Bombardier misses the train on Montreal light-rail project
Company’s largest shareholder Caisse chooses rival’s bid for major contract
(The decision is) something that will cause them sales grief around the world for a while to come.
Bombardier Inc. may have won a significant trade battle in the United States last month, but on Thursday it was shut out of a $6.3-billion light-rail transit project in its own backyard — and by its largest shareholder.
The Caisse de dépôt et placement du Québec announced on Thursday that it had selected a bid by SNC-Lavalin and France’s Alstom to provide rolling stock, systems, operation and maintenance for a major Montreal infrastructure project, a contract worth more than $1 billion.
The Caisse said construction of the Réseau express métropolitain (REM), an expansive transit network connecting Montreal with its suburbs and international airport, will begin in April.
Karl Moore, a professor at McGill University’s Desautels Faculty of Management, said Bombardier’s failure to win the contract from the Caisse, which owns a 30-per-cent stake in the company’s transportation division, could appear as a negative to companies and countries outside of Canada.
“The optics that you can’t even get your own government, who partly owns you through the Caisse, to buy your product, it’s something that will cause them sales grief around the world for a while to come,” Moore said.
“Montreal was one of their very first transportation customers. It’s pretty disappointing from that viewpoint as well.”
Benoît Brossoit, Bombardier Transportation’s president of Americas region, in a news release said “we understand and share the disappointment our employees have about this announcement.”
“Bombardier has been providing innovative transportation solutions in Québec and elsewhere in Canada for close to 45 years,” he said. “As world leader in the supply of automated transportation systems and services, and operation of public transit fleets, we believe that the offer we submitted was both very competitive and ideally suited to meet the sustainable mobility needs of the greater Montréal area.”
Bombardier said it would not be making any further comment at this time because of procurement process rules.
Quebec Premier Philippe Couillard struck a reassuring tone for Bombardier Transportation, which has a manufacturing facility based in La Pocatiere, Que., saying there will be other contracts for the company in the future.
“There will be (subway) expansions; there may be lines of different colours,” he said. “There is lots of work awaiting the people of Bombardier.”
This is not the first time in recent months that Bombardier has lost out on a major transportation bid. In August, the company was shut out of a $3.2-billion contract to supply 1,695 subway cars for New York City’s Metropolitan Transit Authority because of cost overruns and delays. Bombardier was nearly two years late in delivering 300 subway cars for a previous project on New York’s subway system.
In an internal memo obtained by the Journal de Montréal in August, Brossoit was quoted as saying that “our poor performance and serious delays ... sealed the fate of our bid. Our actions exacerbated an already difficult transit situation in New York, and our client’s decision shows that the market is no longer disposed to accept delays in performance and to submit to the consequence of our actions.”
In Toronto, the company has missed several delivery targets for the Toronto Transit Commission’s streetcar order and an order by regional transportation agency Metrolinx for new railcars. Metrolinx had tried to terminate its $770-million contract for 182 light-rail vehicles with Bombardier, citing “significant quality and manufacturing issues.” The two parties eventually struck a deal that saw Metrolinx reduce its order by more than half.
While Moore said Bombardier has made improvements when it comes to delivering its products on-schedule, its recent history of missing significant deadlines may have played a role in the Caisse’s decision to pick Alstom.
“I think they are getting better at it, but they’ve had a couple of major failures that may have factored into the decision,” he said.
Benoit Poirier, an analyst with Desjardins Capital Markets, said in a note to clients that the announcement will bring momentum to SNC-Lavalin shares, which had been down 10 per cent from their 52-week high. Shares of SNC-Lavalin were up as much as 1.7 per cent on Thursday. Meanwhile, Bombardier’s stock slid two per cent to $3.20.