Bombardier Weighs Mexico Rail Bids as Europe Market SlowsFrederic Tomesco and Brendan Case
Bombardier Inc., seeking to diversify the company’s rail business outside recession-mired Europe, is considering bidding on passenger-train projects in Mexico and elsewhere in Latin America.
A half-dozen possibilities have been identified in Mexico, Alfredo Nolasco, head of Bombardier’s Mexican unit, said in a telephone interview. The Montreal-based company is also “actively looking for bids” in countries such as Chile, Peru, Colombia and Panama, said Nolasco, who declined to give details.
Bombardier already builds passenger rail cars in Mexico, which is attracting attention in the rail-equipment industry after President Enrique Pena Nieto proposed reviving intercity passenger service phased out in the 1990s. Sales there would help wean Bombardier from a European market that provided about 63 percent of its $8.1 billion in 2012 rail revenue.
“We’ve arrived at a moment that’s extremely important for us,” Nolasco said from Mexico City. “We want to participate in our home market, in the Mexican market. Now that President Pena Nieto has announced projects of investing in passenger trains and structures, we want to supply the materials that are going to be running on the Mexican tracks.”
Bombardier’s Mexico rail plant in Ciudad Sahagun, about 90 kilometers (56 miles) northeast of Mexico City, employs about 2,000 people. The company’s rail products include locomotives, passenger coaches for commuter and intercity trains, and rapid-transit cars, including more than 1,000 of its R142 model used on New York City’s subway system. In 2010, Bombardier led a group that won a $1.44 billion contract to build a monorail for Sao Paulo.
Mexico has about 100 billion pesos ($7.66 billion) of passenger rail investments in the works, government officials have said this year. Details on planned spending may be released when Pena Nieto presents a national infrastructure program for his six-year term, which he said on June 20 would be announced soon.
“It’s the right time to be looking at Mexico and Latin America,” Louis Hebert, a management professor at business school HEC Montreal, said in a telephone interview. Countries such as Mexico feature “traffic congestion and deficient infrastructure that goes back decades. Everything must either be built or rebuilt. There is going to be huge demand.”
Adding sales in the Americas would be a boost for Bombardier, the world’s third-largest maker of railway equipment by sales, according to a February 2013 study by Paris-based research institute Xerfi Global. China’s CNR Corp. and another Chinese company, CSR Corp., rank No. 1 and 2, according to Xerfi.
Europe’s 18-month recession helped shrink Bombardier’s rail business to 49 percent of the company’s total last year, down from 52 percent as recently as 2010, according to data compiled by Bloomberg. Regional jets, corporate aircraft and turboprops make up the rest.
Bombardier’s widely traded Class B shares have gained 25 percent this year, outpacing the 2.3 percent drop for Canada’s benchmark Standard & Poor’s/Toronto Stock Exchange Composite Index. Bombardier was unchanged at C$4.70 by the 4 p.m. close of trading in Toronto today.
Unife, the European rail industry association, forecasts sales growth in the Americas is poised to exceed the global average. North America’s gain will be 18 percent through 2015-17 from 2009-11, topping the world market’s 16.5 percent rise. Equipment sales will surge 50 percent in the rest of the Americas.
Bombardier estimated last year it built about 65 percent of all subway cars in Mexico’s capital and three-quarters of Monterrey’s urban transit system fleet from the Ciudad Sahagun rail plant.
That facility could help Bombardier’s quest to win Mexican contracts, said David Tyerman, a Canaccord Genuity Inc. analyst in Toronto who visited the plant two years ago.
“Presumably, it would put them in a good position to have a shot at winning some business,” Tyerman, who rates Bombardier a buy, said in a telephone interview. “The Mexican plant is very large, and they have a tremendous amount of capacity.”
Proposed train lines linking Mexico City with Queretaro, about 210 kilometers northwest of the capital, and Toluca, less than 50 kilometers from the city’s western sections, would cost about 77 billion pesos, according to Hernan Villarreal, a transportation official at the Ministry of Communications and Transportation.
Tender offers on those projects will be ready in 2014’s first quarter, according to Villareal, while technical studies are under way on a third line, catering to tourists on the Yucatan peninsula. Other projects under consideration include light-rail expansions in Monterrey and Guadalajara, according to government projections this year.
Bids for the Monterrey project are due by July 16, and the company may pursue the work alone or as part of a group, according to Nolasco.
Benito Rodriguez, a spokesman for Monterrey’s light rail system, did not reply to requests for comment by telephone and e-mail. Officials of Jalisco state, which contains Guadalajara, referred questions to Bernardo Gutierrez, the local representative of the federal government’s Ministry of Communications and Transportation.
“People need an economical, efficient means of transportation,” Gutierrez said in a telephone interview yesterday.
The main goal for Bombardier in Mexico is to sell trains, Nolasco said. “But we can sell signaling, we can sell engineering, we can sell the communications facilities. We will look at each project individually. Depending on the scope, there might be different choices.”
Competitors are circling, too. Siemens AG is awaiting details on the Mexican rail projects, said Markus Mildner, the Munich-based company’s executive vice president for infrastructure and cities in Mexico and Central America.
Alstom SA “is going to participate in the coming tenders” for urban rail work in Mexico, Isabelle Tourancheau, a spokeswoman, said yesterday by e-mail. Levallois-Perret, France-based Alstom can work with local and international partners, depending on the project, she said without being more specific.
Bombardier is “extremely happy to see that the Mexican passenger railroad system is coming back to life, which is great news -- not only for Bombardier but for the country,” Nolasco said. “This is something that Mexico eagerly needs.”