Transit Planners Focus on ‘Niche Markets’ : Employment: New ideas are emerging to help entrepreneurs get started in the manufacture of rail cars in the Southland. Standardization and government control are not considered options.

At the peak of public fury over the Metro Green Line last month, county officials sought to defuse the situation by proposing to set up a government-owned factory at which a contractor could build a new kind of car that could be used by transit agencies across the country.

The idea was to plant the seed for a new industry, which Los Angeles County Transportation Commission members hoped would dampen the uproar by promising to replace some of the thousands of jobs lost with the closing of several aerospace and automobile factories.

Now that tempers have cooled, new ideas are emerging. They do not include a government-owned factory, which private businesses say they do not want, nor a standardized trolley car that other cities say they will not use.

Standardization and government control are out. Specialization and entrepreneurship are in.

Rather than start their own factory and design a general-purpose car that tries to suit wildly varied needs of dozens of transit systems, LACTC planners are identifying a few untapped “niche markets” that local entrepreneurs in their own plants can exploit to get started in the rail car manufacturing business.

At the same time, they are designing a flexible car--one that can be driverless or manually operated--which could be bought in large numbers for use on several local lines.

Large orders, in turn, could help to nurture local entrepreneurs.

Transportation commission planners are bringing together these new ideas in a package that will be presented to the LACTC’s ad hoc Green Line policy committee Wednesday. If received favorably, the proposal will be presented for commission approval a week later.

The shift in strategy started when LACTC staff members, including Executive Director Neil Peterson, discovered that other cities were not interested in buying trolley cars designed to accommodate the unique speed, acceleration, size and propulsion requirements of Los Angeles.

“Nobody wants a standard car,” he told the ad hoc committee this month. “It has been tried before and it doesn’t work, because everybody wants to tweak theirs here and there.”

Peterson also discovered that manufacturers were reluctant to establish temporary assembly plants in Southern California if required to get a large contract, and have no plans to relocate permanent operations to Los Angeles.

Indeed, manufacturers warned the LACTC that any effort to force bidders to build trolley cars primarily with local parts and labor was much more likely to inflate construction costs than create jobs. The artificial market born of such regulations may spawn some local firms, but they probably would not be competitive elsewhere once the local job was done.

Instead, manufacturers suggested, it would better to concentrate on helping local companies learn to make just a few high-value components that they can sell in other cities for years.

And commission members appear to agree.

“If we found a niche market--say, car-shell construction--that shell may only be 10% of the entire Green Line car contract,” said Gerry Hertzberg, Supervisor Gloria Molina’s appointee to the LACTC, “but the car-shell maker could be huge because they could sell their shells to everyone else.”

“We don’t need the LACTC to own or operate its own factory,” said Nick Patsaouras, who is Supervisor Mike Antonovich’s alternate on the LACTC board. “The commission--along with the RTD and the municipal (bus) operators--are major users of products, and they could be the catalyst to bring these changes about.”

Patsaouras, who has long advocated the development of niche markets, also urged development of electric, methanol and natural gas-powered buses and cars. Such “clean fuel” technology is required by local air pollution regulations, giving the region the opportunity to get ahead of the rest of the world in a market with tremendous growth potential, he said.

Car-shell manufacture is another of the most frequently recommended market niches because there is no domestic source of such frame-and-body combinations. The thinking is that a U.S. supplier could instantly do well because most state and local transit agencies are required by federal law to buy vehicles made primarily in this country.

“I think the market is just about right for someone to jump in and say: ‘I’m going to build them here and supply them to everyone else,’ ” Gunter Ernst, president of Sacramento-based trolley car assembler Siemens Duewag, said at an LACTC committee meeting last week.

Another niche, one for which ethnically diverse Los Angeles is particularly well-suited, is the growing opportunity for minority- and women-owned suppliers and consultants.

The LACTC already encourages the development of minority- and women-owned business with its “disadvantaged business enterprise” program, but Gary Hallman of Bombardier Corp. of Canada pleaded with the commission to do more to foster minority-owned subcontractors.

“What we desperately need now is a qualified base of competent (minority- and women-owned) sub-suppliers,” he said. “The advantage is yours because the niche is open and the people are here.”

Lightweight and ultra-strong materials are another niche suitable to Los Angeles, one that dovetails well with car-shell manufacture. Companies experienced at working with titanium, aluminum sheets and extruded aluminum could have a competitive edge as trains and buses are forced to lose weight to improve fuel economy and reduce pollution.

Slimmed-down electronic components--common on airplanes--will be needed on electric-powered buses and cars that are starting to come into use.

Ernst and others urged the transit commission to avoid direct competition with established transportation industry suppliers, no matter how tempting.

For example, the most valuable part of a subway car is the motor. Including accessories, it eats up 30% of the cost of each $2-million car. But Ernst said that a new company would have a hard time building a reputation and the order volume needed to compete with existing motor-makers, including his subsidiary in Ohio.

Others, including LACTC staff and board members, have concluded that final assembly alone is unlikely to be enough to develop a permanent supply of jobs.

Al Thiede, vice president of engineering at the LACTC’s Rail Construction Corp. subsidiary, said 66 workers are needed to assemble a rail vehicle and that most of the jobs are relatively low paying and temporary. That compares to the 660 workers employed in building the components--the motors, frames, windows, seats, doors and floors--for one vehicle. Component manufacturing jobs require more skill, carry higher wages and last longer because components can be made for other rail cars for use in other cities, he said.

The question now facing the commission is whether its imminent purchase of 100 trolley cars--for the Norwalk-to-El Segundo Green Line and the Los Angeles-to-Pasadena Blue Line extension--will play a major role in helping to establish some new transit manufacturing.

Time is short. To meet the Green Line’s scheduled 1995 opening--and to avoid endangering the 1996 opening of the Pasadena line--the commission says it must pick a car design this month to be able to choose a builder by the end of the year.

The car design, meanwhile, also must be flexible or generic enough to be adapted to several lines and perhaps contain components--car shells or electronics--that could be made locally and be sold elsewhere.

A modular design, similar to what was revealed last month as the “L.A. Car,” is likely to emerge, according to documents made public at commission meetings. Based on the Blue Line cars, these vehicles could run with or without drivers, depending on the type of electronic train controls.

The Pasadena line is planned for manually controlled cars. The Green Line also would use manually controlled cars, although the LACTC staff favors building the cars and the track to allow for upgrading to driverless operation.

Peterson said these hybrid cars would likely cost about $2.17 million. However, that may be optimistic. In bidding on a job in St. Louis, Sumitomo Corp. offered to sell conventional Blue Line-style cars for $2.3 million each.

Sumitomo built the cars for the Blue Line in Los Angeles and initially was chosen to build driverless cars for the Green Line, but its contract was revoked after outcry over the selection of a foreign-owned company at a time of high local unemployment.