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Winnipeg Free Press - PRINT EDITION

New Flyer branching out to mid-sized buses

By: Martin Cash

Posted: 05/8/2012 1:00 AM | Comments: 0

SUBMITTED PHOTO New Flyer will produce mid-sized buses in a deal with Britain�s leading bus maker.

NEW Flyer Industries is joining forces with British bus maker Alexander Dennis Ltd. to produce a smaller, medium-duty bus for the North American market.

The long-term joint venture between North America's largest heavy bus manufacturer and the United Kingdom's largest bus maker will provide some much-needed diversification for Winnipeg-based New Flyer.

New Flyer will be responsible for sales, marketing, manufacturing and aftermarket support. Alexander Dennis has already sold 16,000 of the medium-duty so-called midi buses in the United Kingdom, Hong Kong, New Zealand and Australia. It will do the engineering, test and prototype-development activities.

New Flyer CEO Paul Soubry said the first demonstration model -- converting the steering from right to left as well as satisfying all North American safety regulations -- should be done by the end of the year, with the first deliveries some time in 2013.

While New Flyer has become the dominant player in the North American urban bus business, it's a market that can experience troughs -- as is currently the case -- when public-sector financing slows down.

"When our market is good it's very good," Soubry said in an interview from Long Beach, Calif., site of the American Public Transportation Association's annual Bus & Paratransit Conference. "But some might say we are a one-trick pony. This will give us some excellent diversification."

The medium-duty, low-floor midi bus will be marketed to both public transit and private operators. Initially it will include clean diesel propulsion with options ranging from electric hybrid and compressed natural gas to follow.

"Transit operators are faced with unprecedented pressure to operate and adapt their fleets in today's tough economic conditions," Soubry said in a statement. "With the escalating costs of fuel and maintenance, there are many of our transit customers' routes that do not require a full-sized heavy-duty bus with a 12-year design life. Customers on both sides of the border have asked us to provide a bus that meets their needs for this application."

The midi bus will come in 30-foot and 35-foot models with a 10-year operational life, compared to New Flyer's standard 40-foot and 60-foot models with a 12-year lifespan.

New Flyer estimates the market for this type of product could be approximately 1,000 buses on an annual basis. But that's not to say New Flyer will win 100 per cent of that market.

Plenty of other manufacturers have produced models similar in size to the proposed New Flyer/Alexander Dennis model, but many of them have not done well in the market.

Soubry said that was because customers complained of inadequate after-market parts and service support. New Flyer has concentrated on expanding its aftermarket presence and Soubry said he believes New Flyer's success in that aspect of the business will give it a competitive edge.

In a brief research note on Monday, Jason Granger, an analyst with BMO Capital Markets, characterized the development as having a positive impact for New Flyer.

"While we expect it to take time for this program to ramp, it should provide growth and diversification opportunities," Granger said. "At the same time, this deal should require minimal investment initially (perhaps in demo buses, tooling for a new production line), while allowing New Flyer to better utilize its production facilities."

Soubry said he would not talk about what sort of investment both parties will make in the joint venture. "But from a manufacturing perspective, I'm not worried about capacity."

Alexander Dennis does have a sales and marketing function in North America, but only distributed a double-decker bus.

Soubry said he's confident New Flyer can utilize its current distribution network as well as relationships it has with dealers who sell into the private sector to market the new midi model.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 8, 2012 B4

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