Bombardier reputation takes hit after Metrolinx threatens to cancel deal

Ontario's regional transportation agency has not received a prototype on deadline from struggling firm Bombardier



MONTREAL – Bombardier is facing another blow to its reputation after one of its largest Canadian rail customers threatened to cancel a contract over continued delays in delivering a prototype train in Toronto.

Ontario’s regional transportation agency Metrolinx is ramping up pressure on Bombardier by issuing a formal notice of intent in the past week to terminate its $770-million contract after the company missed a commitment to deliver a prototype by the end of October.

No new date has been disclosed but transit officials are at the manufacturing facility in Thunder Bay, Ont., to inspect progress on the pilot vehicle.

Metrolinx said it may not ultimately cancel the contract but is taking the required steps should it ultimately ask a court to rip up the deal.

“We have taken the next step available to us through our contract,” said spokeswoman Anne Marie Aikins. “We will continue to work with Bombardier on this issue and we will deliver on our transit commitments.”

The vehicles from the contract signed in 2010 are to be used on various LRT lines in Toronto, including the $5.3-billion Eglinton Crosstown, that is slated to open in 2021.

Bombardier said the focus on the pilot vehicle has been “blown out of proportion.”

“Bombardier is in no way in default of its contractual obligations in this project. We have a contract to deliver and supply 182 cars and that is what we are going to do,” spokesman Marc-Andre Lefebvre said in an interview.

Bombardier has acknowledged that its performance has been disappointing to the public and its customer, but the company said it has taken steps to rebuild trust.

Production of the railcars isn’t slated to begin until early 2018.

While the contract is relatively small for Bombardier, industry observers say continued delays, coupled with delivery problems with Toronto streetcars, raise the public’s concern about the company as it is seeking US$1 billion in financial assistance from the federal government.

“At the best of times there’s a lot of skepticism around government support of Bombardier,” said analyst Chris Murray of AltaCorp Capital. “It is not helpful that you have these distractions.”

Bombardier has also struggled with delays and cost overruns for its CSeries commercial jet program. Last month, it announced plans to lay off 7,500 workers around the world, mainly in the rail division.

McGill University management professor Karl Moore said ongoing rail challenges make people a little nervous about giving funding to a company that appears incompetent.

But David Tyerman of Cormark Securities doubts the delays will tarnish the reputation of one of the world’s largest train manufacturers. While Bombardier may face more scrutiny from customers, he said all manufacturers face problems.

“I don’t think anybody is completely clean on these things.”

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