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Bombardier sees upside in city congestion

André Navarri, president of Bombardier Transportation: ‘Market trends are very robust.’

Christoph Mayerl/The Globe and Mail

The train division of Bombardier Inc. is showing surprising growth in Europe in spite of the recession and expects rising sales in North America as car-clogged cities reinvest in public transportation, the Canadian company says.

Speaking at the biannual InnoTrains train show in Berlin, André Navarri, president of Bombardier Transportation (BT), the aerospace company's rail division, said that BT's order backlog stands at $31.9-billion (U.S.), the largest in the global industry as cities around the world grow weary of favouring the car over public transportation.

In North American, traditionally a slow market for any rail company, BT's order backlog hit $6.5-billion by mid-2012, up from $4.4-billion at the start of the year.

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"Market trends are very robust," Mr. Navarri said at a press conference. "We have a revival of activity in North America."

The North American surge and continued growth in Europe are welcome developments for Bombardier as the Chinese market slows. With China unlikely to become a growth driver in the near future, Bombardier is focusing on other developing countries and competing hard for contracts in the resilient European market and the resurgent North American market.

It is also pushing new technologies, such as elevated monorail developments, in which trains run on a narrow track, supported by pillars, about 10 metres above the road surface. The company has won two monorail projects, one in Brazil, the other in Saudi Arabia, and expects more as cities realize they are cheaper to build than subways.

Mr. Navarri reiterated BT's goal of achieving an 8 per cent profit margin – earnings before interest and taxes – next year, up from 7 per cent in 2011. Some analysts think the target date is ambitious. In an August report, National Bank Financial said "we believe that the company's 8 per cent EBIT margin target could be pushed out."

Speaking after the press conference, Mr. Navarri said there is no doubt the European debt crisis and the recession in the 17-country euro zone have hurt growth, but has far from destroyed it. He said the European market is still expanding at 2 per cent or more a year, though a rate of 6 per cent would be needed to fulfill the true need for public transportation modernization and expansion.

"If you don't continue to grow the system, you will have paralyzed cities," he said.

A recent study by Germany's Roland Berger Strategy Consultants, published by UNIFE, the European rail industry association, said that world rail market has grown by 3.2 per cent in each of the past three years. "That is a remarkable achievement considering public funds are less available due to the financial crisis, which started in 2008," UNIFE director general Philippe Citroën said.

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Bombardier's recent contact successes include the Frecciarossa 1000, the new Italian train high-speed train that was unveiled at the InnoTrans show. Capable of 360 kms per hour, it will be the fastest train on the continent. The train is in production and Trenitalia, the state rail company, will begin testing its new bullet train next year.

In North America, Bombardier has won orders, or had options exercised, for almost 1,500 metro cars for Montreal, Chicago, New York and San Francisco. Toronto has ordered 182 light rail vehicles.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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