Siemens withdrawal from U.K. rail contract good for Bombardier

Bombardier Transportation's chances of winning an almost $1.6-billion British rail contract and maintaining its operations in Derby, England, appeared brighter Friday following the withdrawal of German rival Siemens from bidding on the Crossrail project.

Siemens said it will no longer proceed with the procurement process because it is too busy with other contracts, including the $2.5-billion Thameslink project it won over Bombardier in 2011.

The winning Crossrail bidder will deliver 600 railway cars for a new line connecting east and west London. The contract is expected to be announced next year, with service starting in late 2018.

Siemens said pursuing another project of this scale could compromise its ability to deliver trains to current customers.

The company described the Crossrail bidding process as fair and said it will continue to deliver signalling and communications and control systems for the project.

CAF, Hitachi also in running

Other bidders are CAF of Spain and Hitachi of Japan. But industry observers believe the exit of Siemens opens the door for Bombardier, which would build the railway cars at Britain's last remaining train factory.

The Berlin-based division of Bombardier Inc. (TSX:BBD.B) has threatened to close Derby unless it wins a large contract.

Walter Spracklin of RBC Capital Markets said the Siemens withdrawal is "all but assuring a win for Bombardier."

He said Bombardier was already widely expected to win this contract after losing the Thameslink deal, but Siemens was a top competitor because the railway cars are similar on both projects.