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Busjack

140 buses deferred

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That sure does sound like the CTA, especially with references to not having yet received state funding, and the word a couple of months ago that Gov. Quinn had held up signing off on the transit bonds portion authorized by the mini capital bill.

Technically, the 140 is the base order.

I had noted earlier that it was suspicious that NF disclosed a contract when CTA didn't, and apparently NF did count its eggs a bit too early. I do think that with this and the 58 bus order, they must have known that there were undisclosed contingencies, that, in turn, kept CTA from disclosing the orders themselves (in the 58 bus case, until, magically, stimulus money coincided with CTA having a preexisting option).

Looking over the links in the headline story today, basically my reactions are:

  • Accounting language is becoming more incomprehensible, especially when written in Candian English (and I used to work for a company run by accountants who used that). It seemed like New Flyer was making money until it said that it had been running a loss for the last two years. Maybe they made it up on volume.
  • I still wonder what the contingencies are in the "contract." The contract was supposedly awarded, but the news story from the Winnipeg Sun said that "CTA hopes to be able to sign the contract in a month or two." Either CTA signed it or didn't, but one has to wonder on what New Flyer based its assumption that it would deliver the 140 buses by March 2010 (if I interpret their fiscal year properly). Did they deliver a prototype to be approved, or is that why no one has seen 4149, because that's the "prototype?"
  • You could think they could move up other business (they had reported that RGRTA had ordered some hybrid artics), but I guess it isn't up to me to run their business.
  • At least the Winnipeg Sun article confirmed MT0851's supposition that it was the CTA.

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Looking over the links in the headline story today, basically my reactions are:

  • Accounting language is becoming more incomprehensible, especially when written in Candian English (and I used to work for a company run by accountants who used that). It seemed like New Flyer was making money until it said that it had been running a loss for the last two years. Maybe they made it up on volume.
  • I still wonder what the contingencies are in the "contract." The contract was supposedly awarded, but the news story from the Winnipeg Sun said that "CTA hopes to be able to sign the contract in a month or two." Either CTA signed it or didn't, but one has to wonder on what New Flyer based its assumption that it would deliver the 140 buses by March 2010 (if I interpret their fiscal year properly). Did they deliver a prototype to be approved, or is that why no one has seen 4149, because that's the "prototype?"
  • You could think they could move up other business (they had reported that RGRTA had ordered some hybrid artics), but I guess it isn't up to me to run their business.
  • At least the Winnipeg Sun article confirmed MT0851's supposition that it was the CTA.

In a way I can understand New Flyer's frustrations. From their perspective, they were supposed to start working on this order in late July and abruptly were halted. From a manufacturing standpoint that really throws a monkey wrench in operations. Now they are scrambling to fill the void this leaves in the production schedule for the factory. There obviously are gaps, hence the layoffs. Also you have to think of all the supplies pre ordered for this deal that are also caught in limbo. NF's kind of left holding the bag. But CTA's not entirely at fault, New Flyer itself has lost 14.7 million in the last three months. That's the majority of their problems. The company needs to turn a profit to stay afloat. What I don't understand is how can a company that does the lions share of business in the US not turn a profit. Where are they losing money? Anyway I thought I'd let you know, Andre reported #4149 being received in June 2009 on another forum so it should be here. I personally haven't seen it and wonder if perhaps it's sitting at a shop somewhere.

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In a way I can understand New Flyer's frustrations. From their perspective, they were supposed to start working on this order in late July and abruptly were halted. From a manufacturing standpoint that really throws a monkey wrench in operations. ...

The question, though, is that if they really didn't have a firm contract, the monkey wrench was foreseeable. BTW, I wonder if ElDorado has booked the Pace order, even though it appears that, unlike CTA and Metra, there is yet no announcement that Pace received its ARRA money.

... But CTA's not entirely at fault, New Flyer itself has lost 14.7 million in the last three months. That's the majority of their problems. The company needs to turn a profit to stay afloat. What I don't understand is how can a company that does the lions share of business in the US not turn a profit. Where are they losing money?

Again, I'm not going to claim to be proficient in accounting jargon, but it appears that most of it is attributed to "noncash charges," which, in the referred attachment, appears to be things like depreciation of inventory and assets, and getting most of its income in US$, while its debt is in C$. With all the fluctuation in the exchange rate (C$ has been everywhere between US$.80 and $1.00), they could get pinched. Something similar happened to the original NABI, when the dollar fell against the euro, on which Hungarian money was pegged.

There could also be some underbidding to get the business, given reports such as, with respect to the 150 leased ones that NF was willing to sell buses with a "normal price" (maybe based on the option with the price index adjustment) of $860K for $800K each. I don't think that things are as competitive as in the 80s, when companies such as MAN, Volvo, Neoplan, etc. were in and out of the U.S. market, but there still seems to be some of that there. After all, GM got out of the bus business in the late 1980s, and no one before then figured on that happening.

What's more curious is that NF is distributing its cash (as dividends) even though its cash position is down. One would normally think that a company would conserve its cash in hard times.

BTW I just had a bizarre thought about Carole Brown, but she's not worth it anymore.

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The question, though, is that if they really didn't have a firm contract, the monkey wrench was foreseeable. BTW, I wonder if ElDorado has booked the Pace order, even though it appears that, unlike CTA and Metra, there is yet no announcement that Pace received its ARRA money.

Again, I'm not going to claim to be proficient in accounting jargon, but it appears that most of it is attributed to "noncash charges," which, in the referred attachment, appears to be things like depreciation of inventory and assets, and getting most of its income in US$, while its debt is in C$. With all the fluctuation in the exchange rate (C$ has been everywhere between US$.80 and $1.00), they could get pinched. Something similar happened to the original NABI, when the dollar fell against the euro, on which Hungarian money was pegged.

There could also be some underbidding to get the business, given reports such as, with respect to the 150 leased ones that NF was willing to sell buses with a "normal price" (maybe based on the option with the price index adjustment) of $860K for $800K each. I don't think that things are as competitive as in the 80s, when companies such as MAN, Volvo, Neoplan, etc. were in and out of the U.S. market, but there still seems to be some of that there. After all, GM got out of the bus business in the late 1980s, and no one before then figured on that happening.

What's more curious is that NF is distributing its cash (as dividends) even though its cash position is down. One would normally think that a company would conserve its cash in hard times.

I don't think you can have a bus order from New Flyer without a contract. And a bus order CTA has. Based on the terms used here "deferred" which means, "to withhold for or until a selected time", I would say the buses are still coming just delayed. Until you hear the words the order is cancelled, it's not dead. It's almost like last year when CTA ordered 58 mystery buses in October 2008, and in the winter claimed it had no money to pay for them. Then spring arrived with Obama's stimulus package which paid for buses already ordered. As far as the NF economic situation, New Flyer posted a 4.1 billion dollar backlog on Jan 15th 2009. The company's been expanding with a new parts warehouse on the west coast, could they just be expanding too fast? Transit agencies increasingly seem to be piggybacking on each other's order. (Just look at the up to 900 order) Doesn't that in fact cheat the company out of future earnings through inflation. Saying they are having economic troubles with business like that is like saying Wal-Mart is closing a few stores that have good business. I can't help but wonder if this is a smoke screen for the employees, lay them off because of a manufacturing gap, wait for a deferred payment and call them back to work.

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I don't think you can have a bus order from New Flyer without a contract. ..... I can't help but wonder if this is a smoke screen for the employees, lay them off because of a manufacturing gap, wait for a deferred payment and call them back to work.

Undoubtedly the latter. However, I don't see how NF books 280 units of production into its system for the fourth quarter if there isn't a commitment to take the production.

I'm not saying there isn't a contract. However, whatever contract there is must have a lot of contingencies not in the Request for Proposals. I can sort of see the argument that CTA made a contract but did not give Notice to Proceed, but, again, one would assume that a company doesn't book the production schedule until it gets the Notice to Proceed.

As you noted with the 58, it seems awful strange that New Flyer makes these announcements about options being acquired or contracts made way before CTA does. It also seems sort of strange that New Flyer appears to be the only manufacturer actively "trafficking" in options. While Pace announced that it had a total of 222 options with ElDorado (which seemed high at the time), you don't hear anything about ElDorado requiring that they be assignable, since Pace is slow on taking up the last 82, but, my reading of the response to Proposer 1 indicated that it was insisting that CTA make all options assignable. Of course, NF is the only one who can explain why.

Your "all of the sudden the money appears" point appears correct, in that the contract was supposedly signed in December, while we still had a Gov. Blago and no capital bill. Again, NF and CTA may operate on the basis that the money will arrive from somewhere, but then they take the risk of the eventuality that happened.

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The CTA Tattler picked this story up from here. Note that it wasn't from their usual CTA sources.

The one thing they have that we didn't was:

The CTA had committed last year to buying 140 hybrid buses at a cost of $123 million, but the authorizing ordinance stated that funding must still be identified.

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This finally showed up on WGN Radio news. Just 3 days after it was reported here. Again, they said that the CTA claimed that board approval was contingent on having the funds.

I wonder if they got it from the CTA Tattler on Chicago Now, which they own, which, as noted above, got it from here. The Trib. has treated several of its Chicago Now blogs as news recently.

Update: I also see that the people who (charitably speaking) don't have a clue have already taken over the Chicago Breaking News comment board.

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One thing that I notice is mentioned in the Chicago Breaking News article about the deferred 140 artics is that it is mentioned that all the 6000s would be retired when CTA is able to get the funding to finally get those arctics. The article made a passing reference to CTA likely having for the time being put money into 'maintenance of Flxible buses received in 1995, that would have been retired by the 140 deferred buses.'

The updated story says "For now, the setback means the CTA will likely have to spend more money to maintain old Flxible buses that entered service in 1995 and would have been retired when the 140 new buses arrived." It doesn't necessarily say "all." However, it probably is "most" (i.e. about 190 based on a 4/3 ratio)

In any event, it looks like that story was updated at 6:10, which is later than my prior post and most of the comments that I found uninformed. IIRC, the mention that it was missing state capital bill money was first in the update. Again, there is no point in me trying to archive old versions of the Trib., however.

BTW: I am shocked that Noelle Gaffney finally acknowledged the order and it being delayed. Remember where the story first broke, at least in Chicago. You can pat yourselves on the back.

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The updated story says "For now, the setback means the CTA will likely have to spend more money to maintain old Flxible buses that entered service in 1995 and would have been retired when the 140 new buses arrived." It doesn't necessarily say "all." However, it probably is "most" (i.e. about 190 based on a 4/3 ratio)

In any event, it looks like that story was updated at 6:10, which is later than my prior post and most of the comments that I found uninformed. IIRC, the mention that it was missing state capital bill money was first in the update. Again, there is no point in me trying to archive old versions of the Trib., however.

BTW: I am shocked that Noelle Gaffney finally acknowledged the order and it being delayed. Remember where the story first broke, at least in Chicago. You can pat yourselves on the back.

Might likely be most but in anu event I'm not really seeing as many as 100 sticking around when the time comes that CTA finds more funding for arctics. The other question that comes to mind is something Trainman put forth, do we really need so many artics, especially now with CTA now bringing them in with so few seats for the size bus?May as well work with 40 footers. (The question of the number of arctics is Trainman's point. The seating issue is mine extending upon that question).

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did they reject some bus order from NFI?

No it was simply deferred or delayed. According to this the article :

The CTA was expected to buy 140 buses over the next five months, but in late July it delayed the order after funding fell through.
. I don't believe this would qualify as a rejected order yet since the CTA has not canceled the order.

-------

Incidentally here is the St. Cloud article on this: New Flyer Cuts 70 St. Cloud Jobs

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Incidentally here is the St. Cloud article on this: New Flyer Cuts 70 St. Cloud Jobs

A story that cites both Vice President Joe Biden and U.S. Sen. Al Franken and uses the term "embarrassment" must be a first. I suppose that they expect Illinois Gov. Pat Quinn to go to St. Cloud and explain where is the state money. Which might be the point of not producing the state money, because it generates few jobs in Illinois.

My father had mentioned today about how the stimulus was not working, to which I said "did you hear about the bus stimulus problems?" (although, technically, state money wouldn't be federal stimulus money, but apparently there wasn't enough of either to keep NF going full steam). Maybe the Hon. Sen. Franken can team up with the very Hon. Senator Tombstone Burris to send another federal stimulus grant of $122 mil. to the CTA and make everyone happy.

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Word from the grapevine at Mississauga Transit is that the City of Mississauga has been offered some "discount" hybrid articulated buses from New Flyer. Ironically the City of Mississauga is currently in the midst of procuring more articulated buses. Now I can only assume that these are the deferred CTA DE60LFs. I have no idea how many buses are being offered, or how much of a discount is being offered.

It's not the first time the city of Mississauga has gotten buses at a discount, back in 1997 when WMATA (DC) had a large order for Orion Vs. Due to a lack of funding they had to deffer part of the order. So Orion, who's headquartered in Mississauga, offered Mississauga Transit 35 Orion Vs at a discount price because they were already built to a degree. As a result Mississauga Transit couldn't spec the buses which in turn, resulted in the discounted price. We ended up getting them spec'd completely for WMATA, save for the paintjob.

Anywho, New Flyer must be offering a significant discount, because CTA specs are quite different from Mississauga's. If Mississauga does end up getting some of these CTA spec'd DE60LFs, god forbid they come with the Stimulus artic's seating layout, I rode 4180 on the 146 last Friday from Michigan and Chestnut to the Alder Planetarium. Half an hour of sitting sidewards drove me nuts and left me with neck pains, from twisting my neck to try and see outside.

Now before you all start soiling yourselves over this, nothing has been confirmed yet and this is entirely dependent on Mississauga City Council approving the order before the CTA secures funding. Chances are city council will though.

I'll keep you guys posted.

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I believe that I read on some Canadian forum that NF had previously done something like that (something like NF had actually produced the buses for Winnipeg, which didn't have the financing, so the actual buses went somewhere else).

In that at the time NF announced the deferral, it said that production was to start next week, it is possible that it is just trying to sell its suddenly available capacity, but not necessarily the same spec. or the actual CTA buses. Just as the CTA 4000s and 4150s seem almost the same (except for the seats), even though the options came from two different sources (according to the CTA), maybe Mississauga gets a deal on LFRs, at least aesthetically, just to keep the production line moving.

As you said, it depends on what your city council decides to do. Also, kudos for essentially having broken the story here.

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I believe that I read on some Canadian forum that NF had previously done something like that (something like NF had actually produced the buses for Winnipeg, which didn't have the financing, so the actual buses went somewhere else).

In that at the time NF announced the deferral, it said that production was to start next week, it is possible that it is just trying to sell its suddenly available capacity, but not necessarily the same spec. or the actual CTA buses. Just as the CTA 4000s and 4150s seem almost the same (except for the seats), even though the options came from two different sources (according to the CTA), maybe Mississauga gets a deal on LFRs, at least aesthetically, just to keep the production line moving.

As you said, it depends on what your city council decides to do. Also, kudos for essentially having broken the story here.

Mt0851's story makes sense. Like I said before, even though the buses haven't been assembled, doesn't mean NF don't have the bus shells and available fixtures for the order. They obviously are taking up space there now, so they would have to clear the space, so they could process other cities orders efficiently. The CTA doesn't sound like they are doing anything too quick, I wouldn't expect any word on these until next year's budget comes out. With Nf selling buses at a discount, there taking a loss on this order. I'm surprised there's not some legal means, by which NF could recoupe a loss like that. BTW, I read the other day that Da Mare is seeking an additional 800 million in more stimulus funds. So there's that wildcard to throw in. The CTA could use some of that, I can't help but wonder if next year's budget is going to be spent for Bombardier railcars. So they have there hands full.

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Mt0851's story makes sense. Like I said before, even though the buses haven't been assembled, doesn't mean NF don't have the bus shells and available fixtures for the order.

That would depend on their inventory practices; one would assume that by now they have some "just in time" system. In that they said that production was to start the last week of July, and that there were to be layoffs in Winnipeg, as well as in Minnesota, and they manufacture their own shells in Winnipeg, at least I wouldn't assume that at the moment they are sitting on 140 shells.

With Nf selling buses at a discount, there taking a loss on this order. I'm surprised there's not some legal means, by which NF could recoup a loss like that.

We discussed that we don't know what is in the contract, and, if it is like CTA says, contingent on funding, there is no legal liability until the contingency is met.* New Flyer took the risk by scheduling the work under those circumstances (and apparently has done so in the past).

The only way CTA would be liable is if the board passed the resolution with the contingency, management signed the contract without it, and New Flyer wasn't required to do its due diligence to read the actual ordinance (stuff like the third has happened, but since NF has dealt with CTA in the past, must know that the board has to authorize the purchase). The RFP was not as clear as the Pace one on that, but if the contingency is in the contract, so be it. We also noted that the contract is subject to a Notice to Proceed, and if that Notice hadn't been given, that condition also was not met.

___________________

*No different from if you sign a contract to buy a house contingent on getting a mortgage loan at 6% and selling your present house within 90 days, but despite best efforts, one of these doesn't happen. At that point, the seller has to start over.

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That would depend on their inventory practices; one would assume that by now they have some "just in time" system. In that they said that production was to start the last week of July, and that there were to be layoffs in Winnipeg, as well as in Minnesota, and they manufacture their own shells in Winnipeg, at least I wouldn't assume that at the moment they are sitting on 140 shells.

I never said they'd be sitting on 140 shells, as the manufacturing was ongoing, but when the "stop the presses" order was placed some already had been built. I guess we'll find out how many when they sell them off. It's impossible to have a just in time contingency or the manufacturing would take twice as long. They would have to be prepared for the assembly or they would have to wait to get the shells. It's like printing the newspaper in the mid evening to make a tomorrow's edition. As far as the contract, they needed to set up a point of no return date to insure themselves. With a troubled US economy, this could happen again with someone else.

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I never said they'd be sitting on 140 shells, as the manufacturing was ongoing, but when the "stop the presses" order was placed some already had been built.

I can't see how you can say that, since they said manufacturing was supposed to start the last week in July, after the order to defer was given. There might be some parts around, such as a few hybrid drives, but unless NF was really irresponsible, nothing like completed buses. And if they were that irresponsible, that's their problem.

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I can't see how you can say that, since they said manufacturing was supposed to start the last week in July, after the order to defer was given. There might be some parts around, such as a few hybrid drives, but unless NF was really irresponsible, nothing like completed buses. And if they were that irresponsible, that's their problem.

They must have ordered the hybrid drives already, because Mississauga had no plans to order hybrid artics, then all of a sudden New Flyer offers discount hybrid artics to the city.

There's a huge debate about New Flyer going on in the Canadian forum, and the way its going it seems like New Flyer had already ordered a lot of the parts for these Chicago units.

Also, New Flyer will be apparently shutting down all plants for 2 weeks at the end of the year.

http://www.cptdb.ca/index.php?showtopic=9396&pid=316523&st=0&#entry316523

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I can't see how you can say that, since they said manufacturing was supposed to start the last week in July, after the order to defer was given. There might be some parts around, such as a few hybrid drives, but unless NF was really irresponsible, nothing like completed buses. And if they were that irresponsible, that's their problem.

I think you misunderstood me here. I mean't shells being completed (a few to start the order to send to the assembly phase)(not buses )pre - last week of July. Probably the big question is by the start of manufacture, do they mean shells completed for a pre assembly stage or nothing. I think that things are a little further along than a few hybrid drives or there wouldn't be a discount sale.

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There's a huge debate about New Flyer going on in the Canadian forum, and the way its going it seems like New Flyer had already ordered a lot of the parts for these Chicago units.

http://www.cptdb.ca/...=0&#entry316523

Until New Flyer discloses, their guess is as good as any.

What seems to be confusing there, and in actuality, is how NF counts its backlog. Obviously, an option isn't firm until it is exercised. However, a base order, while apparently firm in NF's eyes, isn't until the contingencies are met, and apparently they are late in coming to realize that.

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As I mentioned, there could be a discount sale just to get something on the assembly line, or as MT0851 suggests, because some components, like the hybrid drives, were already in stock. The question is how NF perceives minimizing its loss, whatever it is, and they won't be telling us (or according to the Canadian forum, their workers, since that forum seems to indicate that the layoffs are excessive compared to the number of CTA buses involved; again, I don't know).

The indication on the Canadian forum that they may have pushed through their stimulus business may indicate why, for instance, the 10 bus RGRTA order can't be pushed up; maybe it was already pushed out.

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Word from the grapevine at Mississauga Transit is that the City of Mississauga has been offered some "discount" hybrid articulated buses from New Flyer. Ironically the City of Mississauga is currently in the midst of procuring more articulated buses. Now I can only assume that these are the deferred CTA DE60LFs. I have no idea how many buses are being offered, or how much of a discount is being offered. ...

Necropost, possibly again, but I see from the headlines on the homepage that New Flyer is saying that Ottawa picked up the slack. New Flyer's site went down when I clicked on the press release link, but another version is here.

In that the buses are D60LFRs instead of DE60LFs, they technically aren't CTA's buses. As I indicated about a year ago, the language of the press release indicates that New Flyer was shopping its production capacity, not the actual buses.

I don't know if the price is comparable now that the Canadian dollar is at par, but it seems like 306 buses for C$190 million, adding up to about $620,000 per bus isn't that great a deal for diesel articulateds, unless the 19% off is to compensate for inflation written into the existing Ottawa contract that didn't occur.

Finally, while CTA and some of you seem to like the idea of shopping used articulated buses, I really doubt that CTA would start furloughing Novas for the ones now being repurchased by New Flyer.

Maybe our Canadian friends can further illuminate the details of this deal.

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Update: Now that New Flyer's site is back working, if anyone wants to speculate about "who got CTA's buses" (assuming that is a fair speculation), it might be TheBus of Honolulu:

Now Manufacturing:

Honolulu's Oahu Transit Services Inc.

...

TheBus has purchased New Flyer's DE60LFR model – a 60' articulated diesel-hybrid bus. This bus model can accommodate up to 120 passengers and can improve fuel economy by 15 to 35 percent compared to a standard diesel configuration.

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Someone at CTA stated last week that they are looking for hybrid buses when funding becomes available. (But I don't know if it will be with New Flyer considering what happened with the 140 deferred.) Looks as if they want to replace the nova's some are over 9 years old. It would probably take a year to receive any buses once a contract would be made. I just hope they don't lose some of the nova's because of a future service cut.

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