Episode 45
Resolving the Bus Manufacturing Crisis: Challenges, Changes, and the Path Ahead
The bus manufacturing crisis has been looming for years as more and more OEMs dropped out. But the final straw was when Proterra filed for bankruptcy protection and REV Group said it was closing its ENC facility to focus on the Canadian market. In the blink of an eye the U.S. was down to two major bus manufacturers: GILLIG and New Flyer. This put the entire public transit industry into crisis mode. Delivery times for new buses went from 12-18 months to 18-24 months--and longer.
How did we get this point?
It's not an easy answer, but a combination of contract terms, the pandemic, supply chain issues, and the transition to zero-emissions buses all factored in. But this week Paul dives into it with former FTA Administrator and Managing Partner at Cardinal Infrastructure Sherry Little, along with Jennifer McNeill (Vice President of Public Sector Sales and Marketing) and Stephanie Laubenstein (Director of Sales and Business Development) from New Flyer.
They talk about all the causes and how the industry came together to find real, tangible solutions that will help the OEM bus industry get back on its feet and come back stronger for the future.
Coming up next week on Transit Unplugged we have Philip Gerhardt head of Transport for London's Head Bus Performance to talk with Paul about optimizing the over 650 bus routes across London that serve millions of riders each day.
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00:00 Resolving the Bus Manufacturing Crisis: Challenges, Changes, and the Path Ahead
00:05 Paul buying his first bus and an intro to the episode
03:09 Introduction and Guest Welcome
03:41 Current State of the Bus Manufacturing Industry
04:41 Challenges and Advocacy Efforts
06:59 Legislative and Policy Changes
11:09 Impact of the Pandemic on Bus Manufacturing
14:13 Recovery and Future Outlook
15:34 Customization and Standardization in Bus Manufacturing
25:45 Transition to Zero Emission Buses
31:21 Conclusion and Final Thoughts
34:48 Coming up next week on Transit Unplugged
Disclaimer: The views and opinions expressed in this program are those of the guests, and do not necessarily reflect the views or positions of Modaxo Inc., its affiliates or subsidiaries, or any entities they represent (“Modaxo”). This production belongs to Modaxo, and may contain information that may be subject to trademark, copyright, or other intellectual property rights and restrictions. This production provides general information, and should not be relied on as legal advice or opinion. Modaxo specifically disclaims all warranties, express or implied, and will not be liable for any losses, claims, or damages arising from the use of this presentation, from any material contained in it, or from any action or decision taken in response to it.
Transcript
Hi, I'm Paul Comfort and this is Transit Unplugged.
Speaker:You know, I remember way back when I first started my career in Queen
Speaker:Anne's County as the county's first transportation coordinator in my
Speaker:early 20s, right out of college.
Speaker:I was so excited to buy my first bus for the agency and I
Speaker:remember it was And El Dorado.
Speaker:7.
Speaker:3 liter diesel.
Speaker:I loved that bus.
Speaker:I used to drive it.
Speaker:I actually got my CDL, my commercial driver's license, driving that bus.
Speaker:Because that's always been part of kind of my history.
Speaker:One of these historical career.
Speaker:Over 30 years ago, getting that bus.
Speaker:I remember the Secretary of Transportation coming over and delivering the keys.
Speaker:to me.
Speaker:I put a picture of it recently up on LinkedIn about that.
Speaker:But now, over 30 years later, unfortunately, We've had some issues
Speaker:in the bus manufacturing business.
Speaker:The REV Group, which was the owner of El Dorado, in January of this year
Speaker:announced that it would close its ENC facility by the end of this year and exit
Speaker:the transit bus manufacturing business, and that was in the wake of Proterra.
Speaker:our leading electric bus manufacturer filing for bankruptcy the previous
Speaker:year, citing the costs and logistics of making small orders from many transit
Speaker:districts as a factor in its bankruptcy.
Speaker:And just prior to that, in June of last year, NovaBus announced
Speaker:that it would leave the U.S.
Speaker:market by 2025 and focus on its Canadian facilities.
Speaker:Do you realize that at least 10 bus manufacturers have left the U.S.
Speaker:market since 2003?
Speaker:And now we have these four remaining, but Proterra having been purchased by Phoenix
Speaker:Motor Cars, trying to bring that back.
Speaker:Volvo Group bought its battery businesses, and Nova on the way out.
Speaker:Two primary large manufacturers left, with Gillick and New Flyer.
Speaker:And I wanted to find out what was going on.
Speaker:I mean, you, you know what's happening.
Speaker:You've seen what's happening in the industry.
Speaker:People I've talked to over and over on this podcast tell me, that the, Buy
Speaker:America requirements, where we can't buy buses from overseas, although some
Speaker:agencies have now requested a Buy America waiver of FTA, they have yet to hear from
Speaker:that, but there's been issues continually, plaguing this industry, and so much so
Speaker:that the White House held a forum in February of this year to kind of pull
Speaker:everybody together, I think 25 CEOs of transit agencies went there, I talked to
Speaker:a number of them afterwards who filled me in on what happened, and then APTA
Speaker:came out with some, recommendations.
Speaker:They had a bus manufacturing task force.
Speaker:Very serious business.
Speaker:I wanted to find out more about where we're at right now in the summer of 2024.
Speaker:And who better to talk to than the former FTA administrator, Sherry Little, who now
Speaker:helps lead up Cardinal Infrastructure.
Speaker:She brought with her, representatives of America's largest bus manufacturer, New
Speaker:Flyer, Jennifer McNeil, Vice President of Public Sector Sales and Marketing,
Speaker:and Stephanie Laubenstein, Director of Sales and Business Development, to tell
Speaker:us what is going on in the industry, what are they doing to solve it, what
Speaker:can the public sector do to make partners with these bus manufacturers to make
Speaker:sure that they stay stable and relevant and alive to provide buses for us.
Speaker:And what's the future look like?
Speaker:This is going to be a great podcast for those of you in the
Speaker:public transportation industry.
Speaker:I encourage you to stay tuned for this great interview Let's listen.
Speaker:Great to have with us, uh, great guest today to talk about the
Speaker:health of the OEM industry.
Speaker:the bus industry, you know, one of the biggest parts of the bus
Speaker:industry is actually the bus.
Speaker:And so we need to have good, healthy bus manufacturers and excited to have with us.
Speaker:Three of the best people we could talk to about it, and that is my good friend
Speaker:Sherry Little, former FTA Administrator, and Jennifer McNeil and Stephanie
Speaker:Laubenstein, from New Flyer, North America's largest bus manufacturer.
Speaker:Thank you all for being with us today.
Speaker:Happy to be here.
Speaker:Yeah.
Speaker:Thanks for having us.
Speaker:Sherry and I, have been talking actually together, because we worked together,
Speaker:somewhat on the side with another group that we're involved in about the health
Speaker:of the bus manufacturing industry.
Speaker:And as a former FTA administrator, and now Sherry, in your role as managing
Speaker:partner of Cardinal Infrastructure in Washington, DC, you are on top of this.
Speaker:maybe give us a little bit of, what's happening right now as we
Speaker:talk August, September of 2024.
Speaker:And give us a little historical precedent.
Speaker:Happy to do that, and thank you for having us on, Paul.
Speaker:We're glad to see you and spend some time with you.
Speaker:The reason why this issue has been so pivotal in our industry is that
Speaker:with the passage of the IIJA, there's unprecedented historic funding
Speaker:for buses, bus and there's a real goal in the Biden Administration
Speaker:to focus on climate change issues.
Speaker:With electric buses and buses generally getting people out of
Speaker:single occupancy vehicles is a really.
Speaker:critical cornerstone of the Biden infrastructure agenda.
Speaker:But it is worth talking about that a critical feature of actually
Speaker:meeting that goal is actually the delivery of the vehicles.
Speaker:So New Flyer was really the canary in the coal mine in raising some OEM health
Speaker:issues before the Biden administration and to our industry generally.
Speaker:And Stephanie and Jennifer are going to talk about what that looked like,
Speaker:but the meaningful part of this is that we were able to, because of advocacy
Speaker:issues with the White House, with FTA, and with APTA, we're able to focus
Speaker:on what the critical impediments were to delivering clean, green buses.
Speaker:And what the Administration could do to help deliver those buses in
Speaker:a meaningful way where there was enough healthy competition in the
Speaker:industry that we could, help the President deliver on that promise.
Speaker:So as a result of the creation of an APTA task force, as well as engagement
Speaker:with the White House Infrastructure Office, And especially with FTA,
Speaker:we had some meaningful reforms that were put in place that culminated in
Speaker:what we call in the industry a dear colleague letter and a report that
Speaker:focused on the health of the industry and looked at some specific issues
Speaker:which had the potential for upending the delivery of this really important
Speaker:promise for the Biden Administration.
Speaker:It took 18 months or more, there was a lot of back and forth between the
Speaker:industry players and the OEMs themselves, but I think we've had some successes
Speaker:on this front, maybe Stephanie can speak to this, it's that New Flyer
Speaker:and sounding an early alarm looked at advocacy to figure out what the specific
Speaker:provisions were in federal law that would help ease the pain for OEMs overall.
Speaker:And I think that's worth talking about because in my advocacy career, this was
Speaker:pretty unusual to get the attention of the White House where they were focused
Speaker:on it in a meaningful way when they passed this historic piece of legislation
Speaker:that has Billions of dollars associated with it, and then they responded in real
Speaker:time to try to address these issues, which is what's so meaningful in our
Speaker:industry, maybe Steph or Jen can talk about what that looked like and how the
Speaker:culmination of that effort resulted in something that has been really meaningful
Speaker:in the notice of funding availability that came out and how the manufacturers
Speaker:We're beneficiaries of payment terms issues, customization term issues.
Speaker:Okay, Stephanie, anything on that?
Speaker:The process was really interesting.
Speaker:we, we definitely started with conversations around what is
Speaker:included in legislation and where are we seeing hurdles?
Speaker:When we need cash moved up front, what are the issues that the agencies are running
Speaker:into and how can we help with that?
Speaker:And what we determined was that there wasn't a lot of clarity around
Speaker:what could or could not be done.
Speaker:And so, one of the first places we started was with the FTA and having
Speaker:conversations around what could occur.
Speaker:and helping to get some guidance from there.
Speaker:we also went into the White House on a couple occasions actually and
Speaker:had discussions around our supply chain, the state of our business.
Speaker:And, and what was happening in order to bring a little bit of attention to those
Speaker:items, because we could really feel the, the pressure occurring in our business.
Speaker:We also, of course, went to the hill and did, did visits with different
Speaker:members to talk about the issues.
Speaker:And one of the things that, that really came out that were still working
Speaker:our, through our way through right now was, that any type of advanced
Speaker:payment required, security, equal to the amount of the advanced payment.
Speaker:And so what we did is we wrote some legislation in the bill around to help
Speaker:actually offset that and take that away.
Speaker:And instead of making it mandatory that there may be a bond or there
Speaker:may not be a bond, we just tried to take away the musts, right?
Speaker:And so that, that was one of our goals.
Speaker:And so we're currently working through a bill right now with, both with Senate
Speaker:Banking and through the House T& I groups.
Speaker:that basically says, you may have a bond, but it's not required.
Speaker:That, you, you know, basically an agency, when they procure, they take
Speaker:a look at the responsibility and responsiveness as a bidder, and they
Speaker:can make some decisions around it.
Speaker:And so that you can do an advance payment without that security
Speaker:option, if you deem it necessary, or okay by, by your standards.
Speaker:and that you don't need an FTA concurrence in order to do that so removing some of
Speaker:the administrative pieces, which should help with some of the hurdles that the
Speaker:agencies are having and allow them to actually realize larger discounts because
Speaker:bonds cost money, financing costs money.
Speaker:And so if we can take away some of these pieces we can actually lower the price
Speaker:of buses right when we're selling them.
Speaker:And so, so we have that working kind of through one stream.
Speaker:And then, of course, through the other stream, we did all the knowledge and
Speaker:education around, and, information gathering with the FTA around price
Speaker:adjustments, payment terms, contract terms, you know, we worked on that APTA
Speaker:task force, that they put together, we visited the White House, and we tried
Speaker:to make sure that there was really clear definition around those items.
Speaker:And once we had that clear definition, we were actually really pleased and
Speaker:surprised because when the loan grants came out, the Notice of Funding Award for
Speaker:the Low and No Emission, it had priorities noted in it around advanced payments,
Speaker:progress payments, customization, procurement methods to reduce price
Speaker:or, reduce excessive customization.
Speaker:And so you could really hear and see that the industry wanted to grasp these items.
Speaker:That, that are really meaningful to our business.
Speaker:And so that, that's a lot of the work we did.
Speaker:Jen, did you want to have anything that you added to that,
Speaker:please?
Speaker:I think you covered most of it.
Speaker:I think that the, the FTA has been extremely helpful, not only in clarifying
Speaker:what's permissible, which is what the Dear Colleague letter, but, but
Speaker:really encouraging it through the, the Lo No and Bus and Bus Facilities
Speaker:Program, the Competitive Grant Awards.
Speaker:and, We're really hopeful that it is the catalyst that will actually
Speaker:change many of the base contracting terms and conditions that come
Speaker:out in procurements going forward.
Speaker:So we're hoping to see this lovely transition to sort of healthier
Speaker:contracts in general for the industry.
Speaker:Thank you for that, setup.
Speaker:I know that the meeting that was held in the White House in February was attended
Speaker:by, at least 25, I think, CEOs, industry CEOs, and a number of them have shared
Speaker:with me, their thoughts on that and how important they felt like that meeting was.
Speaker:Jennifer, tell us about, New Flyer and the industry and kind of the general
Speaker:perspective of where you are now and, and where the industry is now.
Speaker:So maybe before I do that, I'll preface this, you know, the past four
Speaker:years has been extremely difficult for everyone, but the North American
Speaker:Transit bus manufacturers have had just an extraordinary set of
Speaker:circumstances leading up to today.
Speaker:and, you know, to preface my comments, we kind of need to remember that
Speaker:bus manufacturing in North America is an engineer to order business,
Speaker:meaning you can spend 12 to 18 months in public procurement.
Speaker:You can cost, bid the contract, six months of engineering the vehicle, then you
Speaker:freeze a bill of material, you go and you buy all these parts, and then you build.
Speaker:So that whole process can take three years.
Speaker:And if we think about where we were three years ago, you know, there's
Speaker:been just a lot of turmoil, in our industry over that period of time.
Speaker:So, you know, the challenges that bus manufacturers have seen, could actually
Speaker:have started with a procurement that, that, The pandemic began in 2021, or
Speaker:right in the middle of the pandemic.
Speaker:So over the past four years, there's three things that have occurred in
Speaker:the time frame that had really serious consequences for bus manufacturers.
Speaker:The first thing was reduced manufacturing run rates, and at the beginning of
Speaker:the pandemic, there were a lot of facility shutdowns, that sort of thing.
Speaker:And then when business started moving again, you know, we actually
Speaker:found that many transit agencies had frozen their procurements.
Speaker:basically kind of preserving their capital budgets and that resulted in
Speaker:a little bit of a, starvation, let's just say, of the pipeline, that was
Speaker:keeping bus manufacturing lines running.
Speaker:And then once the IAJ funds started to flow, that actually picked up again.
Speaker:And the problem shifted from not being, related to enough, bus contracts, and it
Speaker:actually shifted over to supply chain.
Speaker:So, you know, the bus manufacturers and all of the automotive supply
Speaker:chain had used up the inventory, sitting in, in the supply chain, and
Speaker:we started to see supply shortages.
Speaker:And, and as a result, all the manufacturing run rates, The second
Speaker:thing that we saw, in 2021 and 2022 was unprecedented rapid cost
Speaker:inflation that fell kind of right inside that contracting time frame.
Speaker:So things that you had priced for, you know, a regular level of, of cost
Speaker:inflation where all of a sudden these contracts were immediately underwater and
Speaker:manufacturers were basically taking losses on every single contract in their backlog.
Speaker:And then the third thing we saw was the actual supply disruption.
Speaker:So, we were getting at, you know, at the height of it in 2022, you know,
Speaker:no, no more than two weeks of, notice between a decommit from a major supplier
Speaker:and it actually hitting the, the line.
Speaker:And because these are customized engineered to order vehicles, basically
Speaker:we had a number of different, shutdowns and dropped line entries, which
Speaker:was, which was pretty traumatic.
Speaker:So, you know, all of those things combined, it was kind of this perfect
Speaker:storm of, sort of terrible risks that all came true at the same time, really
Speaker:crippled the bus manufacturing industry.
Speaker:At the worst of the, reduced run rates, you know, we saw almost every
Speaker:manufacturer hitting something like 55 or 60 percent of their capacity.
Speaker:And things are starting to recover.
Speaker:So, you know, that was kind of the, the 2022, mid 2022 timeframe.
Speaker:Things are coming back.
Speaker:we are seeing a very healthy level of active procurements.
Speaker:in fact, quite frankly, the, the market is as high as we've
Speaker:ever seen it, particularly with zero emission, contracts.
Speaker:We have a strong order book and, and backlog.
Speaker:The supply chain is improving.
Speaker:I think we're seeing less pandemic related disruptions and more that has
Speaker:more disruptions that are kind of one of instances related to workforce and labor,
Speaker:as opposed to kind of true shortages.
Speaker:So we're on our way back.
Speaker:You know, we were really pleased with our second quarter results.
Speaker:It was kind of the first time since, you know, the pandemic.
Speaker:at the beginning of the pandemic that we actually saw positive earnings.
Speaker:So, you know, we're starting to recover, but it has been a really,
Speaker:really, long rough haul for all of the transit bus manufacturers.
Speaker:People that aren't involved kind of in the, in the give and take of the bus,
Speaker:of the OEM industry, they are maybe aware that, oh, well, you know, the,
Speaker:Congress and the Biden administration released billions of dollars for buses.
Speaker:Why have we gone from five manufacturers down to two?
Speaker:Or two and a half, whatever.
Speaker:And, uh, so I think you've helped kind of explain that a little bit more, that there
Speaker:were a lot of other competing pressures.
Speaker:Stephanie, what do you have to add to that and, and, maybe some
Speaker:specifics about what's happening now?
Speaker:we've really seen the industry come together, all the different stakeholders
Speaker:from the government, the transit agencies, to the transit vehicle manufacturers, the
Speaker:industry associations, come together, the suppliers, and really think about what can
Speaker:we do different and what needs to change in order to keep stakeholder healthy
Speaker:and in order to be able to actually spend the funding that's available and
Speaker:see through with those commitments.
Speaker:And so if you take a look at the task force recommendations, the FTA Dear
Speaker:Colleague letter and the conversations that occurred at the White House, what you
Speaker:would see is a couple trends occurring.
Speaker:You would see conversations around payment terms.
Speaker:And so if we start there, the reason for that is.
Speaker:As Jen noted, these are engineered to order buses.
Speaker:They're custom, they're specific.
Speaker:The current payment terms in the industry are are that buses are paid
Speaker:for 100 percent at the time they are delivered, accepted, and put into
Speaker:revenue service by a transit agency.
Speaker:So, you could start your building process, so you could get your purchase order,
Speaker:start your engineering, start ordering your parts, raising that bill of material.
Speaker:You could order every piece, pay for it, pay your suppliers.
Speaker:And then deliver the bus, and that could take 50 weeks, 60 weeks,
Speaker:depending on the size of the order, sometimes even longer, and then you
Speaker:would get paid at the very end of that.
Speaker:If you can imagine with today's interest rates, the cost of financing
Speaker:that is extremely high for businesses.
Speaker:And the price of a bus has increased due to inflation, but also because
Speaker:of the zero emission transition.
Speaker:We're now looking at a significant piece of our production line being
Speaker:zero emission, which means it's either going to be a trolley, a fuel
Speaker:cell, or a battery electric bus.
Speaker:And the price of the components that go in there are quite a bit higher.
Speaker:And so, with the engineered order and the pricing, it becomes really
Speaker:important to OEMs to move the cash forward so that it matches when we're
Speaker:actually outlaying cash to suppliers.
Speaker:And so we've really had a big focus on that.
Speaker:What can we do to move payment forward and make working capital
Speaker:move, or make working capital equal to when you see the cash outlay?
Speaker:The other thing we've been looking at is contract terms.
Speaker:What does that look like in today's environment, and how do we appropriately
Speaker:share in risk with transit agencies rather than taking it all on as an OEM?
Speaker:We've seen things like requests for 12 year warranties.
Speaker:With the transition to zero emission.
Speaker:So please provide a 12 year warranty for my battery and propulsion system.
Speaker:When in the past, an extended warranty on those types of components
Speaker:in an internal combustion engine or a traditional propulsion system
Speaker:would be a five year coverage.
Speaker:And so the issue becomes when you have a 12 year coverage, The OEMs,
Speaker:we're integrators of components.
Speaker:We don't own the intellectual property.
Speaker:We don't always manage all the, the warranty claims or have the,
Speaker:visibility to exactly what's occurring.
Speaker:we don't manufacture the part.
Speaker:and so it becomes really, really important that, The warranty term is
Speaker:reflective of what a supplier can offer.
Speaker:Most suppliers won't offer more than a five to six year warranty.
Speaker:So if a 12 year is requested, you're actually asking the OEM to take that
Speaker:risk on themselves and basically self insure something that they
Speaker:don't have the same amount of control over as their base manufacturing.
Speaker:So we've also seen the industry do a lot of work on, on that type
Speaker:of, contract term to try to make more of a risk share occurred.
Speaker:that's very helpful.
Speaker:Thank you, Stephanie.
Speaker:At the beginning of this conversation, Sherry is mentioning that the FTA issued a
Speaker:Dear Colleague letter, and they, basically encouraged the industry to change some of
Speaker:those terms to make them more acceptable.
Speaker:has that happened?
Speaker:Are we seeing that actually occur?
Speaker:Where people are making progress payments, where they are allowing
Speaker:for price increases or decreases like the APTA task force recommended?
Speaker:are transit agencies now, banding together, so to speak, and not making
Speaker:so many specializations so that you don't have to have 90 different
Speaker:types of windows in your warehouse.
Speaker:who wants to talk to that one?
Speaker:Jennifer or Steph?
Speaker:I'll start and then I'll pass back to Jennifer for the
Speaker:engineering portion probably.
Speaker:So, definitely the industry has gotten together and had these conversations.
Speaker:So, APTA has been working on the white book specification, they've been really
Speaker:focusing on the commercial piece, they've had a working group go through that, we've
Speaker:come up with a set of recommendations.
Speaker:That are definitely going through the commenting process right away, and,
Speaker:and we'll be looking for the final vote hopefully before the end of the year.
Speaker:And that of course was made up of both transit agencies, OEMs, suppliers, and
Speaker:was a really collaborative conversation to try and just get to a, a better
Speaker:place than where the white book started and, and share in some of the
Speaker:risk and adopt these recommendations.
Speaker:When it comes to the transit agencies, for progress payments, we are definitely
Speaker:starting to see an adoption of progress payments, moving, let's say, 75 percent
Speaker:of the bus price up to when you line enter, or, install an engine, right?
Speaker:Payable net 30 days, making sure you have the adequate security through
Speaker:the bus being, you know, near finished before any payments are moved.
Speaker:Definitely seeing that start to adopt.
Speaker:The advanced payments.
Speaker:where you're seeing sort of a deposit at the time of notice
Speaker:to proceed or purchase order.
Speaker:We're seeing agencies try.
Speaker:it's something new for, not that they've never done it because it's
Speaker:very common in construction or rail car, but for bus it's new.
Speaker:And so we're seeing a lot of work be done to try and adopt those and also
Speaker:work around, you know, the FTA requires concurrence on an advance payment.
Speaker:How do you go get that concurrence and how do you do it quick enough
Speaker:that we can offer a discount, for the time value of money?
Speaker:And so I think there's a learning curve, but that we're seeing the intent be there.
Speaker:For the price changes, we have worked really hard to get through our backlog,
Speaker:of, of buses that were priced at a time that didn't match, uh, the
Speaker:inflation to when they were built.
Speaker:We definitely have a couple more that we need to work through,
Speaker:and we're seeing mixed results.
Speaker:We always try to make sure that we provide auditable documentation,
Speaker:that we can really back up the claims that we're making.
Speaker:And in some cases, we are seeing some equitable adjustments, and in other
Speaker:cases, there just might not be the, the budget or ability to do that.
Speaker:and then in terms of the engineering piece, if it's okay, Jen I'm going to
Speaker:pass on to you in terms, because you've sat on some of the calls in the industry
Speaker:around best practices for customization.
Speaker:we definitely, um, hear that, customization is, is definitely a hot
Speaker:topic, uh, in the industry right now.
Speaker:And really there's a lot of curiosity around how much customization
Speaker:plays into the price of a vehicle.
Speaker:so we've been asked that question quite a few times, but interestingly, because
Speaker:there is no such thing as a standardized bus in the North American transit bus
Speaker:world, it's hard to answer that question.
Speaker:but what we, we have done is we've actually taken the time, to think
Speaker:through, Why custom engineering occurs on the contracts that we have,
Speaker:and how we might provide different guidance to agencies on, on how to
Speaker:make their bus more standardized.
Speaker:when we look at it, we think customizations are, are driven
Speaker:by a few different things.
Speaker:The first one that actually has a big impact on customization,
Speaker:are seating choices and layouts, including ADA provisions.
Speaker:And you wouldn't think that, you know, seats would be a huge customization.
Speaker:And the seat itself might not be.
Speaker:But every change in the seating customization creates a custom structure.
Speaker:Custom tapping plates, custom floor heaters, and oddly, all of the
Speaker:electrical harnesses are run through the seats and the stanchions, and
Speaker:so you end up with a lot of cascades related to seating choices and layouts.
Speaker:The second thing that drives a lot of customization are the electronics on the
Speaker:vehicle, and while, you know, agencies are actually typically trying to standardize
Speaker:to their investment for their fleet by making sure that their fleet has the
Speaker:same electronics on board, to a bus manufacturer it ends up being custom,
Speaker:and so there, there really is kind of a bit of a balance there That is required.
Speaker:And then the third thing are, is new major components that the agency wishes
Speaker:to adopt, that maybe haven't been used in that vehicle design previously,
Speaker:like doors or HVAC systems or alternate power plant components, and usually
Speaker:those requests are desired to improve an aspect of performance, maintenance,
Speaker:or reliability, and, and they do require a tremendous amount of work
Speaker:to redesign the vehicles, retest, and then set up the aftermarket supply for.
Speaker:So when we, we look at all three of those things there, there are a few
Speaker:things we can do to kind of create fewer sort of sets of choices, like
Speaker:perhaps setting out, you know, a defined number of layouts, rather than
Speaker:customizing it for each agency, but, you know, we really don't want to stifle
Speaker:innovation either, so I think there's probably a healthy balance of, of
Speaker:customization that can occur, in there.
Speaker:What we actually are advocating hard for is reducing, variation
Speaker:as opposed to customization.
Speaker:So things like having 90 different window sets or.
Speaker:52 different shades of interior white panels, , when you think
Speaker:about that, you end up having like a lot of small batch manufacturing.
Speaker:And right now when, bus manufacturers are struggling with, supply disruption
Speaker:and inefficiencies, any place where we can actually limit the amount
Speaker:of inefficiency due to having to, you know, do a small run of five.
Speaker:Purple modesty panel sets or you know that sort of thing.
Speaker:Anytime we can we can reduce that I think it it actually will really go a long way
Speaker:to helping out the bus manufacturers.
Speaker:So while I can't give you a total dollar value because there really
Speaker:isn't a standardized bus what we can do and have done actually is we've
Speaker:been able to to articulate to our customers what areas would be really
Speaker:helpful to kind of reduce the number of choices that we're working from.
Speaker:couple more questions before we go.
Speaker:One is, we've touched on it, but I want to dive into it, unpack it a little bit,
Speaker:because there's such a push now to go to alternate fuels from clean diesel to
Speaker:battery electric or hydrogen or even CNG, are you able to keep up with all of that?
Speaker:And, and, uh, do you have any percentages on where we're at now
Speaker:in the industry, what people are looking for, anything like that?
Speaker:so I'll, maybe I'll start with, NFI and then I can talk a
Speaker:little bit about the industry.
Speaker:So, for, for New Flyer, all of our production lines are, capable of, both
Speaker:zero emission and internal combustion propulsions, and we do that on purpose
Speaker:because really, More often than not, the universe does not deliver you exactly what
Speaker:you want to build, so you actually need a lot of flexibility in your manufacturing
Speaker:lines to make sure that you can level load all of the different, facilities.
Speaker:Right now, we are capable of battery electric in all of our facilities, and
Speaker:we're working to get hydrogen fuel cell electric capable over the next couple of
Speaker:years in all of our facilities as well.
Speaker:so, you know, we were actually, a little bit Agnostic to what the mix
Speaker:happens to be in in any given facility.
Speaker:When we look at where we think, our deliveries will be, I think probably
Speaker:by 2025, we are expecting that our proportion will be roughly 40 percent
Speaker:zero emission across all of the NFI group, for zero emission versus
Speaker:internal combustion engine, and, and we think it'll come to Parity and 2027.
Speaker:So we'll start to see that tipping point where we get past 50%.
Speaker:When we look at the actual industry itself, we track what we call, we have a
Speaker:five year bid universe, and so basically, whenever a transit agency tells us
Speaker:what they're planning to purchase, and whenever they release a procurement,
Speaker:we record all of that, and, and we take a look at, you know, what that
Speaker:proportion is, and our five year forward looking, market, this bid universe,
Speaker:is actually more than 50 percent zero emissions, so we have, we are seeing that
Speaker:shift in, in the procurements, occur.
Speaker:And, you know, with all of that data, we think it'll go, past 50 percent by 2027.
Speaker:And then it will keep increasing.
Speaker:you know, by 2030, we think the bulk of all of the manufacturing in, in
Speaker:North America will be zero emission.
Speaker:It'll be a very, very high percentage of it.
Speaker:One of the things that, that has been really helpful, just in terms of,
Speaker:you know, not only the, the amount of investment that is, is, being
Speaker:put forth through the IJ and zero emission vehicles, but also some of the
Speaker:mandates around, asset planning, zero emission transition plans, that sort
Speaker:of thing, with the, the FTA, is that it is, It is actually incentivizing
Speaker:agencies to be very intentional about their fleet replacement plans.
Speaker:So they are thinking through what their last internal combustion engine
Speaker:procurements might look like, what their infrastructure investment needs
Speaker:to be, and then what their zero emission vehicle purchases need to look like.
Speaker:And because they are being very intentional, they're actually sharing
Speaker:with us some very meaningful information that allows us to plan our supply chain
Speaker:to be, a little bit broader and a little bit more resilient, going forward.
Speaker:what we have done on the zero emission side of things, and as I mentioned,
Speaker:you know, we do have our predictions of what our production will look like, but
Speaker:because we actually have capability in all of our factories for all different
Speaker:types of propulsion, we're fairly agnostic to that from a manufacturing
Speaker:perspective, but the supply base actually needs to be strengthened,
Speaker:the zero emission supply base.
Speaker:So what we have done is, we have actually brought on more zero emission component
Speaker:suppliers, across the NFI group to, to actually, help handle that future.
Speaker:And so we're able to get things like dual sourcing of batteries, where you
Speaker:get a more resilient supply chain.
Speaker:And, and we're looking at all the different components that make
Speaker:up our zero emission vehicles and making sure that not only are, are.
Speaker:So it's not just making the initial suppliers healthy, but that we're
Speaker:bringing more suppliers that can supply similar components on so that
Speaker:we can grow at that rate as well.
Speaker:So I'm actually pretty hopeful.
Speaker:I think that, I think that we will all be capable of transitioning as
Speaker:fast as the industry needs us to.
Speaker:I do believe that the pacing item in the zero emission transition is actually
Speaker:going to be the charging infrastructure.
Speaker:That is going to be, that is going to pace the vehicle deliveries at this point.
Speaker:That makes sense.
Speaker:I was telling you earlier in the green room that I was just talking with
Speaker:Eulois Cleckley down in Miami Dade about building, you know, really America's
Speaker:biggest garage specifically made for battery electric buses and seems like
Speaker:we're a little bit behind on that, that the infrastructure, the charging
Speaker:infrastructure and the facilities need to be ramped up if this is where we're going.
Speaker:Stephanie, any thoughts
Speaker:Well, I mean, the infrastructure is a really interesting piece, right?
Speaker:And I have the opportunity to actually co lead our infrastructure
Speaker:solutions team at New Flyer, and participate in these projects.
Speaker:And we, you know, we do know that there has been just a record level
Speaker:of funding, and that there's been some really great work done in
Speaker:terms of getting chargers out.
Speaker:into the industry, but I do agree that it will be the gating factor, and so
Speaker:I think it's really important that we, we work with agencies, we try to figure
Speaker:out what that timing looks, looks like, what temporary solutions we have, right?
Speaker:Can you take your initial fleet and find ways to temporarily charge or
Speaker:temporarily, fuel a hydrogen fuel cell bus while you are working on
Speaker:integrating into your fleet plans?
Speaker:So I think, again, it's all about that creativity and collaboration between
Speaker:all the different stakeholders on how to deliver upon those promises and
Speaker:take down those hurdles one by one.
Speaker:let's look into the future.
Speaker:You've kind of looked into it a little bit on, on one type of thing, but.
Speaker:The health of the industry going forward.
Speaker:I know there's a lot of concern about, you know, it's funny.
Speaker:I was just in Vienna, Austria and talked to folks there and they said,
Speaker:we're having very similar issues here.
Speaker:long waits of vehicles, less manufacturers.
Speaker:and so it doesn't seem like it's restricted just to North America that
Speaker:we've had some challenges in the industry.
Speaker:I think in, the recent past, so the last 18 months, we've seen a number
Speaker:of bus manufacturers either choose to wind down operations, enter bankruptcy
Speaker:protection , or choose not to be part of the Buy America compliant industry.
Speaker:And that has reduced the capacity of the Buy America compliant
Speaker:bus manufacturing for sure.
Speaker:I think that there is a desire for all bus manufacturers to actually increase their,
Speaker:their run rates for the existing ones.
Speaker:And that is going to be very much metered by the supply chain.
Speaker:So, as the supply chain comes back and actually is, is able to sustain higher run
Speaker:rates, then, then the bus manufacturers will increase their capacities as well.
Speaker:Right now, I think we are sitting at approximately 85 percent
Speaker:of pre pandemic run rates.
Speaker:We've got plans to increase back to, to those levels as do
Speaker:others, and it's really just being metered by, by supply performance.
Speaker:At this point in time, but make no mistake, labor is a very second, close
Speaker:second in terms of, of the, the capacity.
Speaker:We do think that there will be new entrants, and what we think is actually
Speaker:really important is that we've got healthy fundamentals to the industry in terms of,
Speaker:contracting terms, risk sharing, all of those things because, really if you want
Speaker:to have more competition and more bus manufacturing in the space, you've got
Speaker:to have some, just some basic economic healthy fundamentals in there as well.
Speaker:So, we do think it'll come, it's not coming fast enough for any of us.
Speaker:We'd all love it to, to recover faster, but, but we do think we'll get there
Speaker:Stephanie, any final words from you?
Speaker:Yeah, definitely.
Speaker:I would say, overall, we're very hopeful.
Speaker:We see all the industry stakeholders coming together and working on
Speaker:solutions, and so, you know, we start somewhere, and we say, hey,
Speaker:this is a problem, and we think this might work, and it just develops.
Speaker:And, and we're seeing people come to the table with really
Speaker:creative ways to get things done.
Speaker:And I think we're at this point where we're truly modernizing how we procure,
Speaker:what we buy, how we look at this industry.
Speaker:And we're saying, okay, 20 years ago, we bought $300,000 diesel buses.
Speaker:Today, we're pursuing zero emission transition
Speaker:infrastructure that goes with it.
Speaker:Some of the really interesting technology out there around telematics and
Speaker:monitoring, and we're really thinking about as an industry, how do we learn
Speaker:from these moments, and how do we modernize what we're doing so that we
Speaker:can actually make our way into the future slightly differently, considering the
Speaker:health of all the parties involved.
Speaker:And I just think it's, it's a really wonderful opportunity,
Speaker:that, That we all get to learn together and work on this together.
Speaker:And I'm nothing but amazed by the contributions of all the different
Speaker:stakeholders in the industry as we work our way through these problems
Speaker:Thank you, Jennifer, Stephanie, and Sherry for sharing with us the health
Speaker:of the industry, where we've been at over the last 18 months, and where it
Speaker:looks like we're going in the future.
Speaker:We wish you the very best for not only your company but for our
Speaker:industry and the OEM industry as a whole in our transit industry.
Speaker:Sherry, thank you for helping me put this panel together today.
Speaker:Happy to do it.
Speaker:Thank you for listening to this week's episode of Transit unplugged.
Speaker:Hi, I'm Tris Hussey editor of the podcast.
Speaker:And I'd like to thank our guests, Sherry Little, Jennifer McNeill, and
Speaker:Stephanie Laubenstein for their time and insights on this really essential
Speaker:and important issue affecting all of us.
Speaker:Now coming up next week on the show we had back across the pond to London.
Speaker:We are how Transport for London's Phillip Gearhart and the bus
Speaker:operations directorate works with their eight operator partners to
Speaker:optimize the over 650 bus routes.
Speaker:And 19,000 bus stops across London.
Speaker:Transit Unplugged is brought to you by Modaxo.
Speaker:At Modaxo, we're passionate about moving the world's people, and at
Speaker:Transit Unplugged, we're passionate about telling those stories.
Speaker:So until next week, ride safe and ride happy.
