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Siemens wants to bid on TTC deal

Subway cars made in China would cost less than Bombardier’s, German firm says


Toronto risks overspending by as much as $100-million if it goes ahead with a plan to buy new subway cars from Bombardier Transportation without allowing others to bid on the contract, a rival firm says.

At its meeting today, the Toronto Transit Commission will discuss the design of the 232 replacement cars, for which it has budgeted $705-million over five years. It has entered exclusive talks with Bombardier on the cars, which would be built at the company’s Thunder Bay plant.

But representatives of Siemens Transportation Systems of Germany estimate they could deliver more or less the same subway cars for $535-million, although they caution they have not seen the TTC’s specifications.

“We’re very confident that we’re $100-million-plus lower than the competition,” said Mario Peloquin, Siemens’s director of business development for Canada.

Mr. Peloquin said Siemens could offer a substantially lower price than Bombardier because costs tend to “naturally” inflate in the absence of competition on a big contract, and because Siemens would build most of the cars at a plant in China, where labour costs are significantly lower.

He said the only way for the TTC to ensure it gets the best price is to open the contract to other bids. He said his company’s cost estimate was sent to TTC officials yesterday.

But TTC chairman Howard Moscoe dismissed Siemens’s assertions, saying the budget of $705-million is only an “upset figure” and that the TTC intends to pay much less for the cars from Bombardier.

“They don’t even know what our specs are,” Mr. Moscoe said yesterday of Siemens. “It doesn’t mean anything.”

He stressed that the TTC is still negotiating with Bombardier on a price.

“Basically it’s sour grapes,” he said.

Mr. Moscoe pointed to a 1992 agreement between Bombardier and the Ontario government of Bob Rae, signed when the Montreal-based firm bought the once-government-owned Thunder Bay plant, that guaranteed “all future rail transit orders for Ontario customers” would be manufactured either in Thunder Bay or at the company’s now-defunct plant in Kingston.

Money is expected to flow to the TTC from the federal and provincial governments to help pay for the subway cars.

But the current Liberal government at Queen’s Park, while not opposed to sole sourcing, says the 1992 deal is no longer valid. Bombardier has said it believes the deal should be honoured.

Mr. Moscoe said he doesn’t want to get between the company and Queen’s Park: “I don’t want to get involved in any legal matters,” he said.

But he said it is important to keep the Thunder Bay plant — the only plant that produces subway cars in Ontario — up and running, both for the economic health of Thunder Bay and for the benefit of public transit across the country.

“It’s in the long-term interest of all public-transit systems in this country to ensure that we retain a facility for constructing subway cars in this country. If the TTC doesn’t buy this order, who would?”

The TTC has said it will submit Bombardier’s bid to independent auditors to ensure that it is competitive with other international contracts.

TTC chief general manager Rick Ducharme originally recommended that the city councillors who sit on the Toronto Transit Commission put the subway contract out for competitive bids. But the commission decided to go with the sole-source approach.

Mr. Ducharme said he would urge it to seek other bids if he is not comfortable with the price Bombardier wants. He said word from Siemens that it could produce subway cars at a lower cost would put pressure on Bombardier as negotiations continue.

“If it’s $700-million, and Siemens is saying they could have done it for 500 and some, that’s going to be an interesting assessment,” he said. “Once I find out what the apples-to-apples are, that’s what I’m going to have to look at.”

All of the TTC’s current subway fleet and most of is streetcars were built at the Thunder Bay plant. In the late 1990s, the TTC bought its T1 subway cars without putting the contract out to bids.

Siemens also has benefited from sole sourcing, garnering contracts to build light-rail vehicles in Calgary and Edmonton without competition.

But sole sourcing, long a practice in the transit business, has come under fire in Canada, with Bombardier in the crosshairs.

French competitor Alstom Canada, which, like Bombardier, has a plant in Quebec, has protested against calls to give Bombardier a $1.2-billion contract to replace 366 of Montreal’s subway cars without competition.

Paul Pugh, president of the Thunder Bay plant’s Canadian Auto Workers Local 1075, said that if the company fails to get the contract, it would likely mean the end of the factory, which would put hundreds of people out of work.

“For the plant, it’s pretty much life and death,” Mr. Pugh said. “For the city it’s not quite that, but not too far off either.”

The Thunder Bay plant went through layoffs in 2003, which cut its work force to about 400 from close to 1,000. If the TTC contract is signed, at least 300 workers could return to work for five years, Mr. Pugh said.

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