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