BOMBARDIER AND ALSTOM:

THE ACELA EXPRESS

BY-
GROUP 4
RITURAJ PANDEY
TANVI KAPOOR
TRIPTI SINGH
About the Company - Alstom

1. The company was a world leader in tilting train technology with the Pendolino
system. Tilting train technology enabled trains to navigate curves at over 200 kms per
hour on on conventional tracks. Alstoms TV Train was the gold standard in high
speed train travel.
2. It was involved in diverse markets such as cruise ships, nuclear plans and train
systems. They were all industrial products with technical component.
3. Alstom operated globally and its activities included production of nuclear, oil and gas
equipment for energy generation, electricity transmission and distribution, power
conversion, shipbuilding and rail equipment.
4. Companys railway product range included rolling stock such as passenger and
freight trains, locomotives and other associative services.
5. Their market was fraught with complex issues in purchasing, since many parties were
involved in decision making including government agencies. They had long term,
constantly evolving relationship as customers became comfortable with their
technology and systems. Alstoms customers were kind of obsessed with technology.

About the Company Bombardier

1. Initially manufactured tracked vehicles for transportation on snow covered terrain. The
company is characterized by technological innovation and engineering excellence.
2. It has the worlds widest network of motorized snow vehicles. In early 70s they increased
their activity in railway equipment production. They were responsible for the supply of
mass transit equipment in major cities across the globe.
3. They even entered the airline industry. They purchased a company called Canadair. They
had a series of mergers and take overs as a result of which they became one of the largest
airplane manufacturers with engineers working in factories spread across three
continents.
4. By 1990 they became worlds leading maker of railcars and snowmobiles and also a key
player in the aerospace industry. They kept on adding technological elements to their
processing in order to enter new segments and new customer markets.
5. They also entered the fractional business which provided part ownership and leasing
opportunities to individuals and organizations in aircraft. As the fractional companies
grew, clients grew faster. There was an impressive growth but it did not really
materialize into a substantial growth.
6. Their most troubling venture was creation of Bombardier Capital Inc. which financed
consumer loans through US dealers of recreational products and manufactured homes.
There were serious problems resulting into bad loans of $600 million, out of which $300
million were written down.

Story of Acela Express-

 1. Amtrak planned to upgrade the train service in the NEC that stretched from Washington
DC to Boston. They wanted to complete electrification of the line from New York to
Boston and purchase a high speed train system that would reduce the travelling time
significantly.
2. Technologically the plan was difficult as high speed trains such as TGV ran on highly
maintained dedicated tracks with gradual curves. The notion of creating a dedicated right
of way for NEC was beyond feasibility.
3. They joined hands with Bombardier on 15 th march, 1996. Bombardier won the contract
with its high speed tilt train called American Flyer
4. Several factors led to the Bombardier-Alstom bid
Bombardiers experience with North American railcar construction
Bombardier would be responsible for most of the manufacturing and Alstom
would furnish components made in France
The bid price was paramount and Bombardier succeeded well on this score.
5. The American Flyer was about to go into service quickly and was to generate an extra
revenue of $180 million every year to help Amtrak to become operationally self sufficient
by 2003.
6. Bombardier wanted to use its name for the NEC service but Amtrak preferred to name it
Acela Express. There were high expectations and a lot of money was spent on
advertising.
7. The train experienced repeated delays and development problems. It was finally launched
on December 11, 2000. There were problems in the first year of operation. Also the media
took a lot of interest in the problems of the train.
8. However the Acela Express exceeded the expectations of riders by 50% and the
performance after first week rose to more than 90%.

Complications that arose between the companies-

1. Amtrak wanted Bombardier to accept financial responsibility for the delays and
mismanagement. They withheld $51 million in payments to Bombardier. And another
$20 million to Alstom. Bombardier on the other hand launched legal action claiming
$200 million in damages from Amtrak. They claimed that Amtrak had disrupted its ability
to produce and deliver the train by failing to upgrade its track in the NEC. They even
accused US national rail service of providing incorrect data about dimensions of its
tunnels on some routes, causing delays and additional cost.
2. Amtrak officials scoffed at the lawsuit blaming Bombardier-Alstom partnership for the
delays.
3. Due to this performance of Acela Express went down to an all time low, 74%
performance. Its situation kept on getting worse and many trains got cancelled due to
mechanical problems.
4. The problems were not limited to single or simple issues. There were break downs,
freezing up of electronic system leading to blockage of trains, serious cracks in brackets
welded to the power car frame and many more.
 5. As a result Amtrak pulled off all the high speed Acela Express trains from service.
6. On NOV 20, 2002 Amtrak filed a counter suit on Bombardier claiming that it was a
victim of mismanagement by the two Bombardier- Alstom as they failed to met the
performance standards.

The Dilemma and Du Ponts Analysis of the problem

Dilemma

The series of misunderstanding between the partnership of Alstom and Bombardier.

The technical problems with Acela express that led to sour relationship between
Bombardier and Amtrak.
The discontinuation of Acela express and the law suit which led to significant negative
effects on Alstoms image and future marketing efforts.

Analysis of the situation

There was strong competition in the NEC corridor by 2 other companies Siemens and
ABB.
Along with Bombardier there we 2 other protagonists bidding for the project American
ICE and X2000
Amtrak was swayed by the attractive financial packaging of Bombardier more than the
technical merit of American Flyer.
Amtraks ability to pay Bombardier had to come from the revenues that were to be
generated by Acela Express. . Bombardier was to be subject to drastic financial penalties
if performance goals were not met.
Alstom was under financial pressure. They found it better to let Bombardier exploit the
TGV technology in order to reduce upfront cost, rather than preparing its own bid.
There were political issues too. Alstom wont have had a chance to win as a standalone
company.

RECOMMENDATIONS

1. A lot of money and a good financial project are at stake. Hence they should not break the
consortium. And try to be a mediator in sorting out the issue as according to analysis
Acela express could have been a great service and it started really well and did well in the
early phase. Hence there is scope for getting back to business and make money.