CGI to cut 1,000 jobs

Approximately 1,000 CGI employees primarily from the Company’s Montral and Toronto locations, will lose their jobs this year as a result of the lower than expected business from Bell Canada.
CGI reports that more than half of the job cuts are related to the low BCE work volumes and adds that the remaining losses stem from other cost adjustments including reductions in global and corporate functions.
Effective immediately, CGI says, is the elimination of 500 positions. CGI says the remaining cuts will be completed by the end of the year.
In addition, the technology services company says the acceleration and expansion of its ‘Global Delivery Model’ will partially offset the headcount reductions by creating about 400 new jobs throughout its network of ‘Centres of Excellence.’
CGI says it will accelerate the expansion of its ‘Global Delivery Model,’ creating some 400 new jobs throughout its network of ‘Centres of Excellence.’ This will include more than 200 jobs related to the BCE account moving to Atlantic Canada, of which 150 positions will be located at a new ‘Centre of Excellence’ to be established in PEI.
“Spurred by lower than expected revenue and associated margin pressures from BCE in our second quarter, we are taking measures to reduce the overall cost structure and accelerate our strategy to further leverage our global delivery, which favors a mix of nearshore options with offshore capabilities,” president and CEO, Michael E. Roach says.
Roach continues to explain that regardless of lower than expected revenue from BCE, CGI’s business is stable. “Our financial situation remains healthy, with the balance sheet and cash flows to support profitable growth associated with our Buy and Build strategy,” Roach says. “The successful implementation of this plan will further strengthen our financial performance.”
CGI’s second quarter revenue from BCE is now expected to be significantly lower than anticipated on a sequential basis, decreasing at a rate necessitating an immediate workforce reduction.
The Company’s BCE revenue is currently tracking slightly below the 2006 minimum guaranteed business levels on an annualized run rate basis. However, CGI says it remains confident that, based on the amending agreement pertaining to various existing commercial agreements between the parties, revenue from BCE will ramp up towards the minimum guaranteed business levels as the year progresses.
The amending agreement related to existing commercial contracts between BCE and CGI were announced in Dec. 2005. These contracts extended CGI’s contract with BCE from June 2012 to June 2016. Highlights of the amending agreement include:
* CGI’s Q1 FY2006: guaranteed minimum business levels of Cdn$120 million.
* 2006: guaranteed minimum business levels of Cdn$400 million parties committed to negotiate in good faith to identify and incorporate additional work. The parties’ expectations are that this negotiation would generate additional work and associated revenue for CGI.
* 2006: Beyond 100 positions, the parties will share in severance costs, with BCE’s maximum contribution capped at $10 million.
* 2007 & 2008: guaranteed minimum business levels of Cdn$425 million.
* 2006-2008: Failure to meet the minimum business levels would result in the payment by BCE to CGI of 13.25% of the shortfall.
* 2009-2016: BCE and CGI will work cooperatively and in good faith with the objective of maintaining CGI’s portion of BCE’s IT spend (as defined in the agreements) at not less than 30% for each of these years.
* BCE to encourage use of CGI as an IS/IT service provider for any acquired business.
CGI says it will continue to attempt to redeploy affected employees. Individuals currently occupying positions that will be eliminated will receive financial assistance and be given access to outplacement services.
“I am saddened that, unfortunately, some CGI members will lose their jobs and I wish to thank them for their contribution to the Company,” Roach says.