Deal for LA Rail Car Factory Falls Through

by Rafael

AnsaldoBreda is an Italian manufacturer of passenger rolling stock, with a portfolio covering light rail, subways, standard speed and high speed products. SPCR radio reports that the company has walked away from a $300 million order for 100 light rail cars for Los Angeles MTA. In spite of earlier assurances, in the end the Italians were not willing to sign up to stiff penalties in the event of late delivery. It is now likely that the authority will have to execute an open tender process after all, which in the long run may well prove the best possible outcome.

What's Past is Prologue

In 2003, LAMTA awarded AnsaldoBreda a contract to build a new fleet of 50 model P2550 light rail cars with options for 2 x 50 more, in spite of delivery delays on two previous contracts. Evidently, third time is not the charm, as the company is late yet again - by three years, no less. The units already delivered are almost 6,000 lbs overweight, which means they cannot be used on certain lines.

Nevertheless, Mayor Villaraigosa pressed for these options to be exercised in a no-bid follow-on contract, with the understanding that the company set up a factory in LA and also move its corporate headquarters there. An LAEDC report dated March 2009 confidently forecast 535 manufacturing jobs and summarized that "in total, AnsaldoBreda will sustain continuing economic activity worth $368.5 million in economic output and 2,240 FTE jobs in Los Angeles County with estimated annual earnings of $91.1 million." Rumor has it the factory was to be built by an outfit headed up by the former chief deputy mayor.

Critics point out that this level of fresh employment could only be sustained with an annual output of 75 units, which would require additional orders from other US transit agencies. However, in addition its history with LAMTA, the manufacturer is now also several years late on unrelated orders from Denmark and the Benelux. The latter are for V250 "Albatross" high speed trainsets. Nomen est omen, though in all fairness the latter project has been hamstrung by factors beyond the company's control. Given AnsaldoBreda's global track record of missed deadlines, LAEDC's implied forecast that it would become a major player in the US rail car manufacturing industry was perhaps more pious hope than realistic expectation. After all, the company's assembly plant in Pittsburg never grew to the originally intended size, either.

Note that the deal that just fell through would have been ineligible for federal co-funding because the current surface transportation bill contains a five-year deadline for exercising options on existing contracts.

Plan B: Go Fish

With the passage of Measure R last year, LAMTA's needs have anyhow expanded to a total of around 200 cars for both subway and light rail in addition to refurbishment of the existing fleet. The increased size of the deal means the authority now has a much better chance of attracting bids from major players in the rail transit vehicle industry, some of whom also have high speed trains in their portfolio. Names mentioned in the radio interview: Siemens Mobility, Bombardier Transportation and Kinkisharyo, though this list was not meant to be exhaustive.

In principle, a fresh order would be eligible for federal co-funding in the context of even the current surface transportation bill, though that is already being extended for 90 days at a time because the Obama administration has decided to postpone discussion of the next one. Whichever bill would apply, there are long-standing FTA rules against federal co-funding if a tender process is skewed in favor of bidders who offer to set up a local manufacturing facility. Nevertheless, in order to help the Mayor save face, LAMTA intends to write just such a skew into the rules for the upcoming tender. That means sticking with the strictly local funding model in the (forlorn?) hope that USDOT will redirect its generosity to other component projects of Measure R so it ends up a wash.

For reference, Siemens Mobility already has a light rail assembly plant in Sacramento. Bombardier Transportation has rail maintenance facilities in Southern California and is also present other US states. Patentes Talgo S.A. is present in Washington state and is setting up a factory in Wisconsin.

Potential Implications for California HSR

While LAMTA has no formal authority whatsoever over vendor selection for the California HSR project, Los Angeles does wield significant clout in Sacramento. Don't be surprised if Mayor Villaraigosa attempts to sweeten the pot by dropping heavy hints regarding possible follow-on business from CHSRA to encourage bidders to set up shop in his city.

Like it or not, industrial policy - i.e. manufacturing job creation/retention - has been a factor in vendor selection in many HSR projects all over the world, especially for the prestigious initial order. I suspect CHSRA's role in vendor selection may therefore end up limited to the technical and commercial pre-qualification of a shortlist, though neither the Governor nor the legislature have said so publicly.

From Russia With Love

Is California's high speed rail future on display in Russia? According to Siemens and the New York Times the answer just might be "yes":

Siemens’s new train — the Sapsan, Russian for peregrine falcon — is a candidate for the high-speed link planned between San Francisco and Los Angeles that may open in 2020. Alstom, the maker of the French TGV trains, and Bombardier are also contenders. Japanese bullet train designs by Hitachi, which are lighter but less secure in a low-speed crash, the only type of collisions survivable, are another option.

The technological breakthrough of the Sapsan is that the train has no locomotive. Instead, electric motors are attached to wheels all along the train cars, as on some subway trains. (Passengers sit in the first car too.) Its top operating speed is 217 miles an hour, though in tests this model has reached 255 miles an hour, or about half the cruising speed of some jet airplanes.

For now, though the Sapsan will only be traveling at about 150mph over Russia's dilapidated rails.

Siemens is aggressively pursuing the US market, particularly us Californians:

The United States “is a developing country in terms of rail,” Ansgar Brockmeyer, head of public transit business for Siemens, said in an interview aboard the Russian test train, as wooden country homes and birch forests flickered by outside the window. “We are seeing it as a huge opportunity.”

To position itself to compete in the United States, Siemens has placed employees from its high-speed train division at its Sacramento factory, which produces city trams.

California desperately needs jobs like those that would be created building high speed trainsets in Sacramento. Opponents of HSR argue that the risk of a "boondoggle" is greater than the value of the jobs that would be created - 160,000 for the construction of the project, and 450,000 ongoing jobs, according to CHSRA estimates. I have a very difficult time believing that to be the case, especially when California faces the highest unemployment since the end of World War II.

But back to Russia (for a moment). Jaunted, a "pop culture travel blog," wondered if this was a case of "the space race race moving to the rails." It would be nice if we could move past Cold War metaphors when comparing the US to Russia, but clearly the space race was an iconic era in the 20th century, where international rivalry produced major human accomplishments that might not otherwise have gotten done. And as much as I support space exploration, it is undeniable that HSR provides more immediate and tangible benefits than putting a man on the moon.

What really matters is that nations like Russia, Poland and others are recognizing that having a high speed rail network is essential to their future economic prosperity. The US is not immune, despite what those who refuse to admit that the transportation models of the 20th century no longer work would have us believe.

I don't have any plans to be in Russia anytime soon, but if I did, I'd take time to ride the Sapsan.

Clear Winners

Two things jumped out at me in this Wall Street Journal article about federal high speed rail funds. The first is about efforts by corporations to position themselves to benefit from HSR and other passenger rail projects:

Siemens USA, a subsidiary of Germany-based Siemens AG, has spent $76 million to expand a factory in Sacramento, Calif., where it builds rail cars. The company has already provided passenger vehicles for light-rail systems in San Diego, Denver and Salt Lake City, and it plans to hire more than 100 workers in the year or so ahead as it competes for stimulus-funded contracts.

I hadn't known of that Siemens plant, but it's definitely well-positioned to take on HSR work should the Authority choose to go with them to provide the rolling stock for the California system. That isn't stopping other companies, including the French and the French-Canadians, from showing interest:

The fastest trains currently running in the U.S. -- operated by Amtrak as the Acela service between Washington and Boston -- were built by the Canadian firm Bombardier Inc. and France-based Alstom SA. Both companies continue to be major players in the U.S. market.

Both will likely play some role in pursuing HSR contracts here in California. For its part, GE plans to stick to the "higher speed rail," projects aiming at speeds of 110 and 124 mph.

The other and more significant thing that stood out in the WSJ article were comments from FRA administrator Joseph Szabo about what would happen with the HSR grants:

As soon as this week, Joseph Szabo, administrator of the Federal Railroad Administration, Transportation Secretary Ray LaHood and other senior White House officials will start deciding how to award the grants. A Transportation Department spokesman said the officials won't meet with any lobbyists or state transportation officials.

In an recent interview, Mr. Szabo indicated that clear winners will emerge from the process.

"We have to come away with very tangible success," Mr. Szabo said. "One of the worst things we can do is spread the money around so thin" that no major impact is seen."

There's really no other way to read this except that California HSR is going to get a significant chunk of change. All indications coming out of USDOT are that California is going to get money, and that our HSR project is seen as a signature project for this administration. Can't wait to see the final results of the DOT's process.

Will GE Get Into the HSR Business?

Via Trains4America comes this article about GE's interest in reviving its passenger rail division:

Simonelli hopes the new Evolution model could mark the beginning of something else — the return of GE Transportation to the passenger train business.

GE, which built more than 300 Genesis model passenger locomotives during the 1990s, wants to be a player in that industry, Simonelli said.

“GE has the know-how and the manufacturing base to develop the next generation of high-speed passenger locomotives,” he said. “We are ready to partner with the federal government and Amtrak to make high-speed rail a reality.”

Although Monday marked the official unveiling of the new locomotive, 25 of them already have been delivered to Burlington Northern Santa Fe, which is helping GE Transportation continue long-term testing.

This is a smart move from GE's perspective, as the collapse of the US auto industry has politicians in both parties looking for a new manufacturing base. Anything GE can put together on HSR in particular would get a LOT of favorable attention from the Congress.

That being said, the last thing we'd want is a political decision about HSR power and rolling stock. The trainsets we use have to be of a high quality, and there are a lot of excellent off-the-shelf technologies out there. If we can get Siemens or Alstom to commit to building a final assembly plant in CA, then it would go a long way in leveraging GE to make similar commitments.