Bus company is cruising in Minnesota

What's green and growing, cuts oil consumption and traffic congestion, and makes leading-edge technology that employs 1,025 Minnesotans?

The New Flyer bus company.

The little known Winnipeg-based company, whose U.S. manufacturing-and-distribution base is Minnesota, has added about 125 jobs over the past year at plants in St. Cloud (650 employees) and Crookston (375 employees) at wages that can pay as much as $25 an hour for line workers with full benefits.

The company will make more than $1 billion worth of buses this year for Metro Transit and other public and private transit operators here and around the world. At a time when layoffs and plant closings dominate most of the headlines, New Flyer's growth is a welcome shift.

Transit is a growth industry. And it's in the sweet spot as the federal government sends millions of dollars to transit authorities as part of the economic-stimulus effort to put Americans back to work on transportation projects.

Clean, diesel-fueled buses hauling 50 to 90 passengers from downtown Minneapolis to St. Paul, White Bear Lake or Apple Valley may not be sexy. But for a growing number of commuters, transit is cheaper than a second or third car, reduces rush-hour congestion and cuts the U.S. oil tab by billions annually.

"As a bus manufacturer, we're into diesel-electric hybrid technology, compressed natural gas and clean diesel," Paul Soubry, chief executive of New Flyer, said in an interview last week. "The consumer wants affordable, comfortable and green, and that's what transit authorities want to deliver.''

Despite the recession and falling gasoline prices, transit ridership grew 4 percent in 2008 to reach the highest level of ridership in a half-century, according to the American Public Transit Association. Meanwhile, car miles traveled dropped about 4 percent last year, according to the U.S. Department of Transportation.

In addition to cutting traffic congestion and pollution, buses and light-rail trains will help the United States conserve as much as 5 billion gallons of fuel this year.

"There's a 'must' rider who may not own a car and a 'choice' rider who does, but who prefers not to drive to work if there is a bus or [train] alternative,'' Soubry said. "You're starting to see a more comfortable transit experience and there are more 'choice' riders coming aboard. You've got bus rapid transit corridors to the suburbs, longer distances between stops and, in the city or on the highway, sitting in traffic is not fun."

Making buses for the nation

Capital spending on mass transit equipment is growing in America, a bright spot in an otherwise bleak manufacturing sector marked by further job losses and the prospect of bankruptcy at General Motors and Chrysler. At more than 1,000 workers, New Flyer's unionized Minnesota operations have surpassed the payroll of the St. Paul Ford Ranger truck plant, which employs about 700.

New Flyer makes about 40 percent of U.S. buses. The Minnesota plants build buses for customers throughout the country, including Metro Transit.

This month, the St. Cloud plant is building 11 60-foot, "articulated" Metro Transit buses that bend in the middle and seat as many as 80. The cost is $6.4 million, including spare parts and warranty. They join a fleet that includes 160 New Flyers. And Metro Transit has another 25 on order.

Metro Transit ridership grew 6 percent in 2008 and is up 17 percent over the last four years. It has the highest bus patronage per "revenue hour," an efficiency measure, among its peer group of cities such as Portland, Seattle, Houston, Pittsburgh and Denver.

"We have found New Flyer to be focused on delivering a quality vehicle and equally focused on working with its transit agencies to continually improve its product and support its customers," said Jan Holman, Metro Transit's director of bus maintenance.

New Flyer went public in 2005 and trades on the Toronto Stock Exchange. The company earned $87 million in 2008 on revenue that grew 8 percent to $961 million. At the end of 2008, New Flyer had an order backlog of 9,531 buses valued at $4.1 billion, up by 44 percent over the first of the year.

Three out of four Canadian analysts who follow the company, which has a market value of about $500 million, have rated the stock a "buy" in recent weeks. Shares are trading at about $9, a third off its 52-week high.

There are several short-term questions about near-term performance and profit margins, said Paul Holden, an analyst at CIBC World Markets in Toronto. However, he recommends the stock because it is the largest North American player in a growth market.

"This is a big play on the federal stimulus spending in the U.S.," said Youssef Abboud of Clarus Securities in Toronto. "Every transit authority in the U.S. is investing in buses, including Philadelphia, which just announced that it's buying 440 diesel-electric hybrids over the next four years for $256 million. New Flyer has 42 percent of the market. Guess who's going to benefit. New Flyer and those plants in Minnesota."

New Flyer is adding more workers, although it declines to say how many, in 2009.

"This is the biggest, most challenging and satisfying job I've ever had," said Dave Bendorf, manager of the fast-growing St. Cloud plant and a nine-year New Flyer veteran. "We have an excellent workforce in Minnesota, and that's part of why we're successful. We are proud of the fact that we make energy-efficient buses that are part of America's transportation and energy solution."

National attention

Last month, Vice President Joe Biden hosted a town hall meeting at the plant to discuss improving the plight of the American working class, whose wages have languished over the last decade and as the United States lost manufacturing jobs to cheaper-wage nations. To be sure, much of the federal funding for buses for America requires they be built in America. Not a bad idea.

New Flyer also builds buses and shuttles for private operators. Soubry, who joined New Flyer in January after 20 years with an aircraft-maintenance company, said Minnesota works because of the skilled, dedicated workforce spawned by local high schools, technical colleges and down-sizing companies. The state also is in a central location from which New Flyer delivers buses across the country.

Critics of public transit note that fares of $1.50 to $3 per ride typically cover less than half the cost of the ride. Yet the far-flung interstate highway system and local roads are built and maintained at public expense. Many counties have concluded it is cheaper to cut congestion using transit than to expand or build new roads. Moreover, most governments can't raise enough money through existing fuel and motor vehicle taxes to even maintain existing roads and bridges.

The fastest-growing Metro Transit business is employer-sponsored multi-ride cards that subsidize employees for using transit, according to Metro Transit.

Soubry said New Flyer and the transit customers it serves increasingly are focusing on convenience, comfort, cost and the environment to generate more riders and assuage state legislators and localities who provide operating subsidies. In other words, transit is being marketed to win over those ''choice'' riders. And it's tough to knock the bus as second-class transportation when it whizzes by your traffic jam on an express lane.

New Flyer should hit record revenue this year, replacing old buses that average a street life of 12 years with more efficient models that burn a variety of fuels. And Minnesota will get an unspecified number of new jobs.

"In Minnesota, we are the integrator and assembler of a lot of technology sent from 200 different suppliers in 23 different states," Soubry said. "We've got to train and retain good employees. Without them, we don't have a business.''

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com