BUSINESS

Hyundai Rotem blasted for sloppy handling of U.S. rail car project

By 윤민식
  • Published : Jan 17, 2013 - 17:38
  • Updated : Jan 18, 2013 - 10:35

Hyundai Rotem was pounded by a U.S.-based public transportation agency for failing to follow through with a $190 million contract for providing new commuter rail cars.

The U.S. company -- the Massachusetts Bay Transportation Authority, or MBTA -- has consequently threatened to terminate the contract in case of further delays.

According to a letter sent to Hyundai Rotem on Dec. 21 last year from Jonathan Davis, the MBTA’s chief financial officer, obtained by The Boston Globe, the procurement contract with the Korean company has reached “a point of crisis.”

Davis said he had written to convey his “profound disappointment for Hyundai Rotem’s seemingly lack of commitment to improve its chronically unsatisfactory performance.”

He also said that due to Hyundai Rotem’s “inaction, inattentiveness and generally poor performance,” the MBTA would terminate the contract if the Korean company fails to respond and take corrective measures by Jan. 11, which was last Friday. 

Hyundai Rotem, an arm of the Hyundai Motor Group specializing in building mostly trains, ground weapon systems and vehicles, in 2008 signed a contract with the MBTA to replace part of the company’s aging rail cars with up to 75 modern coaches by October 2010.

Only four of the coaches -- said to be undergoing testing -- reached the MBTA just two months ago.

In that waiting period, the MBTA had been forced to renegotiate the deal with Hyundai Rotem to push back the delivery date in return for discounts.

The quality of the cars has also become an issue with the MBTA, which said the workmanship has degraded “at an alarming rate” at both the Changwon factory in Korea and the Weccacoe facility of Hyundai Rotem USA.

Wire bundles, for example, were drilled through in multiple locations on a number of cars, the MBTA said, lamenting that there was “no apparent effort on behalf of Hyundai Rotem to remedy the myriad causes for the overall lack of quality.”

Nonetheless, the U.S. agency said the Korean company has recently demanded payment on an unfulfilled milestone, which has caused the MBTA up to $4 million in damages.

After the letter was sent, Hyundai Rotem’s Cho Sang-whui, president and CEO of Hyundai Rotem USA, and Kim Jong-han, executive vice president of procurement at Hyundai Rotem, met the MBTA general manager on Jan. 11, the final day of the deadline issued by the U.S. agency.

Hyundai Rotem said the MBTA is also at fault, adding that despite the letter, the MBTA has no intention of terminating the contract, and that the two sides plan to amicably settle the matter.

Some progress has been made since the fallout, the MBTA said in a statement, although “certain areas of concern remain.”

The agency also said, “It’s important that HRU’s new leadership team not only understand the procurement’s ongoing issues, but also take the corrective actions necessary to address the shortfalls.”

Hyundai Rotem has over the past decade actively wooed the U.S. with promises of low prices and advanced technology.

It has four contracts in the U.S., including the one with the MBTA. 

Inexperience and miscalculated business plans are cited as other causes behind the Korean company’s delay. 

Hyundai Rotem, while working on the assembly of the MBTA cars, is still in the middle of completing an order for 120 coaches for the Southeastern Pennsylvania Transportation Authority. 

By Kim Ji-hyun and Lee Ji-yoon

(jemmie@heraldcorp.com) (jylee@heraldcorp.com)


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