Hitachi’s manufacturing and assembly plant in Newton Aycliffe, is one of three bidders shortlisted to design, build and maintain a fleet of more than 40 much-anticipated new trains to replace the ageing Metro carriages on the network.
The company faces competition from Spanish firm CAF and Stadler, a rail construction company headquartered in Switzerland.
The Hitachi plant employs 700 people and built the East Coast Mainline's new Azuma trains.
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It won a £400million order for new Midland main line carriages but failed to secure a £1.5billion London Underground contract and has no orders beyond spring 2020.
But Ben Houchen, the Conservative Tees Valley mayor, has claimed the company has lost out to CAF, condemning it as “madness”.
His claim has, however, been dismissed by Nexus, the public body which owns and manages the Metro system.
Mr Houchen said: “Let's take a breath to make sure the right choice is made, because at the moment this is the wrong decision.
"Trains built locally by Hitachi Rail can be found on railways around the world, but because of this horrendous decision this is being put at risk."
Nexus issued a statement in response confirming the bidding process is still underway, with no decision due until January 2020.
A spokesman said: “The procurement of our new train fleet is an ongoing process. We cannot comment on any details of the respective bids from Hitachi Rail, Stadler, or CAF at this stage. The successful bidder will be officially announced in January.”
The first new Metro trains are expected to arrive in late 2021. These will come as a godsend to regular passengers who have become frustrated by the increasingly unreliable system.