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Delivery of T’s new fleet beset by delays

By Eric Moskowitz
Globe Staff / March 27, 2012
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New commuter rail cars designed to replace part of the MBTA’s aging fleet are at least a year and a half late, leaving thousands of suburban riders waiting for modern coaches that state transportation officials had expected to be running by now.

Assembly has yet to begin on the T’s order at a Philadelphia plant run by Hyundai Rotem USA, a South Korean company that won the $190 million contract to build 75 cars despite little experience in the US rail market.

Frustrated MBTA officials blame the delay on the Korean firm’s slow or cursory responses to input from the Massachusetts agency regarding the design of the double-decker cars before production. Under a best-case scenario, the T expects a few of the new coaches to be running by the end of this year.

“We’re having a very difficult time working with them to commit to a schedule that they can achieve,’’ said Jonathan R. Davis, the T’s acting general manager.

The T made headlines in 2008 for banking on Hyundai Rotem, even though the company had yet to open an assembly plant in the United States, a requirement under federal law, or negotiate the stricter safety standards that have bedeviled a slew of large corporations trying to enter the US rail market.

But executives from Hyundai Rotem and the T who reviewed the bid four years ago assured the MBTA’s board that Hyundai Rotem could do the job and deliver on time, with the first four Seoul-built coaches arriving in October 2010 and the rest rolling in from Philadelphia between May 2011 and December 2012. At the time, the state’s transportation secretary encouraged the board not to delay voting because of the need to upgrade the T’s 410-coach fleet, plagued by air conditioning failures and other problems with 1980s single-level cars.

Now, Hyundai Rotem says it is a year or more behind schedule on most milestones, while an MBTA timeline obtained by the Globe calls even that unrealistic.

While preparing for assembly of the MBTA’s cars, Hyundai Rotem’s Philadelphia factory is still finishing a 120-coach order for the Southeastern Pennsylvania Transportation Authority delayed partly because of clashes between Korean managers and US workers, who complained of disparaging treatment.

A Hyundai Rotem official said the company has learned from the work in Philadelphia - describing it as “the usual challenges of a newcomer in the market opening up a manufacturing facility in North America’’ - and will assemble the MBTA cars more smoothly.

“Having much stabilized the current production, we are very confident in our workforce’s ability and have been investing a great deal in training and planning for a seamless transition into the production of the MBTA [order],’’ senior director JY Jeong said by e-mail.

Hyundai Rotem made a bold entrance into the United States nearly a decade ago when it began pursuing contracts with low bids, high-level connections, and attractive promises. Seeking a debut order from the Philadelphia transit agency, its consultants included John K. Leary, a former leader of that agency and MBTA veteran. It vowed to build a Philadelphia factory and beat experienced manufacturer Kawasaki on price.

In Boston, Hyundai Rotem underbid Kawasaki by nearly 20 percent and received high technical marks from T staff reviewing the bid, which glossed over the Korean firm’s lack of US experience, according to meeting minutes and materials prepared for the board.

Jonathan Klein, a global transportation consultant and former executive at rail and transit agencies, said the T should have known better than to accept on faith the promises of a company untested here.

The MBTA “really did sort of a Donald Rumsfeld, everything-will-go-right-because-I-need-everything-to-go-right, like the invasion of Iraq,’’ said Klein, who did not work on the Hyundai Rotem deals.

Once hired, Hyundai Rotem either did not understand or did not take seriously feedback from the MBTA, according to T officials. As the order bogged down over design, the two sides negotiated a 2010 settlement granting Hyundai Rotem an extra 10 months while doubling the possible payments the T could withhold for missed milestones, to $19 million. The T also negotiated a discount on $3 million in extra features.

But the T board was not informed of the production delays or the settlement until recently, when MBTA staff requested money for a related contract with PB Americas - an affiliate of Big Dig contractor Parsons Brinckerhoff - to act on behalf of the MBTA in Korea and Philadelphia and to test coaches on arrival in Massachusetts. With work dragging, PB sought $14 million instead of its original $10 million.

T Board chairman John R. Jenkins called that a “bitter swallow.’’ Board member Ferdinand Alvaro Jr., a corporate lawyer, rebuked T leaders for being soft in negotiations with Hyundai Rotem and said the Korean firm instead should write the PB check.

“We’re talking about fare increases and service reductions, and to me it looks like we’re giving away money to our contractors,’’ he said. “I have a real problem with that.’’

Richard A. Davey, who became T general manager in 2010 and state transportation secretary last year, said the agency was limited in how aggressively it could push Hyundai Rotem.

“We have worked . . . very hard to hold this contractor’s feet to the fire, but the bottom line is they were delayed, and we had two options,’’ Davey said. Those options were to cancel the contract, sue, and try to recover money already spent plus minimal damages - then find a new contractor - or coax Hyundai Rotem to make good.

The penalties the T can impose are greater than those negotiated in Philadelphia. But that transit agency - which says it is satisfied with the quality of its coaches, if not the production delays - held Hyundai Rotem more tightly to the design schedule. It sent staff members to work in Korea, as well as consultants; the T has only sent consultants.

“It wasn’t easy,’’ said Luther Diggs, assistant general manager for operations in Philadelphia. “You’ve got to manage them from the first day, and you’ve got to manage them every day, because if you don’t, they will get away from you.’’

The T board reluctantly agreed this month to use MBTA funds to pay $4 million more to the consultants overseeing the T’s coach order.

“I’m going to support this because I know we need to move forward,’’ board member Janice Loux told T administrators. “[But] I want you to go to Philadelphia, I want you to go to Korea, wherever you have to go, and I want you to find the people in charge and bring them before this board. . . . They need to be ready for the hard questions, and maybe they should bring their flak jackets.’’

Eric Moskowitz can be reached at emoskowitz@globe.com.

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