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Posts Tagged ‘Buy America’

Amtrak California was expecting to receive new railcars. Funded through the 2009 stimulus package, the new railcars were supposed to replace antiqued models, some of which date back to the 1970’s. But production is stalled, for the usual and predictable reasons; i.e. the strict Buy-America procurement rules, and trying to debug a unique train design:

The tight restrictions on when and where the stimulus money can be spent left Nippon Sharyo with almost no room for error with a car model that it hadn’t built before and a brand-new assembly plant 80 miles west of Chicago that cost $100 million.

Crashworthiness of passenger railcars has been a primary focus of car designers since collisions involving commuter and freight trains in Southern California killed 11 people in 2005 and 25 people in 2008. Nippon Sharyo’s car hasn’t been able to pass a federally mandated test for absorbing rear- and front-end compression force generated in a crash.

After repeated failures, engineers are now redesigning the car’s body shell. That and additional testing will take about two more years to complete, according to people familiar with the matter. The entire job was to be finished in 2018, with the stimulus-funded portion due for completion in 2017. Now, Nippon Sharyo isn’t expected to start production until 2018, people familiar with the work say.

Nippon Sharyo isn’t the only manufacturer running into these problems. Spain’s CAF is having similar issues:

Five years after winning a $343 million contract to build 130 long-distance railcars for Amtrak, Spain’s Construcciones & Auxiliar de Ferrocarriles SA is struggling to complete the order. The work was supposed to be completed by early 2015, but as of late last year the company’s CAF USA Inc. subsidiary had turned out 70 baggage carsfrom its plant in Elmira Heights, N.Y. Nearly 400 defects were identified in the first 28 baggage cars delivered, according to an Amtrak report issued in February. The work schedule has been renegotiated, with each delay pushing delivery dates further.

lahood_nippon

Secretary LaHood announcing the Amtrak railcar order at the Nippon Sharyo plant, where he said: ” thanks to a standardized design initiated by our Federal Railroad Administration…the parts and components for passenger rail cars and locomotives lowers the costs of production and improves competition. It also makes it easier and reduces costs for operators to maintain equipment.”

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The Oxnard Derailment

On February 24th, a Metrolink train struck a pickup truck that was hauling an empty trailer. Normally such a collision would be no big deal. But in this instance, the train derailed spectacularly, with passenger cars strewn about. Dozens of passengers were injured and the train engineer was killed.

This scenario wasn’t supposed to happen. Metrolink had spared no expense in building new trains to meet the latest FRA safety specifications. The Hyundai-built train was equipped with crumple zones, and special couplers to keep trains aligned and upright in a derailment. None of these supposed safety features functioned as expected. An internal report blames shoddy workmanship:

The confidential report states that the manufacturer failed to meet design specifications that Metrolink required for cow-catchers on cab cars. The unmet specifications related to struts that extended into the car body and a requirement that cow-catchers be able to withstand a load of 100,000 pounds. The document noted that the specifications “may need to be more robust.”

In addition, the report stated that the cow-catcher had some poor welds and that other parts of the device “showed probable failure” despite extra brackets and good welding in other places. A photo attached to the report shows that the cow-catcher had broken off the cab car. Arrows point to four weld failures and areas where bolts were sheared off.

According to the report, a metallurgist found that one of the two failed couplers displayed evidence of a manufacturing defect known as porosity — a casting flaw that causes voids and bubbles to form in the metal.

Not to defend Hyundai, but the real problem isn’t poor quality control, but rather bad train design, and Buy-America trade-protectionism. There are any number of overseas manufacturers who could have sold Metrolink a service-proven trainset. But because Metrolink isn’t allowed to buy trains overseas, Hyundai had to create a whole new facility in the US, and set up a domestic parts stream. That is a complicated endeavor. And the trains themselves are of a custom design, largely dreamed up by government bureaucrats. It is no wonder the Metrolink train is defective.

The most distressing part of this fiasco, though, is the failed coupler. Most newer regional/commuter trains don’t even have couplers, because the world has moved on to articulated trains. Articulated trains have many benefits — one of which is that they are much less prone to jackknifing in derailments. But US rail planners continue to oppose the use of articulated trains, for truly baffling reasons.

oxnard

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The NEC is a legacy 100 year-old infrastructure, whereas the Calfornia high-speed rail project is clean-sheet design. There was never a rational explanation as to why California should use NEC-compatible equipment when the corridors are so completely different. And now, thankfully, sanity has prevailed:

It became clear in meetings with manufacturers during the last few weeks that the requirements were too different to incorporate into one set of trains, said Lisa-Marie Alley, a spokeswoman for high-speed rail.

“The feedback that we got from the industry was that Amtrak and high-speed rail need such different things, it was almost impossible for them to build a train that meets both our needs,” she said. “We’d hoped that the industry had evolved to where they can accommodate both.”

The agencies concluded that too many compromises would need to be made to meet both their needs, which would “move us away from a service-proven design and create significant risks as to schedule and costs,” Amtrak spokesman Craig Schulz said in an email.

One of the puzzling things about the CHSRA has been its inability to work with its California partners (Caltrain, Metrolink) on really basic things, like compatible platform heights and signal systems — while at the same time design its high-speed trains to be compatible with a rail line 3000 miles away. The NEC requires high-platform trains, which precludes Caltrain and CHSRA from sharing platforms. Hopefully, with this decision, Caltrain and CHSRA can at least use trains with the same platform height.

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Buy-America (Solar Panel Edition)

When the US government subsidizes green technology, that is considered a good thing for the environment. But when a foreign government does it, that is considered anti-competitive:

The Commerce Department on Tuesday imposed steep duties on importers of Chinese solar panels made from certain components, asserting that the manufacturers had benefited from unfair subsidies.

The duties will range from 18.56 to 35.21 percent, the department said.

The decision, in a long-simmering trade dispute, addresses one of the main charges in a petition brought by the manufacturer SolarWorld Industries America. While it is preliminary, the ruling means that the United States will begin collecting the tariffs in advance of the final decision, expected later this year.

It is hard to see how this tariff will save jobs. Solar panel installations had been one of the bright spots of the economy — particularly in places like California’s Central Valley where there is high unemployment and high electricity bills.

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Frankenelevator

Is there anything Buy-America can’t screw up? An Italian company won the bid for its diagonal elevators, but the “performance specifications” were written to favor American subcontractors:

Project administrators preferred that the software and other components come from American companies with whom they were more familiar. (The authority said its contractors, not the agency itself, made these decisions after being presented with performance specifications.)

The controller was made on Long Island. The speed governors, or limiters, came from Ohio. Other pieces, like buttons and speakers, were manufactured in Queens. “It’s like if Ferrari would be instructed to put in a Chevy engine and a Ford transmission,” said Charley Hart, the project manager for Kone, the company overseeing the elevator and escalator installation. “Yes, it can be done. But it’s a challenge.”

The elevator and its assorted pieces passed tests separately, and other construction appeared to be moving apace. Publicly, officials said they remained on track for a Bloomberg-era start date. But when the parts were integrated for the July test, the system failed. Mr. Horodniceanu has taken to calling the elevator his “mutt,” for its hodgepodge pedigree.

Even if they get the elevator working, I wouldn’t feel safe riding it.

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Here is one group of economists that understands the problem with Buy-America policies. In their paper The Political Economy of Public Bus Procurement: The Role of Regulation, Energy Prices and Federal Subsidies, Professors Li, Kahn, and Nickelsburg report that the American bus fleet is more expensive and more polluting than that of other countries:

This absence of international trade has multiple implications. First, the absence of international competition likely leads to high prices. This could result in fewer buses due to capital constraint and hinder the economics of scale that is vital for public transit (Morhing 1972; Parry and Small 2009). While it is difficult to construct a hedonic bus price regression where we control for key metro bus characteristics, our research suggests that measured in comparable units, buses in Tokyo and Seoul are half the price of U.S. buses and buses produced in China are even cheaper. While cynics might question the quality of China’s buses, it is notable that wealthy and well governed Singapore is importing buses from China.

In the absence of international competition, U.S. tax payers face a higher price for subsidizing urban bus services and U.S owners of the domestic firms that produce the buses gain some monopoly rents. There is a fundamental asymmetry in that a small group of domestic producers benefit from the absence of imports while the costs borne by tax payers are broadly spread out (Stigler 1971, Becker 1985). Based on data from 1997 to 2011, the average price for a U.S metro bus (in year 2011 dollars) was $309,000 with the 10th percentile of the empirical distribution being $104,000 and the 90th percentile at $497,000.

A second implication of the absence of bus imports is extra energy consumption and hence greenhouse gas emissions. The bus fleets in Seoul and Tokyo are both more fuel efficient than in the U.S. The fleet fuel economy of buses in the U.S. was 3.54 miles per gallon (of gasoline-equivalent fuel) in 2011, compared with 4.74 in Tokyo which also operates a diesel-dominated fleet of about 1500 buses. In Seoul, the average fuel economy of 61 diesel buses was 5.05 and that of 7,469 CNG buses was 4.04 in 2011.

Chinese electric bus, being tested for use in Los Angeles. A rare example of a foreign bus manufacturer selling to the US market.

This Chinese electric bus, being tested for use in Los Angeles, is a rare example of a foreign bus manufacturer selling to the US market.

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Economists For Protectionism

jeanetteProfessional economists generally look for ways of improving labor productivity. And most economists would take a dim view of protectionism (and other market barriers). So you would think that the US transit industry, with its dismal labor productivity, is fertile ground for research, right?

Apparently not. Consider this “Research Brief” written by Dr. Jeanette Wicks-Lim  at the UMass Political Economy Research Institute. Called How “Buying American” Can Raise the Job-Creation, the report argues in favor of greater Buy-America requirements for transit vehicles purchases:

How many jobs does the U.S. economy gain when manufacturers raise the domestic content of their products? This research brief presents estimates which show that, on average, when manufacturers fully source the components and subcomponents of their vehicles domestically they create at least 26 percent more jobs than manufacturers that only meet the 60 percent Buy America requirement.

What she fails to consider is that the 100% Buy-America vehicle will be as much as 2x more expensive. It will also be much less reliable, and take years to custom-design.

That extra expense is an opportunity cost. Billions of dollars is being wasted that could go towards expanding the transit network, or running more transit service. Those things provide jobs too. As well, the overall economy would see benefits from have more extensive and frequent transit service.

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