MEMORANDUM FROM CIE CONCERNING BUS BUILDING PROJECT
Since the breakdown in negotiations with Van Hool McArdle for the supply of buses to meet CIE requirement, CIE has had discussions with a number of companies interested in setting up a bus building industry in Ireland. These included Irish, U.K., European, U.S. and Canadian companies.
The Board has now approved a Management Agreement contract between Bombardier Ltd. (an Irish Company which is being set up by Bombardier Incorporated Canada) covering a joint project for the production of buses for CIE with the possibility of the firm producing vehicles for export at a later date.
The main features of the arrangements are:—
1. The factory premises for the project, which is located at Shannon will be leased by CIE from SFADCO. CIE will own all assets, the jigs for the manufacture of buses and all other ancillary machinery and tools.
2. Bombardier Ltd. will have the responsibility for the employment of labour, the management of that labour and the construction of buses in accordance with CIE’s requirements.
3. CIE will provide the designs and the jigs which have been commissioned from Hamburg Consult who are designers for Mercedes Benz.
4. CIE has come to an arrangement with General Motors of America for the supply of power packs, including transmission and axles for the new bus design.
5. All materials for the manufacture of buses will be purchased by Bombardier Ltd. in consultation with CIE. Bombardier Ltd. will have responsibility for the protection of these materials from theft, fire, etc. Insurance policies to cover these hazards will be in the joint names of Bombardier Ltd. and CIE.
6. In accordance with the Contract, the price of each bus delivered in the first year will comprise—
(a) actual material costs.
(b) actual labour and overheads, and
(c) management fee
If before the end of the first production period, agreement cannot be reached on prices for buses to be delivered in the second production period, the Contract shall terminate absolutely. It is intended that in the second and subsequent years, the bus price would be determined as follows:—
(a) actual cost of materials
(b) labour and overheads
(c) fixed management fee.
7. Bombardier Ltd. will have the right to use the CIE designs and facilities to build buses for customers other than CIE. In which event. CIE will be paid a fee plus a royalty payment.
8. Either party may terminate the Contract by two years written notice to the other.
There are provisions within the Contract whereby either party may terminate the Contract if the other party fails to honour the terms of the Contract with costs being charged against the defaulting party.
9. CIE will have the right to appoint two non-executive representatives on the five-man Board of Directors of Bombardier Ltd.
It is the Board’s policy that CIE must have a dependable source for the provision of buses. In the Agreement with Bombardier Ltd. provision is made for CIE to operate the activity on its own account should it be deemed necessary to do so or should the commercial relationship with Bombardier Ltd. be unsatisfactory. It is considered necessary to use the technical and the management resources of Bombardier Ltd. in the first instance to establish an efficient production line. It is inevitable that technical problems will arise in regard to construction and the operation of the bus and Bombardier Ltd. are equipped to resolve such problems in view of their experience.
The factory at Shannon was formerly occupied by the Rippon Piano Co. It consists of 105,000 sq. ft. SFADCO have made the necessary adjustments to the structure of the factory to accommodate the bus building activity. There will be provision in the lease for future expansion of the building.
The intention is that production would commence at the end of this year and the first buses would be available in April, 1980. Subsequent production would be at the rate of 5 per fortnight. It is estimated that CIE’s bus requirements over the next 9 years would be 370 double-deck and 379 single-deck. In addition to CIE’s own requirements, it would be the intention to order such school buses as authorised by the Department of Education from the new concern.
The employment in the new industry will be approximately 200.
13th September, 1979.