The Bombardier Affair

[Some historical information here has been corrected with thanks to an anonymous reader.] 

Recently we have seen a lot of media coverage of the political fallout from the proposed subway car purchase.  For those unfamiliar with it, here are the high points:

  • Canadian Car & Foundry in Montreal produced most of the Peter Witts and all of the PCCs for Toronto (only the second-hand cars were built elsewhere). 
  • The plant in Thunder Bay has supplied all of the subway cars since about 1965, and all of the CLRV/ALRVs except the prototypes built in Europe.  (They also supplied early buses and trolley coaches.)
  • Ownership passed via Hawker-Siddeley (hence the “H” series subway cars), through the Urban Transportation Development Corporation to Bombardier.
  • As part of the deal selling the UTDC’s assets to Bombardier, Ontario entered into an agreement to source all rail orders from them.  According to a spokesman for the Ministry of Transportation reported in the Globe, this expired in 1997.
  • The TTC is a major customer for this plant, and their importance has increased as other cities’ orders for rail vehicles went to other manufacturers.  If the TTC stops ordering cars from the plant, it will close.
  • The TTC (without going into the politics) is planning to sole-source its newest subway cars from Bombardier.  Premier McGuinty has written to Howard Moscoe saying that Queen’s Park would not object to such an arrangement, but he neither directs the TTC to make such a purchase or offers any inducement such as enhanced subsidy arrangements.
  • Siemens, Bombardier’s competitor, is lobbying several members of Council to have this deal opened up for bidding, and Rick Ducharme’s resignation turned on  Moscoe’s interference in this bid, among other things.

Late last week, we learned that an Ontario Vice-President of Bombardier had the brilliant idea of sending out invitations to a fundraiser for Adam Giambrone, a member of Council and Vice-Chair of the TTC.  Giambrone disavowed any connection to this move, and Bombardier’s Quebec office quickly went into damage control mode.

Wonderful though it would be for the offending VP to be shown the door, any casual observer has no way of knowing whether this was the act of a ham-handed local or business as usual for the company as a whole.

Coming in the midst of the controversy about the subway car order, and with the memory of Liberal leadership candidate Joe Volpe’s would-be underage campaign contributors still fresh in everyone’s mind, this is a huge black eye for Bombardier.  They hoped to land not only the subway car order but also a possible order for new streetcars.  The contracts may still go their way, but they will have to fight to get the work.  All thanks to an official who doesn’t understand that voters are tired of sleazy politicians who are bought and sold with election contributions.

Where should we go from here?

The TTC (the entire Commission, not just Howard Moscoe), City Council, the Mayor and Premier McGuinty all need to decide whether this is a transit purchase, a regional development issue, or a combination of both.

If Queen’s Park has an interest in preserving the second-largest employer in Thunder Bay, then say so and belly up to the bar.  Why can we give $100-million grants to auto manufacturers to build in southern Ontario, but we want to be o-so-coy about supporting a rail car plant in the north?

If City Hall, collectively, wants to keep this work in Ontario, they should say so.  Yes, lobby for extra funding from Queen’s Park if necessary, but don’t hang your hat on a long-expired agreement or a vague letter of support.

Is it too much to ask that politicians take some responsibility for their policies?

Bombardier, meanwhile, needs to learn that there’s a right way and a wrong way to lobby, and turf people who don’t understand the difference.  The plant in Thunder Bay deserves a fair chance to survive, not a loss-by-default through stupid, misplaced efforts at political manipulation.

12 thoughts on “The Bombardier Affair

  1. Of course, if they were really daring, Bombardier could offer to relocate some or all of the subway assembly line to the 416 or 905 — giving the purchasing regions (905 post Hwy 7 extension) rather than just “Ontario” some benefit from the business — especially ironic that Thunder Bay is way away from any possible purchaser for its product.

    Is it just too naive to note that Bombardier already assembles aircraft in the 416, and that that facility is adjacent to a subway line, giving a nice easy delivery mechanism?

    I suppose it is really.

    Steve:  That aircraft plant has also been threatened with closing.  Indeed, the CAW local there is among the supporters of the expansion of access to the Island Airport because the planes for the new airline would, they hope, actually be built locally.  As for moving operations from Thunder Bay to Toronto, I don’t think that would play very well at Queen’s Park for obvious reasons.  The 416/905 would not be as severely affected one way or another while to Thunder Bay the closing would be an immense hit on the local economy.

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  2. I have to object to one small point:

    The TTC (the entire Commission, not just Howard Moscoe), City Council, the Mayor and Premier McGuinty all need to decide whether this is a transit purchase, a regional development issue, or a combination of both.

    Only McGuinty needs to decide this, not the others.

    All the others have a responsibility to the taxpayers of Toronto to maintain and operate the TTC for the best possible cost, period.

    The issue of regional development, of keeping jobs in Canada (Ontario), is a valid issue, but it is not within the scope of the jobs of the TTC, City Council, and the Mayor.  When the TTC needs new subway cars, it is their job to get them for the best price.

    If in another forum (i.e.: at the provincial level) it is decided that preserving jobs in Ontario is a priority, then that level of government is responsible for coughing up the dough.  (Similarly, if the decision is made at the federal level that preserving Canadian jobs is important, then THAT level is responsible).

    Don’t decide to spend more money on some false altruistic guise of helping Thunder Bay and then turn around to complain to the higher levels of government that you need more money!

    Steve:  I basically agree with you.  The only place we part company is to ask whether Council should be choosing to “buy Ontario”.  In other jurisdictions (many US states, for example), the usual premise is that they “buy local” if the price premium is less than some threshold, and this tends to keep the vendors honest about their pricing.

    If Ontario wants to preserve jobs, they should be prepared to sweeten the subsidy pot just as they do for other industries like the automotive sector.  Nobody complains that their Ontario-built car was built with public subsidy to keep jobs here not just in primary manufacturing but also in the many supply and service industries.

    The flip side, however, is that this arrangement encourages manufacturers to overstate the cost of staying in business in order to extract the maximum “bailout” or “inducement” from local governments.

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  3. I would like to see a bid placed for both this subway contract and some guarantees on the maintance (parts) required and next contract.

    Subway car purchases seem to happen slightly more than once a generation.  If we skip out on the local plant for this purchase we may find it difficult to go back to them when the T3 bid comes up.   About 30 years will have gone by and most of the employees with subway train experience in this plant will have retired or moved on.

    A contract should be put forward for both the T2’s and some guarantees (quality, availability, etc.) for parts and the future T3 purchase should be a part of it.

    Local experience can be very difficult and expensive to rebuild once it has been lost.

    Steve:  There is also something to be said for keeping the plant busy enough to produce a new generation of streetcars too, but looked at on a long-term basis, I don’t think that Bombardier can count only on TTC and GO Transit to generate an unbroken line of work forever.

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  4. Bombardier does not depend solely on GO Transit or the TTC for its survival.  A quick scan at their annual report indicates that there is a large backlog for North American plants.  Beijing ordered 40 ICTS vehicles, California ordered additional bi-level cars for its Road Runner service and a possible expansion for the ICTS fleet in Kuala Lumpur.

    Why must Ontario support Bombardier?  It comes down to national and economic security.  In a world where a barrel of oil can reach $100 USD/barrel, is it smart to order Siemens metro vehicles assembled in China and shipping it 5000 miles across the Pacific Ocean?  Shouldn’t tax payer money be spent on supporting the local economy instead of foreign producers of oil?  All politicians should face reality and admit this fact.

    Donald Rumsfeld once said that he will keep Boeing and Lockheed Martin viable until the end of time with government orders.  He understands that a local capability must be kept at all times.  If Canada’s trade routes are cut off for what ever reason, who will keep Ontario moving?  Is Siemens going to break a naval blockade just so Toronto can receive its metro vehicles?

    I am proud that Bombardier is manufacturing all of Toronto’s transist needs.  It is a proud feeling to see the ICTS Mk1 gave birth to many other systems in the world.  The T1 metro cars are now used in Ankara, Turkey.  I look forward to seeing ICTS MkII, Flexity trams and other Bombardier metro vehicles moving Toronto in the future.

    Steve:  Notwithstanding this backlog, the Thunder Bay plant does not have enough work to keep it running in the long term.  I agree with your premise about keeping local manufacturing capacity, but this should be clearly stated and funded by Queen’s Park and Ottawa, not done through the back door via the TTC and Council.

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  5. There are only three things that need to be said about the subway, streetcar, and the RT replacement cars (whatever they will be) that Bombardier will no doubt get to replace.

    A special subsidy for using Bombardier at the provincial level; 
    A tax credit at the federal level, more contracts more savings; 
    With LRT technology i.e. trainsets of streetcars in their own Right-Of-Way.

    A tax credit should be granted for using other means of fast transit to get people around.  I for one can’t understand why it’s the $120 million/km of subway all the time when you can get 2.5 times more [LRT] for that amount and it’s doing the same thing, and then some.

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  6. I have personally heard Howard Moscoe state that he feels Bomabardier should relocate their operations to their facilities that are adjacent to Wilson Yard.  His resoning, rightly or wrongly, is it would save a whole lot of money and time on delivery.

    I feel that sort of deal would make Bombardier seem as if it were a branch operation of, and solely for, the TTC.

    It does seem, though, that Bombardier has been “dropping the ball” the last couple of years.  So much so, OC Transpo/Ottawa City Council have virtually awarded the new O-Train project to a consortium that includes Siemens.

    Could we be seeing the demise of Bombardier?

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  7. The problem with a re-build of the current streetcar fleet, is that it will not answer the question of accessability (which will no doubt be rammed down Toronto’s throat by the Province if it can’t be proactive and plan ahead.)  A new design with motors up top would do wonders.

    Steve:  Accessability is already mandated by Queen’s Park (by a bill passed during the Harris era, I believe), and under the current timetable transit systems must be fully accessible by about 2025.  This schedule may be accelerated.

    As for “motors up top”, no vehicle puts the motors on the roof, only various subsystems that are normally under a car in conventional designs.  Depending on the wheel arrangement, the motors may be under the car, or mounted vertically above the trucks in an arrangement allowing a gangway in the passenger compartment to pass over the truck at the low floor level.

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  8. By sending the TTC rail contracts away from Thunder Bay’s Bombardier plant, the Ontario government is sending the north into poverty. 

    In the past year alone, Thunder Bay has closed two of three major pulp and paper mills because of unregulated electrical prices.  The third has been downsizing considerably to salvage the plant.

    The harbourfront is lined with abandoned grain elevators because of the re-routing of train traffic to Churchill, Manitoba.  The coal OPG on the waterfront will be closed in 2007 by government mandate.

    With the loss of Bombardier, there will be no more major industry left.  This is why Thunder Bay’s population is in fast decline.

    The contracts stated in other postings for Bombardier are for 20 -30 commuter train cars.  These small contracts only allow for a skeleton staff at the plant, which will run a deficit.

    Steve:  Yes, if that plant is to survive, it needs a long term commitment with a large order as a base to carry it over the gaps between the smaller orders. 

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  9. Why should someone flipping burgers at McDonalds contribute to a ridiculous job scheme of $3 million per job ($750M overall) to Bombardier which is playing the same untendered “survivor” game in Montreal for $1.2B?

    Steve:  You cannot charge the entire $750-million to the cost of keeping jobs, only at most the alleged extra cost which Siemens puts at $100-million.  Most of the money to pay for this comes from Provincial and Federal subsidy funds and therefore comes from people all over Ontario and Canada.  We routinely shell out subsidies this large and more to other manufacturing companies as direct grants.

    Having said that, yes the same thing happened in Montreal which recently awarded a sole-source contract for new subway cars to Bombardier. It is no secret that Quebec has a strong policy of buying locally, and Bombardier is good at working that angle. 

    Why are these cars needed at all?  They were built to last decades.

    Steve:  Actually, by the time the new cars are here, the ones they are replacing will be over 30 years old, their design life.  The H-5 series will not be missed from a maintenance point of view because they were the first of our subway cars to use solid-state electronics, and they were plagued with troubles from day one.  Similar problems exist with the streetcars.

    It is cheaper to give the disabled cab “passes” which I am sure they would prefer.  I would prefer a cab to the TTC anytime.

    Steve:  Actually, accessibility features are only a big issue for the streetcar fleet (which is not the subject of any supply contract yet).  They benefit not only the disabled, but those who have trouble with stairs.  From a service quality point of view, low floor, all-door loading will lessen stop service times.  Cabs are not an option for some travellers who have difficulty folding themselves into and out of an automobile, but can deal with a roomier transit vehicle.

    In 2050 when the subway and streetcars need replacing or refurbishing, alterations can be made. 

    Steve:  By 2050, the vehicles we are planning to replace now would be over 70 years old.  They won’t last anywhere near that long, the cost of keeping them will climb as subsystems and the carbodies deteriorate, and the fleet will become much less reliable with predictable effects on service. 

    Moscoe and Miller are an insult to taxpayers.  Without them Torontonians can spend their earnings as they wish, driving the economy to create the high-tech sectors (and jobs) we wish to buy from.

    Steve:  Hmmm … you may want to add Dalton McGuinty and his handouts to the auto industry to your list, along with whoever is in power in Ottawa where spending is intended to buy votes (just look at the recently announced military purchases).

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  10. Steve, you make some good points.  But the Ontario Municpal Act was set up to require tendering as a feature of transparent, competent and ethical government.

    I believe your $100M should possibly be $235M but even $100M in taxpayer dollars is an enormous amount.  I don’t buy the arguments on needing subway car replacements as I’ve never seen or read about a single dent, bit of rust, a breakdown or electronic failure on any subway car.

    As for old vehicles, The US still uses its B52s from WWII because they were built to last. Can old human joints remain flexible with use? I really don’t know but suspect that is the case although I fully agree that when new cars are needed, lower platforms make sense.

    Steve:  The lower platform issue applies to the streetcars, and there has not (yet) been any decision to sole source this.  Only the subway cars.

    As for spending $250,000 per job for Thunder Bay, how many jobs will such economics cost us when Ontarias waste their cash on un-needed untendered subway cars rather than the homes, subway passes, the arts, electronics, etc. they need which are not not going to be made in Ontario?

    I think this is Premier McGuinty’s first really big mistake.  It taints him with Liberal style spending habits and Liberal ethical practises.  C’mon Dalton, it’s not too late to turn this thing around!!

    Steve:  The Tories love to spend money to save jobs too. 

    The question is whether we are going to embrace a laissez-faire capitalism where jobs, money, contracts go wherever the market takes them, or use our buying power to keep jobs at home.  That, by the way, used to be called “liberalism”, but the word’s meaning has changed over the past two centuries.

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  11. On the issue of keeping jobs in Thunder Bay, Steve, I forgot to mention about the loss of manufacturing jobs.  I suspect it is sometimes because developing nations can produce goods more cheaply and effectively. 

    More often it is because unions naturally want to negotiate one contract rate for all plants whereas manufacturers, especially the publicly traded, must obtain the highest profits and will therefore only locate in centralized areas due to transporation costs.  I believe this centralization would cease if some very modest transportation cost formula were agreed to by unions.  This would make sense as it is generally less expensive to live in Nova Scotia than Toronto, for example.  Manufacturing would then spread out again.

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  12. It is a fallacy to imagine that by buying unneeded subway cars jobs will be “saved”.  Ontario jobs will be lost when Ontarians pay overly steep taxes to fund unecesary government spending and they then cannot afford to buy the Made-in-Canada homes, cars, electronics, etc. they want and need. It is NOT a policy vs conservative argument at all.  That’s the absurdity.

    Steve:  That may be true, but to pretend that governments of all stripes are not in the business of spending money on many types of local employment support at the national and provincial level is also absurd.  As for “made-in-Canada”, it’s rather hard to buy a home that isn’t made here if you’re going to live here; cars are manufactured domestically for the most part;  there hasn’t been a Canadian electronics industry for years.

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