Bombardier Takes Steps to Maintain Its Leadership in All Core Sectors.

Business Editors

MONTREAL--(BUSINESS WIRE)--Sept. 26, 2001

Bombardier (TSE:BBD.A.) (TSE:BBD.B.) announced today that despite a slowdown in the economy and a difficult period for the commercial airline industry in North America, it will be posting positive operating results for this fiscal year, although inferior to targeted objectives.

However, production levels and, consequently staffing levels, will be adjusted in view of lower demand for new aircraft in the U.S.

"We are keeping a close watch on the situation as it unfolds," explained the president and chief executive officer of Bombardier, Mr. Robert E. Brown during a press conference. "We are striving, through both our decisions and our actions, to protect the Corporation from the shockwaves that are now rocking the markets and to reinforce all our business sectors and, in particular, the financial services sector."

"The diversity of our markets around the world, and of our products and services, is helping us face the storm with calm and resolve, and the future with confidence and determination," added Mr. Brown. "Our backlog, valued at almost $46 billion at the end of last quarter, is well-balanced between our aerospace and transportation groups, and between North America and Europe. We have the necessary resources to face current events, and a management team that has the situation firmly in hand."

Bombardier Aerospace 

With present circumstances leading Bombardier to adopt a cautious attitude, Mr. Brown announced that production levels and deliveries in the aerospace sector are being revised. As for deliveries for this year, a total of approximately 370 business and regional aircraft should be delivered - the same number of aircraft as last year - but down from the 410 aircraft planned. The reduction applies, more or less equally, to regional and business aircraft.

Production rate adjustments also apply to most of the programs. The production of the Canadair 415* amphibian aircraft will be suspended until such time as the order book warrants. As a result of the overall outlook for turboprops, a special charge of $264 million before taxes ($177 million after taxes) related to development costs of the Q400* aircraft, will be posted against third quarter results.

"In spite of these adjustments, our production volumes continue to be impressive and confirm our worldwide leadership in the regional aircraft and business aircraft sectors," said Mr. Brown.

Adjustments to production will compel Bombardier to lay off, before the end of the year, a total of 3,800** employees in its aerospace facilities in Canada, the United States and the United Kingdom. This reduction will affect 5% of Bombardier employees worldwide, or 10% of employees in the aerospace sector, which created over 9,800 jobs in the past 24 months. If the markets do not significantly recover within the next few months, 2,700 other employees could be laid off early next year. Costs resulting from this year's lay-offs should total approximately $45 million before taxes ($30 million after taxes).

"We are saddened to have to take such measures," Mr. Brown said, "but we will do everything we possibly can to create the conditions we need to bring these employees back to work." In fact, the CEO said he is convinced that flying is part of our way of life in North America and that once the inevitable period of adaptation and transition is over, air traffic and growth in the sector will resume.

Bombardier Transportation 

Reviewing Bombardier's other core businesses, Mr. Brown underlined that the transportation group is reporting good news and that the consolidation of Adtranz is going smoothly.

"The growth of our rail transportation business is noticeable," he said. "With a backlog worth over $20 billion, we are the leading supplier of rail transportation equipment in the world, and we are making market breakthroughs practically every month. About 70% of our rail transportation business is in Europe, where the European Commission has just announced investments totalling over 2.2 billion euros in rail transportation infrastructure."

** Montreal: 2,005 employees; Toronto: 650 employees; North Bay: 30 employees; United States: 635 employees; United Kingdom: 480 employees

Following the Adtranz transaction, the manufacturing strategy is being finalized and Bombardier now estimates that a special charge of approximately $180 million before taxes ($126 million after taxes) will have to be posted against results of the fiscal year.

Recreational Products

The recreational products sector is also posting better than expected results.

"We are very satisfied with the performance of this group," said Mr. Brown. "Our product offering has been considerably expanded, which makes us less dependent on seasonal products. With the recent acquisition of the Evinrude* and Johnson* outboard engines, the geographical spread of our markets is truly global now."

Bombardier Capital

The sustained slowdown of the US economy has hit Bombardier's financial services sector the hardest, particularly the manufactured housing and the consumer products financing portfolios, which have both been taking a heavy toll on Bombardier Capital's results. "Despite significant efforts on our part, the state of the US economy, amplified by the September events, made us conclude that there is no alternative but to withdraw completely from these two sectors and concentrate on our core competencies. This measure," concluded Mr. Brown, "will now position Bombardier Capital to contribute positively to the overall performance of the company."

As a result of this decision, Bombardier will be posting a special charge of $663 million before taxes ($394 million after taxes) in fiscal 2001-2002.

Targets

Bombardier is readjusting its targeted earnings per share growth for fiscal 2001-2002. The company is now targeting an earnings per share growth of approximately 15% for the year, before special items, instead of the 30 to 40% range previously targeted. For the next fiscal year, with the information on hand, Bombardier targets a similar level of growth.

"The current situation does not impair either the strength nor the leadership of Bombardier," concluded Mr. Brown. "And we're making sure we are ready to take full advantage of the economic recovery when it comes."

Bombardier Inc., a diversified manufacturing and service company, is a world leading manufacturer of business jets, regional aircraft, rail transportation equipment and motorized recreational products. It is also a provider of financial services and asset management. The Corporation employs 79,000 people in 24 countries in the Americas, Europe and Asia-Pacific and its revenues for the fiscal year ended Jan. 31, 2001 totalled $16.1 billion Cdn.

FORWARD-LOOKING STATEMENTS 

This press release includes "forward-looking statements" that are subject to risks and uncertainties. For information identifying legislative or regulatory, economic, climatic, currency, technological, competitive and other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see Bombardier's Annual Report under the heading Risks and Uncertainties in the Management's Discussion and Analysis section.

* Trademark of Bombardier Inc. or its subsidiaries

Note to Editors: A photo of Mr. Robert E. Brown is available on our Web site at the following address www.bombardier.com as well as via The Canadian Press.