Winnipeg Is Making Major Local Transit Bus Firm New Flyer More Likely To Fail

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I have a lot of sympathy for Winnipeg. I’ve been there for work many times. I’ve been there in their frigid, tens of degrees Celsius below zero winters. I’ve been there in their dusty summers. I’ve even tried to get across the main intersection that pedestrians still aren’t allowed to cross at ground level. I know people who live there who I respect a lot. I even know people who live there after they’ve retired with sufficient affluence to live elsewhere. It’s not an easy place to live, being in the geographical center of North America, yet being a relatively slowly growing city still far under a million inhabitants, so not qualifying for an IKEA, and having the well-deserved sobriquet Winterpeg.

Which is part of why it’s sad for me that Winnipeg is complicit in the likely bankruptcy of one of the region’s biggest employers, New Flyer, North America’s biggest bus manufacturer. I’ve written about New Flyer’s strategic blunder recently, where it is leaning into the seduction of higher individual unit revenues for hydrogen fuel cell buses paid 50% by the federal government’s Zero Emission Transit Fund.

The trap is that every hydrogen fuel cell vehicle cell bus they sell loses them in the range of three sales of battery-electric buses to competitors, especially Chinese ones. This means that they are losing market share steadily in an unforced error.

Why are they choosing this own goal? Because as noted, it’s seductive. They get more money for each hydrogen electric bus than for every battery-electric bus, and they get a lot more for their battery-electric buses than for their diesel buses. Further, Canada paying 50% for the hydrogen buses makes the sticker shock much easier for transit agencies in Canada.

But there’s another factor I hadn’t realized when I published on their strategic blunder: they are the only hydrogen bus manufacturer in Canada. That means that every transit agency in Canada foolish enough to buy the dead end technology is required to sole source it from New Flyer. That monopoly on the market means that they can jack up the prices even further than is warranted for a product which is much more costly to buy, much more costly to operate, much more costly to maintain and much less reliable than diesel or battery-electric buses. As I said, seductive.

Why are they losing three battery-electric bus sales for every hydrogen bus sale? A few reasons. The first is that they are sucking budget that could be applied over more battery-electric buses into the dead end of more expensive hydrogen buses. The second is that that because they aren’t focusing on the real long term solution, battery-electric buses, their battery-electric buses are inferior to competitors, especially Chinese ones, while also being more expensive. How expensive? How does a million Canadian per inferior battery-electric bus sound? The third is that they are creating seriously unhappy customers in the transit agencies that they sell to. When you dissatisfy your clients with an expensive, inferior product and there are cheaper, better alternatives on the market, it doesn’t matter how used to you they are, they are going to buy other buses in the long term.

This is all incredibly obvious, so why isn’t New Flyer figuring this out? Well, it’s because they are desperate. They almost went bankrupt a couple of years ago, in part due to COVID and likely in part due to Uber’s impact on bus transit in the USA and Canada, and only $200 million in governmental loans and credits bailed them out. Meanwhile, BYD has established a factory in California and is winning orders of hundreds of battery-electric buses because its vehicles are cheaper and better. Existential dread makes people and firms do stupid things, and one of the stupid things for New Flyer is hydrogen fuel cell buses.

I did say one other thing, didn’t I? The other thing is their seat on Board of Directors of the Canadian Urban Transit Research and Innovation Consortium (CUTRIC). That’s going to bite them because of the incredible conflicts of interest CUTRIC is enmeshed in, apparently entirely intentionally and without any strategic insight. I published on this recently, and I’ll summarize it here.

• Canada’s Zero Emissions Transit Fund (ZETF) allows gray hydrogen fuel buses with roughly the greenhouse gas emissions well to wheel of diesel buses, including natural gas and hydrogen leakage.
• The ZETF has made CUTRIC the sole organization that transit agencies can hire to do bus decarbonization studies and also receive 80% of the cost of the study from ZETF. Sole sourcing point one.
• CUTRIC’s Board has three firms which get a lot more money if hydrogen buses are chosen, Enbridge with its plans of hydrogen economy dominance (as well as its sister members of CUTRIC, Fortis BC and Fortis Alberta), Ballard Power with its fuel cells, and New Flyer with its sole-sourced, expensive hydrogen buses. Sole sourcing point two.
• CUTRIC creates incredibly flawed studies like the one for Brampton that’s off by about $1.5 billion on a $9 billion cost workup, which erroneously find that lots of hydrogen buses are required in transit fleets.
• Transit agencies, constrained by this setup, mostly have to use CUTRIC to do studies because organizations that would do good studies like Stantec, WSP, or Dunsky can’t compete with 80% discounts. CUTRIC meanwhile, is charging about double the going rate for the studies it does, and delivering deeply biased, low-quality results that wouldn’t get through quality control in real engineering and consulting firms.
• Transit agencies, constrained by this setup, end up having to get hydrogen fleets, spending potentially billions of dollars on more expensive hydrogen buses, more expensive hydrogen refueling systems and more expensive energy in the form of hydrogen.
• And the point of all this, decarbonizing bus fleets, isn’t achieved to nearly the same extent as battery-electric because gray hydrogen ends up being used.

You’ll note that the only organizations which aren’t losers in this are the natural gas transmitters and distributors Enbridge and Fortis, and Ballard Power. The first group can’t lose because they perpetuate pushing molecules for energy with governmental money and they defer real climate action.

Ballard can’t lose because its business model is losing money for its investors, having done so every year since 2000, an average of $55 million each year and $1.3 billion in total. Ballard doesn’t care that this is a dead end, riddled with conflicts of interest, failure of governance, and thermodynamics. That’s a plus for it.

But New Flyer can lose. It actually has a valuable role in the future. It delivers, warranties, and provides parts for buses which possibly hundreds of millions of people use annually across North America. It could maintain its market share leadership simply by committing to and focusing on battery-electric buses.

Instead, it’s following in the footsteps of Quantron. Who is that, you ask? It’s a now-bankrupt European manufacturer of battery-electric and hydrogen trucks of various sizes. It didn’t focus on battery-electric, and as a result its battery-electric trucks, like New Flyer’s buses, were inferior, with only 250 km range compared to Daimler’s equivalent products with 400 km range, and more expensive as well, €80,000 vs €60,000, adding insult to injury. To get 400 km of range from a Quantron van, you had to buy an even more expensive fuel cell vehicle, once again with governmental subsidies.

IKEA Austria bought this story. They had a lot of low range Quantron delivery vans. They got a lot of governmental money to buy hydrogen refueling facilities and Quantron fuel cell vehicles. Now Quantron is bankrupt. IKEA’s entire battery-electric and fuel cell fleet has no warranties, no OEM support, no maintenance contracts, and no parts supplier.

In this story, Quantron is New Flyer and transit agencies in North America are IKEA.

So how is Winnipeg complicit in all of this? Well, it is an even more a captive market for New Flyer than the rest of Canada and the USA because it’s the local firm. There’s no way to buy anything except New Flyer buses. There’s a close — very, very close — relationship between New Flyer, Winnipeg’s politicians and Winnipeg’s transit organization.

It’s so close, in fact, that Winnipeg didn’t bother to get CUTRIC with its massive 80% ZETF subsidy to do its fleet decarbonization study. One assumes that the people leading Winnipeg’s transit organization simply asked New Flyer what they should do, and it told them to buy equal numbers of battery-electric and fuel cell buses to start. Now, per council minutes, the fuel cell buses have been perpetually late, the hydrogen refueling system has been perpetually late, the requirements for safety for putting fuel cell buses inside depots have contributed to $105 million, 50%, cost overruns on the depot overhaul, and it’s impacting delivery and quality of actually useful battery-electric buses from New Flyer as well.

Winnipeg has applied for and received ZETF approval to buy New Flyer hydrogen buses which are a massive part of New Flyer’s current fiscal, quality, and delivery problems. Winnipeg is actively participating in New Flyer’s failure.

If Winnipeg’s council were wise, they would do the following. They would reach out to other major New Flyer transit customers in Canada. They would get them all on a Zoom call. They would stare each other in the eyes and agree not to give New Flyer more money for inferior products. They would agree to jointly meet with New Flyer’s Board of Directors and make it clear that they wouldn’t support any more waste of time or money on hydrogen buses, and that New Flyer would have to focus on battery-electric buses only. If not, they would shift all of their decarbonized bus orders to the several battery-electric only bus providers.

For the next point, Winnipeg can’t be this wise, but other transit agencies in Canada should be. They should band together, work with Doug Ford’s administration and invite BYD or Yutong to set up a battery-electric bus factory in Ontario. Winnipeg can’t do this because they would be creating competition for New Flyer, and that’s politically non-viable, but none of the other cities and transit agencies have New Flyer as a major local firm.

Winnipeg’s transit leadership will read this, I’m 95% sure, simply because my series on CUTRIC, per feedback from a lot of Canadian transit professionals, is making the rounds. A conversation with a Canadian fleet decarbonization professional today made it clear that the national CUTA transit conference this week included a lot of discussion of the series, and that a lot of CUTRIC’s members were taking my advice and exiting the organization.

But that doesn’t mean that Winnipeg’s leaders will internalize and act upon it. They will, instead, turn to their buddies at New Flyer, who will assure them that I’m a gadfly, a nobody, and wrong. And they’ll believe them. After all, they’re a tight, close knit, cozy group of politicians, bureaucrats, transit executives, and manufacturing executives in the geographic center of North America. Who am I?

Merely a coastal elite who has assessed every major form of transportation decarbonization, published multiple repowering curves through 2100, advises global investment funds and corporations on decarbonization strategies, and someone who gets paid a lot of money to speak for an hour on the subject, even over Zoom, never mind what I charge for showing up in person.

Oh, also someone who loves transit, cares for it, wants it to succeed, and who has used transit on the four continents where he has lived and worked.

Transit matters. I’m a Canadian who has lived, worked, and played in far more of Canada than most people, in part because I’m a Canadian military brat and in part because I had a major technological transformation architect, program manager, and leadership role with a big tech consultancy for years. I’ve run to catch buses, I checked a bus schedule and caught a bus most recently three days ago, and I rejoiced when I could tap my Apple watch to pay on transit in Vancouver, Toronto, and Montreal.

The strategic advice I’m providing to Canada’s government, Canadian municipalities, CUTRIC, and New Flyer for free, global firms and funds pay me a lot of money for every year. It’s possibly a strategic mistake to give it away for free, but my motives are to accelerate decarbonization of transit in Canada while enhancing ridership reliability and experience quality. Right now, I’m seeing many indicators that I’m driving the conversation in a positive direction.

My series is a pro bono give-back to the country and cities I love. Vancouver and Toronto are my home cities, having moved to each of them twice. I’ve lived and worked in every other major Canadian city, wandering around them for hours at a time and enjoying their unique urban flavors. I’ve done the same with dozens of global cities, most recently Brussels, where I spoke about European competitiveness with China and the USA on stage with a European member of parliament and the energy minister of a European country.

Transit matters. Canadian transit is heading down a fork in the path that leads to failure, no climate wins, and lost money. With luck, I’m positioned to nudge Canadian transit agencies and firms back on track. If not, Canada will throw billions down a hydrogen money pit, Canadian transit agencies will frustrate their riders with bad service, Canadian municipalities will waste a lot of their own effort and tax revenue, and New Flyer will dissolve into receivership. It’s worth my pro bono efforts to avoid this. I’m happy to let my international clients fund my attempts to prevent Canada going down the wrong path.

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