A previously agreed $300m deal for 100 light rail cars deal between the Los Angeles County Metropolitan Transportation Authority in the US and Italian rail maker AnsaldoBreda has collapsed.
The Italian firm has declined to accept the contract's conditions, which include financial penalties for late deliveries.
The contract was signed despite opposition from within the transport agency citing the Italian firm's underperformance in a earlier contract, in which locomotives were delivered late and were too heavy to be used on all light rail routes.
The deal, agreed in September, was based on an option in an earlier agreement with AnsaldoBreda to supply 50 rail cars.
The deal also required the Italian firm, a Finmeccanica subsidiary, to build a manufacturing facility in the city.
The agency will now open fresh bids with the contract expected to be awarded in spring 2010.