BUSINESS
09/20/2011 08:57 EDT | Updated 11/20/2011 05:12 EST

Bombardier to reduce CRJ aircraft production starting in January 2012

MONTREAL - Bombardier plans to reduce production of its marquee CRJ commercial regional aircraft starting in January due to a shortage of new orders, but doesn't plan to slash jobs as part of the move, the company said Tuesday.

The world's third-largest aircraft manufacturer announced the decision Tuesday in an effort to sync manufacturing with weakened market demand.

The CRJ is a family of passenger jets with 60 to 100 seats capable of medium-haul flights.

"Although several sales campaigns for our CRJ aircraft are making progress and the long-term prospects for the CRJ program remain positive, the reduced pace of orders has made a review of our production plans necessary," Bombardier Aerospace president and CEO Guy Hachey said in a release.

"For these reasons and after careful consideration, a CRJ aircraft production decrease is warranted in the short term."

Bombardier (TSX:BBD.B) said the changes affect 350 of the 1,200 employees who work on the CRJ program in Mirabel, Que., north of Montreal.

These employees will be shifted to other Bombardier aircraft programs or ones in development in the Montreal area, including the CSeries that will be assembled in Mirabel.

Bombardier is also looking for help at its Global business jet completion centre in Montreal. Its other programs under development include the Learjet 85, and Global 7000 and 8000 large business jets.

The move doesn't affect Toronto production of the Q400 turboprop commercial airliners, which was already reduced because of lower orders.

Any production rate changes will have a "corresponding impact" on Bombardier's supplier base but details weren't immediately available, spokesman John Arnone said Tuesday.

Bombardier won't specify how much production will decrease or how long the decrease will last.

Its order backlog for the planes was 61 at the end of the second quarter or 15 months of production, compared to its target of 18 to 21 months. Orders were down from 70 in the prior period.

The company is maintaining its guidance for commercial aircraft deliveries at about 90 planes for 2011 and will provide its forecast for 2012 later in the year.

Analysts estimate CRJ deliveries will decrease by 11 per cent next year.

Michael Willemse of CIBC World Markets said investors will likely be disappointed by the CRJ production cut which was expected due to continued weakness in commercial aircraft orders.

"Given ultimate replacement needs at Bombardier's traditional customer base, we expect commercial aircraft shipments at Bombardier Aerospace to eventually rebound back to the 90-100 level over the next few years," he wrote in a report.

The Montreal-based company signalled a few weeks ago that it would likely reduce production of regional jets in the fall. The announcement appears to have been pushed up because the slow global economic recovery has hampered the success of several sales campaigns.

"It's always a wait-and-see approach to the determination of sustainable production rates and it appears obvious that the current market conditions and a slower than expected world-wide economic recovery give us pause to reconsider production rates," Arnone added.

On the Toronto Stock Exchange, Bombardier shares were unchanged at $4.24 in morning trading.