New Montreal metro car order won't prevent layoffs at Bombardier-Alstom

Bombardier's North American Division President Raymond Bachant, left to right, Quebec Transport Minister Jacques Daoust, Montreal Mayor Denis Coderre and STM Chairman of the Board Philippe Schnobb take a ride in one of the new AZUR metro cars, Montreal, Que., Feb. 7, 2016. THE CANADIAN PRESS IMAGES/Mario Beauregard

MONTREAL -- A $448-million order by Montreal's transport agency for more Azur metro cars from a Bombardier-Alstom consortium won't save at least 100 Bombardier Inc. workers from layoffs.

The fate of the plant in La Pocatiere, which houses the company's railway division, had been uncertain since the loss of a lucrative Montreal electric train contract and a lack of orders.

Announced Monday, the fresh deal for 153 rail cars follows Bombardier's announcement of company-wide layoffs of 5,000 employees last week -- including 2,500 in Quebec and 500 in Ontario -- as part of chief executive Alain Bellemare's five-year plan to rein in costs, focus on rail and business jets and reduce the company's net long-term debt of $9 billion.

The work order comprises 17 trains of nine cars each, with deliveries set to start in the spring of 2020, according to the consortium and the Societe de transportation de Montreal (STM).

Montreal-based Bombardier's share adds up to $281 million, with French rail giant Alstom claiming $167 million.

The agreement comes as a hefty top-up to the STM's original $1.2-billion order in 2010 for 52 trains -- 468 cars -- to modernize the city's electric metro fleet. The last two of those trains were slated for delivery by the end of the year.

The contract extension prolongs the jobs of 170 Bombardier employees who will be assigned to the new order, and also includes 70 employees at an Alstom plant between Montreal and Quebec, said Benoit Brossoit, who heads Bombardier Transportation's Americas region.

"Most of our customers are public entities," he said in an interview, highlighting the train division's reliance on public contracts.

Despite the new order, about 100 employees at the La Pocatiere facility will be laid off through February, the consortium said.

Most of the manufacturing and all of the final assembly of the new Azur cars will be done in there, in the Lower-Saint-Laurent region northeast of Quebec City. Alstom will supply the engines and chassis as well as train control, passenger information and video surveillance systems.

The deal mandates 60 per cent Canadian content and will draw on a network of several hundred suppliers across the province -- the last of a dying breed of contract in Canada, according to Brossoit.

"We're not going to see contracts like this in the future. This is the last one," he said, referring to high local content thresholds.

"It is more and more complex and difficult to justify activity being done here in Canada and in Quebec when those requirements are very hard on us," he added, pointing to stringent local content rules in the U.S. and Europe.

In February, Quebec's public pension fund manager awarded a pair of contracts for a $6.3-billion light-rail project that will connect the city to its suburbs and to its international airport. Montreal-based SNC-Lavalin Group Inc. is a part of both consortia that are responsible for making the cars and for engineering, procurement and construction. Bombardier has no role in either.

No local content requirement for the rolling stock contract was set by the Caisse de depot et placement subsidiary that is overseeing the project.

Bombardier shares closed down 15 cents or 5.7 per cent at $2.50 on the Toronto Stock Exchange.

Companies in this story: (TSX:BBD.B, TSX:SNC)