Thursday was not a good day if you were the Italian company AnsaldoBreda making light rail cars for Metro. During a sometimes-testy hearing, LA officials ripped into the company, saying its work thus far was unsatisfactory and arguing that the firm made broad promises that it quickly broke.
Metro initially hired AnsaldoBreda to build 50 light rail cars, with two options to build 50 more cars each -- a deal worth more than $300 million. But the company came under fire because the first rail cars delivered by the company were 6,000 pounds overweight and about three years late.
"If it had been up to me I would have cut you lose five months ago," board member and Los Angeles County Supervisor Zev Yaroslavsky told a company official during the hearing. "... My problem is I don't trust your company. That's really what it comes down to."
Yaroslavsky also criticized a lobbying effort mounted by the company in hopes of retaining the contract to provide rail cars, calling it "frankly despicable." He also accused the firm of reneging on promises given to the board just two months ago.
Metro Board members agreed to continue negotiating with the firm for another two months before deciding whether to award it another $300 million contract.
The company, however, has strong backing from local labor unions, which said the firm's plans to build a rail-car manufacturing plant in Los Angeles would be a major boon for a city with a 12 percent unemployment rate.
In May, the Community Redevelopment Agency of the City of Los Angeles approved an agreement with AnsaldoBreda to build a 240,000-square-foot manufacturing plant on a 14-acre plot near downtown. The plant, which will only be built if Metro approves the contract for light rail cars, would anchor a "clean tech" corridor that Mayor Antonio Villaraigosa hopes to establish.
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The project would create 1,200 construction jobs and 600 to 800 permanent positions, according to the Los Angeles County Federation of Labor.
Federal regulations, however, prevent the board from considering that factor when weighing the merits of the contract, which must be awarded based on performance.
But the possibility of jobs still weighed heavily on the minds of board members, who agreed to postpone a vote on the contract until September so more negotiating could be done.
"Those jobs are needed in this town badly," said board member Richard Katz.
A company official also admitted to the board that mistakes had been made in the past, but, "We are going to rectify those mistakes."
Metro CEO Art Leahy told the board he is continuing to negotiate terms of the proposed contract, including sharply increased penalties for late delivery of rail cars. He noted that Metro has already withheld $10 million from the company due to penalties assessed for its performance on the first round of vehicles.
A particular sticking point to the board are the specifics of a possible $300 million letter of credit the company was offering to put up as a financial guarantee of performance. Details of that guarantee are expected to be hammered out over the next two months.
