Toll Holdings elusive on rail plans

By PAM GRAHAM

Since David Jackson took charge of Tranz Rail last October the company has disappeared from the headlines and its website has been stripped to the basics.

Analysts say its new majority owner, Melbourne-based Toll Holdings, does not want to risk paying more to buy out minority shareholders by talking its acquisition up.

And they wonder about a supply chain operator's commitment to rail.

In Jackson's first interview since taking over, the Australian says the non-rail business looks exciting but also that Toll bought a rail business and will expand it.

He is cautious about what he says, cutting to the chase occasionally between block shots to most questions, and avoiding numbers.

The news is that decisions have been made on the company's business structure, and advertisements for three senior executives for rail will go in weekend papers.

There will be two business units: Toll Rail and Toll Tranzlink. Toll Rail will just be a pure train linehaul operation providing services to Toll Tranzlink and external customers. Toll Tranzlink will comprise the rest of the business.

The track sale to the Government will be executed by the end of this month and the handover of day-to-day network management is on course for July 1.

Toll sees the new Rail Safety Bill as a major issue and will be lobbying against it, arguing that responsibility for safety lies with the operator.

It will oppose any increase in the size of trucks on roads and agrees with others that new employment laws increase costs.

Head office will remain on Auckland's North Shore.

Most of the desks at the company's designer officers are empty and Jackson looks sideways at the artwork of twisted rails on the walls. "Beautiful, aren't they?"

He is down-to-earth and does not condemn what he has inherited. He is surprised at the state of infrastructure in New Zealand, a country he had never visited before taking over Tranz Rail.

Jackson and Toll's long-distance division director, John Ludeke, hired a light plane to visit staff at various depots. The message was: 'We are here to learn, it is a significant investment for us, we are not here to shrink the business, and there will be change'.

Jackson drops his 'I must be careful what I say to the press' demeanour when he talks about Toll, the company he joined eight years ago.

He reported to Mark Rowsthorn, Toll's main operations executive, while running Toll SPD, a container operation that used road, rail and ships.

Toll is said to have a flat management structure and small-company culture even though it employs 15,000 people, compared to 95 in 1986.

"The chemistry within Toll is very important. I've said this a hundred times, but you could work three lifetimes and not have had a job like I've had in the last eight years," Jackson says.

Managers have to engender the culture downward, he says. Critics wonder if they can.

The company grinds out profitability by working on management systems, understanding cost bases and trying to increase volume.

It buys some businesses to buy skills and Jackson says he has found skills, passion and some good information technology at Tranz Rail.

Jackson was involved with the outsourcing of Fremantle port's rail operations to Toll's Australian rail joint venture.

He has run the concept by Ports of Auckland. It works where trucks would cause congestion and if the journey is long enough to justify rail.

Toll won't be running the 1800m double-stacked trains seen in Australia. The tunnels here are too small and network light.

New locomotives cost up to $10 million and Jackson does not signal bulk orders. He talks of powering up locomotives, making the right choices about rolling stock and aligning them with Government-funded trackwork. Without detail.

Toll works for incremental gains. Jackson is here for three years and says it is realistic to expect that the benefit of capital invested will not be realised by the end of that time.

Toll chief financial officer Neil Chatfield has said that up to $40 million a year, twice the amount pledged in the Government track buyback deal, could be invested. Jackson is not saying where, except that a "fair chunk" would go to rail.

One issue he raises is deaths at rail crossings. Toll was horrified at the number in New Zealand. "Somehow we have to get a safety message to the New Zealand community."

Jackson says the inter-island ferry businesses is critical to the rail network, but all he will say is that it is "under review". So too are all service providers to Tranz Rail.

Everyone has a theory about Tranz Rail, the business it has been and could be in the future.

It is a monopoly with large customers who would prefer a choice.

One, Carter Holt Harvey, is cutting costs.

"I see my role as having a lot to do with major customers," says Jackson.

"As long as we are lean and mean and we get our costs as low as we can, then we can't do any more than that."

Another major customer is Mainfreight, a major competitor. They will be treated as a customer, says Jackson.

Mainfreight wants to move more freight on rail if services from secondary North Island cities to the South Island are improved. Tranz Rail runs fixed fast trains from Auckland to Wellington.

There are goods that "New Zealand wants on rail and we want on rail," says Jackson.

He predicts better connectivity between modes of transport. "I think our customers will see a more united one-stop-shop package.

"We are a provider of services to customers whether it is rail, road or ship."

Jackson says the industry he has been in for 20 years is tough and Tranz Rail is complex.