Bombardier layoffs a symptom of Canada’s failure to stay competitive, says expert

Bombardier is eliminating 7,500 workers around the world, with roughly 2,000 positions being cut in Canada. But they’re hiring 3,700 in countries with lower costs. One expert says Canada’s struggle to be competitive in the international marketplace is one reason why.

Of the 2,000 positions being cut, around 1,500 are in Quebec, two-thirds of global positions are in transportation and nearly 2,500 in aerospace. Bombardier said the positions will be eliminated by end of 2018.

READ MORE: Bombardier announces 2,000 job cuts in Canada, 5,500 more worldwide

The company announced earlier in February it plans to cut 7,000 positions by the end of 2017.

“I know these aren’t easy decisions in the short-term but they are the right decisions to ensure the future of the company,” CEO Alain Bellemare said in an interview with The Canadian Press.

Why is Bombardier outsourcing jobs?

Ian Lee, a professor at Carleton University’s Sprott School of Business, said Bombardier’s decision to outsource jobs is a result of Canada’s high unit labour costs — a metric that measures the price of labour per single unit of output.

Canada has the fourth highest in the world, according to the Organisation for Economic Co-operation and Development.

“You can pay high wages, but you have to have really, really high productivity,” Lee said. “We are just not competitive.”

Tweet This Click to share quote on Twitter: "You can pay high wages, but you have to have really, really high productivity," Lee said. "We are just not competitive."

Lee said protectionist policies at all levels of government have made Canadian companies, whether it’s in the airline industry or telecom industry, less competitive.

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“It’s reduced the dynamism of the Canadian economy, it’s reduced our competitiveness,” he said.

WATCH: Bombardier announces more layoffs

0:09 ‘I’m never going to leave the table’: Liberals committed to striking deal with Bombardier

• ‘I’m never going to leave the table’: Liberals committed to striking deal with Bombardier
• Why are Liberals reluctant to invest in Bombardier?
• Bombardier job cuts part of larger company restructuring plan: Innovation Minister
• Bombardier cutting another 7,500 jobs

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Bombardier said the restructuring will include the streamlining of administrative and other non-production related functions.

Meanwhile, the union representing Bombardier workers in Montreal said it can’t keep up with the mounting job losses that have affected the workplace.

“It creates a lousy work environment,” David Chartrand, a spokesperson for the International Association of Machinists and Aerospace Workers, told The Canadian Press.

The Montreal-based plane and train maker said job losses will be offset by more than 3,700 strategic hirings as Bombardier ramps up production of its CSeries commercial jet and new Global 7000 business aircraft, with the jobs being added in low-cost countries that have established higher cost operations.

“It’s the only way that we can protect the thousands of jobs in the industry and at Bombardier,” Bellemare said. “It’s a very competitive industry and it’s important to take the necessary steps to remain competitive in this context.”

Tweet This Click to share quote on Twitter: "It's the only way that we can protect the thousands of jobs in the industry and at Bombardier," Bellemare said. "It's a very competitive industry and it's important to take the necessary steps to remain competitive in this context."

READ MORE: Bombardier lowers 2016 delivery forecast for CSeries to seven aircraft

Karl Moore, professor at the Desautels faculty of management at McGill University, said that Bombardier will have to “suffer some pain” here in Canada as it restructures in an attempt to return to profitability and competitiveness.

“One of the key advantages of being a global firm is that you can relocate your value chain to less expensive countries,” Moore said. “A profitable and successful Bombardier means keeping and even creating jobs here in Canada.”

However, the announcement of the job cuts comes at an awkward time for Bombardier as it is seeking a US$1-billion infusion from the federal government and has already received a US$1-billion investment in the CSeries from the Quebec government.

WATCH: Liberals reject claims ‘inaction’ on Bombardier investment reason for job cuts 

1:50 Liberals reject claims ‘inaction’ on Bombardier investment reason for job cuts

Innovation Minister Navdeep Bains said investment from the Liberals is not a matter of if, but how the infusion of cash will be made.

“I am never going to leave the table,” Bains told reporters in Ottawa. “I’ve made it very clear that this sector is very important, this company is very important but we want to make sure we get the deal done right.”

— With files from The Canadian Press