INTRO: Ed Smulders, Director of NS Cargo, tells Richard Hope how profitable rail companies can capture a much bigger share of Europe’s growing international freight market

BYLINE: Ed Smulders

DirectorNS Cargo

IN THIS DECADE, the outlook for rail freight in the Netherlands has been transformed. Once virtually written off as hopelessly uncompetitive in a small country criss-crossed with navigable waterways, NS Cargo has fought its way back into profit.

Its Director, Ed Smulders, points to a 43% increase in tonnage carried over the last five years, with longer hauls generating an even bigger rise of 50% in tonne-km. ’And we are doing this with 60% of the people, 60% of the locomotives and 65% of the wagons we had five years ago.’

With the Betuwe route from Rotterdam to the German border under construction as Europe’s first high capacity dedicated freight line in modern times, it is no surprise that Smulders sees intermodal as ’the fastest growing part of our business, now almost 30% of total tonnage.’

’The number of unitised loads carried by NS Cargo has doubled in five years from 250000 to 500000 boxes, equivalent to 750000 TEU. Our market share of intermodal business moving in out of the Rotterdam area is now over 16%, whereas five years ago it was less than 9%.’

NS Cargo has been operating without subsidy for five years, though it still enjoys a holiday from track access charges which ends in January 2000. Smulders describes the company as ’well on the way to being profitable, including intermodal where we had very heavy losses five years ago and are now close to break-even.’

He is convinced it can only be done if intermodal uses the shuttle concept - fixed formations running to a strict timetable. Currently, there are 270 shuttle trains per week in or out of Rotterdam serving 27 destinations.

Link-up with DB Cargo

Questioned about the nature of the deal with DB Cargo, which is due to be consummated before the end of 1999, Smulders insists ’it is a full merger; both parties have decided to establish a new organisation provisionally called Rail Cargo Europe; the final name will be sexier than that.’

He describes RCE as ’an operational holding company in which activities like marketing, sales, personnel and finance will be managed under a Board of Directors. Underneath this holding company will be two operating companies called DB Cargo and NS Cargo, which will run trains in their respective areas.’

Asked about the obvious imbalance in size between the two partners, Smulders admits this will be reflected in RCE shareholdings but points out that there are a number of yardsticks which can be used. All freight activities will be pooled, including DB’s intermodal subsidiary Transfracht (TFG) and existing shareholdings in Intercontainer-Interfrigo (ICF). This is ’quite different to what the Swiss and Italians have tried to do.’

Liberalise or die

Outstandingly among European rail leaders, Smulders not only believes in open access and competition but also in eliminating all subsidy to freight operations by whatever mode.

Citing the Netherlands and Germany - along with Sweden and Britain - as the four European countries where liberalisation of the rail freight business has gone furthest, he says both NS Cargo and DB Cargo are in favour of open access.

’If you are not, the market will dictate that you liberalise - the customer is always right, and if you don’t do it other forces will drive you in that direction. If you want to compete with road and bring about a modal shift, there is only one way and that is to liberalise the railways.’

Another, more controversial, tenet of Smulders’ creed is the need to end subsidy to rail freight operators. ’As long as railways are receiving subsidy, they face the government with their hand out, and show their back to the customers, so you don’t get liberalisation. We have got together with DB because their thinking is also moving in the same direction.

’Sacrifices have to be made to become cost competitive. Our subsidies stopped five years ago and that’s why we rationalised; you have to be forced to do it. I am convinced that you can cut the cost of rail transport by 30% in every European country.’

When it comes to track access charges, he acknowledges the EC’s case for marginal costing but opposes higher taxation of lorries. ’That’s a dangerous route. OK, we don’t get money from the government directly, but life is made miserable for our competitors so now we can rest on our laurels.’

Co-operation essential

One aspect of the pressure to open up railways to competition which does worry Smulders is a view prevailing within the EC and some governments that competition requires co-operation between rail operators to be suppressed.

’I am a strong believer in competition. It’s good, its keeps you alert and inventive. On the other hand, we would never have been able to build our shuttle services as fast as we did if we had not looked for and found ways of co-operating with other railways.

’Officials and politicians keep talking about competition - and that’s good - but they should also allow co-operation because on the rails we can’t do without it. If it was forbidden tomorrow, all the trains would stop.’

Hence Smulders supports the EC’s initiative for Trans-European Rail Freight Freeways ’not because I think it is the ultimate solution, but I see it as a first good step.’

Terffs require a high level of co-operation between train operators and infrastructure providers. When the first route to Rotterdam came into being, ’we looked at it with our shipping customers and found that transit times were worse and costs higher than what we had already.’

’Having discussed it with Dr Sinnecker of DB Cargo (p87), we agree that we want to use a Terff as soon as possible. It is not the ultimate system, only a beginning. Let’s make use of it - then we can get into a dialogue and show how we can improve things.’

But what happens if moves towards liberalisation are not reciprocated? Smulders quotes an SNCF colleague as saying "you are a liberalised country, so especially when you are together with DB, we will compete with you into Rotterdam."

’I replied "that is what life is about, so you can come here and we will send a locomotive to Paris." He just laughed and said "don’t think your loco can come to Paris because my people will sit on the tracks." - and I have had this twice now from the top levels of SNCF.’

’I am convinced that you can cut the cost of rail transport by 30% in every European country’

Ed Smulders