UK: Bombardier wins £188m rail contract

[John Ashworth]

Bombardier wins £188m rail contract

Last UK train factory thrown lifeline after losing Thameslink deal

Dan Milmo, Industrial editor
guardian.co.uk, Wednesday 28 December 2011 14.27 GMT

Britain's last remaining train factory has been thrown a lifeline after winning a £188m contract to build 130 new rail carriages.

The future of the Bombardier plant in Derby is under threat, with more than 1,400 jobs earmarked for the axe, after the government chose German manufacturer Siemens as the preferred bidder for a £1.4bn Thameslink trains contract this year. However, the Department for Transport is scrambling to find contracts that will prolong the future of the 172-year-old former British Rail factory and on Wednesday it announced a deal for Bombardier to build 130 carriages for the Southern franchise.

The transport secretary, Justine Greening, said: "This deal for more than 100 new carriages is great news for rail passengers and brilliant news for Bombardier and Derby. It lands Bombardier with a crucial train order and I look forward to Bombardier workers in Derby being among the winners of this important deal." Although the Southern rail franchise has awarded the contract, it is supported by a payment of £80m from the DfT.

Production of the carriages will begin in the second half of next year, although the deal is not a like-for-like replacement for the Thameslink contract. The 1,200 carriages for the Thameslink route were seen as pivotal for the long-term future of 3,000 jobs at Derby because, even with the Southern contract, the plant will have no more work once a contract with London Underground expires in 2014.

Greening said last week that she was "enthusiastic" about giving the Canadian group a £120m contract to build new carriages for the CrossCountry franchise, although she has yet to give the full go-ahead to the contract. Taken together, the CrossCountry and Southern deals would provide orders for around 165 carriages – or about 14% of the Thameslink contract.

An official at the Unite trade union said the Southern contract alone would not be enough to secure the plant's long-term future. "It is a positive step in the right direction but is not the answer in itself. The campaign needs to continue," said regional officer Tony Tinley. "Clearly it is a positive step and a lot of the achievement is down to the level of commitment from the local community, trade unions and politicians. However it is a step in the right direction and not the solution."

Bombardier said it was "delighted" with the Southern contract as it laid out other life-saving developments that it hopes will come to fruition this year. Paul Roberts, Bombardier Transportation's chief UK representative, said he hoped for "contractual agreement" on the CrossCountry carriages by March 2012 and expected "greater clarity" on the £1bn Crossrail contract in the new year. Pointedly, Roberts also welcomed the recommendation by the Commons transport select committee that future train orders hive off financing from train design and manufacturing when deciding the winner of future carriage contracts. The committee was told that Siemens's superior financial firepower was a key factor in securing preferred bidder status for Thameslink.

Roberts said: "These developments are therefore an encouraging step in the right direction and will be integral elements in considerations as part of Bombardier's UK review."

Bombardier has not yet laid off the full total of 1,400 workers, with the company deciding to wait for the results of the Southern, CrossCountry and Crossrail deals. Colin Walton, who retires as chairman of Bombardier's UK transport business in February, has described the CrossCountry and Southern contracts as "vital" for the plant's future.

But it is thought that Bombardier will still need to secure a Crossrail-sized contract to guarantee its future in UK train manufacturing. The award of the contract for 60 trains for the Heathrow-to-Canary-Wharf Crossrail route has been pushed from late 2013 to 2014 to save costs, with the government saying that it will allow the tender to include recommendations from a review of public procurement that was announced in the wake of the Bombardier decision. Although European Union rules forbid member states from showing domestic bias in procurement decisions, the government has made clear it would like the Crossrail contract to give UK-based firms a fighting chance, with ministers talking of a "sharper focus on the UK's strategic interest".