Bombardier Partners with Rival Siemens for US$3B Share of German Rail Contract


MONTREAL - Bombardier Transportation has signed a framework agreement with Siemens AG for a US$3-billion share of a large German high-speed rail contract.

The Berlin-based railway division of Bombardier Inc. (TSX:BBD.B) is partnering to develop and supply components for up to 300 ICx high speed trains for Deutsche Bahn.

Two orders for 220 trains would be worth US$3 billion to Bombardier. The agreement also includes an option for up to 80 additional trains that could be ordered until 2030.

Production will start in the summer of 2013.

The contract was previously announced by Deutsche Bahn as its largest-ever order.

Walter Spracklin of RBC Capital Markets said the deal demonstrates Bombardier continues to win big contracts in Germany, including a recent $867-million deal from DB Regio for 200 mass transit locomotives.

''With management highlighting potential key contracts in Germany for up to 1,000 rolling stock cars and locomotives, we note that Bombardier is participating significantly in the country's transit initiatives and we believe has further opportunities in the future,'' he wrote in a report.

Spracklin said the latest agreement with a major competitor highlights the strength of Bombardier's products and its opportunity for further collaboration.

Bombardier will supply Siemens with body shells, trailer bogies and complete final assembly of coaches.

The head of Bombardier's passenger division said improvements that improve the aerodynamics and reduce the weight of the cars developed by the company will make a significant contribution to the project.

''The ICx will have a decisive influence on the future of long-distance travel in Germany and will be a showcase project,'' said Stephane Rambaud-Measson.

Bombardier's work will be done at its sites in Gorlitz, Hennigsdorf and Siegen, Germany.

''We are delighted to be playing a decisive role in a big project in our home market here in Germany,'' added Oliver Schmidt, a vice-president of sales.

More than 100,000 Bombardier trains are in operation in over 60 countries around the world. The train and plane manufacturer has annual revenue of some US$17.7 billion.

On the Toronto Stock Exchange, Bombardier's shares closed up 24 cents, or 3.6 per cent, at C$6.91 on Monday.

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