A loan application to build a Las Vegas high-speed rail line was rejected because the operator wanted to use foreign-built trains:
The Department has made clear that we prioritize projects that build a foundation for economic competitiveness by advancing domestic rail manufacturing in the United States. The FRA expects recipients of RRIF loans to purchase steel, iron, and other manufactured goods produced in the United States for their projects, regardless of whether the rolling stock is separately financed.
We recognize that a foreign equipment manufacturer may face challenges in meeting these Buy America requirements when responding to an initial opportunity in the United States for a limited order.
Note that the loan was not going to be spent on the train-sets. They would have been purchased separately. But the mere fact that any non-US goods were to be used was enough to kill the project.
And how exactly is this rigid adherence to Buy-America supposed to create jobs?
Now some would argue that this was a bad project anyway. The line would have terminated too far from Los Angeles to attract enough ridership. I agree with that point, but the rejection letter makes no mention of this. So what happens when the next HSR application comes along — and it is a really solid application. Will the DOT again make unreasonable requirements on rolling stock? There is no domestic HSR manufacturing, and it is unrealistic to expect HSR manufacturers to magically spring out of nothingness to market trains for a project.
What we have here is a classic chicken-and-egg problem. Domestic HSR manufacturing cannot exist without HSR lines being built. And HSR lines cannot be built if the DOT mandates domestic rolling stock.
[…] blog Systemic Failure points to Ray LaHood’s rejection of a $5.5 billion loan application by a private group […]
[…] blog Systemic Failure points to Ray LaHood’s rejection of a $5.5 billion loan application by a private group […]
[…] like the blog Systemic Failure cite a classic Catch-22 with this decision. “Domestic HSR manufacturing cannot exist without […]
I would argue this is a poor project….
Why couldn’t a HSR industry “spring up” suddenly? The US has plenty of idle factories & idle capital; I would imagine it might be tough to find competent engineers and project managers in order to get things running quick & efficiently for an industry with little demand. The country already has all its hens, so it becomes a question of how does the US bring those hens together and get working on some eggs to meet the (hopefully) coming demand.
It requires a lot of effort to train everyone, from chief engineers to line workers. US transplant factories that are set up to satisfice Buy America tend to just train the line workers doing the most routinized tasks, while the engineering and design are done by either foreigners or consultants. It works okay for very large orders, like the ones New York makes, but for small ones, the unit cost goes up.
The correct way to set up an American rolling stock industry is to import trains, have local maintenance facilities (possibly owned by foreign vendors, it doesn’t matter), and develop expertise from the railroad workers and the maintenance workers that could source specific parts of a train. If American maintenance people discover they can build a wheel more cheaply than Bombardier’s in-house plants, then Bombardier will notice and start importing wheels from the US. A tech transfer agreement like the ones in China might also work, but it’s unlikely the vendors will agree to sign one again.
They tried this repeatedly in the 70s when various defense contractors tried to get into the train manufacturing business, with results that were… not the best, as exemplified by the (now-retired) Boeing light rail trains in Boston and SF. The problem is that trains are fairly complex and specialized products that require a lot of expertise to get all the right parts and get them all working together right.