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MTA's rail-car contract falls apart at last minute, scuttling hundreds of jobs [Updated]

October 31, 2009 |  9:14 pm

A tentative and controversial deal to build 100 rail cars for Los Angeles County's transit system has fallen through -- taking with it plans to build a $70-million factory that would have created hundreds of local jobs.

Last-minute negotiations failed to result in a contract with AnsaldoBreda, an Italian manufacturer that is three years behind schedule on an existing contract to deliver 50 rail cars to the Los Angeles County Metropolitan Transportation Authority. Despite those delays -- and the delivery of cars that were 6,000 pounds heavier than specified -- AnsaldoBreda was positioned to win the new $300-million contract through an option with a deadline of Friday at midnight.

Just weeks ago, L.A. Mayor Antonio Villaraigosa had hailed the impending deal because the company said it would build the rail cars at a new Los Angeles factory. Villaraigosa had cited a study estimating that the plant would deliver $368 million in economic activity, including 650 factory jobs and close to 1,000 union construction jobs to build the facility. The Los Angeles County Federation of Labor had lobbied the MTA board in favor of the contract.

Today, the mayor expressed disappointment. "In these tough economic times, it was important to make every effort to bring good jobs to L.A. and simultaneously exercise due diligence to protect public funds in pursuing this contract,” Villaraigosa said in a statement. “Unfortunately after months of negotiations, at the last minute, satisfactory financial guarantees were not provided and the deal was not signed.”

Hours before the deadline, the company raised new issues -- including a cap on daily penalties for delivering rail cars behind schedule, said MTA spokesman Marc Littman. Transit-agency negotiators declined to make additional concessions and the time period to reach an agreement expired.

The deal’s disintegration has ramifications beyond the future work, said MTA board member Richard Katz, a Villaraigosa appointee. He cited an agreement under which AnsaldoBreda was going to provide two free rail cars, which sell for $3 million each, to make up for building the vehicles heavier than specified. The heavier cars forced the MTA to reinforce some bridges.

In tones that reflected the soured relations between the company and local officials, Katz called AnsaldoBreda “unprofessional and so unbusinesslike,” and said the company's inability to perform under its existing contract could result in litigation.

Officials from AnsaldoBreda could not be reached, but the company has defended its work and says it can point to the successful delivery of rail cars in other cities.

[Updated at 10:26 p.m.: In a statement, AnsaldoBreda president and CEO Giancarlo Fantappié said that his company had provided sufficient financial safeguards for MTA and that he regretted a deal could not be reached "despite multiple efforts to negotiate in good faith on both sides." He added: "Despite this turn of events, Los Angeles continues to represent a focal point for our strategy in America." AnsaldoBreda is eligible to take part in new bidding to build the rail cars.]

The MTA intends to rebid the work quickly and hopes to sign a contract that will result in local jobs, Katz said.

The effort to exercise the option with AnsaldoBreda has long had critics, including county Supervisor Mike Antonovich, who in a statement called the latest development “a victory for taxpayers.”

The company “failed once again to deliver on a promise made to the people of Los Angeles County," said Antonovich, who also sits on the MTA board. “Los Angeles city insiders and special interests attempted to ram through a substandard outfit, creating costly delays in the MTA's ability to seek a legitimate firm to build rail cars.”

-- Howard Blume