TTC Will Take Legal Action Against Bombardier, Demands Explanation

At its meeting of October 28, 2015, the TTC Board unanimously passed the following motion regarding the order for Flexity streetcars from Bombardier:

  1. Authorize the TTC General Counsel to immediately commence a claim or legal action against Bombardier for all damages sustained by the TTC relating to or arising from the schedule delays in the delivery of the streetcars and any other non-performance related issues.
  2. Direct the Chair to write to the CEO Bombardier requesting he appear before the Board at its November Commission meeting to explain Bombardier’s failure to meet past deadlines and its delivery commitments for streetcars going forward.
  3. Request TTC management to consult with alternative suppliers for delivery of the remaining TTC streetcars, should Bombardier be unable for whatever reason to fulfill this order within contractual timelines.
  4. Request TTC staff to report back on the financial and operational impacts on the TTC should Bombardier not be able to fulfill their contractual obligations to deliver streetcars.
  5. Request TTC staff to seek the advice of an outside business analyst to present to the Board on their assessment of Bombardier’s corporate outlook.
  6. Request TTC staff, in any negotiations on damages, liquidated or otherwise, to consider as a priority additional LRV’s as compensation.
  7. Direct the Chair to write to the Premier of Ontario requesting the Province’s support in facilitating the completion of the City of Toronto’s order for streetcars from Bombardier.

This motion came out of a confidential session of the Board which led to the text approved here. Point 1 was the staff recommendation in the report on the agenda, and the remaining points were added.

The story of constantly shifting delivery timelines and excuses from Bombardier has gone on for a very long time, and they have exhausted the TTC’s patience. Several comments in public session suggested that if Bombardier expects ever to be awarded work by the TTC in the future, they will have to try very, very hard to win their trust.

This is something of an empty threat, at least in the short term, because the TTC will not be ordering more subway cars until the early 2020s. Moreover, Bombardier has long been Queen’s Park’s vendor of choice for rail car orders that receive provincial funding, and it would take a major upheaval to dislodge them from this position.

Whether the Bombardier CEO actually shows up at the November 23, 2015, meeting remains to be seen. Indeed, it would be an odd situation should the TTC action have already been commenced to make such a presentation, let alone subject himself to questions he could not reasonably answer without compromising his own company’s position.

Chair Josh Colle noted that clause 7 recognizes the fact that he has already been contacted by the head of Bombardier Transportation in Germany, three Cabinet Ministers, the Mayor of Thunder Bay, and others, and that this is a politically high profile file. It will be interesting to see whether the union representing Thunder Bay workers shows up with tales of incompetence at their plant, or at least first hand descriptions of the quality problems with material received from Bombardier’s plant in Mexico. Such a move would be to establish their own credibility and fight for their jobs, a situation akin to what happened during the Canadian content debates when the contract was awarded.

Queen’s Park also has an interest through Metrolinx where concern about on time delivery of cars for the Kitchener-Waterloo ION line (whose cars will come from the Metrolinx share of teh Toronto order), and there are effects further down the line for other LRT projects if the contract completely collapses.

No doubt there will be updates on this story in the regular media in coming days.

34 thoughts on “TTC Will Take Legal Action Against Bombardier, Demands Explanation

  1. Hi Steve,

    With this lawsuit, could we see a situation where, for a lack of a better way to describe it, Bombardier “throws in” the additional 60+ streetcars at no charge? In any of the discussions you may have been privy to, has the thought ever come up? Or, are they at the point where they just want to divest themselves of anything to do with Bombardier as quickly as possible?

    Steve: It’s very hard to get a read on what the TTC’s end game is. If Bombardier could just clean up its act and deliver cars, that would be ideal, but TTC is tired of being jerked around. For its part, Bombardier claims that part of the delay is the TTC’s fault, although how this can explain basic manufacturing defects is a lot to swallow.

    Then inevitably there will be some members of Council who see this as a chance to reopen the whole issue of streetcars as part of the TTC network, and LRT lines for future operation. It would suit them just fine to see a huge additional cost above what was already an expensive, problem-plagued project.


  2. Luckily, Bombardier is not in the condo development business else they’ll be late all the time. Oh wait! The condo developers do that on their own without Bombardier.


  3. Who were the other bidders and what was their price and delivery schedule?

    Steve: There was only one other bidder, Siemens, and their price was 50% higher than Bombardier’s. One big problem they had was that they did not have an existing plant as a manufacturing base. We know that Thunder Bay can produce vehicles, but there have been many problems with this batch, not all of which originate at that plant.


  4. It is very interesting to look at Bombardier’s problems. They outsourced to a semi-Third World country in order to avoid paying proper wages. The result is that they are in severe default on a major contract – which has consequences not only because of penalty clauses in the contract – but also because the world is looking on at Bombardier’s ability to deliver.

    Now Bombardier is paying penalties and for a third shift at Canadian wages to fix the manufacturing defects caused by its cheap labour. Perhaps Canadian Manufacturers should take this as a lesson. I expect that in the end it would have been cheaper for Bombardier to do the “Mexican” manufacturing in Canada with proper wages and proper supervision.


  5. I get the feeling the TTC will eventually cut ties with Bombardier. I know it would take extreme circumstances to do such a thing but what choice is there?

    The sense I am getting is that the TTC is reaching it’s breaking point with Bombardier. In your opinion is it possible for the TTC to cut ties with Bombardier and re-tender the contract in essence saying “f**k it, it will take just as long if we re-tender the contract”?

    Steve: A problem has always been that Bombardier had the inside track for any contract where Ontario was footing a substantial chunk of the bill. This was a powerful disincentive for anyone else to bother with the expense of a bid, much less contemplating setting up their own manufacturing facility. The decision on who to buy vehicles from is as much a Queen’s Park decision as it is the TTC’s. Can you say Scarborough RT? Can you say CNG buses? Can you say Presto? Ontario has been meddling in technology choices for the GTA for decades.


  6. And yet we’re still giving Bombardier the contract for the Eglinton-Crosstown vehicles? Are we going to be having this discussion again in 5-6 years?

    Steve: To be clear, Bombardier already has the Eglinton-Crosstown contract. When the TTC placed its order, the Transit City lines were still part of their plans, and the contract had provision for the vehicles for those lines. This option was subsequently assigned to Metrolinx. Obviously, Metrolinx has an interest in seeing this sorted out too, but is unlikely to be as public with their displeasure as Toronto’s politicians.


  7. Reading your article you quote from the TTC decision that:

    “Request TTC management to consult with alternative suppliers for delivery of the remaining TTC streetcars, should Bombardier be unable for whatever reason to fulfill this order within contractual timelines.”

    Would that not mean that the TTC would end up operating two types of streetcars – the 12+ Flexity Outlook cars they have, plus whatever new streetcars the TTC would receive from the new supplier? Or would the new supplier be able to use the specific design that the TTC uses? This seems to be an interesting part of the process to me – what will happen if the TTC uses a new supplier.

    Steve: Yes, but I think this is mainly sabre-rattling. If the TTC started talking seriously about buying subway cars from a non-Ontario supplier, even non-Canadian, all hell would break loose. This is a challenge that will face Metrolinx in the electrification project because there is no guarantee Bombardier Canada has a suitable product it could credibly bid on given the TTC screwups.


  8. I agree with Steve that with the plant in Thunder Bay and Bombardier being Canadian (corporately even though when it comes to rail it’s in Germany) it’s unlikely that the TTC would be allowed to purchase from someone else, unless somehow Toronto could get funds on its own as Queen’s Park would insist on Ontario jobs in return for providing the money. And that is highly unlikely.

    The only interesting thing though is that Bombardier has already setup the rail sector as a separate company which is listed on a European stock exchange. Despite denials by the company this of course means that it could be sold as a separate entity. They have done this already with the recreational products which were of course how the company was created initially.

    Should that happen, I cannot see a future where Thunder Bay survives within a German company, the British plant is almost closed and so is the Austrian plant. Especially not if CETA is approved as Ontario would no longer be allowed to insist on Canadian content.

    I would think it could be a liberating experience for Toronto. And Queen’s Park has already shown some willingness to cut some slack with the LRT in Ottawa which is provided by Alstom.

    Oh sure the LRT will be assembled in Ottawa but that’s minor and helps with logistics, the real money is made in Europe. And the staff assembling the LRT will maintain them so it makes sense to have them assemble the vehicles.


  9. Are the next 3, 4 or 5 new TTC streetcars going to be still arriving at the end of 2015?

    Steve: That is the current claim by Bombardier.


  10. The TTC is saving over half a BILLION dollars by going with BBD. Maybe that ought to be taken into consideration in the overall scheme of things. Good thing they are late as the new car barn is STILL not open. What would they do with them?

    As for Siemens or any other builder there is the long vacant Ford plant near St.Thomas that nobody wants to buy. Ought to get that cheap.

    Steve: Leslie Barns will open in late November, and the Flexitys will shift to that location according to the Service Planning memo for the next schedule period that just came out.


  11. Further to the other comments, let’s not forget that the most recent contract by Metrolinx for rail vehicles was given to a Japanese manufacturer for the UP Express vehicles. Perhaps there is hope out there … somewhere.


  12. I wonder at what point the past the break even point is crossed and the Mexican supply chain ends up costing more money than it’s saved?

    The issue of the Mexican parts that weren’t built to spec and didn’t fit raises general concerns about how Bombardier’s doing work at that plant. Not following the blueprints is not following the blueprints and having parts that don’t fit is the same thing whether you’re building a streetcar, a TTC streetcar, or a doghouse. Has anybody gotten in trouble for not building these assemblies to the plans and actually shipping them out believing they’ll be acceptable? Breathing down people’s necks in Thunder Bay isn’t going to do anything to fix this situation when the problem’s occurring upstream in the parts supply chain. The TTC people should have been visiting the plant in Mexico, not the one in Thunder Bay.

    Steve: The problem may be in Mexico, but the management issue lies at Thunder Bay for even attempting to fob off bad cars on the TTC.


  13. What I find strange is why Bombardier is having any issues at all, as the Flexitys are not a new product and variations of which have been used in many other cities.

    Yes the TTC’s gauge is different, but I don’t think there have been any other large changes to the design, so I’m curious to know how BBD managed to screw the pooch on this one.

    Steve: The sub-assemblies for the cars running in Europe were built in Europe. Bombardier set up a North American supply chain in anticipation of orders in the USA.


  14. I wonder if Bombardier has considered adjusting their supply chain so that they get parts from Europe instead of Mexico. I would be a huge change, but perhaps it’s necessary.


  15. “I wonder if Bombardier has considered adjusting their supply chain so that they get parts from Europe instead of Mexico. I would be a huge change, but perhaps it’s necessary.”

    It isn’t parts, its assembly of components including the bodies themselves, the most recent problem of defective crimping of wiring connectors, both caused by poor workmanship.

    Apparently it wasn’t until the previous episode when the stuff hit the fan that BBD sent a management person to Mexico to oversee the work. This suggests there was no supervision by BBD prior to this.

    BBD should have set up a plant in Ontario instead of Mexico. Remember one of the major Japanese auto makers set up a second plant in Ontario a few years ago and they stated one of the key reasons they chose Ontario was because of a well educated work force. This after another foreign auto maker chose a southern “Right to Work” (-for-less) State and then found out the local workforce was so illiterate they could not read instruction manuals! They had to set up classrooms and train workers using pictographs! You get what you pay for.


  16. How many rail industries in Canada were bought up by Bombardier? Can one of them can build us a streetcar? Shame. There’s no choice anymore. Buying Canadian doesn’t mean what you think it means. Better to set employment mandates vs dollar amounts given to “Canadian companies”.


  17. I think that Toronto has enough of these new streetcars to have one surviving mixed streetcar/bus route as this is the final nail in the coffin of Toronto streetcar history and for good as every world class city has gotten rid of these for a reason (New York, Chicago, London, etc).

    Steve: London has reintroduced streetcars. As for World Class cities, the list is endless: Berlin, Paris, Amsterdam, Rome, Milan, Prague, Vienna, Hong Kong, Melbourne.


  18. With Bombardier’s severe problems (sucking all the money out of the rail division for the bleeding airplane division), I doubt that Bombardier will *exist* in 2020.

    I wouldn’t be surprised if TTC finds itself buying streetcars made at Thunder Bay… by Alstom or Siemens. All indications are that the Bombardier family is going to sell off the rail division in order to prop up the airplane division, and now they’re just haggling over the price.

    Remember, Bombardier’s streetcar designs are basically ABB/Adtranz designs. Corporate ownership has changed in the past.


  19. “Should that happen, I cannot see a future where Thunder Bay survives within a German company, the British plant is almost closed and so is the Austrian plant. “

    Actually, I think Siemens or Alstom probably would keep one Canadian plant and one British plant open (along with one US plant). It’s surprising how many countries want their trains “built locally” even if that just means carshells and assembly. Saves on shipping costs for those huge carshells, anyway, so there’s reason to do it.


  20. I guess someone forgot to tell the Americans that Washington, D.C. might lose their “world class” status by building streetcars. Even Dubai, which was rolling in money until the collapse of oil prices, was building LRT/streetcars.

    Liked by 1 person

  21. Ah, I forgot my original purpose in posting. My wife recently completed her immigration from Cuba. Last weekend we made our way downtown to see the sights. She was a bit scared/claustrophobic of the subway, being underground, and she was highly excited about seeing the streetcars. (She first asked me what the tracks in the road were on the Queensway, and in my poor Spanish I said “electric trains”). They still have the tracks in Havana, but long ago cannibalized the overhead wires for other purposes. She took several photos of both the new Flexity cars and the older style CLRV. I never knew I married a railfan!


  22. The optimist in me hopes that Bombardier completes its Flexity order before its rail division either goes under or is parceled off.

    The realist in me however suggests that the TTC should look at re-tendering the contract. Recent reports out of Quebec suggest that Bombardier may be going tits up. They are claiming that ONE BILLION DOLLARS will not be enough to save its aerospace division and we all know how badly things are going with their rail division right now. It is only a matter of time before clients start jumping ship and the company folds. If I were the TTC and Metrolinx I would not wait to be caught with our pants down. I would just get out while we still can.

    When over a billion dollars cannot save you… you know you are screwed. The writing is on the wall and the TTC needs to get out while it still can.


  23. “Further to the other comments, let’s not forget that the most recent contract by Metrolinx for rail vehicles was given to a Japanese manufacturer for the UP Express vehicles. Perhaps there is hope out there … somewhere.”

    Metrolinx piggybacked on an existing order from San Marin County in San Francisco area.

    I wonder if Bombardier was actually honest with the TTC from the beginning, maybe the TTC would’ve accepted a later delivery schedule?


  24. Me:

    I think that Toronto has enough of these new streetcars to have one surviving mixed streetcar/bus route as this is the final nail in the coffin of Toronto streetcar history and for good as every world class city has gotten rid of these for a reason (New York, Chicago, London, etc).

    Steve: London has reintroduced streetcars.

    I was speaking of London, Ontario.

    Steve: Well, there’s also a Paris, Ontario, and the original name of Kitchener was “Berlin”.


  25. Things are looking dark for Bombardier. Yes, I think the TTC should consider that it may be necessary to seek another firm to supply most of the required vehicles.

    However, as to whether it is inevitable that Bombardier will go bankrupt — I am reminded of the dark predictions that James Cameron’s Titanic would bankrupt the studio. It was late, and the delivery date kept being pushed back. It was massively over-budget. James Cameron had agreed to give up all his director’s fees, in return for a greater share of the profits.

    Industry insiders kept insisting “why the only way Titanic could turn a profit would be if it was the highest grossing film in history!” Of course Titanic WAS the highest grossing film in history.

    So, I don’t think it is inevitable that Bombardier will go bankrupt.

    I can’t recall whether I only read it here, or whether I read it in the press. Isn’t the main problem that Bombardier ships chassis parts to Thunder Bay from a Mexican plant, and the Thunder Bay workers find those Mexican parts aren’t accurately built?

    The CBC broadcast a long segment where a reporter visited various plants owned by Canadian, in Mexico. Some of those interviewed seemed to be saying that even though their pay was a fraction of what Canadian factory worker got paid, after years of on the job training, a poorly paid Mexican worker was capable of work of equivalent quality to a Canadian worker. Other Canadian management types seemed to be saying that they did all their most challenging work in their Canadian plants.

    I’ve wondered whether the Canadian workers might be exaggerating how bad the parts from Mexico were, to prevent more job erosion in Canada.

    Steve: The TTC has on site inspectors at Thunder Bay, and they have seen these problems first hand. It’s a quality control problem in the Mexican plant coupled with overall bad project management by Bombardier.


  26. @Jim,

    Since when has London, Ontario been a “world class city”? Their current 2030 Transportation Master Plan is moving towards BRT to relieve stress on their bus-only system, and looking to upgrade BRT to LRT where volumes would sustain it.


  27. Does anyone here know if there have been any new streetcar deliveries since September? Not sure if this site is up-to-date or not.

    I have a feeling this threat of a lawsuit will further hinder the delivery of new streetcars – at least until it’s resolved. I doubt we will see any new ones until 2016.


  28. Looks like Quebec is doubling down on Bombardier. Their Pension Plan just bought 30% of the rail division for $1.5B. I wonder when Montreal MPs will start lobbying for C-Series Jets out of Billy Bishop.

    Steve: The end state of this approach could be interesting if Bombardier uses a continued sale of its rail division to fund the black hole of its aircraft development. As for Billy Bishop, the number of planes Porter might or might not buy from Bombardier is not going to determine the future of that company.


  29. Look on the bright side everyone! Now that car 4413—#12—is on property and undergoing its burn-in period, the TTC can finally have its “big bang” on Spadina. 18 months later than originally planned.


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