Railpower seemed to be on track a couple of years ago. Its fuel-efficient technology promised to save rail companies money, and it received a vote of confidence from the Ontario Teachers’ Pension Plan, which invested $35 million in 2007 and another $20 million last year in exchange for convertible debentures. (OTPP is Railpower’s largest creditor.)

But Railpower has never turned a profit and failed to secure any significant orders for its locomotives last year. Construction on its manufacturing plant in Quebec ceased in the fall, and nearly 40% of the company’s staff was laid off in January, leaving 84 employees.

The company maintains in its latest release that it continues the search for alternatives, and that it may seek to extend its creditor protection order, which expires tomorrow. (Railpower was already granted an extension last month.) It is tough to foresee a positive outcome, however. The U.S. may be cracking down on emissions in the transportation industry, which was supposed to be a major driver of Railpower’s business, but the company has much stronger competitors, primarily GE Transportation and National Railway Equipment. Neither of those two companies suffered the corporate and public relations disaster that Railpower did, either.

The firm’s flagship product, a low-emission and fuel-efficient locomotive called the Green Goat, proved to have a major safety flaw: a battery leak that could cause the locomotive to burst into flame. More than 60 locomotives were recalled, which had cost the company around $20 million as of last year. Shares plummeted after the recall and Railpower became a penny stock.

The flaw was discovered shortly after José Mathieu joined the company as CEO in 2005, and the problem caught both him and the board by surprise. The magnitude of the turnaround before Mathieu was so large that when I spoke with Cormark Securities analyst MacMurray Whale last year about Railpower, he wondered, “If you go back and ask Mathieu, ‘If you knew what you know now, would you go back and quit your job?’ I would be really interested to know.”

Whatever the case, Mathieu was shown the door when Railpower filed for bankruptcy protection in February. The company may get another extension tomorrow, but with tight credit markets, dim sales prospects and the spectre of the Green Goat still hanging around the company, this could be the end of the line for Railpower.

Further reading: Railpower in its glory days, when it was set to “revolutionize the railway industry.”

So it’s worth asking, Just who the heck was driving? The entire prolonged privatization process was badly managed from the start. Whether it was the controversial bidding process, the aborted merger discussions with Telus, or the lawsuit with the bondholders that went right to the Supreme Court for an 11th hour decision, nearly every step of the way, something was always going not quite as planned. To my mind, that suggests something was wrong with the plan in the first place.

The irony, of course, is that after all of this rigmarole, BCE as a company is almost certainly better off not being privatized. Operating without the need to service an extra $32 billion in debt, especially in these markets, will give the executives quite a bit more flexibility to run the company and stay competitive.

But that probably doesn’t mean too much to BCE’s long-suffering shareholders. Assuming this deal does not somehow miraculously coalesce by Dec. 11, shareholders should be taking a  long hard look at the board of directors. After all, they were the people that kept backing former CEO Michael Sabia’s meek attempts at improving shareholder value—and that is where this all started, if you can cast your mind back far enough. Sabia’s now gone, and telecom veteran George Cope is finally getting a crack at running Bell, but it’s foolish to think he should be reporting to the same board.

News reports suggest that under the old board’s direction, the more drastic asset sales that had been planned by the new owners, led by the Ontario Teachers’ Pension Plan, would be “off the table”. Reinstate the dividend, maybe buy back some shares, hope that placates shareholders. (Notice there’s nothing in there about merging with Telus—at this point, snowballs have a better chance in Hell.)

But in no way should shareholders be placated. I’m sure that more than a few of them were steaming at this remark by chairman Dick Currie in the morning paper:

“There’s not much one can say about it, in terms of anger or exhaustion. We did the very best we could do all the way through,” said Mr. Currie, former president of Loblaw Cos. Ltd. “As far as I am concerned, the board has done a superb job under very difficult circumstances, and if the deal doesn’t go through, it is not because of a lack of trying.”

If BCE shareholders hadn’t stopped reading and thrown the paper across the room, this paragraph at the end of the story probably made them feel at least a little better:

…a number of BCE directors are expected to step down from the board at the next annual meeting, if the takeover does not play out. Mr. Currie did not reveal his plans, except to say he wants to ensure the company is on sound footing.

The bottom line, however, is the same as it ever was: BCE needs to become a more competitive, better run company that can show it knows how to operate as a 21st Century telco. If this is not a catalyst for serious change, you have to wonder what would be. But the fact that it’s taken so many years for it to only come back around to this same challenge is a damning indictment of the people that were supposed to looking out for investors all along—the board.