Bombardier loses VIA Rail contract to Siemens in Canada

Bombardier losing a Crown corporation contract sends clear messages

VIA Rail, Canada’s national passenger rail service, has announced that it has selected Siemens to provide locomotives to replace its older engines and expand its service. This is specifically for the highest volume portion of the service through Toronto and reaching from Quebec City to Windsor.

The company that they didn’t select is Bombardier, the Quebec-head quartered Canadian rail company. The company with a political lock on all major governmental acquisition processes in Canada.

What is VIA Rail? It’s an independent Crown Corporation. It has annual expenses of $631 million CAD and its revenue was only $366 million CAD in 2017. The difference is subsidized by the federal government. VIA Rail loses money because it’s legislatively mandated to provide passenger rail service to over 400 communities, most of which are tiny villages and town with almost no passengers. Like Canada Post, it’s hamstrung in terms of closing the revenue gap. As a result of the above, its procurement processes are both not as strictly managed as purely governmental acquisitions and more subject to political influence.

The selection of Siemens in this context sends a few messages of varying nuance.

The first is obviously that Canada’s procurement process is open for international business, transparent and fair. As with Trudeau buying the pipeline, making it clear that Canada is open for business is good national policy.

The second is that it sends a message to Germany that despite Ontario’s cancellation of an almost completed wind farm being built by WPD, a German firm, Canada is open for business for German firms such as Siemens. Ontario being Canada’s biggest economy, Ford’s actions such as direct intervention in Hydro One since taking the reins of power have been hanging a large ‘closed for business’ sign around Ontario’s neck. Perhaps most notably, the German Ambassador to Canada pointed out the governmental meddling in a completed deal and an almost finished wind farm.

The third is that it says that, despite appearances over the past decades, Bombardier actually has to work for contracts in Canada occasionally. It was just bailed out — again — for billions — again — by the Quebec and federal governments — again — and then sold its one shining air asset to someone else, effectively losing the money at a card game at three in the morning. Bombardier has been the drunken husband of Quebec corporations for decades, spending wildly, losing money and then slinking home to promise it won’t do it again. Maybe the C-Series debacle in combination with the Toronto streetcar fiasco is making it possible for politicians to not keep being the abused spouse. Or maybe it was just a year early in the cycle of abuse, faux apology and forgetfulness.

The fourth is that it says that VIA at least is distancing itself from the likely corruption convictions which Bombardier Transportation is facing over Russian bribery. Bombardier has been looking at SNC Lavalin — another Quebec firm and at one point the most corrupt firm globally according to the World Bank with about half of the roughly 600 incidents of major corruption being within SNC Lavalin and its subsidiaries in 2013 — and learning the wrong lesson, that corruption pays. While Quebec, Canada and by extension all municipal governments and Crown corporations are the abused spouses in this analogy, having your spouse arrested makes it easier to break the cycle.

The fifth is that Quebec took its eye off the ball. It’s unusual for a Quebec politician to admit to being incompetent at corporate welfare, yet that’s what happened.

Asked to comment on his previous promise to use all of his influence to make Via Rail change its mind about going with Siemens, Quebec’s Economy Minister Pierre Fitzgibbon said he got involved late in the process but plans to learn how to better support Quebec companies next time around.
“The influence I had didn’t work, but certainly I’m going to — from a post-mortem perspective — look at what could have been done differently to protect our Quebec and Canadian content,” he said in an interview with CBC News.

The sixth is that it says Siemens is so much better than Bombardier at making train locomotives that it can beat it competing at a moneyless Crown corporation which is headquartered in the same city as its chief competitor. That has to sting in Bombardier’s HQ, as the Berlin Transportation executives do report to the Montreal CEO.

Finally, there’s a lesson in there about Siemens, a German company, beating Bombardier Transportation, a German-headquartered subsidiary, as well. With GE’s slow dissolution, it appears that Germany is doing extremely well at getting a major portion of train manufacturing in this hemisphere.