China’s Train Makers Eyeing Big Deal: In Talks With Canada’s Bombardier For Buying Its Train-Making Unit

Two Chinese train makers are reportedly in talks with Canada’s leading train and plane manufacturer Bombardier Inc.’s rail business. The Canadian manufacturer is working on a historic restructuring of the company and is keen on selling its train division.

Bombardier is the only manufacturer in the world that builds both trains and planes. Its train business has been steadfast in supporting the company with seamless cash flow in ironing out the bumpiness of aerospace operations where long gestation periods are common, reports Globe and Mail.

Lucrative Train Unit

Bombardier has not announced a formal sale but has sounded out banks to scout for prospects for its train unit-Bombardier Transportation. The train unit makes high-speed trains, trams, subway cars and other rail equipment. The unit is based in Berlin and has 39,700 employees worldwide at 63 production and engineering sites. The Canadian footprint is at Quebec and Ontario, consisting of 3,500 employees in assembly plants, engineering centres as well as service centres.

The two public sector companies of Chona, CSR Corp. and China CNR Corp. are also planning to merge and post-merger, it hopes buying a controlling stake in Bombardier’s train business will catapult them into the global league of train makers. However, analysts say CSR and CNR will not be alone in the race for the Canadian train maker, as competitors from the West and Japan may try to buy it. Bombardier Transportation is one of the three biggest makers of rolling stock in the world. Others are France-based Alstom SA and Germany’s Siemens AG, reports Wall Street Journal.

Bombardier Realignment

Speculation is that Bombardier executive chairman Pierre Beaudoin wanted the company to focus more on building aircraft. He recently hired an aerospace industry veteran named Alain Bellemare as chief executive and said Bombardier would explore initiatives such as “participation in industry consolidation” to cut debt. It was a signal that the company is open for strategic options in the train business.

Bombardier spokeswoman Isabelle Rondeau refused to comment on the speculation about BT's sale prospects. Quebec economy minister Jacques Daoust had said in April that he was assured by Beaudoin that BT will not be sold outright. However, Andrey Omelchak, president of Lionguard Capital Management, Montreal said the Chinese proposals might be the “first innings” of a sales process for BT.

(For feedback/comments, contact the writer at k.kumar@ibtimes.com.au)