Despite SEPTA's freeze on its rail cars, Hyundai Rotem's stock up

SEPTA's decision to ground the largest fleet of passenger railcars built by Hyundai Rotem's South Philadelphia factory didn't hurt the company's share price, which rose modestly in trading Monday on the Korea Stock Exchange.

Hyundai Rotem's investors such as Vanguard Group are used to the political, scheduling, and quality-control disputes that often plague multinational military and transit-vehicle providers, such as Hyundai Rotem.

Still, the headlines over the weekend - that inspectors are checking welds while passengers are herded into crowded, older trains, possibly for months - do not help the company's efforts, or the city's, to achieve the decades-old dream of growing its Weccacoe Avenue plant into a center for the U.S. passenger railcar business, and become a successor to long-vanished American manufacturers.

Hyundai Rotem says it has pumped more than $25 million into the plant, which sits east of I-95 and just south of Wolf Street.

The facility employed 350 Transport Workers Union members at its peak in the early 2010s, flying many of them to South Korea for training with specialized welding equipment, and customizing cars to fit SEPTA's hundreds of legacy stations.

Employment is now down to 77, though many more jobs at contractors and suppliers in the region also benefit from Hyundai Rotem orders, City Councilman David Oh said.

Rotem lost more than $300 million last year on sales of $3.3 billion. But it is on track to show a profit in 2016, according to Korean investment reports.

"We've already overtaken last year's sales total" and are competing for more contracts in Baltimore and Los Angeles, as well as with SEPTA, said Andrew Hyer, head of U.S. business development for the company.

He said parts suppliers have joined SEPTA and Hyundai Rotem in meetings "to overcome this and do it as diligently and safely as possible."

Los Angeles transit officials have been investigating whether a design flaw contributed to a fatal Metrolink crash in a train of Hyundai Rotem cars. SEPTA complained of long delivery delays.

Boston transit officials chose a rival Chinese manufacturer, CNR Changchun Railway Vehicles Co., to expand its commuter railcar fleet after that company agreed to build a larger factory in western Massachusetts than Hyundai Rotem would commit to.

Hyundai Rotem stock remains below its initial public offering price from two years ago. Hyundai Motor Group, which bought Rotem in 2001, remains its largest owner.

But the price has risen this year after the company won large contracts to supply a Malaysian subway system and a South Korean military contract, among other wins.

Oh says the city has a lot at stake in resolving the issue at SEPTA, which Hyundai Rotem says occurred on pieces supplied by a contractor.

"Our interest is that they are a manufacturer that employs people and hires vendors," Oh said. "They distributed, in their last contract, $180 million to vendors mostly located in and around Philadelphia."

He says the Hyundai Rotem plant could pour millions more into the city if it is chosen among the suppliers for high-speed trains, long advocated for the busy Northeast rail corridor.

Competing companies that try to enter the business will face "the same kinks as Hyundai Rotem," Oh said. So "it's very important to look at what happens in this case, and determine who is at fault, and what the remedies are."

JoeD@phillynews.com (215)854-5194 @PhillyJoeD www.inquirer.com/phillydeals