Is Thunder Bay Worth $180 Million?


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.”

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.