Cubic Faces Alta Anew in Bid for Big Subway Job
Passengers stumble across lots of unusual things while riding New York City’s subway trains, but it’s unlikely that any find could surpass the $100-million pot of gold that Cubic Corp. is seeking in the fabled tunnels beneath the Big Apple.
San Diego-based Cubic hopes to snare a multiyear contract to install automated fare collection devices that would augment the cumbersome and labor-intensive token system that has driven New York City Transit Authority turnstiles since 1920.
The contract would soar during a five-year period to $100 million, if the Metropolitan Transit Authority, New York’s umbrella transit organization, further automates its various subway, commuter train and bus lines.
Consequently, the fare collection industry has been hailing the contract as the “prize of the century,” according to New York-based editor Luther S. Miller, who has written about railroads for 29 years.
But, to win the contract, Cubic must prevail in a unique competition that transit authorities have designed to determine if relatively delicate, computer-controlled fare collection systems can survive the dirt, vibration and vandalism that are part and parcel of the world’s busiest subway system.
French Firm in Race for Contract
The carefully orchestrated trial that begins in January will pit Cubic’s Western Data subsidiary against arch-rival Alta Technologies, a Needham, Mass.-based subsidiary of Compagnie Generale d’Automatisme, France’s leading fare collection device manufacturers.
CGA incorporated Alta in 1980 to comply with “Buy American” legislation that federal legislators passed to protect the nation’s remaining equipment manufacturers from foreign competition that had derailed U.S. railroad car manufacturers such as St. Louis Car and Pullman.
Cubic declined to state what percentage of its $337 million in 1986 revenue was generated by Western Data. However, Western Data and two related fare collection operations finished 1986 with a $110-million order backlog.
Other domestic and foreign companies--including Chicago-based General Fare Inc., which is expanding its automated fare collection business--build individual components for fare collection systems.
But in recent years, only Cubic and Alta have had the financial strength to bid on capital-intensive systems such as those installed in Miami and Washington. Additionally, Cubic and Alta--or its parent, CGA--also have competed for lesser contracts in Baltimore and Buffalo.
Competition for the New York system is seen as especially important because “as one of the major transportation systems in the country, it could be an (important) example for other cities,” according to Alta President Pierre Lereboullet, a former CGA executive who joined Alta in 1982.
“It’s one of the biggest games in town and you can’t be in this business and sit it out,” agreed Western Data Chairman Raymond deKozan.
Cubic, which in addition to making fare collection systems is a defense contractor and owns an elevator installation and repair company, entered the fare collection business in 1971 with the acquisition of Western Data, an operation staffed largely by former Litton employees.
Western Data grew quickly in 1972 when IBM failed to bid on the second phase of a fare collection installation on San Francisco’s BART. Cubic Western Data, the only remaining bidder, won the contract.
More Than 900 Employees
Cubic and its London-based partnership with Westinghouse Brake & Signal of England now have more than 900 employees, including about 400 in San Diego.
In contrast, Alta, a private company that does not release financial data, maintains a “core” of about 20 employees in its Needham headquarters. The company turns to temporary help and subcontractors when new orders surface, Lereboullet said.
“They can get the circuit boards from one (U.S.) manufacturer and the cabinets from another company, and it’s all made in America,” said J. Wesley Leas, a transit consultant from Bryn Mawr, Pa. “But Alta does get the engineering and designs from CGA, its French parent.”
“I’ve been competing with CGA since 1973, worldwide,” DeKozan said. “(Alta Technologies) was just a device they used to get around the Buy America Act.”
That worldwide competition resulted in Cubic winning contracts in London, Hong Kong and Singapore. The company teamed with Westinghouse Brake & Signal to defeat CGA for a $90-million contract to install automated fare equipment in the London subway, the Underground.
Cubic has vented some of its frustration in an ongoing series of print advertisements that urged legislators to protect “the only American manufacturer of automatic fare collection” from unfair foreign trade practices.
Alta’s inroads into the U.S. market, have included winning contracts valued at $3 million each in Buffalo and Baltimore.
Lereboullet said Alta in each case took great pains to ensure that “the buy-American regulations are met.”
Cubic has taken equally careful steps to ensure that Alta toes the regulatory line.
The company used Maryland’s Freedom of Information Act to gain documents needed to support its contention that most of the system came from France.
Cubic also applied pressure in Buffalo: “It seems to me that Cubic spends more money on lobbying and legal fees than engineering,” a Buffalo transit administrator said in a 1983 Forbes magazine interview.
The intense competition also was obvious when the two manufacturers were competing for multimillion-dollar contracts in Miami and Washington.
In Miami, Alta alleged that transit officials doctored a vital Cubic bid document in order to tilt the competition toward Cubic, which eventually won the $4.6-million contract. A federal investigation, however, failed to substantiate Alta’s charge.
Washington’s Metro system recently ended Alta’s long-running bid to be named as a second source for new fare card machines and gates that will be installed as tracks press farther into Virginia and Maryland.
The automation devices that Cubic and Alta build are expensive, but systems buy them because automation helps reduce the high costs of employee theft and labor costs, according to DeKozan.
The computer-controlled systems also provide daily ridership data that is used to develop marketing programs. Transit authorities have gradually learned that “they’re dealing with the same marketing problems as Macy’s and Neiman-Marcus,” according to Miller.
Automated fare systems also make it easier for transit authorities to charge different fares--peak, off-peak, student, elderly--and make it possible to peg fares directly to distances traveled, an impossible task without automation.
New York City’s test, which is to run for as long as a year, involves magnetically coded “swipe cards” that will be issued to 10,000 NYCTA employees, 30,000 schoolchildren and 10,000 daily commuters.
The cards will activate automated turnstiles that will be installed at 79 stations. Cubic’s system will operate at 40 stations and Alta’s system will be installed at 39 stations.
NYCTA officials expect the upcoming trial to determine whether relatively sensitive equipment can co-exist in the system’s harsh environment, said NYCTA spokesman Jared Lebow.
Steel Dust a Problem
“Because we have steel wheels running on steel rails, there is steel dust that might clog up sensitive works, and we do have a vandalism problem,” Lebow said. “We’re looking for something that can stand up to the ridership we have now, which is about 3.7 million fares a day.”
Even if the new technology works, some observers wonder if subway riders will embrace it. “Some people will always want tokens,” Lebow said.
