Bombardier, the Canadian maker of trains and planes, has taken another $189 million US hit in its venture into the London Underground.

Undaunted, the Montreal company said it has signed an agreement with a unit of Italy's Finmeccanica to develop a train capable of speeds above 300 kilometres an hour. The new train will avoid "the shortcomings of existing concepts" by applying technologies recently developed by the two companies, it said.

Bombardier three-month chart

In its London misadventure, Bombardier said Tuesday it will pay the $189 million US to a subcontractor, Westinghouse Rail Systems, in an untangling of contracts to maintain and revamp much of the London subway system.

The contract changes, which are subject to court approval, would reduce Bombardier's order backlog by $2.6 billion US, leaving it with orders worth $3.8 billion US in the venture.

Bombardier announced in 2003 that it had landed $7.9 billion US in contracts over 15 years to supply rail cars, signaling equipment and maintenance in a privatized overhaul of nine of London's 12 subway lines.

The project has turned out unhappily for Bombardier and its four partners in a consortium called Metronet, which was  bogged down in cost overruns and insolvency.

On the bright side, Bombardier said it will receive a $56 million US payment on overdue bills for signalling work and rolling stock.

"We are pleased that these negotiations are coming to a conclusion and to have maintained our contracts for the supply of new rolling stock," said Andre Navarri, head of Bombardier's rail unit, in a statement.

"London Underground is one of the biggest subway systems in the world, and we look forward to delivering the modern vehicles that London' s passengers deserve."

On the Toronto Stock Exchange, Bombardier's class B shares rose 16 cents Tuesday to close at $5.63.