Budapest and the Alstom Transport

It was last summer that I wrote an post on "The ill-fated Budapest metro." It was an overview of the whole mess of Line 4, still unfinished. The story goes all the way back to 1972 when it was already obvious that the city needs more metro lines, but it was only in 1998 that work could begin on the project. The City of Budapest managed to convince the Hungarian government of Gyula Horn to give a guarantee on a loan that was necessary in order to start work. But then came Viktor Orbán, and the new government refused to honor the agreement. Four years later, after Orbán lost the elections, construction began at last. The original deadline for completion of the line was 2012, but it is highly unlikely that anything will come of it. First of all, István Tarlós, the new Fidesz mayor, claiming financial troubles, wants to shorten the planned length of the new metro line. However, there is another problem that most likely will postpone the whole project far into the future. It is the controversy concerning the braking system of the metro cars manufactured by Alstom Transport, a large and well respected French company whose cars are being used in China, India, Chile, Singapore, Spain, and Turkey.

Last July the National Transportation Authority announced that the Alstom cars are not good enough and it refused to certify them. According to the Authority's experts there were several problems, but the most serious was the brake system. This happened a year and a half after the same National Transportation Authority had announced that upon preliminary inspection the metro cars passed muster and thus, as the contract specified, the City of Budapest paid half of the total cost, 30 billion forints.

The July decision was more than strange considering that the Alstom cars conformed to European Union standards and have been running without any trouble for a number of years. There was a strong suspicion that the National Transportation Authority's decision was not based solely on technical considerations. I always suspected that the long arm of Fidesz, then still in opposition, managed to reach the "brake experts" at the Transportation Authority. My suspicion was reinforced by the obvious delight of the Fidesz members of the the City Council at the prospect of breaking the contract with Alstom. They wanted to break the contract right there, on the spot. Eventually BKV (Budapest Transit Authority) sued Alstom for the 30 billion forints but in a French court the Hungarian side lost. The Hungarians appealed and now the case is being argued before the appellate court in Versailles.

Common sense would have dictated some kind of compromise with Alstom, but Fidesz people loathe compromises. Although prior to his election Tarlós talked about possible further negotiations with the French firm, he changed his mind. Knowing something about the internal workings of Fidesz, my hunch is that the word came straight from Viktor Orbán. No negotiations. Why not? Why should they risk the loss of 30 billion forints? Perhaps once again to derail the completion of the metro that after all was being built during the liberal leadership of the city. Tarlós later claimed that he tried to negotiate but that Alstom refused. Apparently that is a lie. They were ready to negotiate but wanted to have 4-5 billion forints for the changes the Hungarians insisted on. 

Most likely BKV will not only lose 30 billion forints but can start the whole painful process of finding another supplier of metro cars. Further delays. According to people in the know, that might mean a delay of another year and a half. But that's not all. The European Union is providing 180 billion forints in assistance to build the new metro line, money which might be lost if the project is not finished by the EU deadline–2014. Moreover, if the Hungarian side loses the law suit, which is likely, BKV will have to pay very hefty court costs as well. Over and above the 30 billion deposit. According to some estimates that might mean as much as 60 billion forints altogether.

Tarlós is especially furious about the contention of Alstom's lawyers that the Hungarians wanted to break the contract because they actually had a secret understanding with the Russians to purchase Russian cars. In fact, he is ready to sue them for so arguing in the courtroom. As if one lost suit weren't enough. It is very unlikely that the people at BKV actually wanted to buy Russian cars, but I'm sure the French wouldn't understand that a party's political interests are so important in Hungary that to this end they are ready to sacrifice 60 billion forints of the taxpayers' money. Indeed, few people would be able to grasp that such things can happen. But, I'm afraid, they can. In Hungary.

 

 

Sort by:   newest | oldest | most voted
Johnny Boy
Guest
This post is totally full of malicious untrue content. 1. It was not Horn who signed a loan guarantee for the metro but P. Medgyessy who did it violating the law because he didn’t have parliamentary authorization. By the way, he signed it 2 weeks before the new Orbán goverment formed which is violating the law again as a managing government does not have such rights. 2. Construction only started in 2007 or 2008 whereas Orbán’s government lost power in 2002. You elegantl “forgot” about those 6 years to blame Orbán for the delay. 3. Tarlós doesn’t want to shorten the planned line. The second phase of the line is not even in planning and, in contrary to what Demszky lied, the EU doesn’t even know about such an endeavour because it has never been reported for them, let alone winning any tender for money. 4. The Alstom trainsets DO NOT COMPLY with the European standards because they do not have two independent braking systems. In case the central braking controller fails, both circles fail and this actually happened during a test run, so this is not even a theoretical problem only. Moreover, emergency exits were simply non-existent in the… Read more »
Paul
Guest

Wow! First post, hot off the press, and such detail!
Éva, I don’t really understand why, but you must be worrying Fidesz a hell of a lot if they’re going to all this trouble.
So much for the ‘two-thirds revolution’. OV can do what he likes in Hungary and no one can stop him, but he is this scared of a blog with just a few hundred readers – all of them Hungary haters, foreigners, liberal-lefties and other devients.
Is that paranoia I smell wafting over from the East?
As for me, ‘JB’, as it happens I do know an awful lot about metros, so you’ve picked a rather unfortunate area for one of your attempts at blinding with falsehoods. Perhaps we can start with a little more detail on these ‘problems’ with the brakes?
How come trains that are fine on many other Metros in the world and which seemed perfectly fine for Budapest just a little while ago, are now so dangerous that Fidesz are prepared to throw billions of (your) hard-earned Forint away on this silliness?
As always, a detailed reply with facts (and some of those pesky sources) would be appreciated.
(Don’t worry, I’m not holding my breath.)

Ron
Guest
Paul if you really know so much metro’s perhaps you can comment on the braking systems. From what I understand Alstom has four type of braking systems, three of them are implemented in Barcelona and one in Canada. This one in Montreal, Canada seems to be unique. (copied from: http://en.wikipedia.org/wiki/Montreal_Metro ) Montreal’s metro trains use electromagnetic brakes, which create retarding forces against the side rails of the track. The electromagnetic brakes are generated by the train’s kinetic energy until it has slowed down to about 10 km/h (6.2 mph). The train then uses composite brake blocks made of yellow birch injected with peanut oil to bring it to a complete stop. Two sets are applied against the treads of the steel wheels for friction braking. Hard braking produces a characteristic burnt popcorn scent. Wooden brake shoes perform well, but if subjected to numerous high-speed applications they develop a carbon film that diminishes brake performance. Johnny: It is a pity that OV cancelled in 1998 the construction based upon a legal technicality, and as result throwing away not only the planning phase (including the legal frame work of permissions), but also the part of the construction. The reason why the government… Read more »
Johnny Boy
Guest

Paul no matter how much you know about metros, I’m an engineer doing train and subway automation as profession so you’re welcome to engage in any discussion.
You could start right away with the brakes, I specified the problem but you did not counter it. Why not go ahead.

John T
Guest

What I don’t understand in all of this is what the difference is between the EU specifications and those required by BKV? If Alstom have built the coaches to the specifications set out in the contract, then they are going to win this case. Seems a real mess to me.

Paul
Guest

So, now we know your profession, JB.
But if that’s really what you are, then some detail sand sources, as requested (yet again) shouldn’t be too difficult.
Now’s your chance – troll or genuine poster?

Paul
Guest

Ron – no time at the moment, but I’ll try to come back to you on this tonight (GMT).

Johnny Boy
Guest

John T: Alstom probably didn’t even fulfill the EU specifications. Having two independent braking circles is a pretty basic requirement. Plus, there were no emergency exits on the trainsets – AT ALL.
Alstom should have finished producing the trainsets 2 years ago – yet they only managed to hand over one train for testing purposes.
The answer lies probably at the same place where the answer to the latest food scandal lies. Alstom probably thought that for us Eastern barbarians, this will be ok, no need to put in too much effort. Plus, they probably had strong political backing from the previous government (see my reference on how legal competence was handed over to a French court).
As their work turned out to be totally inadequate (and all this happened under the previous city leadership!), now they lie before court to keep the money. They won’t succeed, but they can play for time.
Paul: I’ve always been a genuine poster and I’ve long ago given up any hope to make you understand anything. Right now it’s you who is the troll for still failing to contribute anything meaningful here, let alone trying to rebut my arguments.

Eva S. Balogh
Guest

Paul: “So, now we know your profession, JB. But if that’s really what you are, then some detail sand sources, as requested (yet again) shouldn’t be too difficult.”
Last time he was a translator.

Kirsten
Guest

Eva, they might work in shifts.

John T
Guest

Johnny Boy – thats a lot of “probablys” in your answer. So what you are basically saying is that a world leader in the transport industry is supplying unfit goods that could endanger lives. Do you seriously think they’d take that risk? I think not – its commercial suicide. But of course, the easy way to check is to examine the unit they sent. If they are lying, its easy enough to prove.

Johnny Boy
Guest

Eva: “Last time he was a translator.”
I have two university degrees, one from BUTE, one from Corvinus. Unimaginable to you, eh?
John T: “Do you seriously think they’d take that risk?”
That’s why I’m using a lot of “probablys”. Because there are only a few things I know for certain, others are only my implications. And even I, an engineer working on this very area don’t consider myself competent enough to judge specific matters where I don’t have enough information. Something that never kept any of you from posting ignorant comments, blaming everything on the new leadership of Budapest without even understanding the problems.
I’m working for an even bigger (Europe’s largest) company in transport industry and even here, it happens sometimes that design flaws surface after time. The difference is in how the company handles these cases. If Alstom’s client were a bigger country, let’s say the UK, their behavior would have been entirely different.
“If they are lying, its easy enough to prove.”
This is what is set to happen, in my opinion, once a court treats the parties fairly.

Kirsten
Guest

Johnny, you are working for an international company in Hungary? (I do not expect you to consider Ikarusbus to be Europe’s largest company in the transport industry.) I think I wrote this already before but I cannot resist: one that has been robbing Hungary of its wealth in the past two decades…?

John T
Guest

Actually Johnny Boy, I’d say that this is a colossal cock up on the part of the previous Budapest administration / BKV. Incompetance goes across the whole political spectrum. And I certainly agree that Alstom haven’t been efficient in delivering to time, so they should suffer a penalty for late delivery.
The difference is in how the company handles these cases.
“If Alstom’s client were a bigger country, let’s say the UK, their behavior would have been entirely different.” – Not at all. It just needs an efficient contract manager – clearly there wasn’t one here.

Eva S. Balogh
Guest

John T.: “It just needs an efficient contract manager – clearly there wasn’t one here.”
Quite. BKV signed a very bad contract. For example, paying before delivery.

Member

I know this is off subject, and this would more likely to belong to our discussion abut Hungarian education.. Johnny Boy said that “I have two university degrees, one from BUTE, one from Corvinus. Unimaginable to you, eh?” THere is something wrong wit the Hungarian education as we can all see. I am sure Johnny Boy is a great engineer and translator, but how well rounded the whole package is, that is where the trouble lies.

Jano
Guest

Eva: “Quite. BKV signed a very bad contract. For example, paying before delivery.”
Actually the whole legal background of the metro project was incredibly slippery full of contracts like this one. As another example remember the Fővám tér metro stop case when the corporation who was building the station simply blackmailed the city leadership for more money. I might be wrong, but as far as I remember, Demszky paid up at least to some extent.

Johnny Boy
Guest

Eva: “BKV signed a very bad contract”
So why is Tarlós to blame then?
Kirsten: “one that has been robbing Hungary of its wealth in the past two decades?”
I didn’t expect you to be able to differentiate between companies of the productive sector and companies of commerce/finance. And you didn’t disappoint me, for sure.
Jano: “Incompetance goes across the whole political spectrum”
Correct me if I’m wrong but, as my memory serves, all this mess was made by only one side of the political spectrum and the other side is currently working on cleaning that mess up.
“Alstom haven’t been efficient in delivering to time, so they should suffer a penalty for late delivery.”
And the contract contains that if Alstom cannot get the type authorization from the Hungarian authorities, they cannot be held responsible for it.

Jano
Guest

JB: Note: It was not me saying that line.

Johnny Boy
Guest

Sorry Jano you’re right, I mixed you up with John T.

Ron
Guest

Johnny Boy: Correct me if I’m wrong but, as my memory serves, all this mess was made by only one side of the political spectrum and the other side is currently working on cleaning that mess up.
As far as my memory goes Fidesz and Tarlos had a number of seats in Budapest, and had the power to ask the right questions. Did they do this? I do not believe so. The answers would be going on record and could be used in a criminal case against those people, if their answers were a lie. Well either these answers were not a lie or Fidesz did not ask the right questions, or there are some incompetent prosecutors.
And the contract contains that if Alstom cannot get the type authorization from the Hungarian authorities, they cannot be held responsible for it.
Well they can be held responsible if the authorization is unreasonable witheld. Again the court decide.

Eva S. Balogh
Guest

JB: “Eva: “BKV signed a very bad contract” So why is Tarlós to blame then?”
You’re not too sharp for sure. Because Alstom already has the 30 billion!

Ron
Guest

Eva S. Balogh: Quite. BKV signed a very bad contract. For example, paying before delivery.
Paying before delivery is quite common in business, especially if it relates to long term projects, such as real estate, and I assume with these trains is more or less the same.
Normally, they use a so-called percentage of completion method or the so-called milestone method.
In such case the contract specify that if certain conditions are met or milestone reached the ordering party needs to pay a percentage or ageed upon amount.
I assume that this was the case, and therefore, the BKV had to pay. Question is that either Alstom did not meet the requirements, but somebody was sleeping, or Alstom met the requirements, and under the contract terms they had to pay.
As to the witholding of the approval if the BKV unreasonable witheld the approval they need to pay, if BKV changed at the last moment their demands, such as revised braking system or extra emergency door BKV have to pay. Btw I assume the last happened, and if that is the case may be Alstom has even a chance to charge extra (real)costs.

John T
Guest
“Correct me if I’m wrong but, as my memory serves, all this mess was made by only one side of the political spectrum and the other side is currently working on cleaning that mess up.” JB – I was referring to Hungarian politics in general. You have a bunch of clowns in power now, who took over from the previous bunch of clowns in MSZP. I dislike the whole “political elite” in Hungarian politics. In terms of the contract. if Alstom didn’t build the units to the specification set out in the contract, then it should be easy enough for the Hungarian side to point this out and win the case. BUT, if the specification was poor, and Alstom complied with EU rules because nothing more detailed was set out in the contract, then Alstom will win. Tarlos is blameless at the moment. But if Alstom win and he does not end up with a single train unit because he refuses to pay for the modified brakes (which if he is clever, he could get for nothing if they offset any penalty for late delivery against this work), he’ll lose HUF 30 billion for nothing. It is at this point… Read more »
Ron
Guest

I understand from a Dutch blogster that Tarlos is talking with Alsotom to solve this problem, as it seems that the BKV will not meet the deadline and therefore, will lose the financial backing.
http://www.scribblesfromhungary.com/ this blog is in Dutch.

Eva S. Balogh
Guest

Ron: “I understand from a Dutch blogster that Tarlos is talking with Alsotom to solve this problem, as it seems that the BKV will not meet the deadline and therefore, will lose the financial backing.”
Correct. Also new development. It was maybe on Monday that Tarlós asked the head of Alstom to come to Budapest. The verdit of the French court is expected maybe tomorrow.
Alstom is willing to sit down and talk but I’m afraid that Tarlós’s temperament is really not suitable for such delicate negotiations. But we will see.

wpDiscuz