New Flyer laying off 320 staff

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This article was published 18/08/2009 (6044 days ago), so information in it may no longer be current.

New Flyer Industries, one of the cornerstones of Manitoba’s surprisingly resilient manufacturing industry, said it will lay off 320 people to compensate for the deferral of a large order.

The cuts will include 130 unionized workers at New Flyer’s main factory and headquarters in Winnipeg and another 140 from its plants in Crookston and St. Cloud, Minn. Another 50 salaried employees will be let go, the majority of whom will come from the Winnipeg workforce.

The announcement comes about two weeks after the company disclosed that a large U.S. customer — rumoured to be the Chicago Transit Authority — was forced to defer an order for 140 diesel-electric hybrid articulated buses (equivalent to 280 bus units) worth about $122 million. Production on that order was to have started during the last week of July.

With that large order pulled from the production line, company officials said at the time it will mean the production rate would decline by close to 30 per cent from 50 bus units to 36 per week.

Company officials said efforts were underway to try to bring other work from its $4-billion order backlog more quickly into production.

Tom Murphy, a business agent for the Canadian Auto Workers union who represent the unionized workers in Winnipeg, said about 30 to 40 people at a time will get layoff notices periodically between now and the end of the year.

“The company is still trying to bring work up into the schedule and if something happens then they will bring people back to work quicker,” Murphy said. In addition to the layoffs, the company also announced on Monday that it will shut down all three of its production facilities for two weeks (or six production days) at the end of the year.

The layoff announcement was included in the company’s second-quarter financial results released Monday afternoon.

Revenue for the period ending July 5, 2009 was up five per cent from last year to $273.5 million, but the actual delivery of bus units for the quarter was down slightly from the year before — from 586 to 558.

The company posted a $14.7-million loss for the quarter, compared to a $10.7-million loss last year as a result of the depreciation of the value of the Canadian dollar as well as other non-cash charges.

The deferred order that had to be taken out of the production schedule was due to the unavailability of state funding for the customer in question.

New Flyer officials said there was no indication that any other customers would be hit with the same funding problems.

Company officials said they continue to project that production levels for 2009 will be in line with 2008 levels. However, prior to the order deferral, expectations were that production would increase this year.

And the production-rate slowdown has scared off investors. New Flyer units fell close to six per cent yesterday, or 51 cents, to $8.18.

The units are down from the $10 level before the order deferral was announced on July 30.

Two weeks ago Peter Sklar, an analyst with BMO Capital Markets, reduced his forecast earnings for the year and lowered his target price on New Flyer units from $10.50 to $9.

“We note that this development (the contract deferral) follows on a series of other issues that New Flyer has experienced over the last 12 to 18 months that has caused quarterly EBITDA (earnings before interest, taxes, depreciation and amortization) to consistently fall below expectation, notwithstanding the significant increase in the company’s build rate,” Sklar wrote at the time.

martin.cash@freepress.mb.ca