Bombardier Wins $1.63 Billion Crossrail Deal on Siemens Exit

Feb 06, 2014 4:36 pm ET

(Updates stock trading in seventh paragraph.)

Feb. 6 (Bloomberg) -- Bombardier Inc. won a 1 billion-pound ($1.63 billion) contract to build 65 trains for London’s Crossrail route, securing work at Britain’s last railcar factory after Siemens AG withdrew from the bidding.

Bombardier will make the nine-car trains measuring 200 meters (655 feet) at its Derby plant in central England, the U.K. Department for Transport and Transport for London said in a joint statement. The rolling stock will be delivered from May 2017 ahead of Crossrail services starting December 2018.

The future of Montreal-based Bombardier’s U.K. production came under threat when Munich-based Siemens won a 1.6 billion- pound deal to build 1,200 carriages for Thameslink line, which spans London from north to south. The German company withdrew from the bidding to supply railcars to the east-west Crossrail route last July, citing a high workload.

“This announcement will mean state-of-the art trains providing quick, comfortable journeys for the millions of people Crossrail will serve,” U.K. Transport Secretary Patrick McLoughlin said in the statement, adding that the deal will support the creation of 760 new jobs.

Depot Deal

Bombardier will also build a depot at Old Oak Common as part of today’s contract. The facility in west London will be located where Crossrail passes close to other major lines and has been slated as the site of an interchange on the planned High Speed 2 route between the capital and the north.

“This announcement reaffirms the strong product offering, local presence and competitive cost structure of Bombardier Transportation compared with competitors in the U.K. and globally,” Benoit Poirier, an analyst at Desjardins Capital Markets in Montreal, said today in a note to clients. He has a buy rating on the stock.

Bombardier’s widely traded Class B stock rose 1.7 percent to C$4.20 at the close in Toronto. The shares have declined 8.9 percent this year while Canada’s benchmark Standard & Poor’s/TSX Composite Index rose 0.7 percent.

Crossrail will add 10 percent more passenger capacity in London, with as many as 24 trains an hour, according to the DfT and TfL, which runs the city’s transport system. Bombardier has committed to placing 25 percent of the value of the work with small and medium-sized businesses, they said.

Tube Deal

The contract includes an option for 18 additional trains, while an operating company for Crossrail services is due to be chosen this year.

The win comes after Bombardier was forced to surrender a signaling deal for the London Tube, or subway, awarded in 2011 because of the “complex nature” of the work.

Britain has made trains since it pioneered rail travel 200 years ago. Bombardier’s Derby site was one of several that made up state-owned British Rail Engineering Ltd. until that business was privatized, passing into the ownership of ABB Ltd., Daimler AG -- as Adtranz -- and then the Canadian company.

The other bidders for the Crossrail contract were Construcciones y Auxiliar de Ferrocarriles SA of Spain and Tokyo-based Hitachi Ltd.

The Japanese company is building its own U.K. factory in northeast England to supply 90 Intercity Express trains made up of 596 railcars worth 4.5 billion pounds for the east coast and Great Western intercity lines, though body-shells will be shipped from Japan for final assembly.

“We are disappointed to have lost out in this bid but this will not stop us” from building trains for the British and European market, Alistair Dormer, chief executive officer of Hitachi Rail Europe, said in an e-mailed statement. Hitachi’s train unit “is as British, if not more so as it is also headquartered in the U.K., than Bombardier.”

--With assistance from Frederic Tomesco in Montreal. Editors: James Callan, John Lear