Cubic Appoints New President for Fare Business Division, as It Prepares for Possible Sale

Vriesela

Cubic Corp., the largest supplier of fare-collection systems globally, has hired a new top executive for its Transportation Systems division, appointing an executive from U.S.-based defense and infrastructure technology company Parsons Corp.

Cubic named Peter Torrellas, president of the connected communities business unit at Parsons, as Cubic’s private equity owners prepare for what industry observers believe will be an inevitable sale of the company’s transportation or defense divisions, or both.

Torrellas replaces Jeffrey Lowinger, whose three-and-a-half year tenure as head of Cubic Transportation Systems was considered difficult at times, insiders told Mobility Payments.

Lowinger had to deal with high staff turnover, especially after the nearly $3 billion acquisition of then-publicly traded Cubic Corp. by private equity firms Veritas Capital and Evergreen Coast Capital in early 2021. The takeover brought with it new priorities, which many in the organization didn’t accept. At one point last fall, a Cubic insider had estimated that hundreds had left, though the company at the time said the turnover mirrored industry trends.

Cubic Transportation Systems once had nearly 3,000 employees. The company now is believed to be undertaking a reorganization, including layoffs, said sources, as it primps for a possible sale. Update: Cubic laid off 225 employees as late as last month, according to a source. End update.

Stinging Loss in Melbourne
Capping Lowinger’s tenure as president was the stinging loss of the major fare-collection system contract in the Australian state of Victoria. Most observers considered the winning proposal by rival U.S.-based fare-system supplier Conduent to have been inferior to Cubic’s. But Conduent won the 15-year, AU$1.7 billion (US$1.1 billion) deal, which the Victorian government announced in May.

Lowinger co-authored a strongly worded letter with Cubic Corp. CEO Stevan Slijepcevic, addressed to Victoria’s premier, Daniel Andrews. The letter, which called the procurement process “flawed,” asked government officials to reconsider the award to Conduent. But the officials rejected the request, with a spokesman calling the procurement process “rigorous and wide-reaching.”

Lowinger is believed to have fired and demoted Cubic managers in Australia following the debacle. But after making one or more trips to Australia himself to personally lobby on behalf of Cubic’s proposal, he ultimately got the blame for the loss of the contract. And some fare industry observers with connections to Cubic told Mobility Payments they believe Melbourne was ultimately a key reason for Lowinger’s departure.

“One possible scenario is that the loss of Melbourne and the mitigated track records of existing accounts deliveries, have triggered a halt to Jeff’s entrepreneurial initiatives,” said one, who like other sources asked not to be named in order to speak freely. Another source added: “I would surmise that losing Melbourne caused quite a bit of ‘accountability’ to be meted out; would not be surprised if that is what happened to Jeff.”

Cubic: Lowinger Retired
But Cubic is characterizing Lowinger’s departure strictly as a well-deserved retirement after a 40-year career–more than half of it spent with aircraft maker Boeing. Lowinger, 62, was originally trained as an engineer, and one former employee told Mobility Payments that Lowinger’s background helped him take a  “hands-on” approach to projects, when needed.

A Cubic spokesman credited Lowinger with having “transformed” the company, “by productizing its fare collection platform and services catalog to provide customers with the most competitive offering in the industry,” he told Mobility Payments.

By “productizing,” the spokesman was apparently referring to Cubic giving transit agencies the option of buying its technology in modules or lots. Some transit agencies are interested in the modular approach, which they believe could save them time and money on implementation and help them retain more control over their fare-system contracts.

Backers of the approach include two big Cubic customers, Transport for London and Transport for New South Wales, in Sydney. The two agencies have ongoing procurements that put longstanding Cubic business at risk.

That is not to say that these and agencies find it easy to break away from their incumbent fare-system suppliers with the modular approach. For example, in London, officials are also believed to have been disappointed with the response to its tender request earlier this year for a new fare-system contract that could potentially replace Cubic.

Update: And in Toronto, transit agency Metrolinx, in seeking bids for a new fare-system contract, decided it had to extend its contract with incumbent Accenture for three years to 2025. A local report in late 2021 cited a source that said Metrolinx officials had heard from vendors and potential bidders that a six-month transition period the agency was proposing was not long enough for them to take over for Accenture.

A Metrolinx spokeswoman, however, told Mobility Payments that the agency’s request for proposal had generated significant market interest, but its agreement with Accenture “contained a three-year extension option…to bridge the procurement process and ensure a smooth transition to new systems and contracts without interruption to customer service.” End update. 

Questionable Progress on Goal
The modular approach has its detractors, but suppliers like Cubic need to be ready to serve agencies pursuing the approach. Still, one source on the ground said he believes Lowinger has made insufficient progress in “productizing” and innovating Cubic’s offer.

Cubic’s proposals to large transit agencies tender requests usually feature the same build-operate-maintain model, in which Cubic provides all of the parts of the fare system and serves as system integrator. The offer revolves around Cubic’s Urban Mobility Back Office, which, for example, was used for New York’s Metropolitan Transportation Authority’s OMNY system and largely deployed for big Cubic projects elsewhere, such as in Brisbane, Boston and New Zealand. Following this model also serves to lock the transit agency into Cubic technology.

While other major fare-system suppliers often take this approach, as well, and they would say they are just responding to the way transit agency request for proposals are written, Cubic gets the most heat for this approach because it’s the biggest supplier.

Cubic in early 2021 did introduce another approach, a software-as-a-service mobile-ticketing offer, Umo, targeted at small transit agencies. This is believed to have been green-lighted not by Lowinger, but by his predecessor, Matthew Cole.

Challenges Facing Successor
For Torrellas, like Lowinger before him, Cubic went outside of the organization and filled the president’s post with a candidate without experience in the fare-collection industry.

Torrellas, who took over for Lowinger last week, has worked on public transit infrastructure–though not fare collection–among other industries. As president of the connected communities business unit at Parsons, he handled a portfolio that included rail, utilities, oil and gas, aviation, smart vehicles and facilities.

Before that, he was managing partner for digital cities and infrastructure at Siemens Advanta and head of smart cities and communities at Siemens Smart Infrastructure. 

At Cubic, he will be tasked with expanding Cubic’s market-leading fare-collection business, while seeking to finish major projects that are running behind, including those in New York and Boston. He’ll also be trying to hold onto Cubic’s business in Sydney and London.

He will have other challenges, as well, said one former Cubic employee:

“Peter will have to address morale in a company,” he told Mobility Payments. “Cubic was bought by venture capitalist firms obviously hoping to sell it within three to five years. Strategic decisions driven to increase the share price over delivering for your customers and developing great products was never going to do great things for morale and retention.”

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