Road-to-rail plan under threat

Date: 10/10/1996

By Bruce Barnard

THE EU's bid to liberalise rail freight is in danger of being shunted into the sidings.

Transport ministers last week gave the European Commission the go-ahead to prepare two studies on cross-border rail 'freeways' linking Sweden and Italy and the Netherlands and eastern Europe, by the time they next meet in December.

But significantly, France led a dissenting minority, including Spain, Portugal and Greece, that withheld approval for this minimalist initiative to kick-start Transport Commissioner Neil Kinnock's campaign to erode the power of the state monopolies and hasten the shift of freight from road to rail.

The tougher French attitude to deregulation was trailed two weeks ago by SNCF chairman Louis Gallois, who railed against any “ill conceived liberalisation” which would destabilise the state-owned firm's fight to recover from years of losses and a debt topping 30.7 billion ecu.

The real test for Kinnock's road-to-rail initiative will come just weeks after transport ministers look at the Commission's plans for freeways in early December.

At the beginning of 1997, a new operator, NDX Intermodal, 25&percent;-owned by CSX Corp (one of America's biggest railways), will try to break into some of the main trunk lines across Germany, the Netherlands and probably Italy.

In theory, NDX Intermodal should not face any trouble, as its European shareholders are NS Cargo, the Dutch state rail freight company (25&percent;), and Deutsche Bahn, the giant German railroad (50&percent;).

But the venture will be doomed if other member states and their national railways refuse to give it the same treatment accorded to shareholders in Intercontainer, the container marketing arm of European railways.

The creation of NDX has soured the atmosphere in Intercontainer and threatened to involve the Commission in a complicated competition case. Intercontainer was stung by the “betrayal” of two key share-holders, NS Cargo and DB, in teaming up with a US firm and probably giving it preferential treatment in the booking of freight, yet still demanding loyalty from Intercontainer.

Intercontainer's irate shareholders backed off from making a complaint to DGIV, the Directorate-General for competition, after they were assured they could use 'private' rivals to NS Cargo and the DB.

In Germany, these are independent local railway companies owned by, say, port operators in Hamburg or the local authority in Cologne, which will now have the right of access to the DB rail network.

The episode underlines the tensions in an industry simultaneously confronted by the twin challenges of deregulation and restructuring that will involve tens of thousands of job losses.

An increasing number of shippers are loathe to book rail freight in the coming winter for France, Spain or Portugal, fearing a re-run of last December's five-week strike on the SNCF which left their goods stranded from Metz to Madrid.

A good start by NDX Intermodal would provide a powerful boost to the Commission, which is desperate for successful role models to prove that rail can take on the road.

Officials continually point to the example of an independent rail operation between the port of Rotterdam and Milan run by European Rail Shuttle (ERS), one of whose shareholders is Sea-Land, the container shipping unit of CSX, the NDX partner.

European Rail Shuttle was seen as the great white hope of liberalisation because it forced Intercontainer to improve its often indifferent service levels and showed how private non-railway companies (ERS is mostly owned by shipping lines) can crack monopoly markets.

But ERS is teaming up with the state-owned railways in Intercontainer to run a 'just in time' shuttle between a Chrysler plant in Graz, Austria and Rotterdam and Antwerp, fuelling fears that competition is being snuffed out.

ERS was expected to run its own service, but industry insiders say it faced difficulties on its operations between Rotterdam and Germany, damping its desire to challenge Intercontainer's Chrysler business, which totalled over 22,000 containers in 1995.

While the situation on the ground is uncertain, the Commission is only now wagging its finger at five countries (Belgium, Italy, Luxembourg, Portugal and Spain) for partially transposing into national law a five-year-old directive aimed at opening access to their rail networks. Greece has not implemented any of the directive.