Recruiting in China

THE next generation of trains for Sydney's rail system will be built by a Chinese company with little experience delivering passenger trains to a developed country, a move that will cost hundreds of jobs in the Hunter region.

The Premier, Morris Iemma, made no mention of the Changchun Railway Vehicle Company a fortnight ago when he awarded a $3.6 billion order for 626 rail cars to a consortium headed by the maker of CityRail's Millennium Trains, Downer EDI Rail.

The Reliance Rail consortium said at the time the experience of EDI in building and maintaining the Millennium Train was a "key plank" in securing Australia's largest-ever train order.

But EDI will only be responsible for the design and the final fit-out of the double-decker carriages, to be imported from China. Their electronics will be provided by the Japanese company Hitachi.

Changchun boasts on its website the "great progress" it has made in the international rail market, referring to Iran, Pakistan and Zimbabwe as its notable export success stories. Its carriages also operate in the North Korean capital, Pyongyang.

The 626 carriages in the contract are due to enter the Sydney rail network between 2010 and 2013. They will also replace 498 carriages in the existing fleet.

The Minister for Transport and Deputy Premier, John Watkins, said the Reliance bid provided a superior train at better value for money, "making it a clear winner".

The Australian Manufacturing Workers Union campaigned for the contract to go to two local bidders, EDI or United Goninan. The union's state secretary, Paul Bastian, welcomed the contract going to EDI, but blamed the State Government for requiring only 20 per cent local content. EDI and United, against foreign bidders, had no choice but to look at sourcing some trains from overseas to mount a competitive bid, he said.

EDI says 290 jobs will be created at its Cardiff plant in the Hunter from the contract. However, there is expected to be a net loss of rail-related jobs in the Hunter. United may have to lay off some of the 550 workers at its Newcastle plant.

The NSW director of Australian Industry Group, Mark Goodsell, said the contract required less local content than comparable contracts let by other states.

"There is a risk - a risk to local capacity to build trains and our ability to service them in the future," he said. He warned of flow-on effects to other manufacturing with the loss of skills.

Mr Watkins defended Changchun's quality and reliability. "CRC has significant experience building trains in joint-venture arrangements with major international rolling stock manufacturers, including Alstom, Hitachi, Bombardier and Siemens. It also has significant expertise in stainless steel car body construction and is building 540 stainless steel cars with Bombardier for the Beijing Airport line for the 2008 Olympics."

It was one of few companies that could produce more than 2000 carriages a year.

The Opposition said the project was running late and had blown out from $1.5 billion to $3.6 billion.