Business ethics is not the strong suit of Russians and Hungarians

Almost a year after the City of Budapest decided that the Russian company Metrovagonmash would refurbish the old trains of the Metro 3 line, the first reconditioned train arrived from Russia via Poland.

Originally, the city had wanted to purchase new cars, especially since the old Soviet-made trains on Metro 2 had already been replaced by new modern Alstom trains and the brand new Metro 4 line also uses Alstom cars. In the final minutes of the negotiations, however, the government announced that they would guarantee the 60 billion forint loan the city needed only if the money was used to recondition its cars, not for the purchase of new cars. Once that was decided, the choice was between Metrovagonmash and Skinest Rail, an Estonian company. Skinest’s offer was lower by 9 billion forints, it offered a 30-year guarantee instead of 25, and its motor design would have ensured savings in energy use. But Skinest was excluded from the bidding process because it had eight “formal” mistakes in its bid. These so-called “formal” mistakes always come in handy when Hungarian authorities want to bar someone from the bidding process.

Already at that point Erzsébet Gy. Németh, the only DK member of the city council who alone voted against the Metrovagonmash contract, suspected a connection between the Russian loan to build the Paks II Nuclear Power Plant and the Russian firm’s winning tender. Antal Csárdi, the only LMP member of the body, said at the time that “all signs point to the likelihood that Viktor Orbán during this trip to Moscow in February 2015 promised Putin that the Russian company would get the job.” He told Magyar Nemzet that Alstom sold new metro trains to Paris for less money than Budapest was paying the Russians for refurbished ones.

So, the first train arrived and with it the great surprise. There is a good likelihood that the train, consisting of six cars, is not the one sent to Russia to be reconditioned but a product that Metrovagonmash began manufacturing in 2009. Since the train’s arrival, experts who have examined it are coming to the conclusion that the Russians didn’t touch any of the old trains, described by many as wrecks. Instead, they got rid of some of their older, unsold trains sitting in their warehouses.

The first reburbished/new metro cars / MTI / Photo: Zoltán Máthé

The first refurbished/new metro cars / MTI / Photo: Zoltán Máthé

But why would the Russians resort to such deception? According to those who are convinced of the deceit, the Russians couldn’t possibly compete with manufacturers like Alstom with their less modern, technologically less advanced trains and therefore would most likely have lost in an open bid. But if that is the case, the Hungarian government is also implicated. After all, it was the Orbán government’s decision about the loan guarantee that forced BKV to sign a deal for reconditioned trains and thus enabled Metrovagonmash to get rid of 37 trains with 222 cars. It is likely that BKV, the city’s transit authority, was also complicit in the deception because immediately after signing the contract, the Hungarian side came up with new requirements, possibly to match the model the Russians were planning to send to Hungary.

Mayor István Tarlós doesn’t find anything wrong with this fraud concocted between the Russian and Hungarian governments, Metrovagonmash and BKV. His first reaction was that the opposition’s favorite pastime is hairsplitting. “Let’s suppose for the sake of argument that these cars are new. Then when did the city get a better deal? When for its money it gets refurbished ones or completely new ones?” He has no problem with the Russian and Hungarian governments’ trickery as long as, in his opinion, the city ended up on the winning side.

But did the city do well on the deal? Figures provided by media outlets differ greatly. Origo states that the city paid 69 billion forints for reconditioning the old cars while brand new trains would have cost 90 billion forints. However, according to Origo’s calculation, the cost of refurbishing the cars in Russia actually cost 84 billion forints because the city had to borrow 9 billion forints in foreign currency and the interest for the 15-year loan is 15 billion forints. Portfolio, disregarding any added costs, comes up with €1.33 million per Alstom car as opposed to €0.98 million for the Russian ones. But even if these cars are new, Portfolio adds, their technology is obsolete.

What are the technological deficiencies? What most people will miss will be air-conditioning. The Russians installed some kind of ventilation, but it is hard to tell whether this solution will do the trick. Also, the train uses an outmoded spring instead of modern air suspension and has an antiquated ATO (automatic train operation) which, according to Index, is as if we filled a modern office with Commodore 64s. And Budapest is stuck with these trains for 30 years.

Shortly after the appearance of the Népszabadság article BKV released a lengthy statement in which it “rejects the criticism of the high-quality reconditioning” of the metro cars. It touts the “most modern components,” the “extension of the guarantee without any additional cost,” and “the early delivery of the prototype.” The statement complains about the negative attitude of some people and expresses BKV’s joy at receiving the first six-car unit. And it goes on and on. Only one thing is missing: an outright denial that these cars are new. Attila Gulyás, the head of one of the unions of BKV workers, is taking BKV’s side. He claimed in a radio interview that BKV’s representatives visited Metrovagonmash during the reconditioning phase, and therefore “there are eyewitnesses to the reconstruction.” Otherwise, Gulyás finds these cars much more attractive than the Alstom ones. I guess he likes the Russian-style design, to which he is more accustomed.

Erzsébet Gy. Németh (DK) has already decided to file a complaint based on the suspicion of corruption, fraud, and deceit. LMP is contemplating the same unless BKV within a week can come up with creditable proof that the cars that arrived from Russia are refurbished and not new. As long as the chassis is new, a vehicle is considered to be new, and it is not difficult to determine whether the chassis is forty years old or brand new. LMP’s Antal Csárdi claimed that the Russians accompanying the cars encountered some difficulties with the custom officials, who had their doubts about the identity of the cars. If true, this is an unprecedented case in the business world.

June 3, 2016
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June 3, 2016 8:19 pm

London Calling!

Orban and Lazar must be laughing all the way to their Swiss bank accounts after coming up with this clever ploy with Putin.

If the original trains are of Russian origin (which they undoubtedly are with the dour, drab, communist film-era look) then they can only be refurbished by old communist equipped factories that still have the jigs – or so the EU would think.

Pity the poor passengers as the trains trundle out of Budapest to the Hungarian environs underground – in the 38C heat, the mosquitoes, and ‘Soviet’ suspension – with no air conditioning.

It’s ironic that the first trains supplied to London Underground were trains built by Rába in Gyor, Hungary. They lasted forever! Rába are still going and need the business.

These Russian cast off trains will: fool the EU; please Putin; and line the pockets of Orban and Fidesz.

Putin has another coup – cocking a snoop at the EU.

The train for Orban’s Choo Choo in Felcsút is refurbished 1960′s stock too wasn’t it?

So it’s back to the future – or deja vu all over again!

June 4, 2016 1:45 am

Has the Estonian firm chosen to complain to the EU about these irregularities?

June 4, 2016 2:36 am

This is so crazy – I don’t know how to react …

No air condition?

A bit OT:

I remember my last train ride on a German Intercity (10 years ago – I decided to not use the German railway any more if possible …) where the A/C had broken in the middle of a heatwave – horrible!

We were told that the A/C was working in the next car, so I moved there – but that car was a “smoking area”, almost as horrible!

Later I read that the design in some trains was such that for fear of overheating the A/C would automatically switch off completely when the outside temperature rose above 32 degrees – because of course this never happens in Germany …

So you can find idiots everywhere …

June 4, 2016 2:49 am

When I heard that the Russians had delivered new in stead of refurbished trains I reasoned that this had been the plan right from the beginning. My limited imagination had not allowed me to anticipate it.

This affair shows once again that we (and the EU) should never believe a word comming from the mouth of Orban or Putin.

June 4, 2016 5:45 am

Chicago is having the Chinese build new subway trains here in Chicago. I hope it’s a better deal than Budapest got with the Russians. But at least most of the jobs will be located here in Chicago. See

June 4, 2016 8:11 am

What is the point that needs to be reached before Hungarian politicians will be charged for deception corruption, fraud, and/or mismanagement of public funds? What is the moral borderline of Fidesz members? What is the point when they will say: It is not the future I want fir my child, these are not the ethics, and disposition I want to bring up a family and a country in? How can these people justify not speaking up? They can say whatever they want but they must know this is not right.

June 4, 2016 4:11 pm

Some 1, sadly, they do not know that it is not right. When I complained to a friend in Hungary that a Budapest cabbie tried to short change me she said, well, he does not earn very much and you seem to. This was in 1975.

June 4, 2016 9:55 am

Re: ‘Putin has another coup – cocking a snoop at the EU’

Hehe and but moreso onto the Budapestis. I’d have to think his FSB has a Magyar ‘rail’ section. The ‘straphangers’ should watch out what could be in the seats and windows. Could the villamos’ be next? Sorry for my paranoia but it must be the nature of things with most political and ‘bizness’ events there. When it comes to my experience when riding the Magyar ‘rails’ that was sort of the theme with my visits in the Kadar age. How can I put it? Very Orwellian.

June 4, 2016 11:07 am

A bit OT – but also about railway cars :):

O was in Cairo last week and BBJ reports:

Hungarian Prime Minister Viktor Orbán, Egyptian President Abdel Fattah el-Sisi and business leaders from both Hungary and Egypt gathered at a forum in Cairo yesterday to discuss business opportunities between the two countries, according to reports.

Orbán drew attention to the financing agreement between Hungary and Egypt signed yesterday to make way for the delivery of 700 carriages to Egypt’s state railway, the news agency reported.

What kind of railway cars are these – old Hungarian passenger cars or what?
Sounds a bit strange to me …

June 4, 2016 6:40 pm
I’d be more worried about the outdated ATO than the lack of A/C. No A/C will make you rather uncomfortable, but an outdated ATO could make you (and hundreds of others) rather dead. As for the ‘definition of refurbished’, those familiar with the BBC sitcom Only Fools and Horses will remember when Trigger wins an award for having owned the same broom for 20 years – it has had 17 new heads and 14 new handles, but he insists it is still the same broom… More seriously, the point of a refurbishment is to update the vehicle (e.g. with modern electronics and safety equipment , A/C, double glazing, better seats, etc) and to replace parts that are worn or will become dangerous. So, you would expect obvious changes, like A/C, new seats, etc, and you would expect things like new wheels/bogies, new motors and control gear, etc. But I would be surprised if the body itself would be replaced, as bodies pretty much don’t wear out and can easily be adapted to take new windows and doors and repainted. So the ‘new’ cars should be fairly easily recognisable as refurbished, rather than replaced. But, if the bodies have been replaced… Read more »
June 5, 2016 3:43 am

Paul – apparently you haven’t looked closely at the bodies of some of the cars running in Metro 3. Some of them have rotted out completely.

Roderick Beck
Roderick Beck
June 6, 2016 1:57 pm

It is probably cheaper long term just to buy new rather than undergo extensive renovation. Don’t kid yourself.