January 22, 2019 / 2:49 PM / 5 months ago

Swiss Railways will not take new Bombardier trains until earlier problems fixed

FILE PHOTO - An employee works on a new regional transport train at the Bombardier plant in Crespin, near Valenciennes, northern France, October 17, 2016. REUTERS/Benoit Tessier

ZURICH/MONTREAL (Reuters) - Swiss Federal Railways said it would not take new trains from Bombardier (BBDb.TO) until the Canadian company fixes the ones already in service, raising questions over the timing of future deliveries for the 1.9 billion Swiss franc ($1.9 billion) contract.

Bombardier investors are watching the 62-train Swiss order, one of a handful of rail contracts impacted by delivery delays that generated a disappointing free cash flow result last year and subsequent selloff of Bombardier stocks and bonds.

A Bombardier spokesman said problems with the Swiss trains would not cause “significant changes” to the company’s working capital outlook and were expected to be resolved within weeks, although he declined to provide a delivery schedule.

Swiss Federal Railways spokesman Reto Schärli said future Bombardier deliveries for the country’s largest-ever rail contract would follow fixes to the 12 trains now in service, including doors that don’t close properly and uncomfortable rolling that makes some passengers nauseous.

“We’re not going to be doing any experimenting with our passengers,” he told Reuters, adding the federal rail service does not yet have an estimate for when the problems would be fixed.

A Bombardier spokesman said a “majority of technical issues” were related to a door-system from a supplier, which was working on a solution.

“We are confident that we will resolve the current teething issues we are experiencing and do not see significant changes to our working capital outlook,” said Thomas Schmidt, a spokesman for Bombardier’s Berlin-based rail unit, the company’s largest division by revenue.

Bombardier blamed the higher-than-expected use of cash in 2018 to delays in the rail contracts, since train makers are paid upon delivery. The company said cash from the orders, including the one from Swiss, would be moved mainly to 2019.

($1 = 0.9981 Swiss francs)

Reporting By John Miller in Zurich and Allison Lampert in Montreal; Editing by Denny Thomas and Bernadette Baum

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