US Treasury urged to probe company building MBTA railcars

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STATE HOUSE — Dozens of members of Congress have asked U.S. Treasury Secretary Jacob Lew for an investigation into the Chinese railcar company building Red and Orange line subway cars for the MBTA.

The China Railroad Rolling Stock Corporation, or CRRC, has used subsidized financing from the Chinese government to “underbid private competitors” for contracts in Boston and Chicago, the 55 members of Congress wrote in a letter dated July 15.

The letter led by Oregon Democrat U.S. Rep. Peter DeFazio and Republican Virginia U.S. Rep. Randy Forbes also keys off China’s alleged cybercrimes to raise concerns that “critical rail infrastructure and the sensitive cargo that it carries will become increasingly vulnerable to hackers as the proliferation of Chinese state investment continues without adequate scrutiny.”

DeFazio is the ranking member of the U.S. House Transportation and Infrastructure Committee.

“As with all vehicle contracts, CRRC MA completely complies with the specification and provides vehicles of high quality and competitive pricing,” said company spokeswoman Lydia Rivera. “As the world’s largest railcar builder, supplying railcars to more than 13 countries, we have not been notified of any security problem.”

The deal for the Chinese company to build 284 new subway cars includes the construction of a giant assembly facility in Springfield where the company made plans to establish its U.S. headquarters.

Announced in the final months of Gov. Deval Patrick’s administration, officials hailed the $566 million deal, saying it would create jobs, reduce subway wait times and fit an average of 15 more passengers per car.

CRRC held a groundbreaking at the Springfield site last September attended by Gov. Charlie Baker and other dignitaries. According to Transportation for Massachusetts, the railcar manufacturing contract was about $200 million below the original estimate and the Springfield facility will be 150,000 square feet.

Last year a judge denied Hyundai Rotem Company’s attempt to block the deal. The rival alleged there must have been improper communications when officials from the company met in Hong Kong with Patrick and former Transportation Secretary Richard Davey.

The product of a recent merger, CRRC is the largest railcar manufacturer in the world and “four times larger than the entire U.S. rail manufacturing sector,” according to the congressional letter.

Congressman Michael Capuano, a Somerville Democrat who sits on the transportation committee, did not sign the letter.

“The company in question is currently building a facility in Massachusetts that will result in additional jobs,” a spokeswoman wrote to the News Service in an email. “Rep. Capuano thought it was fair to wait to learn more about the issue before signing onto a letter like this.”

The letter asks for an investigation by the Committee on Foreign Investment in the United States to investigate the “pending transfer of ownership in the Vertex Railcar Corporation involving” CRRC and Majestic Legend Holdings.

On his website DeFazio explains he wants an investigation into a “joint venture with the North Carolina-based rail manufacturing company, Vertex Railcar Corporation,” CRRC and Majestic Legend Holdings – which is “associated with” the parent company of computer manufacturer Lenovo, according to the letter.

Lenovo’s parent, Legend Holdings, and CRRC, are both Chinese state-owned entities, the letter said.

“Given the ownership and history of these companies, the Chinese government is able to utilize the companies to pursue its international trade agenda,” the letter said. “This agenda has aggressively asserted Chinese interests into a range of foreign markets such as Australia, Pakistan, the United Kingdom, and others.”

The inter-agency committee chaired by Lew can make determinations that a transaction “presents national security risks,” enabling the committee to impose conditions or refer the matter to the president, according to the Treasury’s website.

“In effect, American railcar manufacturers and its associated industries, such as steel, are now competing against the resources of the world’s second largest economy,” the letter argues.

— Written by Andy Metzger

Copyright State House News Service