Major bus order for New Flyer postponed

Articulated bus
New Flyer said a major bus order from a U.S. customer has been postponed indefinitely due to funding issues.
MPR Photo/Ambar Espinoza

The Canadian company New Flyer, which makes heavy-duty transit buses, said a major bus order by a U.S. customer has been postponed indefinitely.

The company planned to build 140 diesel electric hybrid buses this year from its St. Cloud plant. In a conference call for investors, the president and CEO Paul Soubry said that the customer intended to buy these buses with state money because federal stimulus available only covered capital projects.

Soubry told investors this postponement will reduce the rest of this year's production.

"If you'll pardon my analogy, I see this as like a punch in the stomach or falling off a horse," Soubry said. "It's a surprise, it hurts, and it's disruptive, but we will get back on and we will keep moving New Flyer forward."

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Soubry said the customer intends to buy these buses once funding is available.

"They asked for something like $600 million of stimulus money for transit-related projects," he said. "They received $250 million to $300 million or something. And so the buses were clearly on the portion that was over/above their funding level."

Other buses in the backlog cannot easily be re-scheduled within the second half of 2009 to fill those production gaps, but the company will look into advancing the production of any customer orders into 2009 wherever it's possible in the production schedule.

The expected revenue from this deferred order is approximately $122 million and it represents three percent of its total order backlog of $4 billion, which is made up both of confirmed and tentative bus orders. This customer has a tentative bus order for 750 buses over a five-year term--that's 16 percent of the company's total backlog.

Soubry said while the company has a significant backlog, it cannot easily adjust production to buses for another customer because of the "engineer-to-order" nature of heavy duty transit buses, including the time it takes to order specific parts for specific customers.

Soubry said New Flyer hasn't gotten any notice from other customers about any potential bus order deferrals. He said he has spoken to all of the company's customers to confirm their intent and ability to purchase buses or place tentative orders.

Soubry said an executive with the Federal Transit Administration (FTA) said it has awarded $3.7 billion out of its $7.5 billion. The remaining $3.8 billion will be awarded by September 1, 2009.

Soubry said the company will pursue all means to minimize the impact of this bus deferral, which includes reducing all expenses and overhead costs related to its original 2009 production schedule, redistributing labor among its plants, and advancing the production of other others where possible.

Soubry said New Flyer has received confirmed orders for 241 buses from six transit authorities as a direct result of the stimulus. New Flyer's chief financial officer Glenn Asham said this was the only order that did not have plans to be federally funded at this time.

Asham said this deferred bus order does qualify for FTA funding, so should the customer submit a new application for FTA funding and get approval, it could use that stimulus money toward this bus order.