Subway Cars: Why You Should Be Getting On Board
From the efficiency of the urban commute to the romance of a ride through the country, our rail systems keep us moving. With just shy of 3.6 billion riders on subway trains alone each year, an aging infrastructure demands attention, and spells opportunity for investors.
Full steam ahead
From the Chicago L to the DC Metro, from the NY/NJ Path to the Portland MAX, light, speed, and urban rails throughout the country are expanding, upgrading, and maintaining vast rail networks. Presently, most of the companies manufacturing rail cars are located overseas; however many are traded on the U.S. exchanges.
A bill calling for Made in America rail infrastructure was introduced to the House of Representatives in April of this year. President Obama's plan for the FY2012 budget included $53 billion over six years for intercity rail. While the outcomes of these initiatives are uncertain, one thing remains clear: Momentum is building for nationally sourced infrastructure.
With soaring gas prices driving many drivers into ridership, a renewed commitment to revitalizing the country's transportation infrastructure, and many subway cars on systems throughout the country aging out of usefulness and safety, the train manufacturing business is primed.
From coast to coast
Back in the 70s, when Boeing (NYS: BA) still made subway cars, they were primary manufacturer of the Chicago L trains. Many of those original cars are still in service on the Green and Purple lines. As most subway cars have a life expectancy of 25-40 years (with maintenance and refurbishment), expect the Chicago Transit Authority to replace them in the next several years.
Washington, D.C. is another perfect example. Last year, Metro signed a contract for 648 new subway cars, at $3 million per car. In addition to replacing aged cars, the system is adding a line. Although Goodrich (NYS: GR) made many of the original Washington, D.C. Metro cars, Kawasaki (PINK:KWHIY) will supply the newly redesigned cars rolling out this year. Another contract will be awarded in 2019.
A new player?
GE Transportation (NYS: GE) has recently announced a new plant in Texas that will focus exclusively on train manufacturing. (GE Chairman and CEO Jeffrey Immelt also serves as the White House's Council on Jobs and Competitiveness.) Sadly, this plant will be too late to fill Houston Metro's order of 19 subway cars, which just went to Siemens (NYS: SI) , or an order for Orlando, Fla.'s Sunrail, which went to Bombardier (TSE:BBD.B).
GE's newly amped-up presence will no doubt bring domestic competition. Add to that the sheer volume of subway systems and moving stock throughout the country, required maintenance, and parts service, and you're looking at a steady, consistent industry that is set to thrive domestically.
Never think twice about the cars on the trains near you? I challenge you to find out. Tell me your town, line, and car manufacturer in the comments below.
At the time this article was published Fool contributor Molly McCluskey doesn't own any of the stock mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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