New Red and Orange Line Cars

[ant8904]

CRRC project is completely unrecoverable

That's actually the question. Can the project be saved? Maybe that question cannot be answered by any of us, but going by our general knowledge and the way everything been presented by the latest reports, it looks like a more realistic outcome than any of us like to consider.

It's been floating in my mind that the situation was CRRC has checked-out. I avoided openly speculating this, but it is reaching a point to say these thought openly a thought that not from the Herald comment section. I have been worried that geopolitics mean CRRC realized they can never break into the North American industry and thus gave up on performing the "extra mile" of a quality delivery to win future customers - they're fated to not gain anymore contracts no matter the price or demonstrated performance.

But going by the newest news article, it sounds like something even worse. They've been dysfunctional while mixing in an even more scary thought. The contract has penalties but it sounds like they don't care - connecting some very speculative dots, but the apathy is not just acknowledging they have no future but also realizing they have no fear of loss - what loss to fear if Chinese portion is out of reach and the American portion is already written off.

Yet another reason NOT to buy rolling stock from a Chinese maker.

Brattle Loop already commented on the major flaw of your line. But I have to add one more thing that does bothers me a lot from the Globe Article - they said the MBTA "selected" CRRC. The MBTA choose CNR and it is notable that CNR has a history on the international level. And if evaluation is past performance vs price, then CNR are in the same performance league as Bombardier - but at half their bided price. A layman may find it suspicious, but again CNR has a successful history and that's suppose to be the real arbiter to gauge a company.

The unsaid part is there was a 2nd Chinese company that did also did bid. A company that implied to bid low but was judged poorly in multiple quality metrics that they were not just not chosen, but explicitly rejected - CSR (page 8).

...And a year after CNR was accepted, CSR merged with CNR and become CRRC. While I have no gauge or window to CRRC's internals versus CSR, the outcome seems in line to the expected results in a timeline where MBTA selected CSR. Then splash on the possibility that CRRC have no care and no fear as I already stated above.

 

[Brattle Loop]

It's been floating in my mind that the situation was CRRC has checked-out. I avoided openly speculating this, but it is reaching a point to say these thought openly a thought that not from the Herald comment section. I have been worried that geopolitics mean CRRC realized they can never break into the North American industry and thus gave up on performing the "extra mile" of a quality delivery to win future customers - they're fated to not gain anymore contracts no matter the price or demonstrated performance.

I find it somewhat hard to believe that a company would do that willingly. They still have sizeable outstanding US orders (including the MBTA's and the CTA's), with, one would expect, significant financial penalties if the cars are late, defective, or simply not built at all, not to mention the additional expense of having to refit the defective ones under warranty to meet the contractual specifications. It's an expensive quagmire, and though CRRC could presumably escape it to a degree via Chinese state money and/or bankruptcy liquidation of its US arms, doing things like that - not to mention any kind of deliberately giving up on quality control - would be badly damaging to their international reputation. I agree that there's a scenario where they might be willing to write off their American misadventure, but I don't think they'd choose to do it in a way that would scare off business everywhere else that they might want to do it: after all, a lot of the places that might not have geopolitical concerns about China may well still have concerns about buying from a manufacturer who demonstrates they're willing to deliberately make crap, or even just accidentally make crap. (The TL;DR version of this: it's more likely crap by accident than crap by conspiracy)

Brattle Loop already commented on the major flaw of your line. But I have to add one more thing that does bothers me a lot from the Globe Article - they said the MBTA "selected" CRRC. The MBTA choose CNR and it is notable that CNR has a history on the international level. And if evaluation is past performance vs price, then CNR are in the same performance league as Bombardier - but at half their bided price. A layman may find it suspicious, but again CNR has a successful history and that's suppose to be the real arbiter to gauge a company.

I did obliquely reference that merger in a parenthetical (though I couldn't remember CSR's acronym). Strikes me as a kind of Boeing/McDonnell Douglas situation for those familiar with the aviation industry, which is often cited (though I dunno if it's been studied) as resulting in MD's stock-price-friendly practices devaluing, hollowing out, and ultimately undermining Boeing's to-that-point stellar reputation for engineering quality. Seems like it's quite possible that we tried to buy the Boeing (CNR) and wound up with the MD (CSR).

I think the suspicious part is the question of how that bid was that much cheaper. It's entirely possible for a company in CNR's position to score as well as BBD in the technical capabilities and come in way, way cheaper...but there has to be some explanation, whether it be highway robbery by the Canadians or, as speculated then and since, deliberate loss-leader underbidding (backed, potentially, by Chinese state money) to get a foothold in the market. I give the T and the Patrick administration a little bit of a break on this one: I don't know that they could have predicted either that the Chinese state would merge technically-competent CNR with technically-incompetent CSR, or that CSR would (apparently) be at least the partial survivor on the technical side.

That's actually the question. Can the project be saved? Maybe that question cannot be answered by any of us, but going by our general knowledge and the way everything been presented by the latest reports, it looks like a more realistic outcome than any of us like to consider.

CRRC can't outright abandon the project without the complete destruction of their US operations. The other US customers (including of the Springfield factory) are going to be watching all of this stuff quite closely. CRRC will get sued into oblivion by every American customer if they try to wriggle out of their contract(s). It would almost certainly mean the complete destruction of their US operations in an embarrassing and expensive manner. Quite possibly more expensive (and almost certainly much more embarrassing) than simply completing the orders. Not to mention the reputational damage if you fail outright, which will make it harder (and therefore more expensive for the Chinese government) for CRRC to do business anywhere outside of China. Blame the problems on the pandemic and the crummy American factory if you want, sure, but a messy, late completion is exponentially better than signaling to all your global customers that you're completely untrustworthy as a contractor, which is the message that would get sent if CRRC just cut bait and liquidated the US operations. On the T's end, they have a massive, massive incentive to get the project recovered, which is that they do not have the time to start over. Half the #12 cars are already scrapped, and the other half likely wouldn't survive any extended period of revenue service; and the Red Line's situation is not much better. The T had and has a lot (far too much, in fact) riding on this order, directly as a result of their own failure to properly plan fleet renewal on anything resembling a proper schedule. Their two worst equipment orders before this, the Boeings and the Bredas, both got saved, and neither was (arguably) as mission-critical as this one. They do not have a viable alternative.

 

[JeffDowntown]

I find it somewhat hard to believe that a company would do that willingly. They still have sizeable outstanding US orders (including the MBTA's and the CTA's), with, one would expect, significant financial penalties if the cars are late, defective, or simply not built at all, not to mention the additional expense of having to refit the defective ones under warranty to meet the contractual specifications. It's an expensive quagmire, and though CRRC could presumably escape it to a degree via Chinese state money and/or bankruptcy liquidation of its US arms, doing things like that - not to mention any kind of deliberately giving up on quality control - would be badly damaging to their international reputation. I agree that there's a scenario where they might be willing to write off their American misadventure, but I don't think they'd choose to do it in a way that would scare off business everywhere else that they might want to do it: after all, a lot of the places that might not have geopolitical concerns about China may well still have concerns about buying from a manufacturer who demonstrates they're willing to deliberately make crap, or even just accidentally make crap. (The TL;DR version of this: it's more likely crap by accident than crap by conspiracy)



I did obliquely reference that merger in a parenthetical (though I couldn't remember CSR's acronym). Strikes me as a kind of Boeing/McDonnell Douglas situation for those familiar with the aviation industry, which is often cited (though I dunno if it's been studied) as resulting in MD's stock-price-friendly practices devaluing, hollowing out, and ultimately undermining Boeing's to-that-point stellar reputation for engineering quality. Seems like it's quite possible that we tried to buy the Boeing (CNR) and wound up with the MD (CSR).

I think the suspicious part is the question of how that bid was that much cheaper. It's entirely possible for a company in CNR's position to score as well as BBD in the technical capabilities and come in way, way cheaper...but there has to be some explanation, whether it be highway robbery by the Canadians or, as speculated then and since, deliberate loss-leader underbidding (backed, potentially, by Chinese state money) to get a foothold in the market. I give the T and the Patrick administration a little bit of a break on this one: I don't know that they could have predicted either that the Chinese state would merge technically-competent CNR with technically-incompetent CSR, or that CSR would (apparently) be at least the partial survivor on the technical side.



CRRC can't outright abandon the project without the complete destruction of their US operations. The other US customers (including of the Springfield factory) are going to be watching all of this stuff quite closely. CRRC will get sued into oblivion by every American customer if they try to wriggle out of their contract(s). It would almost certainly mean the complete destruction of their US operations in an embarrassing and expensive manner. Quite possibly more expensive (and almost certainly much more embarrassing) than simply completing the orders. Not to mention the reputational damage if you fail outright, which will make it harder (and therefore more expensive for the Chinese government) for CRRC to do business anywhere outside of China. Blame the problems on the pandemic and the crummy American factory if you want, sure, but a messy, late completion is exponentially better than signaling to all your global customers that you're completely untrustworthy as a contractor, which is the message that would get sent if CRRC just cut bait and liquidated the US operations. On the T's end, they have a massive, massive incentive to get the project recovered, which is that they do not have the time to start over. Half the #12 cars are already scrapped, and the other half likely wouldn't survive any extended period of revenue service; and the Red Line's situation is not much better. The T had and has a lot (far too much, in fact) riding on this order, directly as a result of their own failure to properly plan fleet renewal on anything resembling a proper schedule. Their two worst equipment orders before this, the Boeings and the Bredas, both got saved, and neither was (arguably) as mission-critical as this one. They do not have a viable alternative.

CRRC can be sued but the only monies recoverable are US based assets. We can saber rattle all we want in US court, but their Chinese assets are safe from any recovery action. What exactly is a dysfunctional assembly line in Springfield worth? Probably not enough to force them to complete the orders.

 

[Wash]

If the Springfield factory could be "recovered" in a lawsuit, might it be possible to turn it over to another railcar manufacturer?

 

[Equilibria]

I find it somewhat hard to believe that a company would do that willingly. They still have sizeable outstanding US orders (including the MBTA's and the CTA's), with, one would expect, significant financial penalties if the cars are late, defective, or simply not built at all, not to mention the additional expense of having to refit the defective ones under warranty to meet the contractual specifications. It's an expensive quagmire, and though CRRC could presumably escape it to a degree via Chinese state money and/or bankruptcy liquidation of its US arms, doing things like that - not to mention any kind of deliberately giving up on quality control - would be badly damaging to their international reputation. I agree that there's a scenario where they might be willing to write off their American misadventure, but I don't think they'd choose to do it in a way that would scare off business everywhere else that they might want to do it: after all, a lot of the places that might not have geopolitical concerns about China may well still have concerns about buying from a manufacturer who demonstrates they're willing to deliberately make crap, or even just accidentally make crap. (The TL;DR version of this: it's more likely crap by accident than crap by conspiracy)



I did obliquely reference that merger in a parenthetical (though I couldn't remember CSR's acronym). Strikes me as a kind of Boeing/McDonnell Douglas situation for those familiar with the aviation industry, which is often cited (though I dunno if it's been studied) as resulting in MD's stock-price-friendly practices devaluing, hollowing out, and ultimately undermining Boeing's to-that-point stellar reputation for engineering quality. Seems like it's quite possible that we tried to buy the Boeing (CNR) and wound up with the MD (CSR).

I think the suspicious part is the question of how that bid was that much cheaper. It's entirely possible for a company in CNR's position to score as well as BBD in the technical capabilities and come in way, way cheaper...but there has to be some explanation, whether it be highway robbery by the Canadians or, as speculated then and since, deliberate loss-leader underbidding (backed, potentially, by Chinese state money) to get a foothold in the market. I give the T and the Patrick administration a little bit of a break on this one: I don't know that they could have predicted either that the Chinese state would merge technically-competent CNR with technically-incompetent CSR, or that CSR would (apparently) be at least the partial survivor on the technical side.



CRRC can't outright abandon the project without the complete destruction of their US operations. The other US customers (including of the Springfield factory) are going to be watching all of this stuff quite closely. CRRC will get sued into oblivion by every American customer if they try to wriggle out of their contract(s). It would almost certainly mean the complete destruction of their US operations in an embarrassing and expensive manner. Quite possibly more expensive (and almost certainly much more embarrassing) than simply completing the orders. Not to mention the reputational damage if you fail outright, which will make it harder (and therefore more expensive for the Chinese government) for CRRC to do business anywhere outside of China. Blame the problems on the pandemic and the crummy American factory if you want, sure, but a messy, late completion is exponentially better than signaling to all your global customers that you're completely untrustworthy as a contractor, which is the message that would get sent if CRRC just cut bait and liquidated the US operations. On the T's end, they have a massive, massive incentive to get the project recovered, which is that they do not have the time to start over. Half the #12 cars are already scrapped, and the other half likely wouldn't survive any extended period of revenue service; and the Red Line's situation is not much better. The T had and has a lot (far too much, in fact) riding on this order, directly as a result of their own failure to properly plan fleet renewal on anything resembling a proper schedule. Their two worst equipment orders before this, the Boeings and the Bredas, both got saved, and neither was (arguably) as mission-critical as this one. They do not have a viable alternative.

There's also the elephant in this room: the MBTA signed this contract during a very different period in US/China relations. CRRC is functionally an organ of a government currently in a trade war with the US, that sees no prospect for new US orders in the medium term, and that might well be at actual war with the US by the end of the decade.

I think it's very possible that China is screwing the MBTA over on purpose, here. They have an incentive to do so, to punish the US for policy choices and hurt Boston's competitive position globally.

 

[Jahvon09]

Yup, just like the previous fiasco with Breda. Oh, wait, they're Italian. Or Boeing. No, hang on, they're American.

It's a good question, albeit one we're not likely to ever fully get an answer to, what things went wrong to make this procurement go so disastrously off the rails (pun fully intended). Obviously standing up a new factory (which was in essence a state requirement, given how much the Patrick administration wanted the things made in a.) MA and b.) Springfield) was always going to be a significant risk area no matter which bidder was selected, because doing that in new territory that lacks a pool of industry-skilled workers is always tricky. Doing it with a US-untested bidder (which was made more likely by the in-state requirement because the established manufacturers with US experience already have/had existing US facilities outside MA) was another risk introduced by the way the state went about things. That both of those things were supposedly achievable in a bid way below the others implies either or both of additional risk (that the company is underestimating the task) or heavy subsidies (which may or may not continue if events change), all of which makes the situation thornier. Then there's the question of whether CRRC itself is structured and/or run particularly poorly (and if I recall correctly, CRRC was formed after the bid was accepted, merging the winner with another company which had had not scored well on the technical criteria).

None of those have anything inherently to do with CRRC being specifically a Chinese company, and two of them (the in-state requirement and the likely result of a US-untested bidder) were unforced errors deliberately introduced for political purposes by the Patrick administration. Absolutely, this process indicates that fudging procurements for political purposes introduces unnecessary complications that increase the risk of problems, and it certainly implies that CRRC's bid was at best far too good to be true, and may well indicate that CRRC (much like Rotem's American misadventure) should not be considered a reliable option. But, no, let's not actually consider any of that, and just chalk it up to the fact that they're a Chinese manufacturer... /s

What about CAF?!! They could've used them. The MBTA used them to make the new Type 9's. Why couldn't they let them make the new Red & Orange Line cars? You see, the T has always bought crappy equipment. Seems that these cars have gone crappy before the order is even completed. They should stick with one company for everything! They've done that over the years. And who suffers from this mishap? The commuters do. When something goes wrong, they are the first ones to feel it. This is part of the reason why the FTA should've stayed on board to make sure that things were done right & in a timely fashion.

 

[BosMaineiac]

If the Springfield factory could be "recovered" in a lawsuit, might it be possible to turn it over to another railcar manufacturer?

^^^ that’s what’s I’ve been thinking about. I’m assuming it would be big bucks to have another manufacturer step and complete the red/orange cars, but what happens after? I recall a time where it was envisioned that CRRC would most likely manufacture new blue line cars, but it looks like that would be off the table.

Let’s say by the grace of god CRRC is able to complete the red/orange and their other US obligations. What happens after? How likely is it that a new manufacturer can step in and take over the Springfield plant?

 

[Jahvon09]

Why would any of the established vendors want to step into this mess for any price?

Yeah, to do that, it would probably take even longer & screw things up even more!! Just get the new trains in good working order & get them on the tracks! Make everyone happy. Technically, it is the T's fault for choosing this company to make the new cars. They had a few to choose from. I wonder if they chose one of the others, would this mishap still happen? One can only wonder!! My best guess is that the T might end up suing them to make things right. Just like they did with Sieman's after ordering the new Blue Line cars.

 

[JeffDowntown]

^^^ that’s what’s I’ve been thinking about. I’m assuming it would be big bucks to have another manufacturer step and complete the red/orange cars, but what happens after? I recall a time where it was envisioned that CRRC would most likely manufacture new blue line cars, but it looks like that would be off the table.

Let’s say by the grace of god CRRC is able to complete the red/orange and their other US obligations. What happens after? How likely is it that a new manufacturer can step in and take over the Springfield plant?

You have to remember that Springfield is just a final assembly operation. All the real manufacturing is happening in China.

A new manufacturer cannot just step in and build the current car designs, they don't own the design. All you get with Springfield is whatever shells and undercarriages are on hand, and the random wiring harnesses, etc. You are not getting any more assemblies out of China.

 

[737900er]

^^^ that’s what’s I’ve been thinking about. I’m assuming it would be big bucks to have another manufacturer step and complete the red/orange cars, but what happens after? I recall a time where it was envisioned that CRRC would most likely manufacture new blue line cars, but it looks like that would be off the table.

Let’s say by the grace of god CRRC is able to complete the red/orange and their other US obligations. What happens after? How likely is it that a new manufacturer can step in and take over the Springfield plant?

I have a hard time seeing another manufacturer wanting to take over for a failed CRRC MA. They'd rather sell their own product (be that a revamped 0700 for Orange or a clean-sheet design). Trying to pick up the pieces without any support from CRRC HQ would be an exercise in futility.

I agree that there's a scenario where they might be willing to write off their American misadventure, but I don't think they'd choose to do it in a way that would scare off business everywhere else that they might want to do it: after all, a lot of the places that might not have geopolitical concerns about China may well still have concerns about buying from a manufacturer who demonstrates they're willing to deliberately make crap, or even just accidentally make crap.

I think this is the most likely outcome. CRRC sells their US operations to some other manufacturer for pennies and becomes a vendor for whatever components they were making (carbodies, etc.). CRRC saves their reputation for re-entry if they ever want to.

There's also the elephant in this room: the MBTA signed this contract during a very different period in US/China relations. CRRC is functionally an organ of a government currently in a trade war with the US, that sees no prospect for new US orders in the medium term, and that might well be at actual war with the US by the end of the decade.

I think it's very possible that China is screwing the MBTA over on purpose, here. They have an incentive to do so, to punish the US for policy choices and hurt Boston's competitive position globally.

The order was also structured to be a marketing exercise, which did work (they got other, bigger US orders), but now it's useless because they realize they can't sell any more product into the US market. At some point it makes business sense to just cut losses and walk away.

 

[BosMaineiac]

You have to remember that Springfield is just a final assembly operation. All the real manufacturing is happening in China.

A new manufacturer cannot just step in and build the current car designs, they don't own the design. All you get with Springfield is whatever shells and undercarriages are on hand, and the random wiring harnesses, etc. You are not getting any more assemblies out of China.

I’m asking what happens to the Springfield manufacturing facility after the red/orange cars have been completed? Assuming CRRC walks away. Is it likely that a different manufacturer could take its place and continue making subway cars?

 

[RandomWalk]

I doubt the Springfield facility will last much beyond the MBTA orders. The LA order is/was slated to be assembled in Springfield. However, I expect they could find a facility in CA to handle assembly.

CRRC’s facility is just a large building for stuffing shells and a test track. By way of comparison, CAF’s facility in Elmira has test chambers and facilities for building car bodies. There’s no there there in Springfield. There is nothing that cannot be done elsewhere.

 

[Jahvon09]

Stuffed shells!! Hah! Sieman's!!! They could've done it. After all, weren't the Blue Line cars made with the same shape as the old Hawkers on the Orange line? And they are making tons of locos & passenger trains for Amtrak. Most of all, they are an American company & they've been in the business for eons!!

 

[ant8904]

Most of all, they are an American company

Siemens is German

 

[Jahvon09]

Siemens is German

Maybe they're better than CRRC!

 

[737900er]

I doubt the Springfield facility will last much beyond the MBTA orders. The LA order is/was slated to be assembled in Springfield. However, I expect they could find a facility in CA to handle assembly.

CRRC’s facility is just a large building for stuffing shells and a test track. By way of comparison, CAF’s facility in Elmira has test chambers and facilities for building car bodies. There’s no there there in Springfield. There is nothing that cannot be done elsewhere.

No one would look at the situation from the outside and say "Yes, Springfield is the perfect place to build rail transit cars." We're not going to have another big order until EMUs or 0700 replacement -- both of which are 10+ years away. They also know that the Commonwealth learned their lesson with the Type 8 and CRRC "built in Mass" debacles -- that wasn't a requirement on the Type 10s. Being in NY is better for selling to MTA which is always going to be multiple times bigger than MBTA, there aren't many logistical reasons to be in Springfield, and wages are higher than in some other areas.

 

[RandomWalk]

If they really wanted things to be sustainable with the built in MA mandate they should have required full car body build up. That would have catalyzed a cluster of transit vehicle skill, but it would have taken more than a single election cycle to pull off.

 

[Jahvon09]

And speaking of the new Type 10's, (this is just a rendering of one) I wonder how they'll do when the first one is delivered & set up for service. Hopefully better than the CRRC cars. But I think they'll need some tweaking to perform right.

 

[Teban54]

I'm originally from China, and I must say all this is so embarrassing.

While others have rightfully pointed out this isn't entirely because of CRRC being a Chinese manufacturer, it is indeed quite common for Chinese bidders to try to undercut cost. So I'm not surprised a single bit about CNR's bid.

I'm not familiar with the CNR-CSR merger, other than the fact that before the merge, they produced most of China's domestic subway fleets and those have been generally in good shape. (Or if they did have maintenance issues, the news haven't reached me yet.) If anyone is interested, I can research a bit more on the merger on Chinese websites.

 

[Brattle Loop]

I think it's very possible that China is screwing the MBTA over on purpose, here. They have an incentive to do so, to punish the US for policy choices and hurt Boston's competitive position globally.

I mean, yes, being an arm of the Chinese state means CRRC is inevitably in the service of the CCP's political priorities, whatever they may be. That said, main-CRRC has operations in a lot of places that aren't the US or China, and it would be an oddly self-harming mechanism of "punishing the US" by lighting CRRC's global reputation on fire. That's why, absent further evidence, I'm leaning towards the incompetence end of the sliding scale of incompetence versus malice. (With the caveat that, given the state of China-US relations, while I'm still not convinced CRRC would deliberately screw this up like this, it's more plausible that fixing the problems might not necessarily be considered their political masters' top priority. I'd be more open to buying that the problems are mostly apolitical, but that there could be a political dimension to how much energy, time, and money is expended to expedite fixing the said problems.)

What about CAF?!! They could've used them. The MBTA used them to make the new Type 9's. Why couldn't they let them make the new Red & Orange Line cars? You see, the T has always bought crappy equipment. Seems that these cars have gone crappy before the order is even completed. They should stick with one company for everything!

The procurement process is the procurement process. Single-sourcing everything leaves you vulnerable to both that vendor screwing up, and to corruption/monopolization. The whole point of the process, done properly (and we can debate all we want as to whether the MBTA does a good or bad job, the answer has varied at times) is to get the best deal for the taxpayers, which is why they're supposed to consider the price and the technical capabilities of the manufacturers. (Though this and the Breda debacle suggest that the T might not be great at supervising those technical matters.)

I'm not familiar with the CNR-CSR merger, other than the fact that before the merge, they produced most of China's domestic subway fleet and those have been generally in good shape. (Or if they did have maintenance issues, the news haven't reached me yet.) If anyone is interested, I can research a bit more on the merger on Chinese websites.

In the MBTA's procurement, CNR was well-rated on technical abilities, and CSR wasn't. I'm curious to know (if you know or can find) if there are other customers of pre-merger CNR who have since encountered similar issues to the T's (because it certainly seems like something went screwy inside CRRC at some point, and it's worth analyzing whether that was in the CNR-CSR merger, or somewhere else.