U.S.-German Team May Get Rail Car Pact

Local transit officials Thursday recommended the awarding of a $205-million contract for 72 Green Line cars to a U.S.-German team that promises to open a Los Angeles plant that will be the nation’s first modern manufacturer of rail cars.

The award to Siemens Duewag Corp., a German company with a Sacramento facility, would create about 200 jobs in California and pump $17 million into the state’s economy, company officials said. In its bid for the lucrative contract, Siemens vowed that more than 92% of the rail cars and their components will be made in the United States and 50% of the work will take place in California.

The contract is a first step in converting the declining defense industry to commercial work, Metropolitan Transportation Authority spokesman Michael Bustamante said.

The MTA tailored the contract to encourage a partnership between transit manufacturers and defense-related industries, which have lost more than 170,000 jobs locally over four years. In all four of the competing teams, military contractors paired up with established rail car manufacturers.

“It’s very significant in terms of being able to reconstruct the industrial base of this country,” said Greg Bischak, executive director of the National Commission for Economic Conversion and Disarmament. “It has the potential to save hundreds if not thousands of jobs.”

Others have been less optimistic about the feasibility of such an ambitious endeavor, noting that several defense companies--such as Boeing Co.--had tried years ago to move into transit manufacturing and met with disastrous results. In fact, the failure of those companies scared off many others in the industry.

“It didn’t turn out very well because those companies didn’t have the background in that area. There’s a big difference in doing mass transit cars and jet airplanes,” said Larry Korb, a senior fellow at the Brookings Institute.

The key difference with the MTA contract, Korb and others acknowledge, is that the defense companies in this case have joined others that have expertise in the field.

The company that ultimately wins the rail car contract--expected to be awarded June 30--will manufacture 72 standardized light-rail vehicles, similar to the Blue Line trolleys that travel between Los Angeles and Long Beach. The contract also calls for two larger models.

The rail cars will be used on the 20-mile Green Line, which is scheduled to begin operating between Norwalk and El Segundo in November, 1994. The cars also will be used on the 13-mile Blue Line extension to Pasadena, which is expected to open in 1997.

Gunter Ernst, president of the Sacramento-based Siemens Duewag, said that he was considering two sites for the Los Angeles facility and had not yet decided which one to use. Rail cars have not been manufactured in the United States since 1987, when the Michigan-based Budd Co. ceased operations.

“We see this plant we want to set up as a really major step in the final Americanization of our product,” Ernst said. “We are assembling vehicles here in Sacramento and this is the last step we wanted to take to fully Americanize the vehicle.”

It is not yet clear whether opposition may arise because the parent company of Siemens Duewag is based in Germany.

The MTA suffered a black eye last year when it was forced to cancel a Green Line car contract with Sumitomo Corp. after critics expressed outrage over giving the Japanese-owned company so much business when American industries were hurting. They had hoped to redeem themselves by encouraging the creation of a local transit manufacturer.

But questions have been raised about whether even a successful California-based transit company will do much to solve the region’s economic woes. Korb and others have noted that the transit industry does not have the same level of government funding the defense industry did at its height. A single B-2 bomber costs $865 million; a transit contract for 72 rail cars is $205 million.

“You are talking about a couple of hundred million dollars--it’s only going to be a small portion of the money they are not getting from defense,” Korb said. “We should be using some of those technologies, but for anybody to think this is going to be the silver bullet that’s going to take care of California, it’s just not going to do it.”

The teams competing for the contract were judged on several factors, including technical expertise and cost. After a five-month evaluation, staff developed their rankings of the teams.

The Siemens rail cars would cost $2.7 million each, or $200,000 less per car than transit officials paid for 15 Sumitomo cars under the canceled contract.

The other companies on the Siemens team include the Pasadena-based Jet Propulsion Laboratory; Baltimore-based AAI Corp., which makes electronic gear for aircraft; Cleveland-based TRW Inc., an advanced-technology company that has a facility in El Segundo, and Sacramento-based defense contractor Aerojet Corp.

The staff recommendation to award the contract to Siemens will be presented Monday at a meeting of the MTA’s construction arm, the Rail Construction Corp. The MTA board is expected to make a final decision June 30 on awarding the contract.

During the intervening days, officials predict that competitors will wage an all-out campaign to nudge the Siemens team from the top spot. The Morrison Knudsen Corp. team, which teamed up with General Electric, Hughes and Lockheed, placed second. Its bid was $18 million lower than that of Siemens.

“We are naturally disappointed,” said William J. Agee, chairman of Morrison Knudsen. “We have offered the lowest price. . . . Our team is committed to this project and we will concentrate our energies to securing this rail car contract until the very end.”

Rockwell International Corp., which joined with Sumitomo Corp. and rail car maker Nippon Sharyo Ltd. as one competing team, ranked fourth and bid $253 million for the project. The third-place team was Bombardier Inc. of Montreal, which makes Learjets, snowmobiles, aircraft wings and military surveillance drones. Bombardier’s partners included Northrop Corp. That team bid $193 million for the rail car contract.

In an environment where most other industries are tightening their belts, transit remains the biggest checkbook in town because it is financed by a steady flow of sales tax surcharges. The competition for the Green Line cars is expected to get fierce.

One transit insider who asked to remain anonymous said: “The joke going around is that the Green Line car lobbyist fees for just one month would allow a person to retire and live like a sultan.”