The Viewliner I Order Meltdown

[Anderson]

Ok, I seem to have recalled reading something about this, but could someone tell me what happened here? IIRC, they got an order placed and the company went broke before it was finished (or something like that). What got delivered and, more importantly, what didn't get delivered that was supposed to?

 

[jis]

Everything that was ordered eventually got delivered. Morrison Knudsen Rail division which had the original order went bankrupt and was acquired by a subsidiary of Alstom, which finally completed the order.

 

[PRR 60]

Ok, I seem to have recalled reading something about this, but could someone tell me what happened here? IIRC, they got an order placed and the company went broke before it was finished (or something like that). What got delivered and, more importantly, what didn't get delivered that was supposed to?

Here’s my Cliff’s Notes version of the Viewliner order, with some opinion mixed in.

The production Viewliner order went to a joint venture of Alstom-predecessor Amerail and Morrison & Knudsen. M-K had made its name as a heavy construction contractor, arguably the preeminent railroad contractor in the country. Like so many companies in the 1990’s, M-K thought they could translate their success in one area, building railroads, into another related area, building railcars. They dove headlong into the railcar business and got several large contracts. They soon found out that they made a mistake. Their bids were too low, and they lost money on every car they built. That is the express track to bankruptcy.

Amtrak initially ordered 50 sleepers from Amerail – M-K. The conventional wisdom was that the order would greatly expand through options to several hundred cars of all different types. The plan was to equip all single-level long distance trains with 100% Viewliner consists. M-K knew the plan, so they bid the 50-car order (which required assumption of all start-up costs) at a loss. The expectation was that forthcoming options for hundreds of additional cars (with the start-up costs already paid) would then be profitable. Sadly for M-K, money issues at Amtrak derailed that plan. No options were exercised. No cars other than the initial 50 were ordered. With only 50 cars to recoup the start-up costs, M-K took a bath on the Viewliner order. That, and similar problems with other car orders, sent M-K into Chapter 11.

The impact of the M-K bankruptcy on the Viewliner order was extended deliveries and quality control issues (plus I suspect some interesting discussions on payment terms). However, all the cars ordered by Amtrak were delivered. No portion of the order went unfulfilled. M-K was acquired by engineering-construction conglomerate Washington Group, and reverted to its roots as a heavy construction contractor. I suspect the M-K CEO who thought building railcars was a neat idea was handsomely rewarded and retired comfortably.

 

[X]

Amerail was formed by MK and its bonding company solely to finish out existing contracts. Pretty soon after production finished Alstom started looking at greatly expanding its US presence, and found its self in the enviable position of a competitor not only folding, but being up for sale as an almost turn key operation.