Province hopes to salvage Industrial Rail contract

The Department of Economic Development is holding out hope that a contract between Moncton's Industrial Rail Services Inc. and Via Rail can still be salvaged.

Via Rail cancelled the $109-million deal with Industrial Rail to refurbish 98 passenger cars last week.

The Court of Queen's Bench appointed a receiver on Thursday for Industrial Rail at the request of the provincial government.

Bruce MacFarlane, a spokesman for the Department of Economic Development, said the provincial government had to protect the investment of taxpayers after trying to mediate between Industrial Rail and Via Rail for two months.

The provincial government has said it backed the company with $22.5 million in loans and guarantees.

"The receiver will go in, evaluate and we'll see if we can try and get some work done at the location and we'll see if we can get some people back to work," MacFarlane said.

About 200 people work at Industrial Rail.

"The receiver will try and see if they can look at the contracts and see if they can put anything and piece anything back together," McFarlane said.

An affidavit prepared by an employee with the Department of Economic Development, described the "deteriorating" relationship between Via Rail and Industrial Rail.

The affidavit said Via Rail terminated the uncompleted portion of its contract to refurbish the passenger cars on April 11.

MacFarlane said the provincial government has paid out $9.5 million to support Industrial Rail.

There is another $11 million at risk.

"We're here today to try and make sure we don't lose the entire total. We've had to pay out twice already. That's why we took action," he said, adding he is hopeful.

Industrial Rail officials could not be reached for comment.

The company fell behind on the refurbishment project, saying it was trying to work around problems that engineers found in the rail cars' framing.

Ernst & Young has been appointed as the receiver.

Industrial Rail laid off 85 people in March.