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Posts Tagged ‘Buy America’

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.

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Loco

Stephen Smith reports on Amtrak’s new overpriced and overweight locomotives:

Like all of Amtrak’s trains, the Amtrak Cities Sprinter will be fatter, slower, more expensive and more difficult to maintain than the models that Siemens sells to other countries.

The ACS-64, as the new model is known, is based on Siemens’ EuroSprinter, but has been modified to meet American regulators’ globally-unique crash safety standards. Many railroads across the world order changes to their trains, but the special requirements of the Federal Railroad Administration go far beyond what others ask.

Other countries use high-quality signaling to prevent collisions from happening in the first place, and crumple zones to protect light trains in case it does happen. The FRA, on the other hand, insists that American trains be bulked up to survive crashes with minimal deformation, with all of the inefficiencies that heavier trains that must be specially ordered entail.

The ACS-64 will weigh in at 98 metric tons, while other versions of the EuroSpriner, from Korea to Belgium, clock in at 80 to 88 metric tons. The Belgians paid around $4.6 million per locomotive and the Italians paid around $5.1 million; Amtrak is paying $6.7 million for each loco, despite putting in a much larger order. (Protectionist rules requiring Siemens to build the locomotives in America—the ACS-64 is mostly manufactured in Sacramento—certainly didn’t help keep the price tag down.) The ACS-64 can travel 135 miles per hour, but will be limited to 125 in everyday operation. The standard EuroSprinter model, by contrast, does 140, despite having a less powerful engine.

The locomotives will also in all likelihood also be more difficult to maintain than off-the-shelf models, as customized products are by their very nature relatively untested.

loco

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Due to delays and defects, Boston MBTA may have to cancel a railcar order with Hyundai Rotem. The root causes are no surprise:

Hyundai Rotem made a bold entrance into the US market a decade ago with attractive promises, well-placed connections, and prices that beat experienced competitors.

Some in the industry considered it a risky bet, given that Hyundai Rotem had yet to open an assembly plant on American soil, a requirement under federal law, or demonstrate experience negotiating the stricter safety standards and other requirements that have bedeviled several large international corporations trying to break into the US transit and passenger rail market.

“North America is the most difficult market. It is the graveyard of car builders,” said Jonathan Klein, a global transportation consultant and former executive and chief mechanical officer at multiple large rail and transit agencies.

 

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Buy-America policies, a self-inflicted trade embargo, makes it very difficult for transit agencies to get rolling stock on the Global Market. Having no domestic passenger railcar industry doesn’t help either.

Case in point: Amtrak California. They have funds in hand, but it will take years to acquire new bi-level rolling stock. In the meantime, what can they do?

The idea of spending millions of dollars retrofitting cars from the 1960’s is absurd. Deacdes ago I rode those cars as a kid, and even back then they seemed antiquated.

I can think of only one historical analog: Cuba’s fleet of antique automobiles.

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How NOT to Build a Train

Railway Age has a recent article on the race to build America’s high-speed trains. Here is the key section, which goes into all the nonsense of a decidedly political process:

The Federal Railroad Administration’s HSR grant program, funded under ARRA (American Reinvestment and Recovery Act), contains a 100% Buy America requirement. That means everything—vehicles, train control, rail, crossties, track fasteners—must be sourced and manufactured in the U.S. The FRA is willing to grant waivers on a case-by-case basis, “but only as a last resort,” Deputy Administrator Karen Rae told a Railway Supply Institute audience in Washington. “Foreign companies have talked with us asking us to change the requirement, and we told them absolutely not,” House Railroad Subcommittee Majority Staff Director Jennifer Esposito (a former Teamsters official) told the same group.

For politicians who feel compelled to wax patriotic and talk about creating American jobs in a recessionary economy, this is perfect public prose. But is it plausible? “Buy America is an emotional and political issue,” says National Railroad Construction and Maintenance Association President Chuck Baker. “There is a greater short-term political risk in resisting it than a long-term manufacturing risk. Buy America is what works; it’s what creates political support. It’s too easy to kill high speed rail, so at least for now, there’s little choice but to agree.”

Privately, some carbuilders are shaking their heads. “We need a sustained capital market for high speed equipment,” says one. ”We’re already at 80% to 85% U.S. content, and moving our carbody manufacturing to the U.S. could bring us close to 100%. But it will drive up our manufacturing costs. We’ll have to create a new supply chain.” Says another, “From a manufacturing perspective, we are one industry, and transit cars are our biggest piece of business. Given the thousands of components that go into a passenger rail vehicle, creating requirements for only one mode, high speed, which represents a fraction of the market, does not provide the economies of scale we need to make a relatively small order viable.”

When DB or Renfe or even SNCF needs to buy a high-speed train, they simply call up Siemens (or Alstom or Talgo) and order some trains. Simple as that. Customization consists of painting a logo on the outside, and maybe choosing colors for the interior. It is no different than how United or Continental orders airplanes, or how Hertz orders automobiles.

Now consider the process for building trains in the USA. Under FTA rules, all train components must be 100% manufactured in the US. And to guarantee no foreign manufacturing takes place, regulators will devise enough oddball design specs that bidders have no choice but to custom design the rolling stock from scratch. Then, local municipalities compete to offer huge tax breaks to lure a manufacturer.

For transit agencies, this nonsense results in 100% higher costs for vehicle procurement. And even as a jobs program, the cost-effectiveness is abysmal.

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Page 18 of ‘SMART’ staff recommendation on DMU vehicle procurement gives further proof that the only US jobs preserved through Buy-America are those of idiot FTA bureaucrats:

As part of the contract, two pilot cars will be built. These cars will be fully assembled and tested in Japan and, to meet Buy America requirements, will be disassembled and shipped to Rochelle for re-assembly and limited retesting.

Here we have a make-work program to build, disassemble, and then re-assemble train cars. Remember when the Soviets used to be ridiculed for this? Why would SMART go to all the trouble?

The reason might be the ill-fated Metro project in Houston, where two prototype cars were to be assembled in Spain. As reported in the Houston Chronicle:

A year-old voicemail retained by one of the Metropolitan Transit Authority’s outside attorneys may hold the key to preserving the first federal light-rail funds in Houston history. The April 17, 2009, message from Scott Biehl, then the Federal Transit Administration’s acting chief counsel, to Metro attorney Ed Gill responded to Gill’s inquiry about whether “Buy America” rules would permit the assembly of two prototype rail cars in Spain if the cars were purchased with local, not federal, funds.

“Ed, you nailed it,” Biehl said in the message, which was included in Metro’s formal response Friday to the FTA’s Buy America investigation. “The answer is we don’t care.”

Based on this message and the advice of its lawyers, Metro believed the arrangement would pass muster under Buy America rules, which require that assembly of all rolling stock for federally funded projects take place in the United States, Metro chief counsel Paula Alexander said in the response letter. Metro sent the eight-page letter, along with a binder containing 32 supporting exhibits, to the FTA on Friday.

In the end, Metro lost its appeal — even though the regular fleet would have been assembled in the US. With the vehicle procurement scrapped, the project got delayed. All because of two test vehicles!

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