Province lends $50M to Winnipeg bus manufacturer stalled by supply-chain issues
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New Flyer Industries, a Winnipeg-based zero-emission bus manufacturer, was handed a $50-million lifeline from the Manitoba government to weather the supply-chain challenge storm.
NFI Group president and chief executive officer Paul Soubry said the company headquartered out of Transcona is sitting on $5 billion worth of unfulfilled orders and options owing to supply-chain challenges.
“You probably saw a bunch of buses sitting in a parking lot. That same unfortunate sight can be seen at every other New Flyer facility,” Soubry told reporters, employees and others at an announcement Friday morning.
Difficulties acquiring parts from suppliers, combined with past slowdowns owing to the COVID-19 pandemic, have forced the company to renegotiate credit with its banking partners and turn to government for short-term loans to free up capital to deliver buses to customers.
He estimated the company has about 500 vehicles that have been built but are offline and about $250 million in cash tied up as a result. Meanwhile, costs for parts have increased by 17 to 20 per cent in just five months.
On Friday, Economic Development Minister Cliff Cullen said the Manitoba government will provide NFI a $50-million loan at commercial rates, to be repaid in 12 months, with an option to be extended for another 24 months.
Export Development Canada, meanwhile, will give the company a US$50-million loan and US$100 million in surety for bids and performance bonds.
Soubry said the backing from the provincial and federal governments cannot be understated and will allow the company to continue to build its business. In 2022, the company secured new orders for more than 4,000 units to be delivered to cities across Canada, the United States, England and Hong Kong.
“We’re at record-level bids hitting the street. The last thing we want to do is not be able to bid to build secure volume for (2023, 2024, 2025),” Soubry said.
“It’s a big, big lifeline for sure,” he said of the government funding.
Just last month, the City of Winnipeg approved a deal to buy 16 state-of-the-art electric buses for $33 million from the company. The purchase deal came a decade after Winnipeg Transit and New Flyer conducted a pilot project with four battery-electric buses.
Cullen called the loan a strategic investment to capitalize on the economic growth opportunities before NFI.
“This will ensure that NFI’s highly skilled research and development team engineers, production-line workforce here in Manitoba will meet the growing demand for NFI buses as NFI’s global supply chain recovers and production ramps up,” Cullen said.
The company employs about 2,500 people in Manitoba and 7,500 people across the world.
Cullen said the loan is not the first time Manitoba taxpayers have supported New Flyer.
In 2002, the government provided a $20-million loan to the company and again offered a US$15-million loan in 2004, Cullen said. Both loans were repaid.
“It’s certainly not something out of line that the government of Manitoba wouldn’t support New Flyer or any other industry that finds (itself) in these types of situation,” Cullen said.
Soubry said the company has suspended paying dividends as a result of the financing agreements. The company haspaid dividends every quarter since it went public in 2005.
He said the suspension would be re-evaluated in six months, when the credit waiver ends.
“I’m much more confident today than I was six months ago,” Soubry said, acknowledging there continues to be hurdles as the business responds to parts shortages.
“To have three levels of government supporting a critical business like ours is really a strong message. It’s a strong message to our customers, to our suppliers… and most importantly, to our employees,” he said.
Soubry said there is unprecedented demand for NFI’s products and “tremendous” support for public transit by governments.
“We’re not going anywhere,” he said.
Winnipeg MP Dan Vandal, minister responsible for Prairies Economic Development Canada, acknowledged his late colleague Jim Carr, who was a champion for a green economy on the Prairies. Carr, who was the Winnipeg South Centre MP, died on Dec. 12.
“This is important for people right across the Prairies,” Vandal said. “Like Minister Carr, we believed Canada has the knowledge, Canada has the skills and expertise to be amongst the global leaders taking action against climate change and transitioning to a greener economy.”
The federal government has struck a supply-chain task force to look at issues and is working on a critical mineral strategy to support green technology, he said. Ottawa is also engaging with provinces, First Nations, and the private sector to improve certainty for the mining industry.
“The critical minerals that are essential for this sort of production are right here in Canada,” Vandal said. “That’s a priority for us.”
Final approvals for the federal loan are expected to be completed next month.
— with files from Kevin Rollason
Danielle Da Silva
Danielle Da Silva is a general assignment reporter.
Updated on Friday, December 23, 2022 6:00 PM CST: Adds photos and full writehru