What’s an Industry Worth?

Brad Schmidt has a lengthy piece in the Sunday O about the delayed delivery of streetcars from Oregon Iron Works.

I won’t debate any facts in the article, I think Brad has a fix on the chronology and events, and I’m not in a position to comment on what he found internally at OIW. I might quibble with his characterization that the prototype is “four years late”. There was a deliberate choice to use the prototype to test a Rockwell propulsion system, and to let OIW take the vehicle on the road for a number of months while selling to other cities.

The question the article poses is whether the jobs created by having a U.S. (and Oregon!) based streetcar manufacturing industry are worth 8 months of delay in getting vehicles in service and getting 5 cars rather than 6? (The vehicle reduction was due to a decision early in the project to substitute an Elin propulsion system for the Skoda system – although there is still a potential to earn back credits that will help fund a 6th car eventually.)

The other question in play is whether the delay is the result of incompetence and the willingness of government sponsors to tolerate it, or if this is just plain hard?

Well, here’s my perspective:

  • Streetcars have a bright future in this country, and the opportunity to have a first mover position in a manufacturing industry is a very good bet.
  • We tolerated a delay of several months from Inekon when opening the extension to Gibbs and had to operate 100% of our fleet daily under similar circumstances. It’s not as if the European streetcar industry has a great track record in on-time delivery.
  • We’re still going to deliver this project within the budgeted contingencies – there will not be an overall project overrun.
  • Yes, it’s hard. I’m not claiming Oregon Iron Works is perfect, but building a streetcar is a VERY complicated enterprise.

Bottom line – I certainly regret the inconvenience to our passengers, but this is a very short-term blip in what I believe is still a terrific economic development opportunity for our region. And I’m grateful our local leaders have the resolve to stick with it.

37 responses to “What’s an Industry Worth?”

  1. “building a streetcar is a VERY complicated enterprise.”

    Compared to…?

    Is it really more complicated than building a double-articulated bus? More complicated than a standard low-floor light rail vehicle?

    Thousands of buses and hundreds of light rail vehicles have been built (well, final assembled) in this country in the past decade.

    I’m willing to give OIW a chance to straighten things out with future vehicles. I’m sure it is hard to start a bus assembly line or an EMU assembly line, too. But it’s not harder than the alternatives.

    And while Oregon will certainly be better off if other cities order our streetcars, would the nation have been better served by simply importing fully-built streetcars from eastern Europe or east Asia, at a lower cost? The hidden costs of Buy American policies may be substantial.

  2. I’m with Chris on the “short term blip” perspective. I keep thinking about how Japanese products were considered to be crappy, second-rate goods back in the fifties. But Japanese companies kept working on their game and eventually wound up producing some of the best-built vehicles and electronics on the planet. It was all a matter of gaining institutional expertise.

    OF COURSE there are going to be problems for United Streetcar. Its first few streetcars WILL be crappy with multiple defects and subject to numerous delays and setbacks. But the builder will learn from the bugs. With each streetcar they build, they’ll learn more. The people working on it will gain greater expertise in their respective areas and turn out better streetcars faster.

    Someday, United Streetcar will be able to compete head-to-head with Skoda, Inekon, Siemens, Bombardier, and other established players in the business. But the company needs to crawl before it can walk and walk before it can run.

  3. I agree with all three writers overall. That said, I remain concerned.

    In recent decades,

    We tried to create a light-rail division at Boeing Vertol, and we ended up with the unsuccessful Boston and San Francisco Boeing LRVs. Instead of learning from sad experience and improving its LRVs, Boeing gave up and went back to just doing aerospace.

    We tried to create a rail division at Rohr Aerospace. They delivered the first batches of BART trains (and designed BART with an incompatible 5’6″ track gauge), and the first batches of DC Metro trains, then — instead of learning and improving its product — went out of the rail business altogether.

    Then there’s the WES/Colorado Railcar fiasco. It’s a different story from Boeing and Rohr, but the result is the same: another blown opportunity to kick-start a US-owned passenger rail maker.

    While United Streetcar keeps trying to build reliable streetcars, the competition — Inekon, Siemens, Bombardier, Kinki-Sharyo, Alstom, maybe even Brookville — is winning the available contracts: Seattle, Cincinnati, Atlanta, and maybe more.

    We’re in an amazing period of pro-transit Federal government.But LaHood is leaving and Obama can’t run for a 3rd term. If Federal priorities change (as they always do), the moment will have passed.

    Meanwhile Chandra Brown has decamped for a Federal job in DC. Her replacement, Kevin Clarke, seems to have a lot of engineering and experience in electronics but none at all in this field. His quotes in the O article are mostly spin.

    My concern with United Streetcar is that it will eventually deliver its current orders, then disband and let OIW focus on boats. No chance for new or follow-on orders. Another blown opportunity.

  4. I frankly wish we’d just stuck with Škoda. Their streetcars work beautifully and don’t make that horrible whine during acceleration. Last time I rode an American-made streetcar, the sound gave me a headache in minutes and an upset stomach. My spouse got vertigo. Now we only ride the Czech streetcars and pointedly avoid the American ones. Otherwise, we walk. It’s generally about the same speed as the streetcar anyway, and it’s getting quite nice outside, so why not?

  5. Andrew, I’m not sure what you’re referring to as “American-made”. Only car 015 is American-made (the one that says “MADE IN USA” on the side.

    I think you may be distinguishing between cars 001-007 (Inekon/Skoda) and 008-010 (Inekon/Trio). But all the of the cars from 001-010 are Czech.

  6. Saint Louis (my home town–GO CARDINALS!) Car Company made the best streetcars ever, implementing the superb PCC design, which was licensed and built in many countries of the world. Then they were denied the original BART contract and became defunct.

    The PCC rights were sold to BNF in Belgium, then licensed to Bombardier of Canada, which then built a plant in Vermont–to build the 100 series MAX vehicles, which in terms of ride, comfort, noise still are the cream of TriMet’s crop–after 26 years of service!

    (Sorry, Siemens, nice try.)

    If Portland Streetcar, Inc., has any excuses for purchasing and operating anything less than PCC-Bombardier performance, quality, design–80 years on from the ALL AMERICAN R&D that led to the standard-of-the-world-streetcar–let us hear them.

    With my Sherlock hat on I sometimes think that Portland Streetcar, Inc., is some (almost) vast conspiracy, but is strains the imagination what the end of that might be. Why streetcars? Better to put its doings down to simple incompetence, as imputed in Brad Schmidt’s article.

    Chickens are heading home. Good luck to all!

  7. Industrial policy–government financing or supporting the development of industry–is always a controversial thing, whether it be tax breaks being showered upon high-techs and Nike, or the attempt to bootstrap industries like solar panels and streetcars. One one hand, a good case can be made that industrial policy–like many things–can be perverted to benefit the well-connected; on the other hand, many capital-intensive industries simply won’t take root any other way.

    (Last time the Oregonian ran a breathless article about problems with United Streetcar–I did complain about the Buy America Act, and its effect on transit systems in the US; though my beef there is that transit agencies and their riders are the ones bearing the cost of BAA requirements, as opposed to Uncle Sam providing additional subsidies for agencies who source stuff domestically).

    Is United Streetcar successful, or does it have the potential to be so? That depends on what you think its goals were. If someone thinks that United Streetcar should be running double-shifts by now, winning business not only from domestic streetcar systems but even from abroad, by that metric it has failed. But if one is viewing this as a long-term play, and taking the view that the company is still learning to walk before it runs, then maybe not. But I’m not sure if anyone agrees what the goals are, or ought to be. Which means that anyone can call it a success or a failure, by setting the goalposts appropriately.

    Certainly, things might have been done better at USI–if you are going to be in the business of building streetcars, it helps to have some skilled streetcar engineers (in various specialties) on staff–which probably means waving lots of money around in Europe and/or Japan, where existing expertise is to be found. Streetcars, or any modern vehicle, are complicated enough beasts that domain knowledge is essential to have, and likely takes decades to acquire organically.

    My concern about USI is if they haven’t done these things–why not? Are they unserious about the business long-term? A failure to understand the complexities involved–at first glance, a streetcar is a simple thing, but making a good streetcar is not simple at all?

    Jim–I seem to remember hearing that the PCC design is not ADA-compliant; and that this is a big reason this design is no longer employed in the US. (It is a good design, and it still is employed in other parts of the world).

  8. I think the media embodies the modern American viewpoint that we, as Americans, are crappy at making things – and therefore should just give up and buy German, Japanese, Chinese, whatever.

    Nice attitude, folks. Whats with the “can’t-do” attitudes lately from the peanut gallery?

  9. I think the future could be bright for United Streetcar, but it sounds like they need to hire a few more engineers and QA personnel. Those late delivery penalties add up quickly.

  10. Two links to Patrick Emerson’s blog regarding comparative advantages and the streetcar (ie, we should let the Czechs build ’em ’cause they’re better at it and trade them stuff we make better, like beer):



    For me it’s the opportunity costs of the streetcar that makes it so objectionable a use of public monies. TriMet and PBOT both need new funding sources. Both will need voter approval. Both have little trust from voters that they’d spend money well or wisely. The CL line’s slow rollout and blackhole of a budget aren’t going to convince anyone, or that the idea of a central city loop is anything but a bad idea badly done.

    I lived in Vienna when they ended their streetcar loop after many years of running the 1 & 2 trams around the city center. After a bit of transition it was a big improvement and I look forward to seeing Portland Streetcar drop it’s silly loop idea and focus more on providing useful (quick/frequent) transit service.

    (more on Vienna’s loop :http://www.humantransit.org/2009/09/vienna-life-without-loops.html)

  11. Hindsight is 20/20, but I think putting money into speeding up the system (priority control of traffic lights) would pay off more than a special label on the side of the car.

  12. Is building a streetcar harder than building a light rail train? Because it seems like those are more streamlined. Maybe because they are more established in the US manufacturing market?

  13. Streetcar manufacturing as envisioned here has maybe ten years – fifteen years tops. It’s over once ‘decision makers’ accept the financial realities of autonomous vehicles. Its capital costs are on the low end of light rail but still much higher than bus. On a per-ride basis, it’s operational costs are barely competitive now with 40′ buses and higher than those for either 60′ buses or larger light rail vehicles. As has been pointed out here by more than one person, robobuses have the potential to turn transit economics on its head.

    I’m not saying that there won’t be the occasional one-off ’boutique’ or ‘amusement park’ installation; only that demand won’t sustain a streetcar manufacturing capability any more than it does for building replica 16th century sailing vessels.

  14. As noted above, there are no real benefits to making streetcars here when firms exist abroad that are better at making them. We should find things we are good at making, and export them for money, which we then use to buy things other people are good at making. It’s not that complicated. The entire Buy America requirement is a case of domestic industries seeking protectionist regulations at taxpayer expense. I don’t often agree with the Oregonian, but in this case I agree with the tone of their article that this whole venture was a mistake.

  15. We should find things we are good at making, and export them for money, which we then use to buy things other people are good at making. It’s not that complicated.

    I think that this region is in fact very competent in value-added manufacturing (including rail cars). There is no question that there is specific domain-specific knowledge for streetcars that we are on a steep learning curve for, but I think it would be a significant mistake to believe we’re starting from zero.

    As for Buy America, I agree there are some significant policy questions around it. But is this region going to have it’s own foreign trade policy, or are we going to play on the field as currently tilted? I’m a pragmatist.

  16. I find it interesting that the BAA requires protectionist procurement practices on a global scale: new transit systems must have a certain percentage of US-sourced stuff.

    But federal funding requirements, at the same time, prohibit more local protectionism–it is unlawful to (explicitly) prefer local firms over other US-based firms in procurement.

  17. A boondoggle is a boondoggle is a boondoggle.
    No excuses should be tolerated.

    There is a ‘sequester’ going on.
    Funny how that sequester only affects things that actually matter, unlike this ridiculous streetcar boondoggle.

    Streetcars are being built while they chop away at the transit that people actually need. The whole thing is so typical of our useless government.

    I asked over at Schmidts post if he had a list of the executive paychecks.
    He didn’t respond, which I find interesting.

    I remember when WES went bankrupt, Trimet continued paying the top executives $30k/mo paycheck.

  18. I remember when WES went bankrupt, Trimet continued paying the top executives $30k/mo paycheck.

    I assume you mean Colorado Railcar (which indeed go bankrupt), as opposed to WES (which is not a distinct legal entity with its own balance sheet), no?

  19. I remember when WES went bankrupt, Trimet continued paying the top executives $30k/mo paycheck.

    I assume you mean Colorado Railcar (which indeed go bankrupt), as opposed to WES (which is not a distinct legal entity with its own balance sheet), no?

  20. Chris, what I am saying is that a good manufacturing policy would be to identify products that we could reasonably be good at making where there is also a market opening. There are plenty of good streetcar and light rail manufacturers to choose from–the fact that they are all foreign should be beside the point. The point is, there would be no market opening if not for protectionist policies that force the issue. Would you like an example of a market opening? How about buses! From what I understand, we are down to only 2 real bus companies, Gillig and New Flyer. That’s not much competition, and I’m sure there is room for a 3rd bus company. I don’t know if Portland is the place for that, but at least it’s an area where there is a real need for another competitor.

  21. From what I understand, we are down to only 2 real bus companies, Gillig and New Flyer. That’s not much competition, and I’m sure there is room for a 3rd bus company. I don’t know if Portland is the place for that, but at least it’s an area where there is a real need for another competitor.

    We had the opportunity to get Orion Bus (a subsidiary of Freightliner) to Portland. We had an opportunity to keep hundreds of Portland jobs in Portland; hundreds of workers earning good wages and benefits, right here in Portland. Using existing factory space otherwise empty and unused.

    We turned that away, because it was “bus” manufacturing. Uncool.

    Orion Bus is no more; that means one fewer competitor, that means higher prices for new buses (not too long ago a new 40′ diesel bus cost around $365,000; today a new 40′ diesel bus is closer to $425,000) and there’s a two year wait for your bus to be delivered.

    We could have had those jobs in Portland, building buses for Portland and the entire region. Instead, we are scraping by and sending our money to Minnesota and California and Germany; while fiddling around with an unproven vendor trying to make a train with zero experience – and cutting bus service to fund streetcars-in-circles rather than people-minded transit systems.

    All, because “bus” is a four-letter word.

  22. Erik,

    What opportunity did we have to bring Orion (prior to its being bought out by New Flyer) to Portland? Were they considering Oregon as a possible site for a factory? And if so, in what way did local officials “turn that away”?

  23. And you say that Orion is no more. Do you think they would have survived in Portland. Why didn’t they set up in a state like South Carolina, where there are lower labor costs. It sounds like this could have been another SoloWorld type debacle, with millions of taxpayer dollars poured into a failing company.

    It looks like part of Orion’s business was sold off to New Flyer, but the company still exists as part of Daimler Buses North America.

  24. Since the streetcar has always seemed to be more about economic development/urban renewal than actually moving people from A to B I don’t see how inconveniencing passengers early in lines operations really matters much.

  25. I assume you mean Colorado Railcar (which indeed go bankrupt), as opposed to WES (which is not a distinct legal entity with its own balance sheet), no?

    ~~~>Ya Colorado Railcar, of course WES itself is a money loser sucking up tax dollars.

    Funny how when it comes to tax dollars how so much waste is tolerated.


  26. I don’t remember hearing anything about Orion coming to Portland. If it had been a possibility, I expect the city would have been all over it trying to make it happen instead of passing it up because of some imaginary anti-bus bias.

  27. Sure, buses need improvement. The new New Flyer coaches aren’t new. The 4 hybrids are installed on old New Flyer coaches. Forget autonomous. How about 35′ hybrid buses? When are Low-floor Hybrid paratransit vans gonna ever get built?
    All that said, rail is basic. Tri-Met has done the job of getting superior rail in place, operatable at high capacity which can influence growth, development and patronage incidentally preserving farmland from sprawl, lowering CO2 & toxic emissions, relieving traffic, confounding contrarian objectionists for sport, etc.

  28. All it would have taken for Orion to come to Portland was the people who clamored and sought out OIW for building Streetcars, to have ridden the 85 bus over to Daimler’s headquarters on Swan Island and make a sales pitch.

    No one did that. Why? Who knows. They all know Freightliner was shedding jobs, shedding shifts, and idling plants.

    We stood around, while TriMet’s bus fleet got older and less reliable. But “nobody rides buses”, and “we need to attract riders who won’t ride buses”. We need to “attract development”…funny; I took my daughter out on a ride on MAX to Hillsboro, and after 15 years there’s still a lot of prime developable land next to MAX stations that is sitting idle and bare. And at the western end…a lot of government, tax-exempt buildings that were hardly vibrant on one Sunday afternoon.

    We could have attracted Freightliner to bring Orion Bus over here…we could have instituted the same “Buy Oregon” policy for buses, that we are demanding for Streetcars. We could have kept Orion alive. We didn’t.

    All because God forbid, it’s a bus. And “bus” is a four-letter word.

    We had the opportunity. We squandered it. Now look where we are. Crappy, shitty old bus service, and non-existent Streetcars to nowhere.

  29. All it would have taken for Orion to come to Portland was the people who clamored and sought out OIW for building Streetcars, to have ridden the 85 bus over to Daimler’s headquarters on Swan Island and make a sales pitch.

    That’s all it would have taken? And you know this, how?

    No one did that. Why? Who knows. They all know Freightliner was shedding jobs, shedding shifts, and idling plants.

    And Freightliner/Daimler was also rather ticked at the local political climate, and looking to move their production elsewhere, which they did. A lot has to do with Oregon not being a “right-to-work” state. A lot also has to do with Freightliner having hurt feelings about the region’s courting of high-tech firms (particularly Intel, at the time), but not giving the same level of tax breaks to incumbent firms (like Freightliner). To what extent tax breaks ought to be awarded to companies to lure them to locate here in the metro are (or relocate, in an attempt to “steal” them from other regions), is a interesting policy question–ideally, Uncle Sam would put a stop to this game, but doesn’t seem interested in doing so.

    What makes you think that Daimler would have opened a bus factory in what was left, after closing a perfectly good truck factory, even if there was more gladhanding of the company by local officials?

    And in particular, what makes you think that local officials (particularly those focused on economic development, rather than transportation), have a bias against bus-builders? Have you heard any of ’em make any statements that the bus industry is undesirable or unglamorous, and/or that bus manufacturing is somehow incompatible with with Portland’s image or civic culture? I can’t remember anybody ever saying such a thing, other than you.

    I’d love to see a bus manufacturer set up shop in Swan Island, don’t get me wrong. However, I don’t recall there ever being a likelihood; that Daimler or anybody was considering such a move (and that the outreach that you seem annoyed didn’t occur, would have been anything more than cold-calling). New Flyer and Gillig seem perfectly happy where they are, Detroit seems to remain uninterested in getting (back) into the bus business, Daimler we’ve already covered, and I’m not aware of any other worldwide incumbent bus manufacturers interested in expanding to North America. Maybe there’s hope for a startup, but then you would have the same risks that you have with United Streetcar–heavy manufacturing is a difficult industry for new entrants to crack, simply because of the immense amount of legacy requirements and domain expertise required to bring a competitive product to market.

  30. Daimler had no intentions of moving Orion production, they wanted out of the bus business especially the transit bus business because there is very little money to be made in it. Daimler is used to making good money per unit of production and that is just does not happen when making transit buses and that is why were are down to only a few manufacturers left Gillig, New Flyer, along with NOVA and NABI which are more niche players. Oh and by the way NABI is the successor to Ikarus that partnered with Crown to build those articulated buses everyone loves (yes, sarcasm).

    The chances of Portland even getting the Orion plant if Daimler wanted to keep it were slim as they would probably be enticed by the subsidies offered by one of the southern states. As it was by being in New York state they were already located near their biggest customer New York transit so why would they move here?

  31. I like the usa streetcar it has comfier seats. I thought there were two in service? a red one and a blue one? Either way i think we should make streetcars here. Makes it harder for them to send us back to the 60’s autotopia again.

  32. Two (from the order for the Loop) have been delivered, but are not yet in service (but one is only weeks away, I believe).

    The only OIW car currently in service is the prototype (with the prominent MADE IN USA wrap).

  33. I had occasion to ride the Oregon-made streetcar the other day. What is that horrible screeching sound I sat through for the entire ride?

  34. Is there a growing consensus among your readers that the Portland Streetcar itself is proving to be a big mistake? Would Portland be better off discarding its streetcar network, and let Oregon Ironworks go back to manufacturing what it was before the streetcar came along?

    Should Portland spend its scarce transit dollars on modernizing its aging bus system and bring it up to the standard of TriMet’s light rail service?

    One very important thing we should not overlook in all this controversy over United Streetcar’s inability to deliver a competently-made vehicle within budget and on time is that its failure to do so is one more “canary in the coalmine” tipoff that the United States is falling farther and farther behind the rest of the world in engineering and manufacturing prowess.

    Our country is sinking into a morass of incompetence and the consequent need to re-invent the wheel. This ineptitude is largely the result of decades of lowered academic standards ranging all the way from kindergarten to the post-graduate level. We Americans are now paying dearly for these lowered academic standards; today many students now entering college have very substandard reading, mathematics and analytical skills, all of which must be addressed and remediated before they can take college-level courses.

    I am not at all surprised by the debacle now unfolding at United Streetcar. There are very few truly capable people we can turn to who have the know-how to successfully carry out a United Streetcar-type of enterprise. As a side-note, I think the current interest in streetcars is a fad which will soon disappear.

    The US has an enormous amount of catching-up to do to retake its former leadership status in the design and manufacturing field.

  35. Tell that to the engineers at Daimler Trucks NA on Swan Island who designed the newest Freightliner brand truck, Cascadia…the best selling heavy duty truck in NAFTA. Or check out DTNA’s Western Star brand vehicles designed and built on Swan Island. Talk about a cool truck.
    re Streetcars, I’m reminded how in Frankfurt they were kept in service by public demand after U6 and U7 started running. Folks were tired of having to go underground and wanted to keep their friendly local streetcar line instead.

  36. Lenny, you make an interesting counter-argument here, but please remember that Daimler Trucks NA is a US subsidiary of Daimler AG, based in Germany, and it’s very likely that expertise from the EU, and Germany in particular, has been and is being relied upon – and furthermore, neither Daimler Trucks NA nor DTNA have anything to do with United Streetcar as far as I know.

    If these two manufacturers are as good at, and have as fine a reputation for, heavy vehicle manufacturing as you say, why on Earth weren’t they considered when bids were sought for a new streetcar rather than call on a company (Oregon Ironworks) with no previous connections to the transportation industry? The choice of Oregon Ironworks defies logic.

    In addition, one or both of these firms you cited might be good candidates to enter the transit-bus field; over-the-road long-distance truck and transit-bus chassis have a lot of heavy-duty items in common. Gillig and New Flyer need some healthy competition.

    It’s becoming apparent that United Streetcar has been in deep water over its head from the start, and it’s now sink or swim. It’s anybody’s guess how it’s going to fare, but the evidence thus far suggests it will take a strong and well-heeled lifeguard to prevent it from drowning.

  37. I’ve little doubt that the US is capable of heavy manufacturing, generally–and that were a concerted effort to be made, US industry could produce high-quality streetcars within a reasonable time. After all, US industry still produces automobiles and trucks and freight railcars and airplanes and transit busses. The lack of domestic transit rail seems to have a lot to do with a lack of domestic demand, for several decades.

    This is one area where high-wage countries still dominate production.

    Whether OIW is willing to make the investment in time and money to get there, and whether this is a good investment to be made, is another question. An argument can be made that the future market for streetcars (and rail transit vehicles, generally) doesn’t justify the large investment needed, and that industrial policy should be spent promoting other industries rather than this.

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