The Reagan administration refused yesterday to subsidize a Michigan firm to help it wrest a $650 million subway car contract from a Canadian company, arguing that the American concern offered an inferior product and probably wouldn't have won the deal anyway.
Treasury Secretary Donald T. Regan said the administration would not match a low-interest, subsidized loan to New York City that the Canadian government provided to help clinch the 825-car contract for the Bombardier Corp. of Quebec, even though the administration had angrily attacked the Canadian loan as unfair.
The interest rate is 9.7 percent, well below the minimum export credit formally agreed to by major industrial nations.
The subway car contract has become a very sore point in the growing political protest over the loss of American jobs to foreign manufacturers employing unfair trade practices.
Some members of Congress and organized labor had opposed the Canadian deal because they said it gave foreign countries carte blanche to flout international trading agreements and "steal jobs from America." They also said the administration talked tough about competing with foreign governments but refused to follow up with action.
Regan said that, although the Canadian financing was improper, it wasn't a deciding factor in the New York Transit Authority's award to Bombardier; thus the administration by law couldn't authorize a matching subsidy from the Export-Import Bank.
Ironically, although the case has been billed as a "Buy America" issue, the Michigan firm, the Budd Co. is a subsidiary of a German firm and the Quebec-based Bombardier Corp. plans to assemble the Japanese-designed cars in Barre, Vt., under license from Kawasaki Heavy Industries of Japan. The Japanese link helped win the deal for Bombardier, the MTA said, because it considers Kawasaki cars to be "unsurpassed in quality."
Under the Budd proposal, 60 percent of the product would have been made by Americans, while 40 percent U.S. labor would be used by Bombardier. The Michigan congressional delegation had lobbied hard to assist their economically depressed state.
The New York agency "considered Bombardier to be the superior bidder in terms of availability and cost of financing, the amount of work done in New York State, reliability of delivery and quality of design, engineering and performance, including compatibility with cars already on order by the MTA," Regan said. "Accordingly, I have concluded that Bombardier would be awarded the contract even if Budd were able to offer matching financing . . . "
The president of Bombardier said the decision "clearly indicates that the order . . . was won fairly in open competition." Richard Ravitch, chairman of the transit authority, said he would go ahead with the Bombardier contract.
According to the MTA, Bombardier provided superior financing and a $1,115 advantage in price per subway car. Although Budd promised to deliver the last car seven months earlier than Bombardier could, the MTA said Budd had been as much as one year late in delivering cars to other subway systems and has a 1,000-car backlog at its plant in Pennsylvania. Bombardier deliveries have been timely, the MTA said.
In addition, Kawasaki recently won a bid to build 325 subway cars for the transit authority.
The MTA said it chose Bombardier in part to spread its business among several manufacturers. It had earlier placed an order with Budd for 316 commuter cars for its Long Island Rail Road line, while Bombardier has not previously supplied equipment to the transit authority. The Bombardier contract also promised more work for New York State suppliers.
Regan was asked whether his decision yesterday signaled that the administration will permit foreign competitors to use unfair trade practices to penetrate the U.S. market. He replied that such decisions will be made case by case, according to the evidence.
Budd denied Treasury's assertion that its product and package weren't as good as Bombardier's. "Budd, along with the vast majority of U.S. businesses can compete effectively with foreign producers but competition must be fair and we think the U.S. government today has failed in its obligations to the private sector," the company said in a statment.
Sen. Donald W. Riegle Jr. (D-Mich.) likened the situation to sales of imported cars, which he said cost hundreds of thousands of jobs and are "a major source of the unemployment in our country today."