[investmentonlinev2006x]

December 30, 2005

Overseas, the Trains and the Market for Them Accelerate

By JOHN TAGLIABUE

KREFELD, Germany - Even more high-speed trains? Europe must be kidding.

In one vast hall, workers in blue overalls are putting the finishing touches on what would, on an old-fashioned train, be a locomotive, except that it houses a spacious conference room with a large table and seven comfortable armchairs.

In an adjacent hall, others are attaching what look like ordinary wheel trucks to a rail car, except that these contain electric motors that will essentially do the locomotive's job of pulling the train.

"We're now turning out a car every one or two days," said Michael Gessner, project manager at the Siemens rail car plant in Uerdingen, a suburb of this industrial city. "When we begin the Chinese order, it will be two a day."

Work at the Siemens factory illustrates a coming together of two developments in high-speed passenger train travel: technical breakthroughs in the way the bullet-shaped trains run, and the opening of vast new markets in Eastern Europe and Asia that are combining to give a steady boost to the business.

Unless they have traveled abroad, most Americans have had little first-hand experience with high-speed trains, and the problems with the Acela service on Amtrak have left its customers with a slightly bad taste. Hence, as countries including Italy and Spain - and emerging markets like China and Russia - open their pocketbooks for huge high-speed railway development, the United States remains on the sidelines, vulnerable to losing out on new technologies for propulsion and vehicle control.

For those who thought railroads were basically 19th-century technology, think again. Thanks to miniaturization, newer trains have motors built into the axles of every second rail car, rather than concentrating the pulling power in the locomotive, as was done in traditional pull-push trains.

The technology makes the trains lighter and enables them to go faster and to brake and accelerate more easily, while causing less wear on rails and wheels.

And the newer generation of very high-speed trains has other breakthrough features, including so-called eddy current brakes, which employ electromagnetic fields rather than brake disks for slowing and stopping.

"The carriages are stable and light and of very high speed," said Francois Lacôte , senior vice president in Alstom's transport division, which will install the new technology in the fourth generation of its TGV.

(The French manufacturer Alstom, like most of the industry, considers high-speed trains to be those with a top cruising speed of 150 miles per hour; trains with a top cruising speed 210 miles per hour are considered very high speed. The Acela's top cruising speed is about 125 miles per hour.)

In November, Siemens landed a $804 million contract to supply 60 sleek-nosed high-speed trains to the Chinese railways. The order is just one in a 15-year program to upgrade China's rail network, including the introduction of 180-mile-per-hour bullet trains. "Up to 2020 they want 12,000 kilometers of high-speed rail," or 7,200 miles, said Dietrich G. Möller, president of Siemens' trains division.

At about the same time, Siemens signed a preliminary contract for high-speed trains to connect Moscow and St. Petersburg. Like China, Russia, too, has gigantic railway ambitions. The line may one day continue beyond St. Petersburg to Helsinki, Finland, and past Moscow to Russian cities like Nizhny Novgorod.

In South Korea, Alstom, the inventor of the train à grande vitesse, or TGV, is supplying 185-mile-per-hour trains for a five-year $17 billion project that has connected Pusan and Seoul.

The growth in Asia is giving the small club of high-speed passenger train manufacturers a lift just as Western European governments are watching their budgets more closely. Europe's dense population and geographical features like the Alps make the construction of high-speed lines costly.

Moreover, environmental groups often resist the construction of new train lines, saying they bring noise and unwanted development and divert money from more urgent needs.

Nonetheless, Spain hopes to have a Madrid-Barcelona link open by 2008; France and Germany are upgrading the line from Paris through Strasbourg and on to the German cities of Stuttgart and Frankfurt for 210-mile trains.

"What has happened is that cuts in travel time have stimulated demand" for trains, said Ernest Godward, an economist with Scott Wilson Railways, a British consultancy.

American industry is largely sitting this one out. While some American companies, like the electro-motive division of General Motors and the MotivePower Industries division of the Wabtec Corporation, are doing brisk business with Chinese rail operators, their business is mainly freight, while the market for high-speed passenger trains is limited to a small group that has shrunk in recent years through a wave of mergers and acquisitions.

In 2001, Bombardier, the Canadian transport company, acquired Adtranz, a German-based rail equipment maker; at about the same time, Alstom bought Fiat Ferroviaria, Fiat's rail equipment division and the original developer of technology that enables high-speed trains to tilt into curves, much the way a motorcycle can.

(Alstom and Bombardier installed the technology on the Acela in the United States, but faulty measurements of the train's right-of-way rendered it virtually useless.)

Within Europe, the three leaders are vying to grab market share with snazzier and ever faster models.

Siemens introduced distributed power, meaning that electric motors pulling the train are distributed through the train's cars; that technology was used in trains for a high-speed line from Frankfurt to Cologne and will be used in trains on the Barcelona-Madrid connection.

Alstom will introduce similar technology on the new Paris-to-Strasbourg TGV line.

Bombardier, fearful of being left out of the running, introduced in October a concept train called the Zefiro, which will include most of the technology employed by the market leaders. Neil Harvey, Bombardier's communications director for Europe, said the Zefiro would have all the latest traction and braking technology and would be loaded with features like electronic seat reservations, power outlets at every seat and free Wi-Fi.

In Europe, to be sure, the growth of the market is not without its obstacles. Some argue that the cost of high-speed rail is excessive, compared with the operation of no-frills airlines, and that it only indulges a European penchant to go first class whenever possible; others say the environmental damage is too great.

In northwest Italy, near the site of the next winter Olympics in February, environmental groups are opposing a new high-speed line and tunnel to connect Lyon in France and Turin in Italy, arguing they would drag even more industrial traffic into the Alps. The train will cross a valley that already has a conventional train line and a superhighway. "It's incredibly costly, they're talking 13 billion euros," almost $16 billion, said Marco Ponti, a transportation expert at Milan's Polytechnic Institute who backs the protesters.

Mr. Ponti likened the project to the English Channel rail tunnel, whose construction cost was almost double the original estimates. "The Channel tunnel went bankrupt not once, but twice," he said.

Mr. Ponti, a former World Bank consultant, acknowledged, however, that "there is a place for high-speed trains for medium distances and in very densely populated areas."

Still, the governments in Rome and Paris are throwing their full weight behind high-speed rail. West of Turin, engineers are blasting a tunnel through the craggy Alps, and this fall Italy took tenders on 30 very high-speed trains and says it wants to acquire 100 in all. Its master plan foresees building high-speed lines in the shape of a T, from Milan in the north to Naples in the south, and from Turin in the west to Venice in the east.

In Asia, too, the European train builders face challenges. For one, there is competition from the fabled Shinkansen of Japan, the first high-speed train to go into service. That design was chosen by Taiwan for a 210-mile-per-hour train inaugurated last year from Taipei to the southern port of Kaoshiung. And while Asian contracts are lucrative, most countries insist on technology transfers including the assembly of most of the trains in local factories. Such requirements put pressure on the Europeans to continuously upgrade their technology or risk being overtaken by their own customers.

"The key is new technology," said Mr. Lacôte of Alstom. "The Chinese market is very interesting," he said. "They have the culture; they want to acquire the technology."

Of course, not all of the Chinese acquisitions will be very high speed. Bombardier, which has a strong presence in China thanks to its Adtranz acquisition, does a brisk business in light rail and subway car construction. This year, Bombardier signed a long-range agreement to supply trains to China with cruising speeds of 120 miles per hour.

The Siemens contract for China calls for it to supply 60 trains with a cruising speed of 180 miles an hour to link Beijing to the coastal city of Tianjin.

And the United States? Despite the debacle of the Acela, European rail executives say that heavy population concentrations on the East and West Coasts and in the Midwest around Chicago make high-speed trains a natural. Mr. Moller of Siemens said, "When the skies and the roads are full, they will turn to trains."

Mr. Lacôte of Alstom said three conditions had to be fulfilled for a country to turn to high-speed rail: the political will, large population concentrations, and a level of economic prosperity adequate to pay for a rail system.

"In the United States you have the second two," he said. "I am not sure that you have the first."


Copyright 2005 The New York Times Company