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It may be before the starter’s gun, but Siemens has brought forward a bid to build 232 subway cars to replace old cars on the TTC’s fleet. The proposed bid is $535 million, $180 million below the $705 million the TTC has budgeted for the project.
The TTC is working with Bombardier on designing the specifications for the next generation of subway cars. The work with Bombardier doesn’t commit the TTC to buying from this builder, but it does make the company the front runner. Some have questioned whether Bombardier should be getting this inside track. We’ve covered some of these developments here.
Howard Moscoe warns that the $705 million is an “upset figure†— the maximum the TTC is willing to pay before it considers other options, like rebuilding the subway cars it hopes to replace. It intends to pay Bombardier or whoever supplies far less than this upset amount, although the final amount has not been negotiated.
“They (Siemens) don’t even know what our specs are,†Mr. Moscoe said yesterday of Siemens. “It doesn’t mean anything.â€
He stressed that the TTC is still negotiating with Bombardier on a price.
The thing is, Siemens is primarily able to offer an initial bid at $180 million below the upset figure because its cars would be built in China.
Mr. Peloquin said Siemens could offer a substantially lower price than Bombardier because costs tend to “naturally†inflate in the absence of competition on a big contract, and because Siemens would build most of the cars at a plant in China, where labour costs are significantly lower.
By comparison, Bombardier would build the cars in Thunder Bay, as part of a longstanding agreement between the maker and the province of Ontario, ever since Bombardier bought the Urban Transit Development Corporation, an Ontario crown corporation. UTDC bought the Thunder Bay plant from Hawker-Siddeley, which manufactured its first subway cars for the TTC forty years ago. The Liberals say that the agreement has expired, but the pressure remains for the TTC to boost employment at the Thunder Bay plant. The plant currently employs 400, down from 1000 before 2003. If the TTC choses Bombardier to build the next generation of subway cars, the company estimates that it can rehire 300 of its workers for another five years.
Toronto’s subways and streetcars and a number of its buses (those made by Orion Bus Industries) have been built by Ontario factories for the past forty years, providing employment and an economic boost to those communities. Is this boost worth the extra $180 million taxpayers may be on the hook for? Or to save money, should our resources be sent to factory workers in China?
We’re likely to hear more about this in the coming months.
16 comments
an open subway train design means bigger subway parties! 🙂
If you look at the above picture of the Siemens train you will notice you can see all the way down to the end of the train. Each car opens into the next car, which gives a fair bit more space since there is no wasted wall/door, gap, wall/door between cars. I am living in Shanghai right now and they use trains by both Siemens and Bombardier. They both have this joined car design. So hopefully, whoever the TTC chooses will use the same idea in Toronto.
Over here, I like the Siemens ones better. The Bombardier ones feel cold and sterile and seem to use cheaper finishings.
Moscoe states that the Bombardier cars will be manufactured in Thunder Bay. We have all heard the story about how the Bombardier Thunder Bay facility will have to close if they don’t get this (any) order. Has anyone asked Bombardier how much of the cars will actually be manufactured in Thunder Bay or how much assembly of pre-fabricated parts, from China, are put together in Thunder Bay. Is Siemens or any other manufacturers offering any local parts/manufacturing/assembly? How much is it worth to the taxpayers of Ontario to have 400 jobs hostage in Thunder Bay? As an Ottawa resident, I’d rather not be taxed for Thunder Bay jobs and Toronto subway cars. I’m sure folks in Toronto will feel the same way when Ottawa gets around to ordering its Light Rail cars.
If the government were to take a stance and apply tariffs on foreign produced items to protect Canadian jobs, that would be one thing. Side-deals like the one between Bombardier & TTC/Province of Ontario is simply not right.
I agree with you that we should question whether we’re getting the best value from Bombardier, but I disagree with you on your point about Toronto and Ottawa taxpayers subsidizing each other’s transit projects.
Ottawa is an important part of Ontario’s economy, and Toronto is a part of Ontario. It is in Toronto’s interest to help Ottawa build its LRT, and this former Torontonian has no objections to his tax dollars going to your project.
As a Thunder Bay resident I’d rather not be taxed to subsidize LRT for Ottawa and Toronto…but I am! Since the Provincial and Federal governments have seen fit to use my tax dollars towards a transportation system that will have little if any benefit to me, at the very least the cars should be built by an Ontario manufacturer. I do not work for Bombardier nor do any of my family but I think that it makes economical sense to generate employment in Ontario and showcase a “Made in Canada” product.
The moral of your arguement assumes nothing in Thunder Bay is subsidized by Ontario taxpayers. I don’t think that’s the case.
I really don’t understand the thinking of some of you Canadians. Weakness in factory employment continues as the high Canadian dollar maked it more difficult for some export-oriented manufacturers to compete. Almost 22,000 factory jobs disappeared in May, bringing the total number of lost manufacturing positions to 187,000 since the end of 2002.
So let’s just ship more jobs over seas to the people who will work for 6 cents an hour. Real smart. Regardless if you think it’s a burden on yax payers for the extra $180 million, if you had half a brain you’d realize that even $250 million more would benifit the enconomies of Canada, Ontario, and Thunder Bay. Stop thinking inside the bubble and get you heads outta your arses.
Sure, swear at us. That’s a convincing argument.
Has anyone in this forum considered the amount of tax dollars that will be returned to the governments of both Canada and Ontario through income and other forms of taxation? Last time I checked, the citizens of China remit no taxes to Canada. It is shameful for Siemens to lobby the local Toronto politicians with promises of saving $180 million dollars. Remember that Bombardier pays its employees well and that these 400 or so individuals (my friends and neighbours) pay their taxes. I’m sure that both the federal and provincial governments are subsidizing this purchase. Mr. Moscoe is being unfairly vilified in the press when he should be commended for taking a stand for jobs for Ontarians.
Though 400 hundred jobs in Thunder Bay may not mean much to those in Toronto, I look towards government investments in the automotive sector to protect those same 400 jobs at a ford plant in southern Ontario. The Federal and provincial governments are throwing away hundreds of billions of dollars in potential tax revenue by giving the strugling car manufactures tax breaks, and by investing in the companies. These investments do little or nothing for the economy of Thunder Bay, or those in Vancouver, or Halifax. Yet we as the tax-payers fund some of these projects. Though the cost will be higher for a Candaian built railcar some reports sudgest that the federal, and provincal government would collect close to if not all of the difference in taxes. So… what if they dedicated that money to Transit, or gave Bombardier a tax break – not unlike those being given to the Auto manufacturers – so that we can Garentee Canadain jobs, and have the pride knowing that Toronto’s new subway cars were not the product of questionable labour polocies in some third world country, but built suporting the Canadian economy both in southern ontario parts plants, and the Thunder Bay manufacturing facility.
Here’s a thought – build the major part of the cars in TB but assemble them at Bombardier Toronto – conveniently located near Downsview subway station, so it might be possible to roll them out of the factory down to Wilson for commissioning. Everyone’s a winner.
Many of these comments mix up Toronto’s transit needs with the issue of Canadian (Ontario) jobs. These are two separate issues.
It is the responsibility of the TTC and Toronto City Council to get the best deal for the taxpayers of Toronto. Period.
Now, if the issue of keeping the money and jobs in Ontario specifically, or in Canada in general is important (I personally believe it is), any extra costs for this option should be paid for by levels of government who have this concern as their task. Toronto is not responsible for creating jobs outside of Toronto, so it would be up to the provincial government to make up the difference to keep jobs within its jurisdiction, or the federal government to keep jobs within its jurisdiction.
Besides this, why should the TTC (and City Council) go and spend more money to keep jobs in Canada, then have to go begging to the provincial and federal governments for more money needed to operate the system? Yes, it is six of one, and a half dozen of the other, but if the TTC chose to spend the lower figure, they would not be alone in lobbying the provincial and federal governments to make up the difference to buy Canadian.
“Bombardier commissioned a study estimating that taxes generated by building the cars in Thunder Bay would return $50-million to the Ontario government and $34-million to the federal government over the five-year contract.” – Globe and Mail, June 22nd or 23rd.
Those numbers do not add up to $180 Million in savings in tax dollars that could be spent elsewhere.
A point was raised about what local content Siemens would contribute. I think that is a great idea. I’m sure the request for proposal from the TTC would already state that the winner of the contract must have its facilities in the local area (1000km from Toronto or so – although Bombardier’s plant is 1250km away). If a statement of this nature is a required component to be met of the awarded contract, then Siemens would have to construct a facility in the area to manufacture / assemble / something to meet this requirement. In fact, if they build a facility, then put it near Toronto so that the city’s tax dollars go directly back to a local city company and the employees of the Siemens plant will then be paying tax dollars back into Toronto’s coffers. That would be a win-win situation for everyone (except Bombardier I suppose)
If Siemens does do that, then the point that Bombardier always holds over the government’s head about loosing jobs in the province can not be used. If Siemens gets the contract, then they just hire those 600 people from Thunder Bay that Bombardier laid off since 2002 (that’s from an article somewhere – can’t find the exact source). Even if Thunder Bay has to lay off more jobs because they don’t get this contact, those same people could find similar jobs at the Siemens plant. And if it is in the Toronto area, they would likely have better paying jobs anyway, plus be able to use the vehicles they are making while riding to work each day.
With that done, the fact of the matter will be that both Bombardier and Siemens will buy substantial components from China subsidiaries or Chinese companies. So the matter of who gets the contract and their true Canadian content would be almost a moot point. I would imagine that Bombardier has a slightly higher percentage of its work done in Canada, but not by much.
Other points to mention are that Bombardier was looking at relocating its transportation headquarters to Germany so that they can say to the German government that if they don’t get contracts there, then they will have to fire people there. Yes, their corporate offices are still in Montreal, but it sounds like a dirty game to me.
Also, as another person mentioned on this web page, the Siemens cars are more visually stimulating, which is a very important point in the Toronto Tourism industry where we want to show to visitors that Toronto is a leading edge city with comfortable and pleasing transit cars to travel around in.
In economics 101 everyone learns that open competition naturally provides customers is better value for their money. Be is a lower price or a higher quality good or better aftermarket service agreements, competition is always better for the customer and always worse for the supplier, so off course Bombardier does not want it, but when spending tax payer’s money – my money and your money – the government should be obliged to get the best value for their dollar.
If Bombardier truly feels that their equipment is better priced and better quality, then let them prove it though an open bid process. It seems to me that they are very worried about going to an open bid process, which makes me think they are hiding something. If Siemens’ estimated price is really too low, then let them see the final technical specs and allow them the opportunity to put in a real number based on the same information that Bombardier has been given. Only then will we be fairly able to compare the two opinions of these two companies.
Finally, Bombardier is subsidized by the Federal government to compete in the aerospace market. They are subsidized so much that the World Trade Organization has to keep a close eye on them to ensure equal subsidizing of Bombardier and their competition in that industry. Although it may be a different division of Bombardier, at the end of the day it is the same balance sheet for its stockholders. It seems wrong to me that the company can receive government funding that is then used to sell goods to government organizations on a sole source basis at elevated prices. I would think that this ethical issue should be enough for any respectable politician to say, yes, lets open up the bid and get a fair competitive price to get the best value for our tax payer’s dollars. And if at the end of the day the Bombardier price is better, then no one can say they weren’t fair about it (unless someone’s election campaign gets a little boost).
The point of my story is if Siemens wants this work, they need Canadian content too. If they include that, and can offer a better price for better quality, then by all means, that’s the one I would buy if I was signing the check! Aside from that I also believe that an open competitive bid is more ethical, and if Bombardier wins it, then by all means to with them.
Any of you that are happy with this contract going to Seimens and them building the cars in China should know what 35 of the major suppliers of parts for the cars are from Toronto and area. So kiss all that work going to them goodbye aswell when Seimens builds the cars in China.
Randy Monteith
For Bombardier assembling the trains at Downsview, this simply won’t work. The Dowsnview D’Havilland plant is part of Bombardier Aerospace, which is a separate division from their train division. The Downsview plant does not have the proper infrastructure, personnel, expertise and space to build rail vehicles. This does not make sense.
I agree that the government should subsidize Bombardier Transportation in the same way that they subsidize the automotive and aerospace industries. However, this is the responsilbility of the federal and provincial governments, not the City of Toronto. The City of Toronto should select the most attractive bid–regardless of where the company is located. The higher governments should provide Bombardier with the resources that will allow them to put together an attractive and competitive bid.
As a Torontonian born in Thunder Bay, I would like to point out that the entire city of Thunder Bay now depends on subsidies of all kinds, including:
-Low timber stumpage fees that upset the Americans
-Subsidies to farmers of the wheat shipped through Thunder Bay
-Funding to transit systems for Bombardier products
-Lakehead University and Confederation College
-The concentration of other federal and provincial services for Northwestern Ontario in Thunder Bay (such as aboriginal services, health and licencing)
Let’s face it, the only places in the current order that don’t eat more value than they create are greater Toronto, Montreal and Vancouver (and I’m not too sure about Montreal). And why? Because we think a pure-market economy uproots people far too often, and because we don’t want to wake up one day and find that every foodstuff and factory product we consume comes from abroad.
But if we phased this sort of resistant thinking out, we would still have farms and factories, because we would also not be subsidizing the cheap oil that underwrites international shipping (and by extension all globalisation), nor the militaries that protect the cheap oil.
But this would be a big change from the mercantilism we have always had to one degree or another since the invention of the nation-state. And we don’t change until we have to. Bring on peak oil!!