Bombardier has a future here but there will be no handouts, says McLoughlin
In his first full interview with the Derby Telegraph since becoming Transport Secretary, Derbyshire Dales MP Patrick McLoughlin talks to business editor Robin Johnson about Derby train-maker Bombardier and the rail contracts that could hold the key to its future.
ON paper, Patrick McLoughlin's words may sound rather harsh to the workers at Bombardier who have been put through the mill after missing out on some major contracts from the Department for Transport.
In an exclusive interview with the Derby Telegraph, the Transport Secretary has said the Derby train-maker has to "compete" for Government work.
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But the message from the MP for Derbyshire Dales could be interpreted as a rallying call, rather than a criticism.
He added that he wants Bombardier to "succeed" and believes the company has a future in the UK, particularly in light of the massive amounts his department is spending on rail.
But he has categorically said that the company cannot expect any handouts.
Mr McLoughlin said: "I want to see Bombardier succeed. It's a very important local business – but it has to compete.
"I want to see Bombardier being able to compete – and I hope and believe they can.
"We have to try to make sure we get the best deal. We can't give a contract to a certain bidder above all other bidders because that is not the way competition works.
"I can't just give contracts to keep any company fully occupied because those contracts have to be viable."
Bombardier would probably be the first to say that it would rather win new work as a result of a fair competition.
But campaigners on behalf of the train-maker may argue that, in the past, the odds have been stacked against the firm. It is now 18 months since Bombardier missed out on the £1.4 billion Thameslink contract to build 1,200 carriages. The contract went to German manufacturer Siemens.
Following the decision, Bombardier shed 1,000 temporary jobs at Litchurch Lane and carried out a full review of its UK operations.
Despite concerted attempts by the Derby Telegraph, the city's rail industry, politicians, unions and business leaders, the Government has refused to reverse the decision.
Thankfully, in February last year, bosses at Bombardier said that they would keep the Derby factory open until at least 2014.
Its future after that would depend on the company winning the Crossrail contract.
Hopes that Ministers will change their mind on Thameslink are fading.
Last month, Transport Minister Simon Burns confirmed that the DfT had reached commercial close with Siemens, which effectively means that a price had been agreed.
But the DfT and Siemens are yet to reach financial close, which focuses on how the trains will be paid for.
Mr McLoughlin said: "I was as disappointed as anyone when Bombardier did not win the contract.
"One of the frustrations is how long it takes for these contracts to be determined. We try to speed them up but you have to make sure that everything is proper and the financing is in the right position.
"Even with Siemens at the moment, although we have reached a stage where we are very close to signing a deal, we expect it to be signed by the end of March.
"I suppose until the contract is signed – the contract's not signed. But I would point out that we are very close to closure on that particular contract and I don't think there's much point in trying to revisit that.
"And even if we start all over again that would take a huge amount of time that wouldn't help Bombardier.
"Bombardier is the reserve bidder. If Siemens were unable to do financial close, although they probably will, that could become an option. But that's a lot of 'ifs' and 'buts'. I wouldn't want to give false hope to anybody."
After the disappointment of missing out on Thameslink and the £4.5 billion InterCity Express Programme, both of which were awarded to overseas companies, Bombardier's long-term future now rests on it securing the £1 billion Crossrail contract.
The project would keep both its skilled engineers and its production line busy for several years to come.
Bombardier is one of four companies bidding for the Crossrail work.
The winner will be announced in early 2014.
The decision by the DfT to overlook Bombardier for IEP, and Thameslink in particular, saw the Government come in for fierce criticism. Ministers were accused of not supporting British workers.
It emerged that the Government did not take into account the social and economic impacts of each bid. Bombardier campaigners claim that if the DfT had done so, then the Litchurch Lane firm would have come out on top.
Furthermore, it was claimed that the train builder with the biggest bank was always going to win the competition, not the firm which made the best trains.
With Siemens enjoying a better credit rating than Bombardier, critics said it all boiled down to money.
But the Government has said that the Crossrail contract contains a number of conditions that were absent from Thameslink.
These relate to the winning bidder ensuring they will have a UK manufacturing presence and take full advantage of the UK supply chain.
Another difference is that the Government is guaranteeing finance for Crossrail – something that can hopefully help avoid the protracted negotiations which are currently taking place between the DfT and Siemens over how the Thameslink trains will be paid for.
But genuine fears remain that, aside from that, the Crossrail deal could be a carbon copy of Thameslink – and that it will again boil down to who has the biggest financial backing.
Mr McLoughlin said: "Crossrail isn't something that the DfT is wholly in charge of. Transport for London is dealing with this, although they will obviously keep us informed.
"We should know the two shortlisted candidates in the spring of this year.
"There are four companies bidding for the work. They have all put a lot of effort into their bids. If it was somehow felt that the outcome was prejudged by the Secretary of State I would find myself in court defending judicial reviews and the taxpayer would be no better off for it.
"Lessons were learned from Thameslink.
"It won't come down to who has the biggest bank because the Government is offering guaranteed finance."
Another contract that Bombardier workers had hoped they would be working on by now is eVoyager.
Just over a year ago, Mr Mcloughlin's predecessor Justine Greening said she was "enthusiastic" about pushing ahead with the project.
EVoyager involves taking an existing fleet of 34 diesel powered CrossCountry trains and converting then to electric/diesel power.
It would see a new carriage created for each of the trains that would carry a pantograph to pick up power from overhead electricity wires.
Bombardier had been working with the Dft on the project and, a year ago, were asked to come up with detailed costings – but the project appears to have been put on the back burner.
The primary reason is the Government's push to fully electrify large swathes of the rail network – including the Midland Main Line, the route which serves Derby.
This week, Network Rail submitted a business plan, which included the electrification of that route, to the Office for Rail Regulation.
The cost of electrifying the Midlands Main Line will be £514 million.
It's positive news for Derby – as full electrification of the line will result in faster, greener trains that are cheaper to run.
But it is not such good news for eVoyager.
Full electrification of major routes reduces the need for trains that run on both diesel and electric power.
Bombardier is keen to keep the project alive as it could be worth in the region of £127 million to the train-maker.
Most importantly of all, it would provide much-needed work for the company's highly-skilled engineers.
It is crucial that Bombardier sustains its engineering capability – particularly if it wants to land the Crossrail contract. Mr McLoughlin said: "It is certainly true that the massive investment we are doing as far as electrification is concerned does change the case for eVoyager. We need to properly look at the implications of that."