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Two equipment makers settle dispute with Amtrak

(The following article by Don Phillips was posted on the New York Times website on March 18.)

NEW YORK -- Bombardier of Montreal and Alstom of Paris agreed yesterday to settle a legal dispute with Amtrak in which the sides had blamed each other for a largely failed attempt to apply European high-speed train technology to the United States rail system.

The agreement, which came as Bombardier announced plans to eliminate 6,600 jobs worldwide in a huge realignment of its troubled rail division in Europe, will enable the manufacturers to concentrate on a return to financial health. It will also allow Amtrak to eliminate a distraction just as its president, David L. Gunn, appears to be making progress in improving Amtrak's deteriorated infrastructure, including tracks between Washington and Boston, and locomotives.

Under the agreement, all legal claims will be dropped and the Bombardier-Alstom consortium will collect $42.5 million of the approximately $70 million that Amtrak withheld in payments for the $1.2 billion Acela high-speed rail project.

Amtrak will assume full responsibility for maintaining the 20 Acela trains, beginning in October 2006, about seven years earlier than planned. Under the original Acela contract, the consortium was required to maintain the trains with specific guarantees of availability and mechanical soundness.

The original contract was so specific that the consortium was to pay a fine each time a toilet broke down.

The Acela trains, which run between Boston, New York and Washington, are essentially an attempt to combine French TGV technology with the existing United States rail system, which was designed primarily for freight service and has far more sharp curves than European high-speed systems. To compensate for the curves, the Acela trains were built with a tilting mechanism in each car.

The Acela trains have proved highly popular with passengers. Mechanically, however, the program went awry almost from the beginning.

The trains were delivered late and have suffered such a variety of mechanical problems that only 13 of the 20 trains are in service at any given moment. Some of the more recent problems have been serious, including cracks in wheel sets that have resulted in a withdrawal from service of all the trains for a time.

But some problems took on an air of high comedy. After it was too late to do anything about it, Amtrak discovered that the cars were four inches too wide to allow full use of the tilting mechanism.

The trains' toilet doors tended to stick closed, trapping passengers. In an exchange typical of the Amtrak-consortium relationship, Bombardier said that the toilet door was actually an Amtrak design.

In November 2001, Bombardier filed suit in United States District Court for the District of Columbia seeking damages. Amtrak countersued.

"Instead of continuing to spend unnecessary time and money on costly and attention-diverting litigation, the full focus of our efforts will now be on improving the performance of Acela Express and delivering the best service we know how for the passengers who enjoy and depend on it,'' Mr. Gunn said in a joint statement with the consortium.

Bombardier's president, Paul M. Tellier, said that the consortium was "satisfied with the solution reached out of court with Amtrak'' and promised a seamless transition of maintenance functions to Amtrak.

The agreement with Amtrak came as Bombardier announced that it would close 7 of its 35 plants in Europe over two years, eliminating 6,600 jobs, or about 18.5 percent of the rail division's work force. The company estimated that the plant closings would cut its annual costs by about 600 million Canadian dollars ($448 million).

Bombardier plants in Amadora, Portugal, and in Doncaster and Derby Pride Park in England are to be closed this year. In 2005, plants will be closed in Pratteln, Switzerland; Ammendorf, Germany; Kalmar, Sweden; and Wakefield, England.

Both Bombardier and Alstom have had financial difficulties in the last few years, but appear to be making progress in recovering.

Bombardier also announced yesterday that it lost 52 million Canadian dollars ($39 million) for the quarter ended Jan. 31 before special items and income taxes, compared with a loss of 358 million Canadian dollars a year earlier. The company posted a net loss of 448 million Canadian dollars ($335 million) for the most recent quarter, compared with a loss of 1.02 billion Canadian dollars in the quarter a year earlier.

Thursday, March 18, 2004

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