Bombardier Order For Rail Coaches Could Reap $2.5 Billion

Bombardier Inc.'s rail division recently signed a "framework agreement" to provide German railway Deutsche Bahn with passenger rail cars in a deal worth up to $2.5 billion. This agreement would see Bombardier Transportation build 800 double-deck coaches for Deutsche Bahn, which came out of the 1994 restructuring of German railways following reunification. "This is the largest framework agreement for vehicles that Deutsche Bahn has ever awarded to a single supplier," Bombardier Transportation president Andre Navarri said in a statement.

The German firm's CEO Hartmut Mehdorn said his company is making the large investment despite a global economic downturn that has made many companies extremely cautious about capital spending. "Precisely because worldwide economic growth is being assessed so skeptically, we must have the courage to invest in the future," Mehdorn said. "Efficient, high-capacity transportation systems require a state-of-the-art vehicle fleet with energy-saving trains that can be flexibly combined and driven."

The first firm order is expected to come in early summer, but it's too early to say how large it will be or when the first cars will be delivered, Bombardier Transportation spokesperson David Slack said. The coaches will be built at five European plants in Germany, Sweden and the Czech Republic. Bombardier has already delivered about 1,600 double decker coaches to the German railway. The coaches are also in service in Israel, Denmark and other countries. However, the new coaches will be powered to run without a locomotive. "It's one of our biggest and best customers in one of our most important markets and it's an endorsement of a service-proven technology," Slack said.

National Bank Financial analyst David Newman said the order is Bombardier's largest since the November 2006 order from SNCF, which was worth $4.4 billion. He expects deliveries to start mid-2011 and last five to seven years. Last February, Deutsche Bahn and Bombardier signed a separate framework agreement for 321 Talent 2 trains worth $1.9 billion. Deliveries will begin this year, through 2014. Bombardier is the world's largest train manufacturer and holds 40 per cent to 50 per cent market share in passenger coaches in the European Economic Area. Industry analysts expect Bombardier's rail division will receive many new orders in the coming years as countries boost their infrastructure spending to kick-start local economies and address efforts to reduce greenhouse gases.

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