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French rail order a coup for Bombardier Add to ...

Bombardier Inc.'s $1.1-billion (U.S.) firm order for 80 regional double-deck trains from the French railway authority is the latest win in the company's bid to strengthen its increasingly dominant position in the global rail market.

The contract to supply next-generation intercity, suburban and regional trains to six regions of France under the auspices of the SNCF is by no means the largest that Montreal-based Bombardier has won over the years.

But it is part of a broader corporate strategy that has seen the company expand into 60 countries based on an increasingly diversified portfolio of cutting-edge-technology trains.

The deal with SNCF, for example, was clinched thanks to train technology that can be modified to meet the specific needs of the six French regions acquiring them, said a spokesman for Bombardier's rail unit, Bombardier Transportation.

"The scale we have allows us to provide the right mix of price and customized technology," said Marc-André Lefebvre.

The deal announced yesterday also positions Bombardier for potentially bigger follow-up contracts, up to 780 more trains worth $11-billion as France's regions push ahead with aggressive spending programs to revamp their aging regional fleets, he said.

Adding further potential value is a program to adapt the technology developed for the SNCF order - dubbed Regio2N - to the needs of other countries, such as the Netherlands, he said.

Cameron Doerksen, an analyst with Versant Partners, said this latest coup for Bombardier's rail division helps offset the prolonged slump in the company's other unit - commercial and business jets - although trains produce lower margins than aerospace.

Rama Bondada, an analyst with Macquarie Securities in New York, said in a note to clients that the SNCF contract "reinforces our view that contract wins at Bombardier Transportation will drive the stock in the near term as aerospace weakness persists."

Rail now accounts for about half of Bombardier's annual revenues of $20-billion. "We should continue to see decent growth" at Bombardier Transportation, Mr. Doerksen said.

The first batch of trains in the new contract will be delivered in 2013.

 

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