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| Roles
for U.S. Investors |
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High Value:
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| Let me talk specifically about
roles for U.S. investors and how I think the privatization here would play
out. I see a high value in U.S. participation due to our experience in
marketing. We've been through deregulation in our country. It's been an
expensive process, a lot of people have lost a lot of money and there
are many lessons learned, not all of which are translatable to the UK,
but some are. For financing, we have a well-developed railway equity and
debt market in our country; again, some elements of which are
translatable to the UK, and some are not. In terms of intercarrier
relationships, we have a well-developed system of interchange between
carriers and the biggest complaint you'll hear our customers give us is
that two railroads can't agree on price, service, equipment and it's not
a seamless connection. We are making progress, but we're not there yet.
And of course another value is equity investment. |
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Low Value:
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| What I would put a low value
on, however, is in the areas of: operations, engineering and labor
relations. The UK's operating
environment is much different than in the U.S.; it's much more regulated and
the type of expertise that we have would not have a lot of value. In the
engineering area, you've built the world's railways; there is nothing
that you really have to learn from anybody in the engineering area.
Last, in the labor relations area, I would submit that our environment
is much different in that the U.S. is more regulated than the UK. We have a
very convoluted, unusual, distorted labor relations environment in the
U.S. which has no parallel any place I've ever been. |
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| Conclusions | ||||||||||
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Thank you. |
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| Questions
& Answers |
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Q: |
One very basic theme for British Rail, the many freight companies that operate in Britain and in Argentina, and Wisconsin Central in New Zealand is that in Britain we have primarily a passenger railway with full compliance in terms of safety standards and regulation, whereas the other three are primarily freight railways where there is the odd passenger operation. Would you comment on the differences with respect to how you feel you might be constrained or limited in Britain in trying to operate the freight service over tracks that were primarily occupied by and designed for passenger service? | |||||||||
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A: |
I don't see that that really has any impact of significance on the ability of freight to prosper. The main concern I have with the way the privatization is structured has nothing to do with costs, and it has everything to do with revenue and that is rail vs. rail competition. It is quite common for freight railways to operate over passenger lines. For example, we do that to get into Chicago, and Conrail operates over Amtrak on the high-speed Northeast corridor. That is the kind of thing that operating people can work out at the local level as long as there is a commitment to working together. | |||||||||
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Q: |
One of the reasons for the poor figures of the Freightliner at the present time is the very poor productivity in the train crews. I believe I've seen that the average engine driver in this service averages 45 miles a day. What total figures would you expect to get from your railway operation in the U.S.? | |||||||||
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A: |
In terms of the typical productivity of a train crew, my guess is that on Iowa Interstate we would get about 200 miles in a single day from our crews. | |||||||||
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Q: |
I was intrigued by your comment that the main threat for competition in the UK is rail vs. rail as opposed to trucks despite the loss of traffic to road over the years. Would you please discuss further? | |||||||||
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A: |
I think that the job of the transportation department at British Steel is to minimize your transportation costs, and I think that you're doing your stockholders a disservice if you don't do that. What you need to do is to take advantage of every possible opportunity to minimize your transportation costs. To the extent that you can bring three trainload freight operators in, plus an electric utility that is going to get its own train and have some excess capacity on the back of a train, and offer them your business, winner takes all, you will get them to cut each other's throats. And then you will win and they will breakeven if they are the successful bidder. | |||||||||
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Q: |
First, the competition between freight companies has been discouraged prior to the sale, naturally; we've been aware of that. Secondly, and more importantly, a single purchaser has not been ruled out so I come back to your point that there might not be any competition as you contemplate. | |||||||||
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A: |
My response is that if there is a single buyer for the three trainload freight businesses, the likely result would be that at least one Open Access operator would enter the market. | |||||||||
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Q: |
Can you tell me whether the growth in America has been due to reclamation of previously lost shares of the bulk market or whether you might have made any inroads into the previously untapped potential in the FMCG market (consumer goods) and it was the thought that as you gain potential in that market that revenue would grow? | |||||||||
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A: |
We have done both. In the case of boxcar traffic, which we lost over the years to truck, a certain amount of that we have recaptured at lower margins through intermodal. In the case of bulk traffic, we have improved our position by becoming more efficient on short-distance traffic. We are trying to convert some of our intermodal business to boxcar business. When you get away from private siding business and bring your customers into using intermodal terminals, you're really teaching them how to use trucks because you need to get it into a truck to get from the customer to the intermodal terminal. If it's in a truck, why not take it all the way? I am a big fan of what has been long looked down upon in the US, which is so called loose car railroading. I think that there is more profit to be made in it; it is also a more rewarding business. | |||||||||
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Q: |
This is related to your last point on the difference between intermodal and the boxcar. What is fundamentally different in the UK is actually just that -- the lack of rail private sidings. If you take a private siding building and you have to have your own private collection siding and you instead just use the rail hub, some people think that's exactly why the boxcar won't work. It is very much a way of looking at things -- the configuration of the customer's total cost as well as the rail station. | |||||||||
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A: |
I agree. | |||||||||
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