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High-Speed Rivalry Picks Up Steam

http://online.wsj.com/article/SB10001424052748704463504575301051535500696.html?mod=WSJ_hpp_sections_business

By MELANIE TROTTMAN And PAUL GLADER

Foreign railway operators and equipment makers are gaining steam in the race for a chunk of the $8 billion the Obama administration has awarded states for high-speed rail projects, but Amtrak, which wants to remain the nation"s sole operator of high-speed trains, risks getting left at the station.

On a 2½-day trip to Japan last month, Transportation Secretary Ray LaHood officially hung out the welcome sign for foreign makers of high-speed passenger-rail technology to bid on the projects.

Mr. LaHood tried out Japan"s high-speed trains, including Central Japan Railway Co.“s magnetic levitation train and East Japan Railway Co.“s bullet train, and he invited Japanese companies to “bring us your expertise” and “use American workers and American facilities.”

The trip also had implications for Amtrak. The struggling U.S. national railway manager, whose fastest trains run between Boston, New York and Washington at speeds of up to about 150 miles an hour, is only now forming a high-speed rail department and searching for someone to head it.

”Amtrak would have been the default operator as recently as 18 months ago,” says Brooks Bentz, a partner at consulting firm Accenture PLC who specializes in transportation. Now, “these other entities are going to aggressively chase this.”

The Obama administration wants to put 13 new, high-speed rail links between cities in Florida, California, the Midwest, the Northeast and the Northwest. The Transportation Department is working with states to plan train-service upgrades and new rail lines for trains running at speeds of 150 to 220 miles an hour.

To qualify for the stimulus funding, overseas companies must hire American workers and make parts on American soil, a stipulation the Obama administration cites when asked if the global competition disadvantages U.S. companies.

“We need the experience from overseas, but the jobs are going to be developed here from the U.S,” says Joseph Szabo, head of the Federal Railroad Administration, which runs rail safety and assistance programs. “The opportunities are very ripe here for joint ventures.”

The program could be big enough for General Electric Co. of the U.S., Siemens AG of Germany and Bombardier Inc. of Canada each to win contracts. Few consortia have formed to bid on the projects, and partnership talks are in early stages. Most companies are waiting for more information from states before structuring bids.

Lorenzo Simonelli, president and CEO of GE Transportation, has said his company is “ready to compete” for projects involving “higher speed” rail for trains up to 124 mph and—thanks to a partnership with China"s Ministry of Railways—"true high-speed” rail for trains up to 220 mph. The ministry is a leading developer of such high-speed trains in China. GE said a contract for the partnership could create 3,500 U.S. jobs.

“At least 80% of the content of any potential high-speed rail or signaling equipment would be manufactured in the U.S. or sourced from U.S. suppliers,” said GE spokesman Stephan Koller, who said final assembly would occur in the U.S.

Last week Amtrak wrote to the FRA, urging the agency to “recognize the value” of Amtrak"s intercity passenger rail network as a base for expanding high-speed rail. “The recent federal legislation has completely changed the playing field,” said Amtrak spokesman Steve Kulm. “We realize that introduces competition for Amtrak, and we believe we can compete.”

Amtrak is also looking abroad. Amtrak officials have met with several equipment manufacturers, operators and infrastructure owners based in Asia and Europe to discuss partnerships, says Mr. Kulm, who declined to elaborate. He says it has also entered agreements with several states to operate their rail service and help with project applications.

The Virginia Railway Express, which serves Northern Virginia, recently awarded Keolis Rail Services America, a subsidiary of the French national railway, a five-year $85 million contract to take over operations of its railway from Amtrak in coming weeks. The French company is also bidding to operate rail lines in Maryland and California.

Still, some U.S.-based rail experts say foreign firms may not find the bonanza they are hoping for if they try to bid on such U.S. high-speed rail projects without a partner.

The FRA"s Mr. Szabo expects a mix of competition, and said, “There"s clearly a role for Amtrak.”