Bombardier’s New Jersey Transit Win Softens ‘Astonishing’ Blow in Canada
Bombardier Inc. got a split decision in its accelerated push for rail contracts, scoring a victory in New Jersey and a home-turf loss the company called “astonishing.”
The Montreal-based manufacturer won a $669.1 million deal Dec. 12 to supply railcars for New Jersey Transit, a project with the potential to balloon to $3.6 billion based on options for additional equipment. That took some of the sting out of losing a $1 billion pact to provide locomotives and passenger cars to Canada’s Via Rail, which awarded the business to Siemens AG.
Bombardier is trying to overcome recent stumbles on high-profile rail projects as CEO Alain Bellemare bets the company’s future on train equipment and private jets while stepping back from commercial aircraft. Bombardier has been plagued by missed deadlines in a Toronto light-rail project and was blocked last year from bidding on a New York subway-car contract because of past delays.
The company’s Class B shares climbed 4.3% to C$2.30 at 2:13 p.m. in Toronto amid a broad market rally. Siemens climbed 1.6% to 99.51 euros at the close in Frankfurt.
On-Time Focus
The New Jersey Transit deal still must be finalized, Bombardier said. The rail operator will decide later whether it needs more equipment.
In Canada, government-owned Via Rail said on-time delivery was a key reason for its decision to choose Siemens for a C$989 million ($740 million) supply contract and a 15-year maintenance pact valued at C$356 million. The trains will be manufactured at a Siemens plant in Sacramento, Calif.
“Via Rail is happy to partner with one of the global leaders in the rail industry, a company recognized for its innovation and its engineering,’’ CEO Yves Desjardins-Siciliano told reporters Dec. 12. The new train sets “will substantially improve the customer experience for our millions of passengers currently and those to come, offering more comfort, bike storage” and greater accessibility.
VIA Rail selects Siemens Canada to replace its new Québec-Windsor corridor fleet. Thanks @Canada for this historic investment. https://t.co/4Mu0ZU5s4K pic.twitter.com/ow3LJp6rKv — VIA_Rail (@VIA_Rail) December 12, 2018
Deliveries for testing will begin in 2021, with passenger service scheduled to begin in 2022, Via Rail and Siemens said. Via Rail’s passenger traffic has increased by more than 30% since 2014, the CEO said.
‘Extremely Disappointed’
Bombardier said it was “extremely disappointed” in the outcome.
“It is astonishing that a call for tenders for trains which will pass through Canada’s national capital and Quebec’s provincial capital has not been subject to measures which would ensure maximum local benefits and the use of Canadian high technology, in accordance with Canada’s international obligations,” the company said in a statement.
The loss was Bombardier’s second major setback in Canada this year. In February, Caisse de Depot et Placement du Quebec, Canada’s No. 2 pension-fund manager and owner of a minority stake in Bombardier’s rail unit, picked France’s Alstom SA to make trains for a C$6.3 billion automated system in Montreal.
Via Rail said it worked with an independent supervisor to ensure the bidding process was equitable. The Siemens order includes 32 bi-directional train sets and options for an additional 16, he said.
Aging Fleet
The passenger carrier announced a request for bids in April as it sought to modernize its fleet. It had specified 9,100 passenger seats as well as an unspecified number of fuel-efficient diesel engines — with the option to operate on electrified rail infrastructure.
Via Rail operates one of the oldest passenger fleets in North America, with an average age of 35 years, Desjardins-Siciliano told reporters in Montreal. Via Rail is planning to gradually retire its existing trains over the next five years, he said.
Besides Munich-based Siemens and Bombardier, Talgo of Spain also bid for the contract, Desjardins-Siciliano said.
Via Rail can’t demand a minimum percentage of Canadian content because it is governed by international free trade agreements, he said. But Siemens rail executive Michael Cahill said more than 20% of supply and services connected with the order will come from Canadian companies.
— With assistance from Tony Robinson
