Bombardier Inc. is poised to nab a potentially lucrative train contract on the U.S. eastern seaboard in what would be a key win for its struggling rail unit in North America.
New Jersey Transit Corp. was set Tuesday to pick Bombardier Inc. to supply 113 multilevel passenger train coaches in a contract worth about US$700-million, according to the agenda for a Dec. 12 meeting of the transit agency’s board of directors published on its website. The purchase is subject to board approval.
The agency has options to buy an additional 636 rail cars at a future date for a total contract value of US$3.6-billion. That would make it one of the largest rail contracts for Bombardier on the continent in years.
The deal would mark a key win for Bombardier and rail unit boss Laurent Troger as the company fights to re-establish its industry credibility in Canada and the United States after experiencing problems shipping on time to customers. New Jersey Transit Corp. is the third-biggest transit agency in the United States, an organization with highly complex operations and a capital budget rivalling that of some Class I railroads, according to trade publication Railway Age.
Bombardier was dropped from bidding last year on a US$3.2-billion contract to supply a new fleet of subway cars for New York's Metropolitan Transit Authority after falling more than a year behind schedule in delivering subway cars for another section of the city's transit system. The company has also experienced trouble with late deliveries of new streetcars and light-rail transit vehicles in Toronto. The city's Metrolinx transportation agency eventually turned to rival Alstom SA to help supply its light-rail needs.
Montreal-based Bombardier is betting on rail to deliver half the US$20-billion in sales it wants to generate by 2020. The unit has a backlog of US$34-billion, worth more than three years of production. Pension fund Caisse de dépôt et placement du Québec owns a minority stake in the business.
Bombardier said last month it will deliver about 20 per cent more trains this year than last, a major increase in output that has clogged its manufacturing system and resulted in delays on a handful of contracts. Those issues, combined with lower advances on other deals, led the company to chop its 2018 free cash flow target by US$600-million in its latest quarter. It expects to make that up as trains get delivered.
“It’s going to work its way through and we still remain very confident that overall, that business is going to generate that cash flow sustainability over time,” Bombardier finance chief John Di Bert told analysts in New York on Dec. 6.
“This is an encouraging development and we’re pleased to see this next step in the procurement process,” Bombardier spokesperson Maryanne Roberts said. “We look forward to the board’s decision.”
The shares closed Tuesday up 3.8 per cent, to $2.18 in Toronto trading.