First MARTA CQ400 Stadler Metro train

[Paniolo Man]

The first train is substantially complete and has been stretching it's legs on the test track this week. Not sure about the timeline for delivery or if it'll go to Pueblo for testing or not. There are several other sets in production. This first train has taken a while to build, though once the process is established, these will fly off the line.

 

[Paniolo Man]

Well my picture got some media buzz last week and an updated timeline from MARTA:

The first train will arrive in Atlanta in January, presumably after a testing period at TTC in Colorado. Later in January there will be a public unveiling.

The first trains will enter service in July.

 

[cirdan]

are they replacing existing trains, or are they providing additional service?

 

[EchoSierra]

Wow, finally! When I swung by a couple months ago, those were all still under tarps on the side of the building!

 

[Paniolo Man]

are they replacing existing trains, or are they providing additional service?

The initial order is a complete replacement of the existing fleet, MARTA has options for 25 more trains should they feel like expanding service.

 

[PaTrainFan]

The initial order is a complete replacement of the existing fleet, MARTA has options for 25 more trains should they feel like expanding service.

Question: When an agency or railroad exercises "options" for more equipment what are the terms, typically? Same cost per unit? I would imagine that depends how far down the line that occurs.

 

[EchoSierra]

The cost per unit depends on the timeframe for the options contract. If the options contract is for a short term (ie they want to exercise the options while the delivery of the initial order is ongoing) then the options will have a similar cost per unit. If the options contract is for a longer term (ie they might decide they want more of them after the initial order is completed) then it will cost more and have a longer delivery time because the contract basically pays for that production line to stay open but idle in case they need to build more. If the contract expires without being exercised, then there's a fee that is paid for the time for keeping that option open, and no further vehicles are delivered under that contract.

To put it simply, the options contract prepays for the time on the production line and storage of any tooling needed to fabricate non-common parts and carbodies, so if they exercise the options early, the vehicles will cost around the same as the firm order and take a shorter amount of time. If they exercise the options later, it will take a longer lead time to source the materials needed to produce more, and account for other factors like inflation.

 

[BlackDiamond]

If they exercise the options later, it will take a longer lead time to source the materials needed to produce more, and account for other factors like inflation.

You also have the factor of a trained workforce who may have been furloughed if there was no other work available for the plant and has gone and found other jobs in the meantime.

 

[John Santos]

The point of having an option clause in the contract is to so the buyer can get a firm price, for some period of time, if they decide they want to buy more units. For the vendor, the point is have a leg in the door for future purchases, to gin up some additional possible business and to help with future production planning. Without the clause, and any additional items purchased by the buyer are subject to another round of competitive bidding, which is time-consuming and the buyer might not find anyone willing to meet their terms a at reasonable price and the vendor might lose the bid to another vendor.

Edit: fix THREE typos!

 

[cirdan]

The point of having an option clause in the contract is to the buyer can get a firm price, for some period of time, if they decide they want to buy more units. For the vendor, the point is have a leg in the door for future purchases, to gin up some additional possible business and to help with future production planning. Without the clause, and additional items purchased by the buyer are subject to another round of competitive bidding, which is time-consuming and the buyer might not find anyone willing to meet their terms a reasonable price and the vendor might lose the bid to another vendor.

Agreed.

Furthermore, if a small follow-on order is awarded to a different manufacturer, this would result in a small micro fleet of different equipment leading to higher costs in training, maintenance, holding of spares etc. A secured option is a good way to assure fleet uniformity, at least within the same generation of equipment.

 

[cirdan]

Question: When an agency or railroad exercises "options" for more equipment what are the terms, typically? Same cost per unit? I would imagine that depends how far down the line that occurs.

I understand that if there is an option, that there is a guaranteed price, but this is not necessarily the same price that was paid for the initial order, but will have some variable factor for inflation (because inflation cannot be predicted). The price will typically also include some other padding beyond this to cover the cost of opportunity and costs of storing and maintaining tooling that is not otherwise needed.

For small follow-on orders, costs through an option will still typically be cheaper than a separate order as per unit costs tend to decrease with the size of the order because costs of initial engineering and design work, tooling etc can be absorbed over a larger production run.

Any sub-suppliers will similarly sign options with the main supplier so availability of parts is guaranteed.