T betting on untried firm to build fleet
Korean outfit has scant US presence
The MBTA, which has a history of long delays in its rail car purchases, is relying on a South Korean company that has never built a passenger rail car in the continental United States for a vital set of train coaches needed to upgrade its aging fleet.
For years, commuters have been demanding newer equipment on the Massachusetts Bay Transportation Authority's commuter rail, a key cog in the state economy, which carries 72,000 people to and from work every day. Managers have promised that the 75 new double-decker cars will reduce crowding, cut down on maintenance delays, and prevent the type of widespread air conditioning problems that dogged the system in the summer of 2006.
To deliver on that promise, the T has placed a $190 million bet on a company, Hyundai Rotem, that has yet to open an assembly plant on American soil, a requirement under federal law. The company must also learn how to negotiate the country's much stricter safety standards, which have bedeviled many other large corporations, including Daimler and
Rotem officials and the T employees who evaluated the contract proposals say the company made the best offer - both technically and financially - and that it has a strong worldwide reputation. The train cars, they say, will arrive on schedule, with four pilot coaches due in October 2010 and the rest of the fleet beginning to arrive the following August.
"Even if someone's produced very good trains elsewhere in the world, doing it in the United States is a whole new drill," said Fred Salvucci, former Massachusetts transportation secretary and now a lecturer at MIT.
MBTA general manager Daniel A. Grabauskas, through a spokesman, declined an interview request, but issued a written statement. "While the procurement process is only in its infancy, the MBTA is more than satisfied with the contractor's level of responsiveness and diligence to this point," Grabauskas said.
T officials said their choice of Rotem was not influenced by the fact that former T official John K. Leary, who also once led the Philadelphia transit system, has worked as a consultant for the company. Leary's son, Richard, is now head of operations for the MBTA.
As a result of the potential conflict, John Leary declined an offer to work for Rotem on the MBTA bid and Richard Leary recused himself from the local bid process, according to a March 8, 2007, letter to the MBTA. John Leary did not return numerous phone calls seeking comment.
For the last five years, Rotem has been aggressively pursuing American rail car contracts with very low bids, well-placed connections, and promises to match or surpass the quality of more established competitors like Kawasaki, the Japanese company that has built rail cars for the MBTA and many of the nation's largest transit agencies for two decades. To win the MBTA contract, Rotem bid $30 million less than Kawasaki, its only competitor. The MBTA's staff rated Rotem slightly higher than Kawasaki in technical quality, despite Kawasaki's American track record, according to bidding documents obtained by the Globe.
Omar Messado, manager of contract administration and marketing for Kawasaki, said the company complained to the MBTA about the rating process on the recent contract, but did not file a formal protest because Kawasaki wanted to preserve its relationship with the T. Still, he acknowledged that Kawasaki could not match Rotem's low price.
Hyung Wook Kim, president of Hyundai Rotem USA Corp., acknowledged that the company was on a tight schedule. "But within our experience earlier - in different markets or different projects - it could be a quite achievable target schedule," Kim said.
Kim said a Philadelphia factory will open in March. The four pilot cars will be built in South Korea.
Karen V. McGann, the MBTA's director of vehicle engineering, who led the technical evaluation team, said the T is pleased with Rotem's progress with its factory and satisfied with the company's progress on its other two contracts.
Rotem has fallen months behind schedule on its other two American commuter coach orders, in Philadelphia and Southern California. Officials at Southern California's Metrolink commuter line and Philadelphia's SEPTA said they expect delivery of their trains about six months later than first promised because of problems Rotem has had buying the specific type of steel required on US train cars. Kim said the delays would be no more than three months in either city. Despite those delays, Metrolink and SEPTA officials say they are pleased with Rotem.
But until they deliver the real thing, there will be questions. Boston commuters have suffered through delays and quality concerns in two recent high-profile rail car purchases.
A 1995 contract to build Green Line trolley cars with the Italian company now known as AnsaldoBreda resulted in accusations of shoddy work - including derailments and leaky air conditioning systems - and a $50 million lawsuit against the MBTA. The T halted delivery in 2004 after frequent breakdowns. The order was completed this year.
Production snags and manufacturing flaws delayed new Blue Line trains by at least three years. German-based Siemens began delivering cars this year after bolstering its US-based workforce and transferring a manager to oversee the operation.
"There is a lot of self-delusion by car builders," said Klein, who was not involved in the Rotem purchases.
Unlike European commuter coaches, American cars must be built to withstand the intense pressure of a rail crash with a heavy freight train, requiring specialized steel alloy.
"The European theory on how to keep people safe on railroads is to avoid collision. The American theory is to expect that collisions will happen and to build the vehicles like tanks," Salvucci said.
Companies new to the US market can also have problems establishing reliable relationships with subcontractors and suppliers. Siemens Transportation learned that lesson on the MBTA's Blue Line project. Before reconciling last year, the T accused the German company of substandard work.
The MBTA order will be third in line at Rotem's Philadelphia plant. But Rotem and its project management partner, Sojitz Corp., promised that will not be an obstacle.
"Once the engineering issues are all done and the prototypes are completed, it's just a matter of repetitious work and it's a question of how much productivity you have, one shift, two shifts, or three shifts," said Hats Kageyama, vice president of Sojitz.
Kageyama said Rotem and its partners would do whatever it takes, realizing rail passengers are impatient for new cars as more commuters flock to public transportation.
"Time is money," he said. "If we spend more time than expected, whoever's fault it is, still we lose money."
Noah Bierman can be reached at nbierman@globe.com. 