By Allison Lampert
MONTREAL (Reuters) - New York City Transit will stop taking new train car deliveries from Bombardier Inc (TO:BBDb) until it fixes existing cars, as the Canadian aerospace and transportation company faces pressure to improve performance at its rail unit, its largest division by revenues.
NYC Transit President Andy Byford told a Metropolitan Transportation Authority (MTA) committee meeting this week that Bombardier is not making a "case" to win future rail contracts from its longstanding customer, following performance problems and delivery delays on the 300 subway car order, according to a webcast of the meeting viewed by Reuters.
Bombardier has made progress in meeting its latest delivery schedule on the order worth about $600 million, but several of its R179 subway cars were pulled from service recently, partly because of air compressor software defects, members of the MTA's Capital Program Oversight Committee were told on Tuesday night.
"The most recent thing we've done is stopped delivery," Byford said. "And we're not yet turning that delivery mechanism back on until they get their act together."
Bombardier spokesman Eric Prud'Homme said the company is working with NYC Transit to approve a "technical solution" that would return the trains to service.
"We expect this to happen shortly," Prud'Homme said. A spokesman for MTA, which oversees NYC Transit, referred to the webcast when contacted by Reuters for a comment.
Bombardier shares gave up early gains to trade down about 2 percent soon after the Reuters report.
Montreal-based Bombardier's rail unit accounts for about 55 percent of total revenue and has an order backlog of $34 billion. But some older contracts are marred by delays and performance problems.
Bombardier has said it will focus on growing its rail and business jet divisions after the company ceded a controlling stake in its flagship CSeries jet program to Airbus SE (PA:AIR) and sold its Q400 turboprop aircraft program to Canadian aircraft manufacturer to Viking Air.
Its stock fell sharply after the last quarterly earnings in November when the company missed cash flows due to troubles with a handful of delayed rail orders.
On Tuesday, Reuters reported that Swiss Federal Railways would not take new trains from Bombardier until it fixes the ones already in service.
"CHRONICALLY LATE"
Bombardier has delivered 160 cars from the 2012 NYC order of 300 R179 subway cars, worth about $600 million. The order is now expected by September 2019, compared with an original completion date of early 2017.
The MTA is undergoing a 10-year plan to modernize the city's transit, with billions of dollars of investment earmarked for thousands of new subway cars. "I have just made it very clear to them (Bombardier) that they are certainly not making their case for new orders very favorable. And that right now I wouldn't be wasting my board's time in asking for the business for them," Byford said. "If we're comparing bids and we know that someone is chronically late, by not just a couple of months, but a couple of years, this board will remember that," MTA board member Susan Metzger said. Prud'homme said Bombardier is taking responsibility for the trains, and has over 50 full-time employees in NYC working to support the R179 fleet. The company will have to provide at least 16 additional trains above the 300, free of charge and MTA board members were told the agency is in negotiations for an additional two trains as damages.
Separately, Bombardier said on Thursday it will buy a wing manufacturing unit from aircraft parts supplier Triumph Group (N:TGI) to boost its business jets program.