You might expect a nation renowned for its timepieces to be a stickler for punctuality. You would be right: perhaps nowhere is Montreal-based Bombardier Inc. facing more customer blowback for delays in the delivery of its next-generation vehicles than Switzerland.
Bombardier is embroiled in a dispute with Swiss Federal Railways (SBB) over a 1.9-billion-Swiss-franc ($2.3-billion) contract for 59 passenger trains. The engines and cars are now expected to be delivered two years behind schedule, and the parties are wrangling over mounting costs. Meanwhile in January Swiss International Air Lines learned that the 30 planes it ordered from Bombardier’s new and much-anticipated CSeries will arrive in the second half of 2015 instead of late this year. The national airline is the CSeries’ launch customer. And though Swiss sounds more patient than SBB, Bombardier’s reputation has taken a hit.
The disappointment, of course, is not confined to Switzerland. Bombardier stock fell 7% on news of the CSeries postponement Jan. 16. Still, some analysts were not surprised. “Delays [for aircraft] are inevitable in this day and age,” says David Newman of Cormark Securities. The new line of aircraft represents Bombardier’s attempt to crack the commercial airline market dominated by Boeing and Airbus. It promises quieter engines and greater fuel efficiency than rivals in its class.
Bombardier’s high-speed, double-deck trains for the Swiss, called TWINDEXX Express, are also marvels of innovation, capable of tilting slightly in a curve in order to reach their destination faster. The parties blame that delay on factors including design changes requested by SBB to address complaints from associations for the disabled, as well as technical requirements related to the unique Gotthard Tunnel that required the car bodies to be redesigned.
Questions have arisen lately about who will pay for the additional costs related to the late trains. Stéphane Wettstein, who heads Bombardier Transportation Switzerland, says he has “quantified” and communicated to SBB the extra costs that his firm has had to bear until now. SBB, for its part, points to penalty payments in the contract for late delivery, which is now slated for the end of 2015.
While the dispute could further hurt the company’s bottom line, both SBB and Swiss seem intent on getting delivery as soon as possible rather than cancelling their orders. Wettstein believes they understand the risks of buying entirely new products. “There are very few countries that buy so much innovation and technology as Switzerland,” Wettstein says. “I think these companies know that when you develop new products and technologies, there are always certain challenges.”