Tranz Rail Appoints Outsourced Service Providers

Tranz Rail took another major step towards a tighter focus on freight and interisland transport today with its appointment of internationally respected companies Transfield Services and Alstom New Zealand to provide infrastructure and motive power services to its rail businesses.

Transfield Services has secured a three-year $150 million contract to provide infrastructure services (track maintenance, overhead lines, points) to Tranz Rail while Alstom New Zealand has a seven-year $200 million contract to provide locomotive services.

Tranz Rail Managing Director Michael Beard welcomed the new rail business partners and expects them to bring fresh skills, talent, technology and attitude to the rail business in New Zealand.

The move is consistent with Tranz Rail's strategy to focus on its core freight and interisland transport businesses.

"The injection of technology and the service and attitude changes associated with performance driven contracts will bring significant benefits to both Tranz Rail and its customers. The training opportunities available and the chance to work on the latest technological developments should give fresh impetus and enthusiasm to staff working with our new partners," says Mr Beard.

The appointment of Transfield Services and Alstom New Zealand follows the agreement to sell the Auckland rail corridor to the Crown for $81 million and the sale of Tranz Rail's long distance passenger business for $33 million.

"We are effectively creating a new rail industry that is no longer run by one vertically integrated business -Tranz Rail," Mr Beard says. "We will soon have separate providers of infrastructure and locomotive power and we are still working through plans to outsource our wagon engineering.

"Whether it be a specialist long-distance passenger service operator, or a world-class engineering company looking after our track or locos, our change programme is designed to give New Zealanders a better rail service through specialisation.

"It's an exciting time for rail in this country. Alstom New Zealand and Transfield Services are world-class operators in their fields and we expect significant performance improvement from their involvement. For example, Alstom New Zealand's processes are expected to drive a three-fold reduction in locomotive failures.

"We also expect total savings of about 10 percent per annum as a result of these outsourcing initiatives and resultant internal efficiencies.

Alstom New Zealand Chief Executive Geoff Hunt and Transfield Services' Deputy Chairman Tony Shepherd welcomed the opportunity to work with Tranz Rail.

"We believe we can bring significant advancement to rail reliability through our access to the best available technology internationally said Mr Hunt.

Transfield Services' Mr Shepherd also believes his company's broad outsourcing experience, particularly in rail, will be invaluable to Tranz Rail.

"Alliance relationships such as the one we have with Australian Rail Track Corporation prove our ability in major infrastructure maintenance. New Zealand's rail network will definitely benefit from our involvement," he said.

Mr Beard said the majority of the 800 Tranz Rail staff currently employed in the infrastructure and locomotive power operations would be offered employment by the new contractors. "Those staff generally have a passion for the rail industry and both Transfield Services and Alstom New Zealand are keen to retain that expertise. Staff will have access to further training to enhance their skills and the opportunities to work with exciting new technology.

"Over the next couple of weeks, staff in these operations will have an opportunity to meet with our new partners and discuss potential employment opportunities."

Mr Beard said there would be some redundancies and these would be finalised after consultation with staff and their unions. It would not be possible to indicate which jobs would be required where, until the new partners had completed meetings with staff and unions on-site.

However, the intention is to give staff full details prior to Christmas.

The new contractors were appointed after a 12-month process, involving 50 companies who expressed interest in the Tranz Rail engineering contracts.

Tranz Rail Group General Manager Engineering William Peet, said Tranz Rail had learned from the experience of overseas rail companies that had outsourced operations in recent years. He was thankful for the tremendous amount of work from the businesses that had been involved in this process.

"In particular, we have taken an uncompromising stance on maintaining rail safety with very clear standards written into the new contracts and tough measures to be taken on any breaches," said Mr Peet.

"We closely examined overseas examples in Britain, Australia and elsewhere to ensure we have the right mix of incentives and penalties in these contracts. We must be certain we are encouraging performance but that performance must be met or exceeded without any hint of compromise on safety. The contracts are designed to drive innovation to bring about continuous improvement in safety and performance.

"The same safeguards that are in place now apply to Transfield Services and Alstom New Zealand and any breach can lead to termination of the contracts. Rail in New Zealand is subject to bookshelves full of regulations, self monitoring by Tranz Rail and scrutiny by the LTSA - all of these safeguards remain in place," said Mr Peet.

Mr Peet said Tranz Rail will continue to work towards outsourcing other services such as wagon maintenance and services associated with freight terminals.

The transition to the new owners of the infrastructure and locomotive power and forklift operations will be completed by March 2002.

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