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Foreign firms eye Obama rail plan

(The Associated Press circulated the following story by Joan Lowy and Matt Leingang on July 21, 2009.)

WASHINGTON, D.C. — Foreign companies that dominate the international high-speed rail industry are trying to cash in on the Obama administration's plan to pump billions of dollars into U.S. rail systems to help stimulate the economy.

The stimulus plan sets aside $8 billion for high-speed rail, a figure that has ambassadors and foreign leaders jockeying to get their preferred companies in on the deal. Though the law requires the U.S. to "buy American" with stimulus money, the rail plan requires so many trains and so much expertise that the administration has conceded foreign companies are likely to be part of it.

"I guarantee those companies that have been involved in high-speed rail in Asia and Europe are in America right now meeting those folks that are putting proposals together to tap into our $8 billion," said Transportation Secretary Ray LaHood, who has spoken with Japan's ambassador and transport minister about the matter.

LaHood, who spoke last week at a Washington think tank, met with French and Spanish officials during a recent trip to Europe, where he rode high-speed trains and met industry leaders.

High-speed rail was on the agenda when Jean-Louis Borloo, the French environment minister, met LaHood in Washington in March. And it will be a topic of discussion again during LaHood's upcoming trip to Japan, where companies want to supply the U.S. with rail cars, locomotives and expertise.

Europe and Japan have extensive high-speed rail systems and well-developed industries to support them. The only truly high-speed rail service in the United States is Amtrak's Acela Express, which operates between Washington and Boston. The trains can reach speeds of 150 mph, but average less than 100 mph. Some trains in Europe and Asia average 150 mph or more.

"They do have the expertise in putting systems together and we don't," said Rep. John Mica of Florida, the senior Republican on the House Transportation and Infrastructure Committee.

Mica said he expects most of the high-speed rail money to be spent in the U.S. on locomotive engines, steel tracks, concrete and support systems. But passenger cars will probably be purchased from foreign companies, although they may be produced by U.S. subsidiaries. European and Japanese companies may also play a large role in designing and overseeing rail projects.

The Federal Rail Administration plans to release the first round of grants by mid-September. State and local officials will decide which companies win the contracts.

"If you look at the opportunities that these folks are trying to create for themselves, they're coming to America, they are going to the regions and they are talking to the people who have put together proposals," LaHood said. "And it will be up to those folks if they want to partner."

The "Buy American" provision of the stimulus gives priority to U.S. manufacturers and suppliers. But officials can waive that rule if buying American would delay the project or increase costs by more than 25 percent.

The administration's plan requires hundreds of new passenger trains. Foreign companies figure to be the initial front-runners because iconic U.S. train builders such as Pullman Co. in Chicago and Budd Co. in Philadelphia died out more than 30 years ago with America's shift to highway and air travel.

Among the most prominent of the foreign companies are Montreal-based Bombardier Inc., which helped build the Acela, and Spanish company Talgo SA. Talgo says its U.S. subsidiary will build a manufacturing plant in whichever state takes the lead in ordering rail equipment, company spokeswoman Nora Friend said.

Wisconsin Gov. Jim Doyle announced Friday that his state is buying two 14-car trains from Talgo for $47 million for its Milwaukee-Chicago corridor. The deal includes an option to buy more if the state gets stimulus money to extend service from Milwaukee to Madison. As part of the deal, Talgo will open plants in Wisconsin.

Other foreign manufacturers already have U.S. plants that supply Amtrak and smaller commuter trains for New York and other cities. French engineering firm Alstom SA has a factory in Hornell, N.Y., and Talgo has a maintenance facility in Seattle, where 10 years ago it assembled trains for an Amtrak route that runs from Eugene, Ore., to Vancouver, British Columbia.

The stimulus may only be the beginning. Obama has said his $8 billion plan is just a down payment on a high-speed rail network, drawing comparisons to the 1950s creation of the interstate highway system.

To follow up, Congress is working on proposals that would expand high-speed rail, including one plan that would spend $50 billion over the next five years.

"Congress may do more," LaHood said. "If they do, we'll be cheering them on."

Last month, a group of U.S. investors launched a startup to compete with international firms. Value Recovery Group Inc. of Columbus, Ohio, bought up the remains of a shuttered Colorado railcar company and began scouting locations in Ohio, Illinois and Michigan for a manufacturing plant.

CEO Barry Fromm said the new company, U.S. Railcar, plans to build diesel trains that travel 79-90 mph and can be upgraded for 125 mph service.

"We want to keep American jobs and U.S. public investment at home," Fromm said.

Tuesday, July 21, 2009

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