Our Northern Correspondent reflects on the relationship between Sunderland and its new Twin Town, the new destination for £mils of rail subsidy, Berlin
Emails were flying around the Arriva network yesterday, with reassurances. Reassurances that new owners Deutsche Bahn is to retain the Arriva name & brand. Reassurances that we may even see the brand expand to cover existing non-German DB interests. Reassurances that existing directors’ and managers’ jobs are safe. In other words, reassurances that nothing’s gonna change. Managing directors of the Arriva Bus UK were in a telephone conference yesterday, hearing supportive messages first hand.
The cynic in me says we’ve heard it all before. Take-overs bring promises but there’s inevitably change at some point. DB investing £1.59 billion and siting on its collective hands? I don’t think so.
"We have the chance to participate in entering this market in Europe, or we can sit back and continue to shrink. There's no doubt about it: DBs share in the German local transport market is likely to shrink in coming years". DB will take over and then have to sell Germany's second largest rail operator, to whom it has lost ground: Arriva
Meanwhile, I hate to criticise our blog owner too much but he was wrong when he sated that the DB/Arriva deal was not as contentious as Kraft/Cadbury’s. There’s now a reaction that fears a foreign government (in the shape of a German nationalised industry) is seizing control of strategic British assets.
A noble thought but we took the view regarding buses from 1986 and in franchising trains ten years later that such assets were better in private hands. Once there, we must expect the inevitable. And with predictions of just a handful of continental super-groups emerging alongside a liberalised EU transport market over the next 10 years, we will see more like this.
The DB website: a thoroughly modern rail operator
What are these strategic assets that Arriva owns? Important as they are, as the UK’s third largest bus group by revenue, can you call its buses “strategic”? As for the railway, Arriva owns no trains. These are held by leasing companies. One of the three ROSCOs is owned by a consortium of three banks, one British, one French and… Deutsche Bank, that happens to be German (obviously).
Arriva owns, controls or maintains neither track, signalling nor paths. That’s in quasi-national hands under Network Rail. Arriva owns no rail stations. The freehold to any stations Arriva leases is in Network Rail’s name. Arriva rail has no secure future. Unless extended, it’s Cross-Country franchise expires in 2016 and its Welsh one in 2018.
Meanwhile, since no one yet knows the real implications of the DB deal, Arriva’s managers yesterday were in humorous mood, punctuated with much nervous laughter. Would it be true that future orders would feature Neoplans, MANs and Mercedes, all painted orangey-red with minimalist logos? And in left hand drive configuration, too? Arriva already has a fair few spare Mercedes Citaros going begging, though these are likely heading for Malta, should the DB/Arriva tender prove successful.
Will German ownership now mean the trains run on time?
One manager quipped, “This is the road to nationalisation and the deal makes me a civil servant, employed by the German government”. In fact, Arriva employees are no more civil servants than Transdev Yellow Buses drivers or those who worked for the former English state owned National Bus Company.
4 comments:
Arriva's main asset is their presence on the ground in so many European countries.
In 2009, nearly half of Arriva's revenue was from outwith the UK (Google arriva preliminary results), although the UK operations were more profitable. There is a lot of scope in countries where rail privatisation has only just started, and where much of the bus industry is either publicly owned, or at the employee-buyout stage, ripe for 'consolidation'.
I think that the degree to which such a deal is 'contentious', or otherwise, is a matter of perception. To my mind, the Kraft/Cadbury deal was contentious because Cadbury is a long-established British name, with philanthropic associations, which was passing to foreign hands; and, secondly, due to the threat to British jobs - although some of those jobs were under threat in any case, regardless of the takeover. Neither of those issues affect the Arriva/DB deal. Although some of the companies that Arriva has acquired have long histories, Arriva has chosen to abandon those old names. Since Arriva is primarily a transport operator, large scale transferring of jobs to other countries will simply not be possible - the driver of that X31 is not going to find his job transferred to Berlin or even Aachen under DB control!
On the other hand, one could argue that chocolate is not strategic, whereas public transport, in certain circumstances, can be - so, in that respect, perhaps the deal is more contentious. In terms of strategic assets, the right to operate a public transport service would also be considered an asset, as well as the equipment used to perform that function. However, Arriva/DB has clearly not attracted as much media interest as Cadbury/Kraft, and I would hazard a guess that there are more people in the UK who eat Cadbury's products than there are who travel on Arriva's buses and trains.
If Arriva's UK operations are more profitable than those in other countries, clearly DB would do well to leave well alone; and I have no doubt that the operations in other European countries were a major attraction for the DB. However, the question that arises to my mind is whether the DB will be able to fund the expansion that they would clearly like make. The funding issues may not be quite the same as for a UK nationalised industry, but it will clearly be an important consideration on this particular "road to nationalisation".
Incidentally, I couldn't find that particular photo at the head of the DB website when I looked this morning - but it is rather ironic, given DB's apparent disinterest in its museum fleet in recent years. As for civil servants, even DB's own employees in Germany are no longer employed as such now - although there are some longer serving employees who retain that status from earlier times - at least in the west. This has a bearing on the number of employees who take part in strikes.
The real issue with DB take over of Arriva is that DB is state owned, backed by the german taxpayer. Under performing private companies go bust, under performing PLCs get taken over. The new DB Arriva doesn't face those threats & in the world of head to head bus competition so beloved of the Competition Commission, it means they could survive far longer than the rest of us.
Furthermore, it is important to look at DB's different strategies on it shome market and those it is pursuing elsewhere. On its home market, DB is very much trying to squeeze the bottom of the toothpaste. Services are rationalised back to the minimum, extras and special services are incrementally being eroded and nobody cares m,uch about overcrowding and other obvious problems. DB knows it cannot hold large chunks of this market for much longer and is trying to make as much money as it can while it lasts. On the other hand, DB's strategy in the UK (for example) is very different with a more open attitude to investment. So it could be that DB is milking its German market to build up its UK market. Surely for the UK that cannot eb so bad, at least as long as it lasts. But in the longer term the tables could turn and if all viable competitors are out of the action by then, there could be serious trouble looming.
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