Bombardier Inc. plans to cut production of its flagship CRJ regional jet, a move that points to slowing demand in a rocky global market, but also larger strategic issues besetting the aerospace giant.
The Montreal-based train and plane manufacturer said Tuesday it will reduce output of its CRJ commercial jets as it struggles to cope with a dearth of new orders for its workhorse plane in the 70- to 100-seat category.
The decision to slow CRJ production comes as Brazilian rival Embraer SA enjoys robust regional jet sales. Bombardier's regional jet order backlog at the end of the second quarter stood at 61, compared with 261 for Embraer.
Bombardier, which is credited with creating and then dominating the regional jet market starting in the 1990s, has fallen behind Embraer in cracking new emerging markets and in the larger-plane segment that has evolved to meet shifting demand from airlines.
"This plane should be selling better than it is," even in a global downturn, said Richard Aboulafia, vice-president of analysis for Teal Group Corp.
Bombardier Aerospace spokesman John Arnone said that while orders for the CRJ are "soft," long-term prospects for the company's regional jet program are positive. "Things will get better," he said.
The production cuts will affect about 350 employees who work on the CRJ program in Mirabel, Que., north of Montreal. They will be transferred to other current or in-development programs.
Bombardier, which warned a few weeks ago it might have to cut CRJ production if new sales failed to materialize, said Tuesday that the CRJ production cuts will come in January but did not specify by how much output will fall or how long it expects the slowdown to last.
Meanwhile, the outlook has darkened for Bombardier's all-new C Series narrow-body jet that will compete directly with giants Boeing Co. and Airbus SAS.
Airlines have taken a "wait and see" approach to the new, unproven plane, threatening the company's target of getting 300 orders by 2013, a recent RBC Dominion Securities survey of 26 global carriers says.
Bombardier has so far won firm orders for 133 planes, 119 options and 10 purchase rights for the C Series, scheduled to enter service in 2013.