April 19, 2017 / 4:39 PM / in 3 months

UPDATE 2-Court sides with Bombardier in Metrolinx rail contract dispute

3 Min Read

(Adds comment from Metrolinx)

TORONTO, April 19 (Reuters) - Bombardier Inc's C$770 million ($572.79 million) light rail contract with an Ontario transportation agency cannot be canceled despite delivery delays, a judge ruled on Wednesday.

In a victory for Bombardier, Ontario Superior Court Justice Glenn Hainey accepted the plane and train maker's request for an injunction to stop Metrolinx from terminating the contract. The provincial agency, which manages public transportation in Greater Toronto, sought in late 2016 to cancel the 2010 order for 182 cars, complaining of delivery delays and poor execution.

"It appears to me that MTX (Metrolinx) is using the threat of termination for negotiating purposes," Hainey said in his ruling.

He said it was also unrealistic to conclude another supplier could provide the rail cars to Metrolinx by the 2018 deadline.

Bombardier, based in Montreal, said in a statement that it wanted to now "find a clear path forward" with Metrolinx.

Metrolinx President and Chief Executive John Jensen said in a statement the agency was reviewing the ruling.

"Nothing in today's decision changes our focus on delivering high-quality vehicles on time," he said.

Metrolinx wanted to end the contract after questioning Bombardier's ability to manufacture the cars on time and the reliability of the first pilot vehicle, which was produced behind schedule.

The Berlin-based rail division, Bombardier Transportation, is the company's most reliable cash generator. Bombardier is again discussing a potential merger of the rail unit with Germany's Siemens, people close to the matter said this month.

Such a combination faces an uphill battle because of antitrust issues, politics and concerns of who would control the united company, industry sources have said.

Bombardier has also faced delays in Australia. A A$4.4 billion ($3.31 billion) contract to build 75 electric trains for the Queensland state government has been delayed by accusations of design faults, although it is not clear whether Bombardier is fully responsible.

$1 = 1.3312 Australian dollars $1 = 1.3443 Canadian dollars Reporting by Allison Lampert in Montreal; Editing by David Gregorio and Richard Chang

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