Boise firm rides the commuter fast track

The growing reliance on rail travel by workers to get to their jobs each day is paying big dividends for a Boise company. MotivePower Inc., which builds and overhauls locomotives, recently completed the first of 27 locomotives it is building for the Chicago Metra, the nation´s second-largest commuter railroad.

Ken Dey
The Idaho Statesman

The locomotives are part of an $80 million contract the company received in April, 2001.

Officially known as the Northeast Illinois Regional Commuter Railroad Corp. (NIRC), Metra provides commuter rail service between the downtown Chicago business district and 224 stations in northeastern Illinois communities over 12 routes totaling approximately 500 miles of service territory. Metra operates 700 weekday trains, providing 300,000 passenger trips.

The contract is one of the largest commuter locomotive contracts in MotivePower´s history, a history that began in 1972 as a division of Boise-based Morrison Knudsen.

Today, MotivePower is a subsidiary of Wabtech Corp, a Pennsylvania-based firm that has a group of subsidiary companies that provide services to the nation´s rail industry.

And while its roots are in the freight railroad industry, MotivePower is becoming one of the leading suppliers of new and overhauled locomotives for today´s growing commuter railroad industry.

The new brilliant silver and blue, 296,000-pound Metra locomotives are designed, engineered and built from the ground up at the company´s East Boise production facilities.

Every two weeks, a new bullet-nosed Metra locomotive will roll off the assembly line, bound for Chicago. MotivePower should complete delivery of all 27 locomotives by the first quarter of 2004.

Weathering the storm

In 2000, only 7 percent of the company´s revenues came from commuter contracts, but that´s increased dramatically in the past two years. In 2002, 66 percent of the company´s $56 million in revenue came from commuter contracts. This year, company leaders expect 80 percent of its revenue to come from commuter contracts.

While other manufacturing companies have suffered in the tough economy, Motive Power has been able to move ahead, thanks in part to the expansion of the nation´s commuter railroads.

The Boise company has been able to pick up the slack in the declining freight railroad industry by putting more emphasis on building and overhauling commuter railroads.

“We´ve weathered the storm rather well,” said Mark Warner, vice president and general manager of MotivePower.

Warner said the business has always been “lumpy” and varies greatly, depending on the spending habits of companies in the freight and commuter rail industries. Company revenues typically fluctuate between $60 million and $120 million a year.

Warner said the contract with Metra gave the company a big boost.

Since last spring, the company has added nearly 100 employees. The company now employs 325 people at its Boise location and plans to add an additional 25 workers this quarter.

Motive Power´s Metra win came after the company beat out two of the top locomotive manufacturers, General Electric and General Motors, that also were competing for the contract.

Warner said being small actually was an advantage for the company in winning the bid from Chicago.

“Those companies don´t have the engineering competency that we have,” Warner said. “This allows us to capture a niche market, where we can produce a small volume and customized to the customer´s demands.”

The company is so flexible to customer requirements that it was even able to complete a complicated paint job for the Metra locomotives.

Designers at MotivePower initially came up with the paint design for the locomotive, which was blue with orange striping. But when Metra officials were shown the pictures, shadows made it look like the front of the locomotive was silver that blended into the blue.

Warner said the Metra officials said they like the silver blending into blue idea, so painters at MotivePower came up with a template that allowed them to blend the paints.

Warner said a bigger company might not have been flexible enough to make that work.

Praise from Metra

Metra´s decision to award the contract to MotivePower was the first time the railroad had used a different manufacturer for its locomotives.

Prior to the MotivePower contract, General Motors supplied Metra´s locomotives, according to Rich Vadnal, Metra´s program manager for purchases.

Vadnal said MotivePower put together a very competitive package and Metra was very impressed with the company´s technical proposal and the aggressive production schedule it offered. The design of the locomotive also was a big selling point for Metra.

“One of the things that really interested us about the MotivePower proposal was the look of the locomotive: It had a sleek-looking concept,” Vadnal said, adding that the company is looking forward to receiving the first locomotive.

The commuter rail market is expected to keep growing.

Vadnal said that in Chicago they´re continuing to add routes and, until last year´s recession, ridership on the Metra was growing 2 to 3 percent each year.

“Our biggest limiting factor is finding parking (for commuters),” Vadnal said. “If we have parking, they will come.”

According to the American Public Transportation Association, Chicago isn´t the only city with growing rail use. More communities are choosing commuter rail as a way to ease traffic congestion and move people more efficiently.

More than 3 billion people use some form of rail service, and between 1990 and 2000, total ridership increased more than 18 percent.

During the same period, the number of commuter rail systems increased from 36 to 54. The association says an additional 46 new rail systems are planned or in development.

“It´s definitely a growing market, and a lot of systems are expanding,” said Amy Coggin, a spokeswoman for the association.

Coggin said most of the growth has come in the past decade, due in part to changes in federal policy that encourage and help fund new commuter rail lines and expand existing systems.

Throughout the nation, there are more than 4,000 miles of commuter rail lines, with nearly 3,000 more miles in the planning stages, Coggin said.

Coggin said Las Vegas is the latest city to look at commuter lines.

The expected growth positions MotivePower to be a major player in the commuter locomotive market.

A company of firsts

When MotivePower was known as MK Rail, it expanded rapidly from being a company that just built rail cars and repaired locomotives to a company that started building new locomotives.

In the late 1980s and early ´90s, then-MK Chairman Bill Agee moved aggressively to build MK Rail into a transportation powerhouse by pouring millions of dollars into the division and buying up other companies.

Skeptics questioned his strategy, but Agee persevered.

In a 1993 interview with The Idaho Statesman, Agee proclaimed that “almost all the skeptics are coming around,” as he talked about the more than $1 billion in contracts the company had won for rail cars.

In 1994, MK Rail made a bold step by building its first locomotive, going up against industry giants General Motors and General Electric, which at the time were the only U.S. manufacturers of locomotives, with each controlling about 50 percent of the U.S. market.

MK Rail sought to carve out a new market niche by building switching locomotives fueled by liquefied natural gas, a first for the rail industry. That year, the company also built its first high-horsepower freight locomotive.

To raise more capital, MK Rail was spun off as a wholly owned subsidiary, with stock traded publicly. MK, however, owned 65 percent of the stock.

During that time, Agee prophesied the eventual growth of the commuter rail industry.

But MK Rail never quite lived up to Agee´s vision.

It ended up losing millions of dollars and was seen as part of Agee´s overall mishandling of the company that led to his dismissal and the company´s bankruptcy in 1996.

Today, Warner and others acknowledge their history with MK, but it´s an area they would rather not dwell on. Instead, they point to the new accomplishments under the MotivePower banner.

New accomplishments

The new Metra locomotive to roll out of Boise will be the first commuter locomotive to meet the industry´s newer and more stringent crash standards. It also will be the first to meet the Environmental Protection Agency´s new air-pollution standards.

Warner said the company´s rash of major contracts for commuter rail work in both new locomotives and overhaul projects has the company well positioned for growth.

“There are 18 commuter railroads in the U.S. and Canada, and they´re all expanding,” Warner said, adding that as many as 12 commuter railroad start-up companies have already been identified.

The stringent maintenance requirements for commuter locomotives guarantee a fair amount of return business for MotivePower.

Along with building locomotives, MotivePower also does minor and major overhauls. The percentage of new locomotives versus overhauls varies from year to year, but lately the company has been building more new locomotives. In 2002, only 16 percent of the company´s revenue came from overhauls, while 50 percent of the total revenue was from new commuter locomotives.

In December, the company won two contracts totaling $16 million to overhaul locomotives for the California Department of Transportation Division of Rail and the Massachusetts Bay Transportation Authority.

Customer satisfaction remains the company´s main goal to guarantee return work.

Warner said much of the credit for MotivePower´s success has to go to the dedication of its workers, who last year received one of the industry´s top certifications for quality of work.

“Their work ethic, blended with their competency, is something that a lot of companies find hard to match,” Warner said.

To offer story ideas or comments, contact Ken Dey
[email protected] or 377-6428

http://www.idahostatesman.com/Business/story.asp?ID=29789