(The following article by Francois Shalom was posted on the Montreal Gazette website on January 5.)
MONTREAL — Bombardier Inc. said yesterday France’s railway authority converted a further 100-train option from a previously announced contract into firm orders, a deal valued at $570 million (350 million euros).
The 100 high-capacity regional trains are part of a $2.32-billion, 500-trainset order from the Societe Nationale des Chemins de Fer announced in December 2001.
That deal called for 192 firm trainsets, with further options for 308 additional trains. Each of the trains, which can travel at up to 160 kilometres an hour, is comprised of three or four cars, and seats between 160 and 220.
In addition to the 192, Bombardier has now converted 187 of the 308 options into firm orders – a total of 379 firm orders for the AGC (autorail grande capacite) trains. The first were delivered last January, and various regional train authorities in France are now operating about 30 of them.
The latest batch of 100 will be manufactured at Bombardier’s Crespin plant in southern France’s Valenciennes region near Toulouse, and will be delivered between December 2007 and February 2009.
Bombardier Transportation spokesperson David Slack said he couldn’t say how many trains have been delivered so far.
“But we’re producing five trains a month, and are looking to increase that rate to eight a month in May,” Slack said.
The AGC contract signed three years ago with Bombardier was the largest order the SNCF had ever placed with a foreign company, beating out hometurf French company Alstom SA, builder of the legendary TGV (train a grande vitesse) and Germany’s Siemens AG.
The trains are widebodies and can run on diesel, electricity, or a combination of both.
Analyst Cameron Doerksen of Dlouhy Merchant Group said the deal “was a pretty big win back in 2001, because historically, the SNCF hadn’t ordered trains from Bombardier (when it didn’t involve a joint venture with its sometimes partner but mostly competitor Alstom).”
“But the story there is not so much revenue growth, but margins.”
Bombardier’s rail-equipment group has been underperforming, and the company has hired Andre Navarri, a longtime Alstom executive, to turn it around.
His mandate is to boost profit margins to at least six per cent and eliminate cost overruns which have plagued the company in recent years.
The division has announced it will lay off more than 6,000 employees worldwide and close at least seven plants.
Germany’s state-run rail authority, Deutsche Bahn, has cancelled some orders and delayed others. In Great Britain, where rail operators have been undergoing a wave of privatization, a slew of orders in recent years to rejuvenate the creaky system has meant a slowdown in orders in the last year. But France remains a strong market.
Slack said the AGCs will be run by 18 of the 22 administrative regions in France.
He said the remaining 121 options out of the 500 trains announced in the original order are likely to be converted.
“We’re very hopeful, particularly since we’ve been on time all along the way,” Slack said.
“We delivered the first trains 26 months after the notice to proceed – that’s good. So we’re on track for deliverables.”
Bombardier Class B shares closed at $2.24 yesterday in Toronto, a drop of 14 cents.