Breaking News: Contract Talks Between Metro, AnsaldoBreda Break Off. Rail Car Contract Goes to Bid (Updated: 11/1 9:11 A.M.)

by Damien Newton on October 31, 2009

Oh, for the  love of...

After all that drama, the ongoing soap opera between AnsaldoBreda and Metro ends with a press release.  There's a lot more to say about this, but that will have to wait until Monday.  After the jump you can find statements from Mayor Villaraigosa and Metro release can be found after the jump.(update: AnsaldoBreda's statement can be found at the bottom of the page as well.)


MAYOR VILLARAIGOSA ISSUES STATEMENT ON THE EXPIRATION OF ANSALDOBREDA OPTION

LOS ANGELES  - Mayor Antonio Villaraigosa issued the following statement today on the expiration of the option for the Los Angeles Metropolitan Transportation Authority's purchase of rail cars from AnsaldoBreda:

"In these tough economic times, it was important to make every effort to bring good jobs to LA and simultaneously exercise due diligence to protect public funds in pursuing this contract.

Unfortunately after months of negotiations, at the last minute satisfactory financial guarantees were not provided and the deal was not signed.

We will continue to work to see that rail cars can be built in LA using local funds to reap the job and environmental benefits that a manufacturing plant can bring to the region."

METRO STATEMENT RE: UPDATE ON NEGOTIATIONS WITH

ITALIAN RAIL CAR MANUFACTURER FOR OPTION RAIL CARS

     Italian rail car manufacturer AnsaldoBreda S.p.A. has declined to sign a contract with Metro to exercise an option to provide 100 additional light rail cars to meet the agency’s operating needs for new rail lines in Los Angeles County. As a consequence, Metro will proceed with seeking industry bids on a new rail car procurement.

     Good faith negotiations between the two parties have gone on for more than a year. The Board of the L.A. County Metropolitan Transportation Authority had set a deadline of midnight Oct. 30 to reach agreement on exercising the rail car options. But within hours of the deadline last night, AnsaldoBreda S.p.A. required changes to the agreement that were inconsistent with the Board’s direction, including financial penalties for late deliveries. Considering AnsaldoBreda S.p.A. has been late in delivering its base order of 50 cars, Metro officials declined to accept this last minute change.

     Last week the agency’s Board of Directors gave AnsaldoBreda S.p.A. additional concessions including a guaranty financial cap and agreed to accept the company’s offer of two free rail cars because it couldn’t deliver rail cars within the weight limits specified in the contract.

      With half a dozen new rail projects expected to open in the next decade, thanks to the Measure R transportation sales tax, Metro needs more than 100 rail cars manufactured and accepted in time to operate those lines. To avoid losing valuable time while negotiations with AnsaldoBreda S.p.A. were ongoing, the Board directed Metro staff to simultaneously prepare for soliciting bids for new rail cars. Industry experts have been advising staff  in drafting the package. If all goes according to schedule, the transportation agency’s Board next spring will award a contract for new rail cars. AnsaldoBreda S.p.A. would be eligible to bid on this new contract along with manufacturers from around the world.

Metro-178

ANSALDOBREDA STATEMENT ON THE NEGOTIATION OF THE CONTRACT WITH THE LOS ANGELES COUNTY MTA FOR THE MANUFACTURING OF 100 LIGHT RAIL VEHICLES

AnsaldoBreda agreed to provide financial guarantees that included an Irrevocable Letter of Credit, a Performance Bond and a Parent Company Guarantee totaling a value well above that of the contract. However, AnsaldoBreda, in accordance with Company policy, required to restate the provision of the original contract, contemplating a cap on the liquidated damages. Therefore AnsaldoBreda proposed a solution which specified a cap for maximum delays and stated that if the threshold of the cap was ever reached, MTA could terminate the contract for reasons of default and avail itself of the above mentioned guarantees which would cover the total value of the contract.  Unfortunately, on this last point, despite multiple efforts to negotiate in good faith on both sides, no agreement was reached. AnsaldoBreda would like to thank Mr. Leahy and the staff of MTA for the trust extended to them and for the dedication demonstrated in trying to reach a positive conclusion.  Despite this turn of events, Los Angeles continues to represent a focal point for our strategy in America.