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Thursday, March 18, 2010

Disney World Bullet Train May Spur U.S. Sales of Japan, China Locomotives‏

Bloomberg News
New US High-Speed Rail System About To Break Ground

Walt Disney World in Florida may be the next stop for bullet-train makers in Japan and China.

Central Japan Railway Co. and China South Locomotive & Rolling Stock Corp. are competing for the $8 billion President Barack Obama granted for 13 high-speed corridors across the U.S., including a Tampa-Orlando line that may include a station at the Walt Disney Co. resort in Orlando. The Japanese company, also known as JR Central, is eyeing North America as a shrinking population at home limits its growth.

France’s Alstom SA, Germany’s Siemens AG and Canada’s Bombardier Inc. also want to sell trains, tracks and operating equipment under an initiative that Transportation Secretary Ray LaHood called “an absolute game-changer for American transportation.” The high-speed corridors include New York- Buffalo, New York; Los Angeles-San Francisco; and Chicago- Detroit.

“High-speed rail is going to be a big industry in the U.S.,” said Masayuki Kubota, who oversees the equivalent of $1.8 billion in assets at Daiwa SB Investments Ltd. in Tokyo. “A lot of companies are going to try and get a piece of the action.”

‘Top of Our List’

Bullet trains are generally considered to be those traveling faster than 180 mph (290 kph). Japan is home to the world’s first “shinkansen” and the biggest high-speed network, carrying 308 million people in the 12 months through March 2009. JR Central runs Japan’s busiest bullet-train line.

By comparison, Amtrak’s Acela Express, which can reach 150 mph between Washington and Boston, carried 3.4 million passengers in fiscal 2008. Amtrak, which received $112 million of the Obama package to upgrade its Northeast Corridor, uses trains from Alstom and Bombardier, the world’s biggest maker of passenger locomotives.

Nagoya-based JR Central is working with U.S.-Japan High- Speed Rail, backed by Washington-based New Magellan Ventures LLC, to sell its train systems in North America.

“Florida is at the top of our list,” JR Central Chairman Yoshiyuki Kasai said yesterday. “Our marketing partners in the U.S. have been in close contact with the routes we have targeted.”

Those include Texas and a line between Los Angeles and Las Vegas, he said.

‘Smoothest Train’

JR Central controls Japan’s largest maker of bullet trains, Nippon Sharyo Ltd., whose shares have dropped 8.6 percent this year to 539 yen in Tokyo. JR Central has risen 11 percent to 688,000 yen, compared with a 1.7 percent gain in the Nikkei 225 Stock Average.

JR Central showcased its trains to representatives from U.S. high-speed rail groups and embassies in November. Its N700 model accelerated to 205 mph within minutes of leaving a station in western Japan.

“It was probably the smoothest high-speed train I’ve been on,” Robert Eckels, chairman of the Texas High Speed Rail & Transportation Corp., said as he stood on the platform after the midnight run.

The not-for-profit corporation aims to link San Antonio, Dallas-Fort Worth, and Houston by 2020.

Kawasaki, Hitachi

JR Central isn’t the only Japanese trainmaker seeking to boost exports. Kawasaki Heavy Industries Ltd., of Kobe, made the trains for Taiwan’s $15 billion high-speed line that started operating three years ago between suburban Taipei and Kaohsiung in the south. Hitachi Ltd. of Tokyo made high-speed trains that run from London’s northern suburbs to the financial district.

More than 50 countries already use trains or rail parts made in China, which has three high-speed rail lines and plans to connect all provincial capitals and cities with more than 500,000 citizens by 2020, the Ministry of Railways said.

State-owned China South Locomotive and China CNR Corp. signed overseas contracts worth a combined $2.3 billion last year, according to their annual reports. The sales included switches to the U.S. and 20 locomotives to New Zealand.

“China’s rail parts and trains at least have advantage in price,” said Han Weiqi, an analyst for CSC International Holdings Ltd. in Shanghai. “Chinese trainmakers want to go abroad because they want to sell the products at higher profit margin.”

General Electric Deal

New York-based General Electric Co., the world’s biggest maker of freight locomotives, announced a partnership with China’s Ministry of Railways in November to manufacture equipment for U.S. high-speed rail projects. Shao Renqiang, board secretary for China South Locomotive, said the company will “actively” participate in U.S. railway construction.

“It’s too early to say which lines will use Chinese products,” Shao said.

Disney, the world’s biggest theme-park operator, offered to donate 50 acres (20 hectares), worth about $25 million, to Florida for a station at its Orlando resort, according to a Sept. 28 letter from Meg Crofton, the resort’s president.

In return, the Burbank, California-based company wants the rights to approve the station’s design and operate it. The link is scheduled to begin operating by 2015, with plans to reach Miami by 2017.

The $1.3 billion awarded by Obama is half the amount needed for the line. Florida, where unemployment rose to a 35-year high in December and the budget shortfall is expected to be $2.7 billion this fiscal year, is negotiating with the U.S. Federal Railroad Administration for the rest.

“The Europeans and other Asian competitors are all eyeing the U.S. market,” said Michael Finnegan, an executive vice- president at U.S.-Japan High-Speed Rail. “The competition will be fierce.”