The Chinese state-owned company offered transit officials a bargain, but time has proven that it came at a big cost.
The Boston Globe reported over the weekend on the mounting issues facing the new line of Red and Orange Line subway cars being built by Chinese-state owned company CRRC for the Massachusetts Bay Transportation Authority (MBTA).
The MBTA announced earlier this month that the delivery of the 400+ rail cars for the two lines would be a year late, with the last set of trains now set to be delivered in late 2024. The Globe’s investigation highlights a myriad of reasons why, from missing supplies and parts sent to the wrong worksite to installation and vehicle testing delays to unfinished cars stalling on the assembly line.
It gets worse:
“…two full train sets had to be taken out of service to diagnose a loud rubbing noise near the carriages. Moreover, there was a problem with the first set of replacement parts that further set the fix back, an ‘unacceptable’ development that fuming Massachusetts Bay Transportation Authority officials said was an ‘example of CRRC’s poor-quality management.’”
All of this has led to the project is falling significantly behind schedule.
In January, CRRC pledged to deliver four new Orange Line rail cars per month and four Red Line cars per month by September, the Globe reported. Since June, MBTA has received just two cars a month for the Orange line (although it didn’t get any in September) and still hasn’t received anything for the Red Line. The first Red Line train is now expected to hit the rails by the end of the year.
This is probably a good time to take a step back to reflect on how CRRC wound up building these rail cars – and why the problems in Boston offer a huge lesson for future government projects (and not just in transit rail).
We’ve written a lot about CRRC (full name: China Railway Rolling Stock Corporation) over the past two years. CRRC is a Chinese state-owned entity that maintains close ties to China’s authoritarian government, using its role as an international company to gather new technology and hand it over to China’s government and military.
Experts long have worried about how China’s regime could use CRRC to exploit U.S. transit systems and even potentially directly spy on Americans.
CRRC poses such a significant national security threat, in fact, that Congress passed bipartisan legislation in 2019 to ban any Chinese state-owned, controlled or subsidized company from receiving federal money to build transit rail. But the legislation included a two-year implementation delay, and CRRC continues to work on projects that were awarded before the law went into effect.
While much of the attention has been focused on national security, CRRC also represents a direct threat to U.S. economic security. China has made no secret of the fact that it is aiming to use “state champions” like CRRC to dominate global industries.
CRRC significantly underbids on contracts for transit rail systems. The goal isn’t to make money, but to win enough contracts that competitors go out of business, eventually creating a nice little global monopoly for a company that’s effectively an arm of the Chinese state.
When CRRC won a contract to build new rail cars for Philadelphia’s SEPTA system, for example, it outbid its next closest competitor by $34 million. CRRC’s bid was $47.2 million lower than Hyundai Rotem, a South Korean company that even had a factory in Philly.
“I cannot grasp how they are able to do it at that cost,” a Hyundai Rotem spokesperson said at the time.
The same thing happened in 2014, when CRRC “significantly underbid” rival firms to nab the contract to build the new MBTA rail cars. And this isn’t limited to subway systems.
Indeed, we’ve seen the same sort of thing happening with electric vehicle maker Build Your Dreams (BYD), another company with worrisome ties to China’s government. And Chinese state-owned companies have outbid rivals for a slew of other types of government contracts, like in 2004 for the steel used to build the Bay Bridge in California.
You may remember that boondoggle. Citing lower costs, then-Gov. Arnold Schwarzenegger opted to go with a bid from a Chinese company to build the steel for the new bridge. But the project was a total disaster, plagued by delays and safety concerns. It ended up going way over budget and was completed years late. The Sacramento Bee even maintains a whole special page on its website dedicated to the project’s mismanagement.
Likewise, electric buses build by BYD also have had performance issues and even posed serious safety concerns. Buses built for the city of Albuquerque were so bad that the city eventually canceled the deal entirely.
Which brings us back to Boston, where the new CRRC-built rail cars continue to face similar delays and safety issues.
A CRRC spokesperson told the Globe that many of the delays can be attributed to the COVID-19 pandemic, including supply chain issues. But the Globe makes clear that while some of that may be happening, the problems began well before the coronavirus took hold.
“CRRC met just half its production target for 2019. And in June, CRRC acknowledged to the MBTA that it took an average of nine months to complete a pair of subway cars — more than twice as long as its current goal, according to the records,” the Globe reported. “MBTA officials were so disappointed with the work that, in January, they said ‘their confidence in CRRC has been reduced due to past failures,’ according to the minutes of meetings between officials and the contractor.”
CRRC has faced similar issues on other projects, even as far away as Melborne, Australia. Part of the problem there is that so much of the work had been offshored to China that the project has run into major testing issues.
While CRRC maintains an assembly plant outside Boston, much of the rail car construction happens in China – and supply chain and communication issues with the parent factory there also has contributed to delays, the Globe noted.
The myriad of issues facing the new CRRC-built rail cars in Boston is a reminder that while China’s state-owned companies may initially offer a bargain, there is a cost.
There immense national and economic security risks to working with a company backed by China’s regime, and these projects often end up with major issues, ultimately leading to more spending and taking more time to complete.