(The Canadian Press circulated the following article by Allan Swift on May 24.)
MONTREAL — Bombardier Inc. is bleeding $85,000 US a day in late-delivery fees for a monorail transit system it is building in Las Vegas, already four months behind schedule.
The Montreal-based company also faces penalties for late deliveries of light rail cars for a new transit system in Minneapolis, Minn. Bombardier’s transportation division says hitches are a normal part of complex public transportation projects. But the timing is bad as the division, the world’s largest maker of rail equipment, is under the gun from chief executive Paul Tellier to improve margins.
Delays of several months on the two showcase projects, on the heels of problems on high-speed trains delivered to U.S. passenger service Amtrak, are just the sort of profit-eating travails that irk Tellier.
After a major restructuring at Bombardier Aerospace last year, Tellier announced in March that he plans to lay off 6,600 employees at the underperforming rail division and will close seven plants in Europe.
Bombardier Inc. will report first-quarter results this week and investors will be looking for signs that the restructuring initiatives are starting to pay off on the industrial giant’s bottom line.
The Las Vegas project, worth $891 million Cdn, features the company’s monorail technology, similar to the monorail at Walt Disney World in Florida, but the Vegas one is entirely automated – without drivers or human ticket sellers.
The daily late penalties of $118,000 Cdn kicked in 45 days after the deadline of Jan. 20, explained spokeswoman Helene Gagnon. Bombardier now estimates it won’t turn over the keys until “sometime this summer.”
“We’re late, but we’re not far from the date,” said Gagnon, noting that the deadline was set four years ago. “We want to make sure it’s fully reliable before we open it.”
Las Vegas Monorail Co., described as the first modern public transportation system in the world totally funded by the private sector, expects to attract 19 million passengers in its first year. It is connected to eight major resorts, 24,700 hotel rooms and nine convention facilities.
Planned extensions up to 29 kilometres would require public funds, said Todd Walker, spokesman for Las Vegas Monorail.
“Typical transportation projects can be years behind schedule,” said Walker. “Here we are building a $650-million (US) project, and they’re within a few months, so that’s not bad.”
The nine computerized trains of four cars each, rolling at up to 80 kilometres per hour along the 6.4-kilometre line, are undergoing tests on their track adjacent to the Las Vegas Strip. They have to run 30 consecutive days without a glitch before being declared ready for passengers.
Meanwhile the Hiawatha light rail project in Minneapolis-St. Paul, Minn., is on track to meet a June 26 opening date for the first 13-kilometre phase, but again Bombardier will incur penalties for delivering the cars late.
The project, valued at $982 million Cdn, will be the first in North America to showcase a low-floor rail system. Bombardier’s share was to provide 24 cars for $154 million Cdn.
Bob Gibbons, director of customer services for Metro Transit, said Bombardier will face fines for late delivery of between one and two months for the cars, but the system should meet its opening deadline anyway because it was put off twice.
First called to open last October, the date was delayed until April 3 when the State of Minnesota ran out of funds, Gibbons explained. This was later reset to June 26 because of a strike by the transit authority’s drivers.
“The important thing for us is we have received the cars in accordance with the needs of our project,” Gibbons said, although he said Bombardier won’t escape the penalties.
The cars, made in Mexico with final assembly in Plattsburgh, N.Y., had a number of time-consuming defects, which Bombardier’s Gagnon described as “normal and routine anomalies.”
Bombardier’s popular stock (TSX:BBD.B), which surpassed $26 in September 2000 and fell under $3 in March 2003, closed Friday off a cent at $5.58.