Labor Groups Want MTA To Buy American On $900 Million Rail Car Contract

Update: MTA Board defies labor and votes to award the contract to Kinkisharyo. More below.

The state's most powerful labor leaders are urging the MTA not to award a $890 million rail-car contract to a Japanese company, arguing that the money should instead be pumped into the U.S. economy.

Labor leaders want the contract to go to Siemens, a German-based firm which plans to do more of the work in California. Last week, Speaker John Perez and 33 other Assembly members sent a letter urging the MTA to go with Siemens.

Siemens' bid, at $940 million, was $50 million more than the winning bid. The MTA is expected to vote on the contract today.

In addition to the price gap, MTA staffers are also worried about whether Siemens can deliver the rail cars on time. The MTA is buying up to 235 new cars as it readies for a major expansion of the light-rail network, including the Expo Line extension, the Crenshaw Line and the Gold Line Foothill extension. The agency has to get more rail cars in time to launch those lines in the next few years.

But MTA officials still have bitter memories of Siemens' mishandling of an order for 57 rail cars back in 1994. The last of those rail cars were not delivered until 2004, by which time they were six years late. Siemens claims that those problems have been corrected, but MTA officials say they still haven't received an adequate explanation for that delay.

MTA staffers favored Kinkisharyo, the Japanese firm, in part because it has never been late on a U.S. rail-car order. Siemens finished third in the contract scoring, behind Kinsharyo and Spanish-based CAF.

CAF is also protesting the awarding of the contract to Kinkisharyo. CAF's lobbyist, Harvey Englander, argued that if the MTA selects Kinkisharyo, it risks having the federal government reject the contract because too much work will be done overseas. CAF promises to build a manufacturing facility in South L.A., and its bid was $100 million cheaper than the winner.

Kinkisaryo has enlisted its own high-profile help in securing the contract, hiring former Assembly Speaker Fabian Nunez to lobby the MTA. Nunez is a former political director of the L.A. County Federation of Labor, but he and his former employer are on opposite sides of this issue. The Fed chief, Maria Elena Durazo, is backing Siemens.

Kinkisharyo has pledged to build a manufacturing facility in the U.S. if the contract option is picked up, said Coby King, another Kinkisharyo lobbyist.

Update, 2:40 p.m.: The MTA board voted this afternoon 8-1, to approve the $890 million contract with Kinkisharyo, says MTA spokesman Marc Littman.

L.A. Councilman Jose Huizar voted no. Mayor Antonio Villaraigosa ducked the vote, claiming an unspecified conflict of interest. (Updated below.) Supervisor Mark Ridley-Thomas was in Washington, D.C., so he also avoided taking a vote that might hurt him with his labor backers. Supervisor Gloria Molina was out of the room.

At the hearing, Art Leahy, the CEO of MTA, also warned that failing to approve the contract could result in new Metro lines opening without rail cars to run on them. Leahy also warned the board to avoid repeating its costly mistake with Ansaldo Breda, in 2009. In that case, labor groups urged MTA board members to support Ansaldo Breda, despite its difficulties delivering cars on time, because the Italian firm promised to build a factory in L.A. The deal ultimately fell through after Ansaldo Breda balked at offering certain financial guarantees, causing years of delay in acquiring new rail cars.

MTA produced an analysis that showed that Kinkisharyo's bid would generate 348 jobs in the U.S, while Siemens' bid would generate 391 U.S. jobs. The board seems to have decided it wasn't worth the extra $50 million for a difference of 43 jobs.

The Los Angeles Alliance for a New Economy, which backed Siemens, argues that Kinkisharyo was improperly credited with creating jobs that would be created by its subcontractors further down the supply chain. The organization also argued that Siemens was penalized because it already employs a large workforce in Sacramento, and so it did not get credit for creating new jobs. According to LAANE's analysis, the Siemens contract would have created or sustained 923 more jobs than Kinkisharyo's.

The new cars will be substantially similar to those already in service. MTA officials said they would include electrical outlets, so that passengers may recharge their laptops and cell phones. They will also have better and more efficient lighting, and more comfortable seating.

Update 2: Villaraigosa's spokesman says the mayor did not vote because he has received $13,000 in campaign contributions from ex-Speaker Fabian Nunez, who registered as a lobbyist for Kinkisharyo on Friday.

So, not bad for two days' work from Nunez. He wins the contract, and he keeps the mayor from having to vote against the Federation of Labor.