BUSINESS

Bombardier has record rail backlog in North America; wins Saudi rail contract

09/18/2012 05:49 EDT | Updated 11/18/2012 05:12 EST
MONTREAL - Bombardier Transportation says it has secured a record order backlog in North America despite the flagging economy in the United States.

The railway division announced Tuesday at a trade show in Berlin that its North American backlog increased nearly 48 per cent to US$6.5 billion as of mid-July, up from US$4.4 billion six months earlier.

The increase comes after winning a series of new contracts and seeing options exercised over the past two years for metro cars, light rail vehicles and commuter trains in Canada and the U.S.

Overall, the global backlog at the subsidiary of Bombardier Inc. (TSX:BBD.B) was US$31.7 billion as of the second quarter, down from US$31.9 billion at the end of 2011.

"We've had very good results within the Canadian market since 2010 where you had the big cities like Toronto and Montreal that were all changing their metro equipment so that was very important," spokesman Marc Laforge said in an interview.

Toronto is also changing its streetcars. The first pilot car for downtown streets will be delivered by Bombardier at the beginning of October.

In addition, the company has received key subway orders in Chicago, New York and San Francisco. It also won orders for light rail and double-decker commuter cars in Toronto, rail cars in Maryland and New Jersey and automated people mover contracts at airports in Dallas/Fort Worth and Newark, N.J.

"We have proved that Bombardier has the answers to meet the growing demand for efficient and competitive rail systems in the North American market," stated Raymond Bachant, North American president of Bombardier Transportation.

Laforge said the subway segment will likely grow in the United States over the next years as the fleets continue to age and need to be renovated or replaced.

It's part of the reason that Bombardier is expanding its plant in Plattsburgh, N.Y., by 40 per cent.

"We've got great faith in that market and we foresee some interesting growth in the U.S. simply because the need is there."

Amtrak says it is beating ridership records set last year for service in the Northeastern corridor and estimates that the number of passengers will almost quadruple to 43.5 million by 2040.

The U.S. is also earmarking US$35 billion for railroad rehabilitation and improvement financing projects.

"The need for sustainability is there in the U.S. and they are still investing even though the economy is struggling," Laforge added.

High speed rail projects are slowly being considered in several U.S. states, including Texas, Arizona, Michigan, Illinois and California. An US$8 billion project is planned for Central Valley in California that has more people than 32 U.S. states.

"You have to see high speed as a marathon and not a sprint," he said, noting that none of these projects are in the order backlog.

Bombardier employs nearly 7,000 people at manufacturing, engineering, services and business centre locations in La Pocatiere, Que., Thunder Bay, Ont., Kingston, Ont., Plattsburgh, N.Y., Pittsburgh, Pa., and Sahagun, Mexico.

Forecasts for North America suggest more than US$5.2 billion of annual railway orders between 2015 and 2017. The European rail industry association UNIFE said the European market for regional trains is expected to total about US$17 billion per year over the same period.

In a separate news release, Bombardier Transportation said it signed contracts valued at about US$367 million with Talgo SA to develop and supply components for 36 high speed trains for Saudi Arabia.

Talgo, a member of a consortium led by Spanish railway operator RENFE and railway infrastructure company ADIF, was recently contracted to build and operate a 450-kilometre high-speed line connecting Mecca and Medina.

The deal includes Bombardier's (TSX:BBD.B) propulsion and control package, Flexx Power 350 high speed bogies and 12-year maintenance services for the trains and their components.

Most of Bombardier's manufacturing for the project will take place at its plant in Trapaga, Spain.

The Montreal-based transportation giant has participated in the development of many of the world's leading high speed rail systems, including four different generations of the TGV in France.

The world's largest railway manufacturer has an installed base of more than 100,000 units in some 60 countries.

On the Toronto Stock Exchange, Bombardier shares lost five cents at C$3.69 in afternoon trading.

Note to readers: This is a corrected story. An earlier version incorrectly referred to the speed of the rail line connecting Mecca and Medina.