Bombardier has lost a significant amount of money on its streetcar contract with the TTC, and the corporation initially underestimated the work required to fill the $1-billion order, according to company executives.
Lee Sander, president of Bombardier Transportation’s Americas division, and David Van der Wee, chief operating officer for the division, made the admission when they spoke at a meeting of the TTC board Thursday.
Sander said that after earlier delays, the company is now on track to meet the final deadline of supplying all 204 cars by the end of 2019.
But he conceded the project has been more complicated and costly than initially predicted.
Van der Wee acknowledged that, when the company bid on the streetcar contract more than a decade ago, it believed it would be relatively simple to take the Flexity-model streetcars it had years of experience building for cities in Europe and deploy them in Toronto.
It turned out the vehicle required significant revisions to adapt to Toronto’s environment, including making some components out of a different type of steel that could resist corrosion caused by the city’s winter salting and other factors. The cars also had to be re-engineered to fit the unique turn radii, grades, and track gauge of the TTC’s century-old streetcar network.
Perhaps most significantly, Bombardier had to “North Americanize” the production process for the streetcars, including shifting vital welding work to Mexico from the German facilities where the company had built Flexity cars for almost two decades.
“The magnitude of that (work) was, I think, underestimated. And I think that is one of the core issues why the startup of this project was so difficult and so challenging,” said Van der Wee, who has been COO since 2017.
Sander added that “Bombardier has lost a significant amount of money from this project” and, in retrospect, it underbid on the work.
“We, too, in hindsight would have preferred that we had bid a higher amount so … this might have been profitable, as opposed to the very large loss that Bombardier has incurred on the project. Nonetheless we live up to our commitments. We turn around. We deliver,” he said.
A company spokesperson declined to say how much money Bombardier has lost on the deal.
Sander told the board the company’s earlier problems are behind it.
“I can assure you that we learned from our mistakes,” he said.
“Our efforts and important investments in resources and time have paid off and enabled us to significantly improve the number of vehicles produced as well as their reliability when in service.”
He said Bombardier has quadrupled its production rate for the streetcars over the past two years, in part, by spending $20 million to open up a second production line, redeploy employees, and duplicate supply chains for vehicle parts.
The company has produced 188 of the cars, with just 16 left to go in the order.
That represents a remarkable turnaround from earlier stages of the contract, when Bombardier repeatedly blew deadlines to supply the cars.
“What you see today is Bombardier at its best, Bombardier delivering on its commitments,” Sander said.
Asked whether anything could prevent the company from delivering the remaining cars on time, Van der Wee said Bombardier was monitoring the performance of one of its suppliers. The company, called Wabtec, is responsible for important streetcar components such as doors and braking systems, and has recently experienced production issues.
Van der Wee said, so far, Bombardier has been able to handle the resulting parts shortage, but Wabtec’s problems are “a growing concern with respect to our ability to deliver all of the vehicles by the end of the year.”
TTC CEO Rick Leary said his agency was pleased the company had been able to improve production.
“It was only about 30 months ago that the TTC really was uncertain of where it stood with the delivery of these streetcars,” he said.
Leary stated that once the full order is delivered and all of Toronto’s older vehicles are retired, the TTC will be able to make the “grand statement” that its entire streetcar fleet is accessible.
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Bombardier’s presentation wasn’t as well received by some members of the board.
“It’s really on them to deliver the goods that we’re paying for, and they want a gold star for just fulfilling their end of the contract?” said Councillor Brad Bradford (Ward 19, Beaches-East York) in an interview. Bradford argued it was the TTC and its customers who bore the brunt of the company’s production problems.
Because the TTC didn’t receive the cars as quickly as expected, it was forced to attempt to extend the life of its older streetcars, which was a costly process that left riders taking unreliable vehicles that had been on the road for 30 years or more.
The initial schedule called for Bombardier to deliver 73 streetcars by the end of 2015.
It managed just 14.
Late delivery wasn’t the only issue; in July 2018, the company revealed it would have to recall 67 of the vehicles to repair a welding defect, a process that will take years and require taking the vehicles out of service one-by-one and shipping them to a facility in Quebec. The TTC and Bombardier say they will manage the recall to ensure it has minimal effect on service.
The TTC filed a claim against the the company for its production issues and earlier this year the two parties settled for an undisclosed amount.
Much of the TTC board meeting Thursday was taken up discussing a recent report from the city auditor general that found serious gaps in the administration of the Presto fare card system.
Auditor General Beverly Romeo-Beehler said the lack of proper oversight made it impossible to determine how much revenue the transit agency is losing from malfunctioning Presto equipment and other issues with the fare card.
In a split vote of five to two, commissioners asked TTC staff to issue a request for information to identify other potential fare-card suppliers and technology that could “benefit the TTC and its customers.”
A report is expected back by the end of next year.
The decision doesn’t mean the TTC will break its current contract with Metrolinx, the provincial agency that owns Presto. There are still seven years left on that deal, which was signed in 2012.
But board member Jim Karygiannis (Ward 22, Scarborough-Agincourt) suggested it was a way to get Metrolinx’s attention to fix the problems. He likened the TTC’s relationship with the agency to a bad marriage.
“They’re not willing to speak to us. They’re not willing to negotiate with us. They’re not even looking at us as an equal,” he said.
In a statement in response to the vote, Metrolinx Phil Verster said: “We have enjoyed an excellent working relationship with the TTC. We will continue to listen carefully to all of our transit partners.”