Understanding the #Alstom – #Bombardier Deal from A #Canadian Perspective



By Paul Langan


As I drove by the abandoned Rona home improvement store in my community, I wondered if the sale of Bombardier to Alstom would result in substantial job losses in Canada. In 2016, the American hardware giant Lowe’s bought Quebec-based Rona Inc. The result was the closing of 34 stores. 


In 2017, the transportation giants France based multinational Alstom and Germany based multinational Siemens AG wanted to merge to fight off the growing threat of the national Chinese rail company, China Railway Rolling Stock Corporation (CRRC). Bombardier was also trying to merge with Siemens AG. Siemens AG picked Alstom to merge their train divisions with. European competition authorities nixed the idea.


Now France-based multinational Alstom has come to an agreement to buy the half-a-century-old train division of Bombardier Transportation for US $6.7 billion.


According to the Montreal Gazette newspaper, the deal will see the Caisse de dépôt et placement du Québec become Alstom’s biggest shareholder by converting its minority Bombardier Transportation holding onto shares of the acquirer and making an additional investment of 700 million euros ($1 billion). As a result, the Caisse will own about 18 percent of Alstom and control two board seats. But what does the proposed sale really mean to the average Canadian citizen?


BOMBARDIER IS IN A FREE FALL

Despite what the chief executive officer Alain Bellemare of Bombardier states about the company turning around, it is in a free fall. 


The company’s long-term debt in 2018 was $9 billion (US).


When the Alstom/Bombardier merger is approved the company will only sell business jets. Here is a partial list of the liquidation of Bombardier assets: 


– C Series jet sold to Airbus SE

– Toronto’s Downsview facility sold

– Turboprop passenger plane line sold to Viking Air

– Wing-making factory in Belfast sold to the US aerospace manufacturer Spirit Aerosystems

– CRJ regional-jet program to Japan’s Mitsubishi Heavy Industries

– Aerostructures business to Spirit AeroSystems for US$591 million

– Flight Training Centre sold to CAE Inc.



A HISTORY OF PUBLIC DOLLARS – HANDOUTS COULDN’T SAVE IT

Montreal Economic Institute has estimated that Bombardier has received nearly $4 billion in public money from the federal and provincial governments. Plus, Bombardier received another $11 billion in Export Development Canada (EDC) loans to help its customers buy their planes and rail cars. More recent handouts were:


2015 -$1.3 billion from Quebec provincial government

2016  $54 million to a Bombardier led consortium

2017 – $372 million from the federal government

BOMBARDIER LOSES THREE CONTRACTS  

Three recent rail contracts Bombardier lost out in their own home province, strongly suggesting that keeping jobs in Quebec or Canada was definitely not a priority to those in business and government who were part of the decision-making process. Recent USA-Europe-Canada free trade agreements also played a negative role.


Montreal Commuter Rail 24 – Commuter Rail Cars

In 2016, Agence métropolitaine de transport requested bids for 24 new rail cars for their commuter rail network. Bombardier was the only bid and it included 64% local content. 


The Agency asked for new bids and reduced the Canadian content requirement from 25 to 15 per cent. The winner with the lowered Canadian content was Chinese rail company China Railway Rolling Stock Corporation (CRRC). The vehicles will be built in China and only 15% is Canadian content.


Metropolitan Express Network (REM)

The Caisse de dépôt et placement du Québec (CDPQ) is leading the $6.3-billion project. Bombardier was not selected for the contracts of the Metropolitan Express Network (REM). The consortium that won the contract to build the trains was Alstom Transport Canada and a subsidiary of SNC-Lavalin. Alstom is building the  trains in India.


VIA Rail $989M Rolling Stock Replacement

VIA Rail, our national passenger rail carrier, awarded a $989 million contract to Siemens Germany over Bombardier. Siemens will build 32 new train sets. Siemens and VIA Rail also agreed to a 15-year technical services and parts agreement worth $355.5 million. Siemens will build the trains in the USA.


ALSTOM & BOMBARDIER PLANTS IN ONTARIO AND QUEBEC

Alstom and Bombardier have worked together in Quebec. In Quebec since 2010, and extended in 2018, the consortium is building AZUR metro cars for Montréal. The Alstom Sorel-Tracy plant and the Bombardier La Pocatière plants are involved.


The Alstom and Bombardier current sale states that Alstom will create: an Americas headquarters in Greater Montreal, high-tech design, engineering, research and development centres in Quebec.


Alstom plans to develop the La Pocatière, Sorel-Tracy and Saint-Bruno facilities. However details are not available on what exactly is going to happen at the plants.


Global News on February. 17, 2020 reported that – The Confédération des syndicats nationaux (CSN), one of Quebec’s largest labour federations, wants to know more details about the factories in La Pocatière and Sorel-Tracy.


Quebec Premier François Legault supports the sale stating it will bring hundreds of jobs to Quebec. 


ALSTOM PLANTS

SOREL-TRACY, Quebec. Alstom plant built in 2013 is a bogie manufacturing plant currently doing the Montreal metro car order.



BRAMPTION, Ontario – The new Brampton plant is building the Alstom Citadis Spirit Light Rail Vehicles (LRV) for Metrolinx. 


OTTAWA, Ontario – Belfast Yard has been doing final assembling of the Alstom Citadis Spirit LRV. The cars are being built in Hornell, New York and Sorel-Tracy, Quebec


The Confederation Light Rail System was designed to replace the bus rapid transit . The Alstom Citadis Spirit LRV are proving to be a disaster.  Some of the  problems faced by the troubled Confederation Line LRV are eerily similar to those faced by Canada’s only high speed train, the CN Turbo Train in the late 1960s.


The Turbo train was never designed to handle the Canadian winters and proved to be unreliable during their early years due to significant problems that had to be fixed to ensure a smooth winter operation. 


The Alstom LRV was tested in Ottawa, but once in operation a plethora of problems has beset the trainsets. The Alstom LRV experience in Ottawa has so far been less than successful.


BOMBARDIER PLANTS

Bombardier LRV has had their problems in manufacturing also. The delays with delivery to Metrolynx and subsequent reduced orders with their Flexity Freedom LRV is well documented.


LA POCATIÈRE, Quebec — In 2018, VIA Rail Canada awarded Bombardier a $54 million contract to upgrade 17 train cars to be fully accessible. As that contract runs out, it remains to be seen what work Alstom will bring to the plant.


THUNDER BAY, Ontario – According to an April 17th, 2020  article in sudbury.com – Due to the lack of mass transit contracts in the queue, Bombardier has been steadily scaling down its operations in Thunder Bay in the last year and half.


Where once there was a workforce of 1,100, only 420 remain on the floor, assembling the last 36 bi-level cars for Metrolinx. Recent work for 40-50 laid off workers happened when the plant started making portable ventilators for the Ontario government for the pandemic.


MILLHAVEN, Ontario – The Bombardier plant makes Light Rail Vehicles (LRV) and Monorails. The large location also has a test track. It is currently making the Flexity Freedom LRV for Metrolinx.  


MONORAIL

Alstom buying up Bombardier Transport makes Alstom a big player in monorail manufacturing. With plants in the UK, Brazil and Millhaven Ontario, Alstom becomes a leader in the building of monorail systems around the world.


Canada has over a half a century of studies on monorails in Quebec, Ontario and British Columbia yet no public transit monorails operate in Canada even though Bombardier has a factory here.


HIGH SPEED RAIL

The sale of Bombardier to Alstom will result in a global powerhouse in the high speed rail sector.  The number of players in the game is reduced with Siemens AG and Hitachi being the only other significant manufacturers after the giant China Railway Rolling Stock Corporation (CRRC).


Canada has over 30 studies done on high speed rail in the past. No high speed rail on dedicated track has ever been built in Canada despite the fact that a world leader in building them – Bombardier – originated here. There is no evidence to suggest Canada is in a better position to build high speed rail with the merger.


CONCLUSIONS

From a Canadian perspective, the sale of Bombardier to Alstom and the effect of the free trade agreement between Canada, the USA and Europe compounds the problem of creating and stabilizing jobs in the rail manufacturing sector.


The decision in Quebec to reduce Canadian content requirements to only 15%, allowing the China Railway Rolling Stock Corporation (CRRC) to win a contract over Bombardier, is a chilling example of the lack of ethics and loyalty in our own country.


Alstom has stated there would be more work in the future for the Bombardier and Alstom plants in Canada. I will revisit this statement by Alstom in a couple years to see if they honour this commitment. 


Both Alstom and Bombardier have plants in low wage countries like India and Mexico that have done work that could have been done in Canada.


As mentioned, even our taxpayer-owned national passenger rail company VIA Rail picked Siemens to build their new trains in the USA, shutting out Bombardier and Canadian jobs.


These above examples show you just how fragile our train manufacturing industry is in Canada.


The facts are clear. Bombardier was in a financial crisis and their chief executive officer Alain Bellemare was unable to resolve the problem other than to have a fire sale for the majority of the company. The Bombardier Transport division sale was part of this misguided strategy.


I will definitely review this sale periodically to see if Canadians did benefit from Alstom buying Bombardier.


*Paul Langan is the President High Speed Rail Canada

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