One year after it acquired North American Bus Industries, New Flyer Industries has announced it will convert NABI's Alabama plant into producing the Winnipeg company's signature Xcelsior bus platform.
The company said it will spend about $20 million in direct operating costs and capital expenditures in the transition scheduled to be completed midway through 2015.
Paul Soubry, New Flyer CEO, said, "We analyzed the (NABI) product.... It needed investment to upgrade and refresh just as we were doing (at New Flyer). That was an investment we did not feel was prudent. Instead, we felt we could optimize the whole company based on one standard platform ... and then customize for different customers."
The company will deliver on previous order commitments and provide support for NABI products if the buses are in service.
There are about 7,500 NABI buses on North American roads compared with 25,000 of New Flyer's product, so the economies of scale are clearly in favour of the Xcelsior.
Soubry said it was not likely there would be much alteration in the workforce that consists of about 1,300 in Winnipeg and another 2,000 spread out between two manufacturing locations in Minnesota, the old NABI plant in Alabama and a few parts distribution centres in the U.S.
New Flyer had been making about 36 buses per week and about 12 at NABI. Soubry said those numbers won't change.
In a report to investors Tuesday, Bert Powell, an analyst with BMO Capital Markets said, "A streamlined product offering will simplify the production process and offer better scale for purchasing and management of after-market support in our view. We believe this is a natural progression after the NABI acquisition and the market has been looking for clarity around opportunities to extract the most value out of the combined entities."
While New Flyer integrates the NABI plant into its Xcelsior platform, the company continues to move ahead in the development of its all-electric bus. The first model is being tested in Winnipeg and two were shipped to Chicago this week.
Soubry said the development of the electric bus will be key to the company's future, and he said, the company is mindful of a handful of electric bus-makers entering the market.
"We fundamentally believe we will migrate a large portion of what we build to all-electric," Soubry said. "At the end of the day, we have to keep moving. We can't sit still, the competitive dynamics are real."
In addition to the development of the electric bus, the company just signed on with the U.S, and Canadian distributors of the MiDi bus -- New Flyer's medium-sized, low-floor bus -- that's now in production in St Cloud, Minn.