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TTC, Bombardier reach settlement over delayed streetcars

TTC, Bombardier reach settlement over delayed streetcars
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The TTC and Bombardier have quietly reached a settlement over the transit agency’s multimillion-dollar claim against the company for Toronto’s notoriously delayed streetcar order.

Neither the TTC nor Bombardier would disclose the terms of the agreement, which was signed in January but not publicly announced. TTC spokesperson Stuart Green said the details are confidential under dispute resolution process in the $1-billion, 204-vehicle contract.

The settlement comes as Bombardier races to overcome years of production problems to deliver the current fleet by the scheduled end date of 2019. Green wouldn’t say whether the settlement would cover all the costs Toronto’s transit agency incurred as a result of Bombardier’s production delays, which the TTC has previously said have run into tens of millions of dollars.

The contract for the order, which the TTC placed in 2009, allows for the transit agency to claim up to about $50 million in liquidated damages from Bombardier. But a source with knowledge of the dispute told the Star the agency didn’t seek the full amount and instead claimed closer to $35 million.

The TTC is currently contemplating its next expensive order for new streetcars, a purchase from which the Quebec-based manufacturer has not been excluded. TTC staff have said going with another company could lead to more delays and costly redundancies.

Councillor and TTC board member Shelley Carroll wouldn’t discuss specifics of the settlement, but said although negotiations got “really tense” at times, the two sides “ended up in a very fair place.”

Bombardier cuts financial outlook, full-year revenue guidance down by $1B (U.S.)

Carroll said in addition to monetary terms, the settlement included non-financial aspects aimed at facilitating co-operation between the transit agency and manufacturer “to make sure that we get the best out of those vehicles and get the vehicles on time.”

The TTC has been working with Bombardier to speed up deliveries and address ongoing reliability issues affecting the new streetcars , which have so far failed to meet performance targets spelled out in the contract.

“Certainly what we have now allows for us to continue a working relationship around these vehicles,” said Carroll (Ward 17, Don Valley North).

Bombardier didn’t answer questions about the settlement Wednesday.

The TTC board , after the company fell badly behind in delivering the current order of vehicles. According to the agreed-upon schedule, Bombardier was supposed to have supplied 73 cars by the end of 2015, but by the summer of that year reduced that target to just 27 vehicles.

Although he wouldn’t get into specifics, Green said the settlement “resolved all outstanding contractual claims,” including the “TTC liquidated damages claim against Bombardier and Bombardier’s claims against the TTC.”

A report that went to the board last year said the TTC would require 60 additional streetcars on top of the 204 it has already ordered from Bombardier to meet demand until 2023 .

The contract with Bombardier includes an option to buy additional cars from the company, but the manufacturer’s performance prompted the board to seek out other potential suppliers for the purchase.

A market sounding exercise the TTC launched in 2017 identified up to five manufacturers that might be able to supply the additional 60 cars, including Bombardier.

While extending the contract with Bombardier after it fell behind on the existing order could be unpopular with the transit-riding public, the report suggested that by some key measures it would be preferable to go back to Bombardier for the next vehicle purchase.

Buying cars from another supplier would be less efficient because having two types of new vehicles in the fleet would require two sets of spare parts and two maintenance and operating procedures for employees to learn, as well as imposing on the TTC additional administrative costs of managing two large vehicle contracts.

And while the TTC estimated Bombardier could begin supplying the additional 60 cars by the third quarter of 2020, a new manufacturer might take until 2023 to even supply a prototype that would meet the agency’s specifications.

A report expected to include recommendations about the next streetcar order was scheduled to go to the TTC board by last month, but has yet to be published.

The purchase of the additional 60 cars, expected to cost $360 million, was not funded in the TTC budget council approved in March.

In 2016, transit agency staff said the agency as a result of Bombardier’s delays. That figure doesn’t account for a separate $26-million streetcar life-extension program that failed to meet its objectives .

The TTC has also blamed Bombardier’s production woes for forcing it to supplement streetcar service with buses on some routes. The change is costly because buses carry fewer passengers than streetcars and require more drivers to meet ridership demand.

Bombardier has increased its production output and as of Wednesday the TTC had 141 of the cars in service. The manufacturer says it’s on track to supply all 204 vehicles by the end of this year as scheduled.

Green said the TTC remains “optimistic” Bombardier’s recent improvements have made the year-end target “achievable.”

On Thursday, Bombardier lost as much as a quarter of its value and bonds plunged after the company cut its 2019 sales forecast amid new struggles at its train-making business.

In addition to its well-documented struggles with the TTC order, the rail division of the company, which also makes commercial aircraft, has been plagued by missteps on high-profile projects in New York and Europe.
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