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Bombardier in lead for 999-car New Jersey rail contract: sources

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MONTREAL (Reuters) – Canada’s Bombardier Inc (BBDb.TO) is the front-runner to win a New Jersey Transit (NJT) rail car contract, two sources familiar with the matter said, in a boost for the plane-and-train-maker’s North American business which has wrestled with delivery delays and has lost orders to rivals.

FILE PHOTO – An employee works on a new regional transport train at the Bombardier plant in Crespin, near Valenciennes, northern France, October 17, 2016. REUTERS/Benoit Tessier

The order for up to 999 multilevel passenger cars, including options, would be one of the largest contracts in years if most of the options are exercised, one of the sources said.

Chinese state rail company CRRC Corp (601766.SS) was also vying for the contract. NJT ruled out the competing bid from the Chinese company, the sources said, although it was not immediately clear why.

CRRC and NJT did not immediately respond to requests for comment.

Bombardier Transportation spokesman Eric Prud’Homme declined by email to comment on what he called an “ongoing procurement.” He said the volume of the contract is 999 multilevel cars, but he said the “agency has not awarded the contract yet.”

Reuters reported in April that Bombardier was vying for the contract from NJT, which planned to order 113 multilevel passenger cars, with hundreds more in options, to modernize its aging fleet.

NJT, the largest statewide public transportation system in the United States, with over 900,000 daily riders, has faced criticism for delays and breakdowns. An audit published in October concluded that its operations were “inefficient” and “unsustainable.”

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Bombardier, which counts NJ Transit as a longstanding customer, has since been selected as the preferred bidder for the order, whose value is not clear because it depends on the number of options exercised by the agency.

One of the sources said Bombardier had an advantage because of its previous work on rail cars for New Jersey.

Both sources spoke on condition of anonymity about privately-held talks for the contract. One said the order could be finalized as early as December, but warned such decisions can always be delayed.

Earlier this year, Kawasaki (7012.T) of Japan won a New York metro car contract worth up to $3.7 billion, including options.

Bombardier was taken out of the running for the New York deal because of delays on a previous order.

Investors are closely watching Bombardier’s Berlin-based transportation unit after the company recently attributed a disappointing free cash flow forecast to working capital needs in the division, sparking a sell off of its stocks and bonds.

Bombardier shares were roughly flat in Toronto trading on Tuesday, after surging on Monday when analysts described a separate regulatory investigation into the company’s executive share sales plan as routine.

Montreal-based Bombardier has partly attributed the higher-than-expected use of cash to delays by customers in taking their rail cars, since train makers are paid upon delivery. The cause of the delays is not clear.

In a note to clients on Monday, Citi Research analyst Manish Somaiya said the change in cash was partly because of “customer delays in achieving delivery milestones.”

The company has faced difficulties with late deliveries in the past to Metrolinx, the provincial agency which manages public transportation in Greater Toronto, Canada’s largest city.

In 2016, Bombardier launched a turnaround plan for its rail operations in the Americas.

Reporting By Allison Lampert in Montreal; Additional reporting by Brenda Goh in Shanghai; editing by Denny Thomas and Grant McCool

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