Made-in-Moncton Railcars?

Editor’s Note: This is Part III in a series of articles on rail safety even if it doesn’t seem like it. Here are Part I and Part II.

 

On 1 May 2015, Canada and the United States announced “a harmonized set of tank-car regulations” that aimed, as the Financial Post reported, “to make transporting crude by rail a safer endeavour.”

Then-Transport Minister Lisa Raitt, speaking during a joint press conference with then-US Transportation Secretary Anthony Foxx, said:

I know that the safety measures we have outlined today will not be easy and quite frankly they will not be cheap. But the financial losses and the costs of cleaning up after events like Lac-Mégantic would, in the long run, be far more burdensome.

I like to think Raitt also said something about the human costs of such “events,” like the deaths of 47 people, but if she did, the FP didn’t feel it merited repeating.

The new regulations agreed by the US Federal Railway Administration and Transport Canada required that all unpressurized tank cars built after 1 October 2015 meet the new DOT-117 specifications, namely, that “the tank shells be constructed out of 9⁄16 in (14.2875 mm) steel, with 11-gauge (1⁄8 in or 3.175 mm) sheet metal jackets, 1⁄2 in (12.7 mm) thick head shields on the ends of the tanks, and improved valves over previous designs.”

As Wikipedia notes, the agencies “also imposed a retrofit schedule to bring in-service cars up to DOT-117 standards.” And, “depending on the volatility of the cargo carried”:

…DOT-111 and CPC-1232 cars would be banned in certain services in a series of cut-off dates, with all such cars out of service or rebuilt by May 1, 2025.

A quick reminder: CPC-1232 tank cars were introduced in 2011 as a “voluntary good faith effort” by the Association of American Railroads (AAR). The US Bureau of Transportation Statistics notes that the “industry-sponsored” specifications of these cars included:

…a pressure relief valve, more extensive top fittings than on the DOT-111 rail tank cars, and a full height or half-height head shield. The shell of non-jacketed tank cars must be ½ inch thick, and for jacketed tank cars must be 7/16 inch thick.

But in its investigation of the Lac-Mégantic disaster, the TSB noted that the damage suffered by the CPC-1232 cars involved in the crash:

…clearly indicates that product release could have been reduced had the tank car shells and heads been more impact-resistant. Design improvements to these types of cars are needed to mitigate the risks of a dangerous goods release and the consequences witnessed in the Lac-Mégantic accident.

The Financial Post said the “challenge” would be building the new tank cars “fast enough to meet demand.”

The challenge, for me, has been getting my head around the ins and out of these new regulations, which has proved even more complicated than I thought it would be, and I have to do some more reading before I can write the actual next part of this series, so for this week, we’re going to leave the main track for a siding in New Brunswick.

 

ARS, IRSI

In September 2016, Radio-Canada broke the news that Miami-based ARS [American Railway Supply] would begin manufacturing railcars—including grain hoppers, box cars and the new TC-117 tank cars—in Moncton, via a subsidiary called ARS Rolling Stock Canada. ARS said it would create 200 jobs in the first phase of production and hoped to increase that to 450 after three years and more than 700 after five years.

ARS Canada Rolling Stock CEO Arturo Contreras told Radio-Canada the new operation would occupy a site in the city’s Hump Yard most recently owned by the now defunct Industrial Rail Services Inc (IRSI). The facility was originally the CN Moncton Diesel Shop. Built as a running repair shop, it was converted by IRSI into a “heavy overhaul” facility. ARS Canada Rolling Stock acquired IRSI’s assets after IRSI went bankrupt in 2014.

The New Brunswick government lost $20 million in loans and loan guarantees when IRSI failed, a point made by analyst Robert H Cantwell in Railway Age in response to ARS’s Moncton announcement. The piece is helpful in explaining the cyclical nature of the railcar business but I think Cantwell’s passing reference to IRIS going “belly-up” may have done the company a disservice.

I went down a real rabbit hole on this one, thanks to a 2013 report by consultant Greg Gormick called “Revitalizing New Brunswick’s Rail Sector.” Gormick was commissioned by the municipalities of Moncton, Dieppe, Bathurst, Miramichi and Riverview along with Enterprise Greater Moncton to examine three issues threatening the province’s rail sector at that time, namely, CN’s threat to abandon the Newcastle Subdivision, VIA Rail’s decision to reduce the frequency of the Montreal-Moncton-Halifax Ocean from six times weekly to three and the bankruptcy of IRSI, which was triggered by VIA Rail’s decision to cancel two contracts with the company worth over $100 million combined.

In the end, the Newcastle Subdivision was saved (thanks to a large injection of funding from the provincial government) but the Ocean was never returned to daily service and IRSI, as noted already, went bankrupt.

The full story of the VIA Rail contracts is too complicated to get into here, but it’s worth noting that while “bad blood” between the two companies and some poor decision-making on both sides seem to have played a significant role in the debacle, at the root of the matter was federal government under-funding of VIA. (The section of the report dealing specifically with IRSI is excerpted here and is an interesting read if you, like me, are a train nerd.)

To get a sense of the work IRSI did, here are before and after pictures of the interior of a VIA Rail car, which I’m including because a) apparently the material to be used on the seat covers became a huge sticking point between VIA and IRSI and b) that shade of burgundy in the original design brought back such strong memories of traveling to Montreal on the train I almost tried to get up and go to the bar car. (I realize that, in classic before-and-after style, the lighting in the after shot is far better than that in the before shot, but I still think the redesign is an improvement.)

I also have to mention that retired Amtrak President David Gunn, who advised on the report, was “living in Cape Breton” at that time because, local angle.

 

Chinese partners

Okay, back to ARS Rolling Stock Canada’s plans to produce TC-117s in Moncton.

ARS Canada’s Contreras told Rad-Can the TC-117 was “a more complex rail car to build,” so the company would be relying on its partner, China’s CRRC (China Railway Rolling Stock Corporation), with which it had established a joint-venture. This was 2016, and Chinese partnerships, you’ll recall, were all the rage—Albert Barbusci, the Port of Sydney’s “developer,” had announced his own partnership with the Chinese Communications Construction Company or CCCC the previous December.

CRRC, a state-owned Chinese enterprise that trades publicly, is the world’s largest producer of rolling stock in terms of revenue and employs 163,000 people. In 2017, it issued its own press release about the Moncton project, stating that:

The plant was jointly set up by Sichuan-based CRRC Meishan Co., Ltd, a freight train maker under CRRC, Moncton-based ARS Canada Rolling Stock Inc, a local railcar manufacturer and service supplier, and a CRRC subsidiary in Hong Kong. They gained approval from the Canadian government in June 2016.

The problem here is that “Moncton-based ARS Canada Rolling Stock Inc” is not actually “a local railcar manufacturer.” It’s a subsidiary of Miami-based ARS, which describes its business, in a Spanish-language brochure I found online, as railcar leasing, fleet management and maintenance of cargo fleets throughout North America and, in fact, in outsources these last two functions to other companies. (I consulted a Spanish speaker about the contents of the brochure, which I’ll attach below).

The brochure states clearly that ARS Rolling Stock Canada owns the facility in New Brunswick where CRRC will do the actual work of manufacturing railcars, more specifically, a new type of grain hopper (the brochure makes no mention of TC-117s or box cars):

But the manufacturing aspect of the business is given very short shrift in the brochure, which focuses more on ARS’ leasing business.

ARS_BROCHURE

 

Enter ACOA

Rad-Can reported in that 2016 story that the province of New Brunswick had not responded to questions about possible government funding for the ARS plant and the project seems to have vanished from the headlines at that point. But five years later, in 2021, came a press release from ACOA announcing a $3 million repayable contribution to ARS to “purchase equipment and retrofit existing buildings to accommodate a railcar manufacturing operation in Moncton.”

Expectations for the facility had been scaled back rather dramatically: ARS now claimed it would create 83 jobs in its first year of operation increasing to 100 in its second.

Interestingly, there was no mention of ARS’ Chinese partner in the ACOA announcement. As you may recall, Albert Barbusci lost his Chinese partner in 2019, a state of affairs he blamed on two diplomatic disputes between China and Canada—the federal government’s decision to block CCCC’s purchase of a Canadian construction company and the arrest of Huawei CEO Meng Wanzhou in Vancouver in December 2018—but ARS and ACOA just leave CRRC out of the announcement altogether, leaving the reader to wonder whether the Chinese company remains in the picture or not, although how ARS could manufacture railcars without CRRC is an open question.

This 2021 funding announcement caught the attention of the train spotters at Railway Age. One in particular, whom I’ve quoted above, Robert H. Cantwell, seemed particularly exercised about CRRC moving into the North American railcar market. I’m quoting this 2021 piece for its facts, not its tone, which I find pretty hypocritical (how an American can write a sentence like “[China] views our markets as wide open and available for their growth” with a straight face mystifies me).

But Cantwell does offer some interesting information about CRRC’s existing operations in the US, where it won a number of contracts to produce metro cars. CRRC  built transit car assembly plants in Chicago, Boston and Los Angeles, writes Cantwell, but:

…[CRRC’s] production strategy differed significantly from incumbent transit car builders who were vertically integrated and employed thousands of U.S. workers. CRRC, on the other hand, imports the carbody shells and other major components from China, and performs only final assembly in its North American factories, thereby employing mostly Chinese labor and only a couple hundred in North America—all the while conforming, albeit just barely, to “Buy America” requirements.

(CRRC also won contracts to supply 44 railcars to Montreal’s transit system, the first of which were delivered last year.)

This is pertinent to New Brunswick because, presumably, ACOA’s intent in funding a railcar manufacturing facility is to ensure good jobs for locals. But I don’t want to get too carried away worrying about the fact that the company involved is Chinese, because no country has a monopoly on promising jobs on return for government assistance then failing to deliver.

 

Past performance

Cantwell references a previous attempt by CRRC to establish a foothold in the North American railcar (as distinct from transit car) market which is worth recounting.

In 2014, a Massachusetts-based startup called Vertex Rail Technologies took over a former Terex crane manufacturing facility in Wilmington, North Carolina, promising to create 1,342 jobs (average salary: USD$40,000) building railcars. As the Wilmington Business Journal reported, Terex CEO Donald Croteau announced the company’s arrival in a joint press conference with then-Gov. Pat McCrory and state and local officials:

The company was going to be at the forefront of supplying a massive demand for new tank cars that would be necessitated by new government safety regulations, officials said at the time.

In months after the news conference, the fanfare would seem unusual and possibly premature. After a start that included a jumpy rail car market, lawsuits and layoffs, Vertex Railcar Corp. is now a joint venture between Vertex Rail Technologies and Chinese investors and reportedly has about 100 employees working to fill rail car orders at the Raleigh Street plant.

The “Chinese investors” were China’s CSR Corp. Ltd. (China Southern), a rolling stock company, which owned 22%; and Hong Kong-based Majestic Legend Holdings, which owned 45%. By the end of 2015, the company had changed its name to Vertex Railcar Corp and, according to Railway Age, “ownership had shifted to 50% Chinese, as CSR merged with China CNR Corp. Ltd. (China Northern) to become the juggernaut CRRC.”

The appeal of the project to the people of Wilmington sounds heart-breakingly familiar:

From the start, the community seized on Croteau’s plans, which were targeting an area that had gone at least half a century with no major manufacturing job announcements of similar scope. Added to that was a sense that Wilmington might be gaining a little something back of its previous railroad culture after traumatically losing the Atlantic Coast Line Railroad’s headquarters in 1960.

This means CRRC was establishing its North Carolina joint-venture at the same time it was negotiating its deal with ARS in Moncton, another city with a “railroad culture,” or as ACOA put it, tugging on the same heart strings,  “a rich rail history”:

ARS Canada Rolling Stock Inc railcar 🚃 #manufacturing operation will create 83 jobs in @CityofMoncton. New opportunities and a new chapter in city’s rich rail history 🛤️
👉 https://t.co/TPRostlCTj pic.twitter.com/rCFLI3vsfw

— ACOA Canada (@ACOACanada) February 9, 2021

Although Vertex delivered its first 30 railcars in 2015, the operation did not run smoothly. As the Wilmington Business Journal reported in 2018:

Vertex’s troubles go back to its beginnings, with ongoing legal disputes and questions about why, as the years went by, the 1,342 jobs that were promised in 2014 when Vertex first set up shop in Wilmington did not materialize.

Vertex reached the end of its line in 2018.

 

Status report

Curious to know how things were going at the ARS Rolling Stock Canada plant in Moncton, I looked it up online and found a home page featuring drone footage of the exterior of the facility and a pitch to potential clients that reads:

At ARS, we offer integral railcar services for maintenance and repair, including blasting and painting, and new manufacturing. Our facilities are located in Moncton, which also enables us to offer car storage and transloading for effortless access to open-sea waters.

Compare that to the description of the services to be offered in the facility according to the ACOA funding announcement:

ARS will operate a railcar manufacturing, maintenance and repurposing facility in Moncton…

Here’s the photo used to illustrate ARS Rolling Stock Canada’s manufacturing facilities. I’m no communications person, but I have to think that a photo of some actual manufacturing—if you had such a photo—would be more effective:

I asked ACOA about the status of the project and spokesperson Sharon Stanford-Rutter emailed me this response:

In February 2021, ACOA announced a $3 million repayable contribution for ARS Canada Rolling Stock Inc. to purchase equipment and retrofit existing buildings to accommodate a railcar manufacturing operation in Moncton. The project with ARS Canada Rolling Stock Inc. to build the railcar manufacturing plant is still ongoing.

Stanford-Rutter suggested I contact ARS Canada for additional information and I attempted to do so, using the contact form on their website, but as I write, I have yet to receive a response.

Interestingly, when I plugged the phrase “ARS Rolling Stock Canada” into Twitter I turned up precisely three results, two of which were ACOA’s funding announcement (in French and English) and one of which was reporter David Aiken’s comment:

.@melaniejoly , @ACOACanada , Petitpas Taylor , ARS Canada Rolling Stock Inc to buy equipment , Moncton , NB , $3 000 000 , NB , #Ottawaspends LPC Riding Petitpas TaylorLPC@GinettePT

— David Akin (@ottawaspends) February 9, 2021

And that’s all I’ve got for you this week, other than this: I would love for this story to be true. As a fan of trains—and Moncton, where I learned to sell train tickets back in the day—I would like to think workers there were making good money building railcars—I just couldn’t find any evidence of it.

But I would happily be corrected.