Budd’s Railroad-Car Future Uncertain as Contracts and Time Runs Out
The low, gray concrete building stretches six football fields in length. Once a bomber factory, it now houses the nation’s last rail passenger-car manufacturer.
For 50 years, the Budd Co. was the country’s most successful passenger-car maker. Budd produced 11,000 cars since 1934 in 105 different models, including the classic stainless steel Zephyr, Meteor and Comet streamliners of the 1930s and ‘40s.
But foreign competition and mounting losses have driven even the name Budd from American railroading. On Jan. 1, the 2,000-employee rail-car division was spun off from the Troy, Mich.,-based firm. It was renamed Transit America Inc. and told to fight for its life.
New Chairman
Now a direct subsidiary of the West German conglomerate Thyssen A.G., the firm has a new chairman direct from Europe, Hans U. Wolf, as well as a president, Larry Salci, and a chief of operations, Raleigh Huntsman, all brought to the firm in the last two-and-a-half years.
“We have to galvanize this company into action,” says Wolf, a naturalized U.S. citizen who spent 17 years with General Electric and nine years with Thyssen Henschel.
There isn’t much time, according to Salci, who left a job in 1982 as head of the Southeastern Michigan Transportation Authority to become president of Transit America and learn how to make the cars he once operated.
“If we don’t win a major job in the next 15 months, our future is in deep question,” he says.
What has been happening in Washington lately does not provide grounds for good cheer. The Administration proposes to slash federal transit subsidies and discontinue Amtrak, the money-losing national passenger railroad, for which Transit America hoped to build the next generation of passenger cars.
Transit America is now turning out a car a day that sells for $800,000 to $1 million. The cars will go to New York, Chicago, Baltimore and Miami under contracts awarded before 1980. Those contracts for 1,150 cars will be filled by 1987. Right now there are no new ones.
Lost Contract
“I haven’t seen enough initiative,” Wolf says about the company that three years ago lost a major hometown Philadelphia subway-car contract to Japan’s Kawasaki. Salci says he also remains bitter over the loss of an 825-car New York City Transit Authority contract to Canada’s Bombardier. Budd alleged unfair trade practices and filed, but later withdrew, a formal complaint which said the Canadian government had subsidized the contract.
Transit America has countered with adoption of the “Buy America” theme in its marketing division. Wolf says a long-standing policy of using only American steel at the Red Lion Road car plant will stay firmly in place as an example of the company’s commitment to that idea.
Equally firm is the goal of cutting costs. “The board will not approve prices that will perpetuate the losses,” says Wolf. “The shareholder (Thyssen) will not ‘ride out’ anything. It’s a matter of survival.”
Costs must come down far enough to land contracts later this year when a large northeastern city is expected to accept bids. Salci says Transit America, under the old practices and management, lost 14 straight U.S. car contracts to bids that were as much as 40% lower than Transit America’s.
One step was taken a year ago with the cooperation of the plant’s union, the United Auto Workers. Union and company abolished standards requiring 300 man-hours to put the shell of a car together.
The union proposed 150 man-hours and compromised at 125.
“Today, they do the job in less than 100 man-hours,” Salci says.
Traditional Cars
There was an assist from institution of a bonus program for workers who exceeded productivity standards.
Besides getting orders for traditional cars, Transit America must look elsewhere if it hopes to turn a profit. “We cannot get into the black on existing business,” Salci says.
On a side burner is a continuing development project at Budd’s Fort Washington technical center, which Transit America uses on a cooperative basis with its former parent. The secret effort involves three prototypes for the new generation of passenger cars for Amtrak.
The question is, however, whether Amtrak will be around to buy cars.
Salci and Wolf recently met with U.S. Sen. John Heinz (R-Pa.) about the future of the government-owned rail line. The lawmaker was “positive” about its future, the two reported.
David Stockman, director of the Office of Management and Budget, has proposed cutting Amtrak from the budget. Richard Bryers, a spokesman for Heinz, said Heinz and Sen. Alphonse D’Amato (R-N.Y.) would fight to re-authorize the current mass transit funding system and Amtrak next year.
Transit America has another possibility.
“We are exploring international markets on a select basis,” Wolf says. The company is “close” to a deal with the Egyptian government for a mass transit system in Cairo.
Seeking New Markets
In trying to tap new markets, Wolf says he will also turn to his old company, the 7,000-employee rail and military vehicle manufacturer, Thyssen Henschel of Kassel, West Germany, for research help.
The wave of the future may be high-speed rail technology, either the Maglev, which floats a train above magnetized rails at speeds of up to 250 m.p.h., or the steel wheel-steel rail Inter City Experimental technology.
Henschel is working on both and Salci says several American municipalities could place orders in the next decade.
