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Yankee praise for Canuck firm

New Flyer benefits from U.S. stimulus

By: Martin Cash

19/03/2009 1:00 AM | Comments: 0

JOE BRYKSA / WINNIPEG FREE PRESS ARCHIVES Enlarge Image

U.S. Vice-President Joe Biden will trumpet New Flyer’s success in Minnesota today.

U.S. Vice-President Joe Biden chose New Flyer Industries' St. Cloud, Minn., plant for a town hall event today as part of his Middle Class Task Force, and it's not hard to understand why.

The St. Cloud plant has hired about 100 people over the last few months, an exceptional scenario in the battered blue-collar U.S. labour market. The company builds transit buses, something sorely needed across North America as ridership rises and with greater demand for environmentally friendly hybrids.

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Ridership in public transit reached its highest level in 52 years last year in the United States and indications are that it is up five per cent again this year.

Now that the US$800-billion stimulus package has been passed by Congress, New Flyer and the regional economy in Minnesota (not to mention Manitoba) will stand to benefit from the US$7 billion designated for public transit systems.

That's because New Flyer holds more than 40 per cent of the North American urban transit bus market and has a $4-billion order backlog.

That backlog, complete with contracts signed, specifications checked off and prices negotiated, is important because the stimulus money needs to be doled out quickly.

Virginia Miller, a spokeswoman for the American Public Transit Association, said, "We are very pleased with the $8.4 billion ($1.5 billion is for capital projects) and another $8 billion for high-speed rail corridors. It is money we didn't have before and it will go to great use."

The fact that New Flyer has orders queued up makes it ideal for this stimulus effort.

"What you will find with transit systems is that they have existing contracts with bus manufacturers and so it is just a matter of adding on to them. It makes it easy," she said.

Some might wonder why Biden would want to embrace the activities of a Canadian company.

For starters, that Canadian company employs about 650 people in St. Cloud and another 350 in Crookston, Minn. (New Flyer has 1,400 workers in Winnipeg, including all its design and marketing people.)

In a presentation to the U.S. House Committee on Transportation and Infrastructure in late January, John Maranucci, New Flyer's departing CEO, said the company sources 80 per cent of its materials from suppliers in 30 U.S. states.

(To comply with the Buy America regulations, 60 per cent of components must be made in the U.S. along with 100 per cent of final assembly for U.S. public transit authorities to receive U.S. funds for new buses.)

He said the stimulus investment in public transit is needed to trigger the purchasing of the back orders. Spending on new buses will generate an economic growth multiplier effect of six times the original investment with one job sustained or created with every $24,000 of incremental funding.

The U.S. economy has lost 2.2 million jobs in the last four months, so it is not surprising that the White House would not worry too much that a large U.S. employer is actually a Canadian company.

That's not to say that it is trying to pick winners. But there are few large manufacturers who have as commanding a hold on a market as New Flyer does. Maranucci said recently that over the last two years the company has a 55 per cent win rate based on volumes, up from 18 per cent in 2002.

New Flyer is a rare beast these days to experience so many elements that are working to its favour.

One wonders just how envious its manufacturing peers will be to hear that on Wednesday the company renegotiated $180 million in debt that was coming due this August.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition March 19, 2009 B4

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