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Report: Vertex Railcar owes nearly $45.4 million

A tank car sits on track. Image: Vertex Railcar Corporation

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WilmingtonBiz.com reports that CRRC Yangtze Co. Ltd., owner of 22% of Vertex Railcar, claims nearly all of the $45.4 million in debt listed in the Chapter 7 petition filed in U.S. Bankruptcy Court in Delaware. Two other Chinese companies — Wuhan Kemai Machinery Manufacturing Co. Ltd. and Wuhan Flying Free Logistics Co. Ltd. — list debts of $92,561 and $373,273, respectively.

The involuntary Chapter 7 petition generally is a device for liquidation to pay off debts.

Vertex announced in 2014 it would enter the freight-car business at a former crane manufacturing plant, creating 1,300 jobs — although the WilmingtonBiz report says the company never employed more than 200. It eventually closed in 2018.


CRRC’s move to become part owner of the company drew calls for a congressional investigation in 2016. CRRC and Majestic, a Hong Kong-based private equity firm which took a 45% stake in the company, were eventually cleared to complete the deal following a review by the Committee on Foreign Investment in the United States.

COMMENTARY: Lesson Learned

The lesson for the Railway Age audience is that well-intentioned local job creation excitement, plus a focus on U.S. congressional oversight about China’s entrance into the U.S. freight car building market, was likely misplaced energy.

It appears relatively little was done about fundamental market entry risk analysis. Where was the market entry and sizing due diligence?

Now, investors are looking around for recovery of some kind from someone. Apparently no one was tasked with prudently protecting the investors with a SWOT report as to too many builders.


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Jim Blaze

Jim Blaze is a railroad career economist with an engineering background and a strategic analysis outlook. Jim’s career spans 21 years with Consolidated Rail Corporation (CONRAIL), 17 years with the rail engineering firm Zeta Tech Associates, 7 years with the State of Illinois Department of Transportation in Chicago urban goods movement research, and two years studying what to do with the seven bankrupt and unrecognizable Northeast railroads at the federal agency USRA. Now primarily a teacher and writer, Jim likes to focus on contrarian aspects of the railroad industry.