Budd Company gets no US break in New York subway car battle
The Export-Import Bank will not participate in the Battle of the Subway Cars.
On Tuesday, Treasury Secretary Donald T. Regan ruled that the US-based Budd Company could not offer low-cost Eximbank financing in an effort to wrest a $633 million New York subway car contract away from Bombardier Inc., a Canadian company.
Budd said it needed the Exim credit to counter Bombardier's Canadian government-sponsored financing, which would cover 85 percent of the deal at an interest rate of 9.7 percent.
Secretary Regan, however, decided the issue was not so clear cut.
''I have concluded that Bombardier would be awarded the contract even if Budd were able to offer matching financing,'' he said at a press conference announcing his decision.
He did say the Canadian government's offer violated Organization for Economic Cooperation and Development rules on export credits. But he pointed out that the New York Metropolitan Transit Authority (MTA) was required by state law to consider what percentage of the new subway cars would be built in New York State. Budd offered to manufacture 12 percent of the new cars in-state; Bombardier offered a higher 16 to 20 percent.
Mr. Regan also said that Bombardier was offering a design highly compatible with cars already running on New York's labyrinthine subway and that the Canadian company has recently had a better record for on-time delivery than Budd. The MTA has recently ordered 316 commuter train cars from Budd and has expressed ''considerable concern'' about the wisdom of buying all its rolling stock from one supplier, the secretary pointed out.
His decision means the US government has refused one chance to enter a battle in whcih it is sometimes difficult to determine which company belongs to what country.
Budd is based in Troy, Mich., but is owned by the West German steelmaker Thyssen. Eighty percent of its subway cars would have been made in the United States. When originally wooing New York, it had offered a financing package composed partly of export credits from the governments of Brazil and Portugal, where portions of the cars would have been built.
Although Bombardier is a Canadian company, it has said the New York subway cars will be assembled in Barre, Vt. The US content of Bombardier's cars is estimated at 40 percent.
Budd still has a chance to obtain redress. It has asked the Commerce Department to rule whether Canada has violated the subsidy code of the General Agreement on Tariffs and Trade. If it has and Budd has suffered economic injury, Bombardier could be hit by countervailing duties.