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Bombardier's Derby train factory may get reprieve

A worker walks past the entrance to the Bombardier plant in Derby, central England, July 5, 2011.

DARREN STAPLES/REUTERS

Bombardier's Derby train factory, Europe's largest, is in a last-ditch fight for survival.

In July, when the Canadian transportation giant lost a £1.4-billion ($2.18-billion) train-building deal to Germany's Siemens AG, the company announced that about 1,400 employees – almost half the work force – would be let go in the autumn. Bombardier Inc. management made clear the enormous factory, located in central England, would eventually close as existing contracts wind down.

Since then, the political outcry from local and national politicians over the gutting of Britain's last train factory has been so intense that the Department of Transportation has been working overtime to speed up the awarding of contracts that might keep Derby running.

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In early September, 200 Bombardier workers went to London to urge ministers not to award the Thameslink contract to Siemens, to no avail.

For Bombardier, two contracts now look promising. The first would see the company build 57 electric-powered carriages for the passenger fleets used on the CrossCountry railway franchise, whose service extends from Scotland to England's southwest. The contract would be worth perhaps £120-million and Bombardier is already involved in the feasibility study.

"If we win, it could save hundreds of employees," Bombardier spokesman Neil Harvey said Monday. "We built the original [CrossCountry]trains, so we have an advantage here."

The second would see Bombardier build 130 carriages for the Southern Railways franchise. Bombardier is the clear favourite to win the contract since it built the Electrostar trains used on the Southern's London-to-Brighton route.

The Southern contract, which might be worth £200-million, offers the prospect of almost immediate work because Southern wants new trains in service by the end of 2013.

While neither the Southern nor CrossCountry contracts, if won by Bombardier, would be enough to preserve all of the jobs at Derby, they would be enough to guarantee many of the 400 or so skilled jobs at the site. Bombardier fears that the technicians and engineers, once let go, would either leave the industry or migrate to competitors.

The hope of the British government, and Bombardier, is that the contracts would tide the company over until the next big train deal – the £1-billion Crossrail contract – is awarded in 2014. If Derby were to lose all its engineers before then, Bombardier probably would not be able to bid for the contract. If it doesn't, it probably would go to Siemens by default.

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The award to Siemens in July of the Thameslink rail project, which will run on a north-south axis through London, was a serious blow to both Bombardier and Britain's industrial ambitions. If the related services work is included, the value of the contract would have been worth more than £3-billion and secured Derby's future for many years. Derby, which is also home to a Toyota plant and a Rolls-Royce aerospace factory, is one of Britain's last large-scale manufacturing centres.

The government said delivering the contract to Siemens represented better value for the taxpayer and has refused to reopen the bidding. While precise reasons for government's decision have not been released, the speculation is that Siemens, whose credit rating is higher than Bombardier's, offered a more attractive financing package.

Derby has been the centre of Britain's rail industry since the middle of the 19th century and became a symbol of the country's industrial might. The Germans used Zeppelin airships to bomb the city in the First World War. In the Second World War, Derby once again was targeted by German bombers.

The 84-acre site currently supports 3,000 full-time and temporary jobs and about 10,000 jobs among the 100 suppliers in the region. Bombardier is to announce in early October the precise number of Derby employees that will be let go, and when, because of the lost Thameslink project.

Editor's note: An earlier online version of this story and the original newspaper version of this story incorrectly described the Thameslink rail project as running on an east-west axis. This online version has been corrected.

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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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