Metrolinx strikes light-rail deal with Alstom, bypassing Bombardier

Theglobeandmail.com
May 12, 2017
By Oliver Moore

Metrolinx has struck a deal with another manufacturer to provide dozens of vehicles for key Toronto-area transit projects, The Globe and Mail has learned, a sign of how much confidence the agency has lost in problem-plagued Bombardier.

The agreement would see Alstom, which is currently building light rail vehicles for the Ottawa market, produce for southern Ontario as well. At least part of the work will be done at a plant in the Toronto area.

Enough of their vehicles are expected to be delivered that they can be used, if necessary, to open the $5.4-billion Eglinton Crosstown as scheduled in 2021.

A formal announcement is expected Friday for the 61-vehicle deal, which was confirmed by multiple sources.

The vehicles for the Crosstown, as well as several other lines, were supposed to be built by Bombardier Transportation, under a $770-million deal dating to 2010. But the company has been slow to produce functioning prototype vehicles and Metrolinx is no longer confident the remaining vehicles will be ready in time.

Metrolinx is itself liable to the consortium building the Crosstown if the vehicles are late, facing daily fines of up to $500,000.

The deal with Alstom is intended to offer insurance. If Bombardier comes through, the Alstom vehicles will end up on the Finch and Hurontario LRT lines.

But if Bombardier fails, or if Metrolinx manages to end its contract with them, the Hurontario vehicles will be diverted to the Crosstown. In this scenario, the Eglinton project will not be delayed because it lacks vehicles and Metrolinx will not be on the hook financially.

Metrolinx would not comment Thursday evening. Bombardier Transportation did not respond to a request for comment.

Metrolinx has previously said it needs 76 of the Bombardier light rail vehicles – about two-fifths of the total to be supplied under the 2010 deal – to operate the Crosstown. Not all would be required initially to open the line, though. Alstom’s vehicles are also bigger, meaning that fewer would be needed to have the same capacity on the Crosstown.

The deal with French manufacturer Alstom caps a difficult period for Bombardier, the storied Canadian firm.

Bombardier Transportation has been struggling to build streetcars for the Toronto Transit Commission, repeatedly adjusting its delivery schedule and piquing tempers on city council. And parent firm Bombardier Inc. has been embroiled in controversies over government bailouts and executive compensation.

Metrolinx gradually became concerned about Bombardier’s ability to build its light rail vehicles. Last summer, the agency issued a notice of default to the company. And in the fall it followed that with a formal notice of intent to cancel the deal.

But Metrolinx was caught off guard when the company fired back in court to preserve the deal. Its injunction was filed without a heads-up to Metrolinx and the agency learned about it when the media began calling.

Metrolinx was again caught by surprise when the judge granted Bombardier the injunction, preventing the agency from unilaterally cancelling the contract.

The agency had hired Chris Paliare, a top civil litigator, to argue their case and insiders said they had expected to win in court. Blindsided by the loss, Metrolinx officials did not answer media questions the day of the ruling – which happened to come early in the tenure of an interim and media-shy new CEO – and hours later issued a bland statement that promised further action.

The court loss means that Bombardier and Metrolinx have to go through a formal dispute resolution process, which could take eight to 12 months and has an uncertain outcome. In court, counsel for Metrolinx argued that doing so would take so long that it would prevent the agency going elsewhere, and still opening the Crosstown on time, even if they prevailed in the dispute resolution process.

Since losing the court case, the agency and its provincial government masters decided to cover their bases by preemptively bringing in another company.

Signing with Alstom allows them to pursue both the dispute resolution process and still have a supplier to produce vehicles, no matter how this process plays out.