Bombardier Sees Rail Project Issues Solved by the End of 2020

(Bloomberg) -- Bombardier Inc. expects to complete at least three of its most delayed rail contracts this year, with deliveries to two more European customers extending into 2020.

North America’s biggest maker of rail equipment has put in place fixes for five troubled projects that “still need some attention,” Chief Executive Officer Alain Bellemare said Thursday. Rolling-stock deliveries to New York City’s Metropolitan Transportation Authority, London Overground and Crossrail of the U.K. will be fully completed this year, while shipments to Swiss train operator SBB and Germany’s Deutsche Bahn will run through 2020.

Bombardier has made headlines in recent months for a series of delays and quality stumbles on high-profile train projects in those places as well as in Toronto and France. The projects represent a fraction of the more than 150 major rail contracts that the company is working on, Bellemare said.

“Today we fully understand the issues, we have added resources, we have corrective action plans in place,” Bellemare told analysts on a conference call after reporting fourth-quarter results. “We have the knowledge and the expertise to actually fix these issues. We’re far along the path of either delivering trains or completing these projects in 2019 and in 2020.”

$10 Billion

Bombardier is counting on rail, its largest business, to contribute about half of the $20 billion in sales that the company is targeting for 2020.

The Montreal-based company faces no systemic issues in its rail business, the CEO stressed. Bombardier is in “full production mode, and we are experiencing normal technical, operational issues that relate to early in-service introduction,” Bellemare said.

Adjustments include minor changes in design and manufacturing processes, as well as unspecified issues with suppliers, he said.

“It’s good to see that they are planning to work through the majority of these projects in 2019,” said AltaCorp Capital analyst Chris Murray. “From time to time they have some rail projects that tend to disproportionately impact earnings. What they are trying to do is to simplify design and production.”

Bombardier’s train unit is operating under new leadership. Danny Di Perna -- a former General Electric Co. executive who joined Bombardier in August as chief operating officer for aerospace -- was appointed to run the rail division last week after Laurent Troger stepped down. Troger, a 15-year company veteran, “wanted to do something else,” Bellemare said Thursday, without elaborating.

©2019 Bloomberg L.P.

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