DB - “UK is best”

DB Cargo UK Chief Ex­ec­u­tive HANS-GE­ORG WERNER talks to RICHARD CLIN­NICK about the chal­lenges fac­ing the freight sec­tor, and how his com­pany is feel­ing pos­i­tive about fu­ture busi­ness

Rail (UK) - - Contents -

DB Cargo UK CEO HANS-GE­ORG WERNER re­veals why his com­pany is feel­ing pos­i­tive about se­cur­ing fu­ture busi­ness.

Around two years ago, a tip­ping point was reached at DB Cargo UK. The com­pany had an­nounced plans to stream­line its op­er­a­tions and shed 893 staff ( RAIL 812). Fi­nan­cial per­for­mance wasn’t great, and the com­pe­ti­tion was clos­ing in. Con­tracts were be­ing won from the com­pany, lo­co­mo­tives were be­ing bought by its ri­vals, and staff were be­ing poached.

The mood is very dif­fer­ent now, al­though Of­fice of Rail and Road sta­tis­tics pub­lished in Septem­ber show that DB’s freight train kilo­me­tres (the mileage op­er­ated by its trains on Net­work Rail in­fra­struc­ture) de­clined by 10% in the first quar­ter of 2018-19 com­pared with the cor­re­spond­ing three-month pe­riod in 2017-18, whereas many of its ri­val op­er­a­tors recorded an in­crease.

It’s all a far cry from 1996, when five of the UK’s six train­load com­pa­nies were bought by the Amer­i­can com­pany Wis­con­sin Cen­tral, and English, Welsh & Scot­tish Rail­ways (EWS) was cre­ated. Back then, the com­pany was the dom­i­nant brand - the ma­jor op­er­a­tor with plans to grow.

But new com­pa­nies sprung up, and now there are six main op­er­a­tors fight­ing for work. And as con­tract wins in­crease for the ri­vals, so the gap be­tween them and DB shrinks.

The Ger­man com­pany bought EWS in 2008 ( RAIL 567). It was slow to make its mark in terms of brand­ing, and con­tin­ued to op­er­ate largely in­de­pen­dently from main­land Europe.

In 2016, Hans Ge­org-Werner was ap­pointed chief ex­ec­u­tive of DB Cargo UK. He took over that sum­mer ahead of the re­struc­tur­ing, which he de­scribes as a tough time for the busi­ness, but a nec­es­sary one.

Now he’s look­ing for­ward. He’s re­al­is­tic in ac­cept­ing that DB Cargo UK is no longer the dom­i­nant brand it once was, and is putting plans in place to change that.

In the sum­mer, he was also ap­pointed chair­man of the Rail De­liv­ery Group freight board. He jokes that it was be­cause he was con­stantly on the phone to the RDG, but he

A freight cus­tomer will make a con­tract for one, two or five years. And if the ser­vice is poor, it takes a long time for them to come back. Hans-Ge­orge Werner, Chief Ex­ec­u­tive, DB Cargo UK

strongly be­lieves that rail freight needs a voice and has con­cerns that the sec­tor is not be­ing heard (sim­i­lar to how GB Rail­freight Man­ag­ing Di­rec­tor John Smith feels, RAIL 864).

Werner meets RAIL at To­ton, the Not­ting­hamshire de­pot that is DB Cargo’s main­te­nance hub.

As he walks round the fa­cil­ity, his en­thu­si­asm and pas­sion for the com­pany and its staff is ob­vi­ous. He chats about the work that is on­go­ing and his pre­vi­ous vis­its to sites, and as he does so staff come up and greet him. I’m later told that Werner loves noth­ing more than to meet the em­ploy­ees, lis­ten to their con­cerns, and act upon them.

“We’ve been talk­ing about the cul­ture. Has it changed? I think it has,” he says, adding that Sub­scribe at rail­magazine.com staff are free to email him with their ideas and con­cerns.

Werner also en­cour­ages events where man­age­ment and staff in­ter­act: “We have ‘I to I’, which is Ideas to Im­prove where peo­ple come up with ideas. We hope this en­cour­ages them, and they will get a re­ward if the idea is good.”

But the 2016 re­struc­ture still looms large. The im­pact is still ev­i­dent.

“There are two is­sues,” he says. “When we re­struc­tured peo­ple lost con­fi­dence. Peo­ple left as a re­sult of it, and then more left for else­where. Those who had left then said to peo­ple they knew to join them, and they did.” DB’s loss was clearly other com­pa­nies’ gain, in terms of staff.

“The sec­ond is that the av­er­age age of peo­ple dropped. In some ar­eas we have to look to the fu­ture. We are train­ing ju­nior drivers - that is some­thing be­tween main line drivers and ground staff.”

In­deed, the com­pany has ini­ti­ated a re­cruit­ment drive, which has cer­tainly caught at­ten­tion con­sid­er­ing the re­dun­dan­cies of 2016. But, as Werner says, more staff left than en­vis­aged and so DB needs to re­spond ac­cord­ingly.

There are many other is­sues cur­rently af­fect­ing rail freight - ca­pac­ity and pathing, for ex­am­ple. Then there is the con­stant de­mand for trac­tion.

DB’s fleet is pre­dom­i­nantly diesel. Other than a small fleet of Class 90s work­ing in­ter­modals and Class 92s on HS1 freights, the rest of the fleet com­prises ei­ther Class 60s or ‘66s’, with ‘67s’ used mainly for hire con­tracts.

In Fe­bru­ary, Rail Min­is­ter Jo John­son an­nounced plans to end the use of diesel on the rail­way ( RAIL 847). This has un­der­stand­ably gen­er­ated con­cern from some quar­ters, as the elec­tri­fi­ca­tion process has ground to a halt in the UK with bi-mode

trac­tion seem­ingly the way for­ward. How­ever, in terms of freight, so far only the Stadler Class 88s used by Di­rect Rail Ser­vices are be­ing em­ployed by the sec­tor.

Says Werner: “I spoke with Jo John­son some months ago. There’s no ca­pac­ity on rail to haul 2,000 or 3,000-tonne trains with elec­tric trac­tion. It would be good, but we need ca­pac­ity to drive the train.”

He says the RDG has cre­ated a work­ing group, and that it is de­lib­er­at­ing on how to progress the sit­u­a­tion. But walk­ing around To­ton, where there are many ‘66s’ un­der­go­ing main­te­nance, he ex­plains that there are cur­rently no plans to re­place these lo­co­mo­tives.

That’s be­cause the cost of new lo­co­mo­tives is high for what would be a small or­der. Also, the Class 66s re­main the stan­dard freight lo­co­mo­tive for the UK, and are only at their half-life stage.

Werner ex­plains: “For a new diesel lo­co­mo­tive, a new one is £ 3 mil­lion. So £ 60m-£ 80m is a lot for some lo­co­mo­tives. The ‘66s’ are 20 years old, so are half-life. We will go on with that.”

Werner said DB con­sid­ers Class 66s as its main fleet, with ‘60s’ used for heavy freight, ‘67s’ for pas­sen­ger con­tracts and high-speed work, and ‘90s’ for elec­tric ser­vices.

Asked about the prospect of a Stadler dual-mode lo­co­mo­tive (as per the ‘88s’) or a spec­u­lated new tri-mode ma­chine, he replies: “Stadler is do­ing a dif­fer­ent thing. They have elec­tric lo­co­mo­tives and do a hy­brid. The dif­fer­ence is… in Europe it is 90% elec­tric, whereas in the UK it is the other way. There are ideas with hy­brid lo­co­mo­tives - let’s see how they de­velop.”

It’s not long be­fore Werner high­lights an­other con­cern. He be­lieves that rail freight is not given the pri­or­ity in the UK that it should, claim­ing: “In the UK, it is not like in Europe. In Ger­many they are cut­ting 50% of the ac­cess charges to en­cour­age freight.”

He was talk­ing to RAIL be­fore the Of­fice of Rail and Road (ORR) re­leased its Pe­ri­odic Re­view on Oc­to­ber 31 into Net­work Rail spend­ing on sup­port, main­te­nance and re­newal of tracks, sig­nalling and struc­tures ( RAIL 865). This has been crit­i­cised by the Freight Trans­port As­so­ci­a­tion (FTA), which has ac­cused the reg­u­la­tor of miss­ing an op­por­tu­nity to boost the rail sec­tor.

The FTA high­lights that ac­cess charges will rise in the com­ing years for freight. A two-year freeze in costs is rec­om­mended, fol­lowed by in­creased charges over the fi­nal three years of the five-year Con­trol Pe­riod (2019-24), and FTA sug­gests that the in­tro­duc­tion of these in­creased charges for use of the net­work could act as a de­ter­rent for busi­nesses seek­ing al­ter­na­tives to road freight.

Werner says there have been dis­cus­sions with the ORR, and that the first sug­ges­tion had not been ac­cepted, so talks are on­go­ing.

“It will give us some time. Is it OK? Let’s see how we de­velop. Ac­cess fees stay largely the same, then go up,” he says.

Werner is much more pos­i­tive for the fu­ture. “We, as a rail freight com­pany, have to fo­cus on the core busi­ness,” he ex­plains.

In the past, EWS ex­panded into dif­fer­ent ar­eas such as en­gi­neer­ing with its Ax­iom Rail busi­ness, al­though that has now been sold. Now the com­pany is look­ing at var­i­ous mar­kets where it is per­haps not a ma­jor player - such as in­ter­modal, which re­mains the num­ber one com­mod­ity in rail freight.

“We are def­i­nitely not the big dom­i­nant firm, and we have to de­velop,” he says.

“How do we get into in­ter­modal more? No­body makes a lot in that as ev­ery­one wants money - the ship­pers, the ports, the rail­way, the trucks and the hub, and so there is lit­tle money left.

“The big dis­tances make the money. If you are only trav­el­ling 100 miles the costs re­main, but if you travel 1,000 miles then the costs are small. In Ger­many I set up trains to China and eastern Europe, and from France to Turkey.” Werner plans to use this ex­per­tise, gained from more than 30 years work­ing for DB across Europe, to grow the busi­ness. This in­cludes, in the fu­ture, HS2 as well as the in­ter­na­tional mar­ket.

“The Chan­nel Tun­nel was, I think, sup­posed to have 30,000 freight trains per year. We run ap­prox­i­mately 2,000. We are us­ing 15% of the tun­nel. I would be happy to do more, but the ques­tion is: what will change?” he says.

Werner be­lieves that the UK’s de­ci­sion to with­draw from the Euro­pean Union on March 29 next year rep­re­sents an op­por­tu­nity that his com­pany could seize: “Cus­toms clear­ance is an is­sue. Dover could be blocked by trucks, whereas we can bring trains in - sealed - through the tun­nel. Cus­toms can be at ter­mi­nal at Bark­ing, and it would be much more struc­tured and or­gan­ised.”

The UK pub­lic is so crit­i­cal, but I can tell you one thing - the per­for­mance of rail in the UK is the best in Europe. Go to Ger­many, Poland, wher­ever, and you will not find such punc­tu­al­ity and re­li­a­bil­ity any­where else. Hans-Ge­orge Werner, Chief Ex­ec­u­tive, DB Cargo UK

Over­all, he tells RAIL that the im­pact of Brexit is small, with only 4% of DB’s traf­fic trans­ported through the Chan­nel Tun­nel. How­ever, he does en­vis­age a prob­lem at the ports, through the in­tro­duc­tion of charges. He also ques­tions if some com­pa­nies will re­main on these shores, and high­lights one in­stance: “Cur­rently we de­liver 100% of alu­minium to Jaguar, but will they stay?”

Werner talks a lot of com­mon sense on Brexit. So of­ten when peo­ple are asked about what will hap­pen post-Brexit, the an­swer is un­cer­tainty. For Werner, that is not good enough: “It is not a good an­swer, so we cre­ated a work­ing group for Brexit.”

He says the ques­tions be­ing asked in­clude ‘what could be the im­pact?’ and ‘how can we solve it?’

“Cus­tomers are ask­ing, and we can­not say we don’t know. At the mo­ment we have Euro­pean agree­ments with other op­er­a­tors, but af­ter Brexit we have to make bi­lat­eral deals. In France we hand over to Euro Cargo Rail, which is one of our busi­nesses.”

An­other ma­jor is­sue af­fect­ing rail freight is the timetable. While the im­pact on pas­sen­ger op­er­a­tors was well-known, freight suf­fered as well, and it’s likely that it will con­tinue to do so.

Says Werner: “The first im­pact was on the plan­ning team. They had to come and do it again. There are only two or three in DB, and they had to plan hol­i­days and redo ev­ery­thing - it made one staff mem­ber cry. Ev­ery­thing they did was for noth­ing.”

As for the next se­ries of timetable changes, due in De­cem­ber, Werner says that DB re­mains com­mit­ted to its cus­tomers.

“If there are can­cel­la­tions, then that will have an im­pact on the busi­ness. We as a rail in­dus­try have ad­dressed Paul McMa­hon [Man­ag­ing Di­rec­tor, Freight and Na­tional Pas­sen­ger Op­er­a­tor), and have said we will blame Net­work Rail.”

Werner con­firmed that DB does, how­ever, recog­nise the wider is­sues af­fect­ing the in­dus­try. Since his ap­point­ment as chair­man of the RDG freight board in June, he has been work­ing on be­half of the in­dus­try - as well as his own com­pany - to iden­tify so­lu­tions.

“We recog­nise the is­sues and are happy to sup­port Net­work Rail to try and re­solve this,” he says.

How­ever, he has a warn­ing for the in­fra­struc­ture com­pany: “If nec­es­sary we’ll ask cus­tomers to align with us. If they want, they can have a storm.

“Net­work Rail is wor­ried about pas­sen­gers, but they are largely com­muters and they will re­turn. A freight cus­tomer will make a con­tract for one, two or five years. And if the ser­vice is poor, it takes a long time for them to come back.”

RAIL broaches the Royal Mail con­tract, which was lost by EWS. It’s now un­think­able, sadly, that it could re­turn to rail in the vol­umes it en­joyed pre­vi­ously, al­though Werner says that DB has been in dis­cus­sions with Royal Mail. “They have three modes of trans­port: 60-70% is on road, and that is the most un­re­li­able; sec­ond is air, which is the sec­ond most un­re­li­able. The best per­form­ing is rail - the small­est.”

He then lights up, brim­ming with ideas. “I have a vi­sion, run­ning parcels and mail trains from Lon­don to Paris. Why fly it? It might be quicker af­ter Brexit, too?”

Werner is both ex­cited and im­pressed by the UK. He shows me a clip from a Ger­man com­edy show of a train in the snow, and the com­plaints about de­lays.

“The UK pub­lic is so crit­i­cal, but I can tell you one thing - the per­for­mance of rail in the UK is the best in Europe. Go to Ger­many, Poland, wher­ever, and you will not find such punc­tu­al­ity and re­li­a­bil­ity any­where else.

“I was deeply im­pressed. Yes, things go wrong, but the time to re­cover and the timetable is quite good. It is a good sys­tem.”

ROBERT FRANCE.

On Oc­to­ber 6, DB Cargo 66059 passes Harthorpe (just south of Beat­tock Sum­mit) with the 1015 Grange­mouth-Daven­try. Mar­kets such as in­ter­modal rep­re­sent growth op­por­tu­ni­ties for DB Cargo.

PAUL BIGGS.

DB Cargo 66135 pow­ers past Manea (Cam­bridgeshire) on July 24, with the 1418 Mid­dle­ton Tow­ers-Ince & El­ton loaded sand train. Ag­gre­gates forms a key part of DB Cargo’s UK plans.

PAUL BIGGS.

In uni­form red liv­ery, DB Cargo 66065 passes Chel­las­ton (near Cas­tle Don­ing­ton) on Oc­to­ber 19 with the 1243 Wal­sall Freight Ter­mi­nal-Dowlow Briggs Sid­ings empty box wagons. Class 66s re­main the mo­tive power of choice for DB.

PAUL BIGGS.

DB Cargo 60010 passes Catholme (near Lich­field) on Septem­ber 25 with the 0715 Lind­sey Oil Re­fin­ery-Kings­bury Oil Sid­ings loaded oil train.

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