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New Flyer in used-bus business

It's starting by marketing 226 trade-ins to Latin America and Asia

By: Murray McNeill

Posted: 08/14/2010 1:00 AM | Comments: 0 (including replies)

JANEK.LOWE@FREEPRESS.MB.CA Enlarge Image

A new bus rolls through the paint booth at New Flyer Industries. Some of its used-bus customers might want a new paint job on those vehicles, too.

New Flyer Industries hopes to use a recent groundbreaking deal with the City of Ottawa as a springboard into the international used-bus business.

New Flyer president and CEO Paul Soubry said Friday the Winnipeg-based transit-bus manufacturer has already begun marketing the 226 articulated buses it will be receiving as trade-ins in a $190-million deal announced earlier this year with the Ottawa transit authority (OC Transpo).

Among the markets it's targeting are Mexico, Latin America and Asia. If it finds a buyer in any of those places, it will not only be the first time New Flyer has sold a used bus, but the first time it has made a sale outside North America.

"We felt this was a fairly low-risk, low-cost opportunity for us to explore international markets," Soubry said of the Ottawa deal, which marked the first time New Flyer accepted trade-ins as part of a deal.

He said not only are used buses "a fraction" of the cost of new ones, which will appeal to budget-conscious buyers, but the Ottawa buses are only seven to nine years old instead of the usual 12 to 15 years.

Though it will be a couple more months before New Flyer begins taking possession of the buses, Soubry said it's already started marketing them on the Internet and contacting North American and international transit authorities and bus brokers.

Because the buses are still in good shape, Soubry said some customers will likely be willing to take them as is.

Others might want a new paint job or other improvements before they take them.

"Every customer is probably going to be different."

He said it's far too early to predict what the outcome of the experiment might be. "But we're really keen to learn if there is a business there. And so far, it (the response) has been fairly encouraging."

If the experiment is a success, Soubry said New Flyer will likely start taking more trade-ins and getting into the used-bus business in a bigger way.

Although New Flyer is targeting Mexico, Latin America and Asia now, Soubry said the beauty of the Internet is that it gives it access to potential buyers from all over the world.

"So could we get inquiries from somewhere else? Sure."

In a conference call with industry analysts earlier Friday, Soubry said New Flyer officials were pleased with the company's second-quarter financial results, which were released

Thursday.

They showed a big turnaround in

both bus orders (1,156 equivalent units compared to 151 in the first quarter) and earnings -- a profit of US$35.9 million compared to a loss of $13 million in the first quarter and a loss of $14.7 million in the second quarter of last year.

The improvement in net earnings was attributed mainly to one-time foreign-exchange and income-tax-related gains.

Soubry said the sale of 306 new buses to Ottawa was a big contributor to the jump in orders.

He said although competition is stiff in both the new-bus and after-market sides of the business, "market demand remains fairly robust."

With a current firm-orders backlog of 2,136 EUs, Soubry said New Flyer expects to maintain a production rate of 41 EU per week for the remainder of this year.

One EU represents one 30-foot, 35-foot or 40-foot heavy-duty transit bus. One 55-foot or 60-foot articulated bus represents two EUs.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 14, 2010 B4

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