Bombardier Inc. plans to gut its historic British train-building site, famous for almost two centuries of manufacturing and dominance of the industry.
Bombardier Transportation, the rail arm of the Montreal-based aerospace giant, is expected Tuesday to announce massive job cuts at the Derby plant. Bombardier confirmed it will hold meetings early Tuesday with the 3,000 workers employed at the operation in the East Midlands, about 200 kilometres north of London. There will be job losses, sources said, although Bombardier would not confirm reports of 2,000 or more over the next few months.
The site has been making trains since 1839, putting it at the centre of Britain's industrial revolution, and has been owned by Bombardier since 2001. It was instrumental in making Bombardier one of the top train makers in Europe.
The future of the 84-acre Derby site has been in doubt since late last month, when Bombardier lost a £1.4-billion ($2.2-billion) contract to build 1,200 rail coaches for southeast England's massive Thameslink rail project. The winner was Siemens AG of Germany, one of Bombardier's most powerful rivals in the rail business.
The decision was clearly a blow to Bombardier and the community, though the company's expansion into other international markets will help offset that. There is no reason to believe Bombardier won't continue to win major orders in Europe, analysts said.
The Siemens victory came as a shock to Derby and many senior politicians within British government, including business secretary Vince Cable, who is demanding a review of the government's entire purchasing policy. They note that Derby's possible closing could eliminate as many as 20,000 other jobs in the area that supply services and parts, from seats to interior panels, to the Derby factory.
In Britain, Bombardier spokesman Neil Harvey said the company could not comment until speaking with workers. In Montreal, spokesman Marc Laforge said Bombardier has been working on a review of the capacity plan at Derby after losing to Siemens.
"We have to assess what the impact of not getting preferred bidder status is going to be," he said. "We remain committed to the United Kingdom but we need contracts to keep the plants working."
Mark Young, one of the East Midlands officers for Unite, the union that represents most of Bombardier's Derby workers, said the region is still in shock over Bombardier's failure to win the contract.
"Rail manufacturing has been part of this city for more than 150 years," he said. "When I was a young man, virtually every family in the city had someone who worked at the rail factory."
Philip Hickson, leader of the Derby City council, was one of several politicians who went to Berlin, where Bombardier Transportation is based, to plead for the factory's survival. They came away with no hope. "The bottom line is that Derby was very dependent on Bombardier winning that contract," he said. "They've got nothing else for this factory."
Mr. Harvey confirmed that Derby was unlikely to win a significant new contract in the next few months or year. The next big British train contract, known as CrossRail, will not be awarded until 2015.
Bombardier's rail division has about 5,000 workers in Britain. The 2,000 or so who do not work in manufacturing are employed largely in rail services and signalling. Their jobs will stay even if Derby closes.
The loss to Siemens is not Bombardier's only blow. Recently, a consortium led by Bombardier was the runner-up in a bid to make high-speed trains for the £7.5-billion Intercity Express Programme. Hitachi of Japan was the winner.
National Bank Financial analyst Cameron Doerksen said Bombardier Transportation's record backlog of $33.5-billion (U.S.) helps offset the slowdown in Britain.
For example, the transportation unit recently partnered with Siemens on a high-speed train components deal valued at up to $3-billion. It is also aggressively expanding into new markets such as Asia and Latin America, and is already a major player in the development of high-speed rail in China.
It also recently won a beachhead in the potentially lucrative South American market with the $1.44-billion win, along with two consortium partners, for construction of a 24-kilometre monorail system in Sao Paulo.
Bombardier bought the Derby site in 2001 from Adtranz, the former rail division of DaimlerChrysler. Bombardier later sued Daimler, alleging the German company overstated the value of the assets. The two companies eventually settled, resulting in a lower purchase price for Bombardier.
The Derby site started as the home of the Derby Midland Railway workshops. In the 1870s, it became the Derby Carriage and Wagon Works. In time, it became Europe's, and one of the world's, largest rail manufacturing centres, a status it still carries today.
In the First World War, bombs dropped from German Zeppelin airships hit Derby, killing several people. More bombing raids were conducted over Derby in the Second World War in Germany's effort to cripple British heavy industry.
While Derby makes trains largely for the European market, it has also been a major exporter. Bombardier trains made in Derby are used in South Africa, Taiwan and other countries. The plant is operating flat out at the moment, running five production lines for various rail lines, including the Stansted Express and the London Underground subway system.
While Derby may cease to be a train-making centre, its economy will still rely on manufacturing. Rolls-Royce makes jet engines in Derby and Toyota has a car plant in the area.
Eric Reguly
Bertrand Marotte