SEPTA cancels railcar order with CRRC; Chinese-owned company vows to repair relationship

By Jim Kinney | masslive.com (TNS)

SPRINGFIELD, MASS. — The Southeastern Pennsylvania Transportation Authority late last week canceled its $185 million contract to buy passenger rail cars from CRRC’s Springfield factory.

“SEPTA has terminated its contract with CRRC MA for cause,” authority spokesman John Golden said in an email. “The authority is assessing its options for recouping funds that have been spent on the project.”

SEPTA, the Philadelphia area’s transit authority, has spent in excess of $50 million without getting a car on a project that is four years behind schedule, Golden said.

CRRC’s bid on the project was $34 million below than nearest competitor.

The Philadelphia Inquirer first reported SEPTA’s decision. The end of the Pennsylvania contract comes only a few weeks after a reset in CRRC’s relationship with the Massachusetts Bay Transportation Authority. The MBTA agreed to modify its contract with the CRRC to give it more time and more money, preserving 400 jobs in the city and ensuring annual tax payments.

In March, the MBTA, citing progress CRRC has made in both quality and the pace of delivery, extended its deadline into 2027 and increased the cost of the contract by $148 million to over $1 billion.

“We are happy with the reset,” said CRRC spokeswoman Lydia Rivera.

And CRRC hopes to do the same with SEPTA.

“We are going to do everything we can to address SEPTA’s concerns, negotiate and keep making those cars,” Rivera said.

At the Springfield plant where SEPTA’s cars would have been finished, CRRC has 453 employees, including 297 unionized production workers. About half are in the International Brotherhood of Electrical Workers, and half are in the Sheet Metal Works union.

Job security?

Robert Wilson, business agent for IBEW Local 7 in Springfield, worries about job security at the plant. As projects are completed, CRRC is restricted by federal law, and hampered by import tariffs and its own reputation for getting more work.

“I’m personally not overly optimistic. I think quality control is a big thing,” Wilson told The Republican on Monday. “These things are being assembled in China, and there is a lot of reworking that needs to be done.”

According to The Inquirer, tests of bi-level cars for SEPTA’s regional rail system have failed for water tightness, faulty interior panels, wiring issues, bad brakes and unsafe emergency exit windows.

For the T, the cars have had multiple quality issues, including problems with undercarriages that restricted turning and created excessive noise, battery failure and brake problems.

In March 2023, inspectors from the U.S. Department of Transportation audited the Springfield plant, checking to see if CRRC was meeting the federally mandated 70% U.S.-made parts content minimum.

“We are committed to seeking more opportunities to ensure the facility remains operational,” Rivera said Monday. “We are going to do everything we can to remain in Springfield and to maintain those jobs.”

Wilson said the Springfield plan has three contracts — the T, SEPTA and the Los Angeles Subway system — and it’s behind schedule on all three of them.

“Quality control,” Wilson said. “This is mass transit. It’s important. You have deadlines, and you need to meet them. People are paying a lot of money.”

He noted a cultural disconnect between CRRC management and American workers, citing a chaotic approach from China.

CRRC has cited training lapses and difficulty in hiring.

Wilson said workers at CRRC’s plant in Springfield start at a little more than $19 an hour and can earn as much as $40 an hour. They also earn benefits, including a pension.

CRRC makes trains for Chicago transit at a separate plant in Illinois.

But if SEPTA can’t be brought back into the fold, things might get tough for CRRC.

Chinese-owned company

Owned by the Chinese government, CRRC is the largest rail car maker in the world. It has run afoul of its industry competitors and watchdogs, who accuse the Chinese government of bidding artificially low on contracts to gain a foothold in the American market and then not delivering on its promises.

“MBTA should take a hard look at what SEPTA has done and seriously consider taking a similar action. Massachusetts transit riders and taxpayers should demand it,” said Erik Olson, executive director of an industry lobbying group called the Rail Security Alliance.

Olson also pointed out national security concerns. CRRC was placed on the U.S. Defense Department’s updated entity list, which officially designates CRRC as an extension of communist China’s military.

There were already restrictions in place barring transit agencies from using federal money to buy from CRRC, unless they were a previous customer. That exception — for transit agencies like the T, SEPTA and the Los Angeles Metro and Chicago Transit Authority — and a two-year grace period, which has since elapsed, were negotiated by U.S. Rep. Richard E. Neal, D- Springfield.

Massachusetts gave up federal money on the Red Line and Orange Line projects, so it could mandate that assembly work be done in the state. The idea was to create a local rail car industry. CRRC ultimately won the bid.

CRRC spent $95 million here and built a 204,000-square-foot rail car manufacturing facility on a 40-acre East Springfield site that was once a sprawling Westinghouse plant. The plant started production in December 2018.

A casino company already had cleared the site before losing out to MGM’s proposal.

A rail car hub, again

Springfield was an early center of rail car manufacturing. Wason Manufacturing Co. was one of the largest makers of railroad cars and locomotives in the country, and operated here from 1845 to the Great Depression.

In 2017, CRRC got a contract to build 64 subway cars for the Los Angeles Metro in an order that was estimated at about $647 million.

The same year, SEPTA ordered 45 double-decker commuter rail cars.

CRRC has delivered six married pairs to Los Angeles as it ramps up production for that order.

CRRC has been on a regular production schedule since October, after bringing in American manufacturing experts and submitting to the MBTA’s audit and retraining programs. Just over 130 cars have been delivered to the MBTA so far. Rivera said Monday that CRRC is now completing two married pairs of cars — four cars total — each month for the Bay State agency.

Rivera said CRRC still expects to deliver the first two cars to Philadelphia in June.

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