THERE was a time ’when we could have fun with the engineers’, mused Adtranz President & Chief Executive Officer Kaare Vagner on September 10. Not any more. With railways forcing down rolling stock prices and higher profits at the top of the Adtranz agenda, the CEO’s strategy means attacking the cost base: ’tough times are ahead’, he warns. His message is addressed particularly at the group’s German operations. The 11 major factories employing 8500 people represent an unacceptable degree of overcapacity, and downsizing is inevitable.
Adtranz is already using its cheaper plants in eastern Europe to supply hardware for assembly in the west. For example, bodyshells for German Railway’s Class 101 locos being put together in Kassel (above) are now coming from the Pafawag plant in Poland. Kassel has already been reorganised to assemble locos on a single production line, and the huge premises at Hennigsdorf near Berlin face similar change.
Vagner’s restructuring model is taken from Britain, and he is ’flying in a British restructuring team’ to Germany to oversee the changes. He considers rationalisation to have been well handled in Britain as management faced up to a dearth of rolling stock orders during the privatisation of British Rail - costs in Britain are now 50% lower than in Germany. He also feels that purchase of former railway workshops has given Adtranz an advantage in terms of maintenance expertise. This business is set to grow: already DM100m of work a year is being contracted out by DB, and Adtranz has projects in Uganda, India and Latin America.
All this does not mean that the thirst for acquisitions has been slaked - Schindler’s rolling stock business in Switzerland will be added to the Adtranz portfolio on January 1. Vagner says the Swiss company’s expertise in aluminium shell production and double-deckers will complement current capabilities, as well as secure access to the Swiss market.
The group has just set up an office in France, where it is angling for all or part of the contract to supply up to 1400 metro cars for Paris in the early years of the next century. Another acquisition is the expertise of former Eurotunnel Co-Chairman Sir Alastair Morton (p654), who will be well able to contribute advice on funding large projects.
By 2002 Vagner expects to be employing 25% fewer people in Europe, but activity in India and Latin America will increase. Among projects being tendered at the moment are suburban trains for Buenos Aires, which Vagner hinted could be a version of the British 365 or a Danish Flexliner.
Apart from lifting operating profit above last year’s 4% (RG 7.97 p467) Vagner has other ambitions: ’I have one dream left, no two. The first is to turn in real profits, and the second is to merge with GE Transportation ... we would make a hell of a team.’ He confirmed discussions had taken place but acknowledged that ’I don’t know that it is possible’. Adtranz and GE already co-operate on the Blue Tiger, and this may grow into something more. o