BUSINESS

Bell Helicopter cutting 300 jobs in Quebec on weaker military, oil sector demand

04/28/2015 03:02 EDT | Updated 08/02/2015 02:59 EDT
MONTREAL - Bell Helicopter is cutting another 300 positions in Quebec as it reduces its global workforce by 1,100 due to weaker military sales and softer demand in the oilpatch.

The company said it had planned to reduce production of the V-22 military helicopter but an anticipated rebound in the commercial helicopter market didn't happen.

While the industry is experiencing weaker commercial orders and deliveries of medium-sized aircraft, Bell also received fewer customer parts purchases and suffered the continued impact of automatic U.S. federal spending cuts known as sequestration.

In an email to employees, Bell Helicopter CEO John Garrison warned of the impact of weaker sales.

"We must take immediate and aggressive measures across the business to bring costs in line with current and projected business requirements and size our organization for our market reality," he said.

The company is reducing production at its Mirabel commercial assembly centre in Quebec as well as at facilities in Texas, Alabama and Mexico. About 700 employees, both management and union, will be affected in Texas.

A voluntary separation program available to all eligible employees in the United States and Canada could reduce the number of layoffs, it said.

The Mirabel facility has already lost about 450 positions in the past year through attrition and retirements without layoffs. The new cuts will reduce staffing to about 1,200, down 38 per cent from a year ago.

Overall, the staff cuts will result in US$40 million to US$50 million in pretax charges.

Despite the challenges, Garrison said Bell won't reduce investments in new product development programs.

Parent company Textron (NYSE:TXT) said Tuesday that its first-quarter profit increased 50 per cent to US$128 million or 46 cents per share despite weaker results at Bell. Overall revenues were up eight per cent to US$3.08 billion.

Bell's operating profits decreased 21 per cent to US$76 million in the quarter, but were more than offset by improvements in other Textron manufacturing segments, allowing it to maintain full-year earnings guidance.

Bell's backlog was US$5.3 billion, down US$237 million from the fourth quarter. It included an order for seven 412 helicopters from the Canadian Coast Guard, with delivery expected to begin in 2016.

Analyst Robert Stallard of RBC Capital Markets said Bell's civil business is being hit by lower demand in the oil and gas sector.

"Although the Bell civil slowdown is hardly welcome, Texton has moved quickly to mitigate the issue and take out cost," he wrote in a report, adding that the improved U.S. economy is helping its business jet operations.

Textron chairman and CEO Scott Donnelly told analysts that the 80-year-old company will weather this latest downturn.

"So while we continue to see lingering weakness the medium helicopter segment, we believe the growth outlook at Bell over the next several years remains strong, driven by our expanded global commercial sales efforts, recent commercial product upgrades, new commercial products on the way and foreign military opportunities."

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