one of the biggest regulatory hurdles. We continue to work together to obtain the remaining approvals and to complete the Work Councils consultations required before executing the definitive sales agreement.

Building a winning and inclusive culture

Our final near-term priority involves defining a clear vision for the future and building a winning culture; a culture that is above all, people centric.

Given the conversations happening around the world on the need to confront systemic racism, it’s appropriate to use this opportunity to reaffirm our commitment to diversity, inclusion and equality as an integral part of Bombardier’s culture.

Let me be clear. Fully embracing these principles - diversity, inclusion and treating all our employees with the utmost respect - are requirements for working at Bombardier. 

We will also intensify our focus on recruiting and developing a more diverse workforce. We will further invest in creating a workplace environment where all employees feel supported, respected and included. And, we will continue to evolve our community relations programs and partnerships to promote greater opportunities for all.

This is an area where I am personally committed. And, in my new position I will ensure that we put this commitment into action. 

Again, I want to thank all of our employees for their support and dedication to the company, to each other and to our customers during this extremely challenging period. I’m confident that we are focused on the right objectives and, together, we will set the foundation for our long-term and sustainable success. 

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