Metrolinx: Bombardier Flexity Freedom & Alstom Citadis Spirit LRVs

[crs1026]

that is the thing...we are all guessing.......only the contract can determine the truth....and it seems the parties to that contract can't agree...that is why we have courts.

The Bombardier statement mentions change orders made by ML. That's where it gets grey. Many procurement contracts encounter change orders, but too many change orders of the wrong kind create a moving target that no vendor could deliver on. So ML may not have clean hands here either.

So, yeah, it may take a third party to sort this out, and we can't jump to conclusions about who is at fault.

- Paul

 

[steveintoronto]

The Bombardier statement mentions change orders made by ML. That's where it gets grey. Many procurement contracts encounter change orders, but too many change orders of the wrong kind create a moving target that no vendor could deliver on. So ML may not have clean hands here either.

So, yeah, it may take a third party to sort this out, and we can't jump to conclusions about who is at fault.

- Paul

Emphasis on "Many procurement contracts encounter change orders, but too many change orders of the wrong kind create a moving target that no vendor could deliver on. So ML may not have clean hands here either."

There's an interesting parallel case in Urbacon Building Groups Corp. v. Guelph (City), I'm going to have to tread carefully on this, as criminal charges might yet be brought against an individual excoriated in this *civil* case by the Ontario Superior Court Justice's written ruling. It is my *opinion* that had this been anything but a civil case, charges would have been pressed by the Province. They may still be. The named principle "McCrae" has disappeared...

Here is the case as described by the then Guelph Mercury (a now defunct bastion of excellent 'old school' journalism, but the data-base has been resurrected by the flaccid replacement Tribune, also a Metroland publication). The author of this article was also the moderator of the excellent Mercury forums (59 Carden Street) (see: http://guelphmercury.blogs.com/59_c...y-for-all-urbacon-lawsuits-is-81-million.html ), and this case was researched and discussed by a number of prolific posters, myself included. Guelph is still torn politically and *financially* as a result of the factors leading up to this case. All is not what it may seem.

A short excerpt of the Mercury article post court decision:

Guelph pays Urbacon $6.6M to settle city hall construction fight
Sep 09, 2014 by Joanne Shuttleworth

[...]
In September 2008, the city abruptly terminated the contract and ushered Urbacon off the property. The company sued the city for $19 million and the case was heard last year by Justice Donald MacKenzie.

In March, he ruled the city had wrongfully terminated its contract with Urbacon. His reasons for that judgment outlined a history of friction between the city and Urbacon and multiple change-orders that delayed the project.

MacKenzie suggested city staff exerted too much influence over the consultant, Moriyama and Teshima, whose job was to liaise between the city and Urbacon as a neutral party.

MacKenzie also found Murray McCrae's testimony to be less than credible. McCrae was the manager of corporate properties who oversaw the project for the city, and he was the city's prime witness at trial.

"Mr. McCrae's actions culminating in the notices of default and termination created a seismic shift in the contractual liability landscape. This shift fatally undermines Guelph's position that its termination of Urbacon was justified in the circumstances," wrote the judge in his decision.

https://www.guelphmercury.com/news-...-6-6m-to-settle-city-hall-construction-fight/

Here is the summary of the decision, the complete one was a 28 page decision IIRC, four pages of which dealt with Murray McCrae. I wanted to quote what the Judge found ....errr...'wanting' in the testimony and quote exactly, but suffice to say he just stopped short of citing Mr McCrae for contempt and lying. I'll link the complete ruling later if I can dig it out. Since McCrae was in full employment and had a somehow anointed position to act on behalf of the city, even without apparent oversight of the Mayor, CAO or Council, the ruling was scathing against the City of Guelph. The case revealed many machinations at Guelph City Hall as being close to dysfunctional, if not dysfunctional, and unaccountable.

Lessons to be had....and I would not be surprised in the least if similar doesn't show with Bombardier v. Metrolinx, albeit shortcomings from both sides will become apparent.
http://www.canlii.org/en/on/onsc/doc/2013/2013onsc5773/2013onsc5773.html

Edit to Add: In digging to find the full judgment (proving difficult) I notice that the above case is being cited as a precedent in construction law:

Can an owner rely upon read-in evidence from transcripts of subcontractors’ Examinations for Discovery against the general contractor?
Posted on October 1, 2013

There are two ways to introduce evidence given by a witness examined for discovery at trial:

1. The party who carried out the examination can use the prior evidence to impeach the witness’ evidence at trial where it differs from the evience given at the examination; or
2. The party who carried out the examination can “read-in” portions of the transcript produced at the examination and those “read-ins” become part of the evidentiary record at trial.

The recent case of Urbacon Building Groups Corp. v. Guelph (City), 2013 ONSC 5773 (CanLII) – which by the way is producing lots of interesting caselaw re construction liens in Ontario – addressed whether an owner rely upon read-in evidence from transcripts of subcontractors’ Examinations for Discovery against the general contractor. The City of Guelph took the position that it could read-in portions of the transcripts of the Examinations for Discovery of Urbacon’s (the GC) subcontractors against Urbacon.

Much to my nerdy delight, Justice MacKenzie cited an earlier Ontario Decision and a B.C. Decision and ruled that (I paraphrase) discovery evidence can only be read in against the party who gave it. One can easily imagine the mischief that could result from one party relying on the evidence given by X against Y when Y may not have had a chance to challenge or counter X’s evidence and I am glad that the door on this risk has been closed just a little further and, in particular, in the context of a multi-party construction lien action.

http://www.ontarioconstructionlaw.com/tag/case/

Case also cited here: http://www.blaney.com/sites/default/files/Heal_SummaryJudgment_ConstructionLienCases_January2013.pdf

If Bombardier play this well, Metrolinx might take a massive beat down. Key word "might".

 

[amnesiajune]

Wait so remind me why the Canadian government is giving them $370 Million?

First of all, it's a loan. It has to be repaid with interest. Second, it's for Bombardier Aerospace, which is completely separate from Bombardier Transportation aside from sharing a parent company.

 

[steveintoronto]

First of all, it's a loan. It has to be repaid with interest. Second, it's for Bombardier Aerospace, which is completely separate from Bombardier Transportation aside from sharing a parent company.

It's interest free:
Bombardier to get $372.5 million in government loans | Toronto Star
https://www.thestar.com/.../02/.../bombardier-announcement-expected-in-montreal.ht...
4 days ago - The Conservatives say the Liberals are favouring Bombardier after the government announced $372.5 million in interest-free loans to the...

It's not as clear cut as it appears. Does it break WTO regs? Clearly...but so do the others, Boeing, EADS, Embraer, etc. Is it a loan to the rail division? Not directly, but it relieves financial pressure there.

I favour the loan, since it levels the table somewhat, but the Gov't should see a share of the benefit directly since it is a de-facto investment.

 

[amnesiajune]

It's off-topic. Bombardier Aerospace is about as involved with the LRVs as the LCBO is involved with Go Transit.

 

[steveintoronto]

It's off-topic. Bombardier Aerospace is about as involved with the LRVs as the LCBO is involved with Go Transit.

"Off topic"? Didn't stop you from commenting on it, but beyond that, it's as relevant as the Rail Division selling roughly half out to the Caisse for the need for capital for the parent company.

And that has direct bearing on the REM debacle now unfolding in Montreal...but on that, I do digress.

 

[timio]

From Transit Toronto: B-roll footage of Metrolinx LRV 1

 

[amnesiajune]

"Off topic"? Didn't stop you from commenting on it

I'm just correcting a comment that's either horribly mistaken or an outright lie.

It's as relevant as the Rail Division selling roughly half out to the Caisse for the need for capital for the parent company

The Caisse de depot et placement is a pension board, like CPPIB. It doesn't provide subsidies, it's meant to (and does) get huge returns on its investments - 10.9% per year from 2012-2015.

 

[steveintoronto]

I'm just correcting a comment that's either horribly mistaken or an outright lie. The Caisse de depot et placement is a pension board, like CPPIB. It doesn't provide subsidies, it's meant to (and does) get huge returns on its investments - 10.9% per year from 2012-2015.

Well here's the larger picture that you overlook:

Quebec pension fund buys $1.5B stake in Bombardier rail
By Vanessa LuBusiness reporter
Thu., Nov. 19, 2015
[...]
The investment by Caisse comes on the heels of a $1 billion (U.S.) commitment from the Quebec government for a 49.5 per cent stake in Bombardier’s struggling CSeries program.

Development of the CSeries program is years behind schedule and billions over budget, but the flight testing is now complete. The company expects certification soon.

However, sales for the all-new plane, in two sizes, have been sluggish with only 243 firm orders to date – and none in a year.

Porter Airlines, which has placed a conditional order for 12 planes, and options for another 18, will not be allowed to fly the jets from Toronto’s island airport, now that the Liberals have taken power in Ottawa.

As Bombardier has burned through cash to get the CSeries launched, it has had to make substantial job cuts and shelved plans for the Learjet85. Earlier this year, Bombardier raised $3 billion (U.S.) through a debt and equity offering.

With the Quebec investment and the deal with Caisse, which is scheduled to close in the first quarter of 2016, Bombardier estimates it will have access to $6 billion (U.S.) in cash and cash equivalents by year’s end.

As a condition of the Caisse deal, Bombardier must ensure there is always $1.25 billion (U.S.) in liquidity. Sabia said the Caisse never considered investing in the CSeries program, choosing instead in the train division.

Bombardier’s CEO Alain Bellemare, who took over from Pierre Beaudoin in February, says the company has plenty of cash to complete all its programs including the CSeries jet and new Global 7000/8000 business jets.

It also provides a cushion in case market conditions prove difficult, Bellemare told reporters on Thursday. “We now have ‘a safety net,’” he said. “We will also re-establish confidence with our clients which is key if we want to continue selling our products.”

On the third-quarter conference call in October, Bellemare said an additional $2 billion (U.S.) investment would be needed for the CSeries program in the coming years, given it is not expected to get to profitability before 2020 or 2021. [...]

https://www.thestar.com/business/20...-in-rail-business-to-quebec-pension-fund.html

If you send your kids to university, and are pressed to find the money to doing so, but the government steps in to loan them the money, you are getting an *indirect* subsidy.

The real question is the viability of the Millhaven plant to "supply all of North America" with LRT orders. Well guess what's changed south of the border?

 

[TOareaFan]

I favour the loan, since it levels the table somewhat, but the Gov't should see a share of the benefit directly since it is a de-facto investment.

It is not an investment...it is not equity.....it is a loan, the fact it is a loan at 0% interest does not make it an investment...it remains a loan.

 

[steveintoronto]

It is not an investment...it is not equity.....it is a loan, the fact it is a loan at 0% interest does not make it an investment...it remains a loan.

How's that Kool-Aid? I realize a lot of you are going to bat for BBD, and Canada is about to have a very rough time with Nafta, and again, I *favour* the Feds lending to BBD, but for God's sakes use a little pragmatism to assess the story you're being fed: Cdn Alternative Facts?

WTO rules against Canada over low-interest loans for Bombardier deal
CBC News Posted: Oct 19, 2001 7:58 PM ET Last Updated: Oct 19, 2001 7:58 PM ET
The World Trade Organization ruled Friday against a $1.7 billion low-interest loan given by the Canadian government to Air Wisconsin so it could buy 150 aircraft from Bombardier.

The WTO ruled against Canada, just as it had ruled against Bombardier's main competitor, Brazil's Embraer in an earlier similar situation.
The interim decision from the WTO was made public at an Ottawa press conference. A final decision will come by the middle of November.

Federal government officials said the low-interest loans were similar to loans offered by Brazil to help Embraer land aircraft contracts. But the WTO said both situations violate trade rules.

Federal government officials said Friday that Canada will continue to back Bombardier.

Earlier this week, the Globe and Mail reported that the Canadian government was expecting to lose Friday's decision and likely to appeal the ruling.[...]

http://www.cbc.ca/news/business/wto...w-interest-loans-for-bombardier-deal-1.278196

C'mon folks, get real here. The justification for this loan is "they all do it" contrary to WTO regs. If a "low interest loan" was found in violation, a "zero interest loan" won't?
If you want to win the impending trade battles about to ensue, then best you brush up on your trade regs. Yes, we have to cheat, but at least know that you are to be able to game a win. Is Trump Mr Honest Broker Legal Respecter? Phhhhhh....

[...]
Canada and Brazil have a long history of trade disputes over government support to the aerospace sector, including a seven-year battle in the late 1990s and early 2000s.

This case could easily follow the same pattern, said Lawrence Herman, an international trade lawyer with a practice in Toronto.

“If the Brazilian case goes forward, what could well happen could be five or six years of trade litigation because Canada is almost certain to challenge the Brazilian government subsidies to its own aircraft manufacturer,” Herman said in an interview. “I think there’s a lot of interest on Canada’s part and on Brazil’s part in avoiding a bitter trade war as happened 15 years ago.”

http://business.financialpost.com/n...t-to-take-canada-to-wto-over-bombardier-loans

Indeed...

Btw: Amnesia's claim (gist) "The only thing in common is the parent company" is exactly the argument Boeing used for their civilian aircraft while receiving *massive* infusions of cash to their military ones.

It didn't wash with the WTO. And Trump is going to use *exactly that tact* with BBD's Millhaven rail operation that wishes to "supply all of North America" if and when his "America Only" campaign runs into a snag.

At that point, the economy of scale for that plant will plummet, and Cdn prices, if BBD rail remain in the game in Canada, will inflate considerably. What will BBD do? How about move to New York/Vermont like their rail coach division? And then, with CAD down against the Greenback, prices still inflate, plus less jobs in Canada and less monetary velocity.

 

[TOareaFan]

How's that Kool-Aid? I realize a lot of you are going to bat for BBD, and Canada is about to have a very rough time with Nafta, and again, I *favour* the Feds lending to BBD, but for God's sakes use a little pragmatism to assess the story you're being fed: Cdn Alternative Facts?

what Kool Aid is that? I am simply pointing out that in very real terms a loan is a loan and an equity investment is an equity investment....the lack of interest on the loan does not make it an investment...it makes it a loan on very favourable terms....whether it will pass the smell test at the WTO, I have no idea (although I suspect it is a subsidy)....but, like loans, subsidies are not, necessarily, investments.

 

[amnesiajune]

https://www.thestar.com/business/20...-in-rail-business-to-quebec-pension-fund.html

If you send your kids to university, and are pressed to find the money to doing so, but the government steps in to loan them the money, you are getting an *indirect* subsidy.

Pensions are not the government. Let me repeat that because apparently it wasn't clear the first time... Pensions. Are. Not. The. Government. They can oversee a government-mandated pension plan, but these investment boards' only job is to invest its money in ways that will maximize ROI. CDPQ owns a huge stake in Bombardier Transportation for the same reason that CPPIB owns a huge stake in Highway 407 and public school teachers own the Eaton Centre and the UK's Channel Tunnel Rail Link. None of them are interested in subsidizing anything.

"The only thing in common is the parent company" is exactly the argument Boeing used for their civilian aircraft while receiving *massive* infusions of cash to their military ones. It didn't wash with the WTO.

It doesn't matter what the WTO says in this discussion. We're not in a thread about international trade law. I'm just responding to "is the federal government funding a court case against the Ontario government?" That's completely untrue.

 

[EastYorkTTCFan]

Transport minister fires back at Bombardier for court injunction against Metrolinx

I still say Metrolinks is the wrong her they have nowhere to run a porttype yet so why are they are acting like kindergarten children that don't want to share. Alos the fact that they are feeding the media garbage th about the continued TTC delays and saying they are having an effect on vehicles they don't yet need is ridiculous I wouldn't hire metrolinx's to organise a parade down a one street they would probably screw it up too.

 

[dowlingm]

The notion the CDPQ is as disinterested as other govt/municipal funds... I mean, there's a reason why other funds are in toll roads but when Bombardier called they kept their wallets firmly closed.