Monday, November 28, 2011

Why Does Carlisle / Hamayasu / Horner Stick with Ansaldo while Under so Much Fire?

Edit: Mid. January 2012 u p d a t e.

Samples of recent "fire" from rail advocates:

Perhaps Carlisle / Hamayasu / Horner are stubborn (or worse...) but their vices alone are hard to justify their glaring lack of responsibility for a $1.4 Billion public contract that they officiate over. There must be something else and it probably has to do with money and corruption.

Another thing that should make us suspicious is that City, HART and Ansaldo plan to sign this contract between Thanksgiving and Christmas, that is, during the time period that the public pays little attention to the news and the media tends to cover "holiday spirit" stories. This is exactly when the Alternatives Analysis was approved in 2006 which cemented the City's choice of "elevated rail" as the Locally Preferred Alternative.

There is no reason for selecting an inferior rail manufacturer that belongs to a troubled company (that wants to sell off its rail business), located in Italy, a country with possibly insurmountable debt problems. With so many qualified and reliable rail manufacturers, why are Carlisle/Hamayasu/Horner sticking with Ansaldo, the most troubled one, and one one of the most complaint-prone? Why would Hawaii source a train in Italy instead of Japan, China or Korea?

Of course FTA's "Buy America" requirement is nothing short of a joke because there is no comparable US manufacturer for passenger trains and rail cars. All of them are wholly owned subsidiaries of foreign manufacturers.

Note that when I wrote the piece on Don Horner copied below, Finmeccanica's stock had crashed to $5. Yesterday it closed down to $3.

-------- Original Message --------
Subject: Is HART Chair Don Horner Shamelessly Dishonest?
Date: Fri, 16 Sep 2011 15:07:26 -1000
From: Panos D. Prevedouros

Why would he say this?

Pacific Business News reported:

Don Horner, chairman of HART’s finance committee and CEO of First Hawaiian Bank, said he was satisfied that Ansaldo’s finances are in order and the city can proceed with negotiating a contract with the firm. He said he it also gave him “strong comfort” to hear Finmeccanica’s commitment to the project.

“Overall, and I can speak as a banker, I was very impressed with the substantial amount of profitability, the liquidity, the history, and the commitment from the parent company,” Horner said. “I am very pleased with the progress that we made today.”

When the truth is this:

WHEN Finmeccanica announced bad results on July 27th, investors strafed its share price, cutting it down by 28% in four days (see chart). In the first half of 2011, excluding a gain from the sale of one of its businesses, the firm made barely any profit: €13m ($18.2m) on revenues of €8.4 billion. Shareholders are spitting fire.

The Italian government holds a 32% stake. That prevents the company from sensibly quitting unprofitable businesses. Meshed together from a ragbag of defence and technology businesses formerly owned by the state’s IRI and EFIM holding companies, Finmeccanica has everything from helicopters to trains to gas turbines. Its former boss, Pier Francesco Guarguaglini, tried to simplify the group down to three areas: aeronautics, helicopters and defence. But the group still owns several businesses that do not fit.

Its biggest problem is AnsaldoBreda, a maker of trains and trams, which has lost more than €1 billion. The government’s unwillingness to allow job cuts makes a solution impossible. Politicians from AnsaldoBreda’s home region in Tuscany objected loudly this week after Finmeccanica’s new boss, Giuseppe Orsi, talked about selling the division. Some 60% of Finmeccanica’s employees are Italian, though the domestic market yields just a fifth of its revenues.

Finmeccanica is used as a dumping-ground for unwanted state assets. In 2008, when the government finally found a solution for Alitalia, the country’s loss-making airline, private investors gobbled up its profitable flight division but curled their lips at its maintenance business, so in 2009 it was sold to another group of Italian firms, with Finmeccanica taking 10%. Politicians have long pushed for a merger with Fincantieri, a troubled shipbuilder also under the government’s thumb. Last September Mr Guarguaglini was obliged to point out that Fincantieri’s activities have little to do with Finmeccanica’s.


  • Horner is Chair of HART
  • HART has an $1.1 Billion contract with Ansaldo
  • Ansaldo is owned by Finmeccanica
  • Finmeccanica has large debts to BNP Paribas (2nd largest French Bank)
  • BNP Paribas owns 1st Hawaiian Bank
  • Horner is CEO of 1st Hawaiian Bank

Thanks to Ian Lind for bringing this up:

Lessons from US Mainland on How to Ease Congestion and Build Infrastructure

GOAL: Ease traffic congestion that cripples economy and quality of life

: Deliver lanes and tunnels as quickly as possible

: US mainland success stories involve private financing and tolls so that infrastructure can actually be done instead of squeezing local taxpayers and depending on broke state and federal coffers.


(1) There is plenty monies in private funds: Pension Fund Invests in Florida Toll Project. One of America’s largest pension funds—Teachers Insurance and Annuity Association of America (TIAA) has purchased a 50% stake in Florida’s I-595 concession project, a complete reconstruction of this major freeway, including the addition of three reversible express toll lanes. TIAA purchased the stake from developer/operator ACS Infrastructure Development, which holds a 35-year concession to develop and operate the highway, which is now under construction.
Honolulu application: The level of traffic demand between H-1/H-2 merge and downtown easily justifies a tolled HOT Lanes and mainland investors as well as local pension funds will be attracted to it. (Note that none of them will invest a dime in the rail project.)

(2) Use Public Private Partnerships or PPP:
A well-researched and fairly comprehensive overview of long-term concession toll projects appeared in the Oct. 22nd issue of The Washington Post. Written by Cezary Podkul, formerly of Infrastructure Investor, the article discusses a number of recent projects, both large-scale investment in new highways and bridges and the leasing of existing toll roads. It includes the growing involvement of pension funds as investors, and also discusses who won and who lost when a recent start-up toll road filed Chapter 11. (Note: at press time, this piece was available on the Post’s website, but with a very long URL. It’s simpler to just Google the title: “With U.S. Infrastructure Ailing, Public Funds Scant, More Projects Going Private.”)
Honolulu application: State of Hawaii does not have a suitable PPP yet.

(3) Deliver network short-cuts with tunneling
: Tunnel Boring Begins for Port of Miami Tunnel. The huge (41-ft. diameter) tunnel boring machine from Germany began digging the first of two parallel tubes for the new Port of Miami Tunnel on Nov. 4, 2011. Each of the two tubes is expected to take six months to drill and line with concrete panels. The $1 billion project is being procured by Florida DOT under a 35-year concession awarded to a team led by France-based Meridiam Infrastructure Partners and Bouygues Travaux Publics.
Honolulu application: A toll tunnel from Iroquois Point to Lagoon drive will save leeward Oahu commuters to town over 30 minutes one way.

(4) Use
Congestion Pricing to spread traffic demand: Higher peak-period tolls, and charging half-price (instead of zero) to carpools have reduced congestion and increased speeds on the San Francisco-Oakland Bay Bridge, according to UC Berkeley research commissioned by the Metropolitan Transportation Commission. The biggest impact was that more than half the traffic formerly in the carpool lanes disappeared; officials speculate that some shifted to BART and some changed the time of their commute, and many were probably cheaters who now drive in the regular lanes. The overall reduction in AM peak traffic was about 4%, and time savings varied greatly depending on which approach road people use to get to the bridge and the time (within the peak period) that they travel.
Honolulu application: Both tolls and bus fares need to have peak and off-peak pricing. Use of inexpensive passes should not be allowed for 3-4 peak hours during normal workdays.

Thanks to Robert Poole of the Reason Foundation for these recent examples.