Problems Confronting U.S. Urban Railcar Manufacturers in the International Market

Foreign competition entering the U.S. urban railcar market has raised concerns about the ability of U.S. firms to compete. One U.S. manufacturer commissioned Gordian Associates Inc. to study this issue. GAO reviewed the study's findings for accuracy and completeness.

During 1976-78 five of the nine urban railcar orders were awarded to foreign firms. Three of these contracts went to foreign firms because U.S. firms were unwilling or unable to bid or did not submit acceptable bids. The Urban Mass Transportation Administration has undertaken several measures to alleviate these problems. However, manufacturers continue to have some problems with the timing of railcar orders and contract terms and conditions. The Gordian study accurately reported that the railcar industry in many countries could produce more railcars than were being ordered. However, the study was not correct in implying that the only way these countries can maintain their industries is by increasing railcar exports. The study accurately reported that foreign railcar markets in Europe, Japan, and Canada were essentially closed to all but firms in those countries, and that foreign railcar firms received incentives and subsidies not available to U.S. railcar firms, thus providing an unfair competitive advantage. Sufficient time has not passed to determine the full impact of the Buy American provision of legislation affecting foreign competition. A review of the first three railcar procurements initiated since enactment of the provision showed that at least one foreign firm was persuaded not to bid because of the provision.