Interview with Jean-Pierre Audoux, Delegate-General – French Railway Industries Association (FIF).

Holder of an International Economics Directorate, Jean-Pierre Audoux has occupied several top positions at the Ministry of Defence, the National Defence General Secretariat, the Industrial Affairs Ministry, then  within the EDF Commercial Strategy Department before his appointment as  FIF Delegate-General in 1996. He has authored several books including one entitled « World industrial  strategies : towards a new paradigm ? » published under the auspices of  the CFCE/ Industrial Affairs & Overseas Trade Ministry.

How do you view the current rail-sector scene in France ? What exactly will be the role of the future Office of Rail Regulation (ARAF) ?

While the Grenelle Green Summit effectively “legitimised” the rail mode by  pledging € 100 billion worth of railway infrastructure investments, the sector is nevertheless undergoing major change. The transformation process actually started in the Nineties, with the onset of the first wave of European Regulations followed by the gradual migration of closed railway economies towards forms of organisation more in phase with the new globalised economic order. The bottomline is that the railway manufacturing sector is now liberalised right across Europe, with the existing rail freight and passenger networks due to follow suit by 2020. These structural transformations have unfortunately coincided with a sustained economic crisis, and this in turn has slowed-down growth, dried-up funding sources and placed extra constraints on the public purse…..And let’s not forget the «industrial unrest” which has weighed so heavily on the trading results of SNCF, whose freight business posted a loss of € 1 billion in 2009!

Add to this the difficult transition undertaken by the French railway system, as epitomised by the delayed deployment of the Office of Rail Regulation (ARAF), initially scheduled to take place on 1 January 2010 and subsequently put back to end 2010 or early 2011 through inability to find a suitable chairman : a situation symptomatic of the prevailing dilemma to say the least!

Given the current economic environment, which are the improvement levers that can possibly be deployed by legacy  operators or new entrants in response to customer needs ?

The newly-created Office of Rail Regulation should incentivise the accelerated advent of new entrants. On the freight side,  we can already report a concrete movement towards the emergence of short-line freight operators able to group-regroup wagons over 10-100 km  distances and direct them towards freight reforwarders, whether « legacy » railway operators (SNCF, DB, etc..) or road hauliers. The stakes are simply colossal for the territorial entities, and here we merely need look at what the Germans have achieved in this field by developing a more competitive supply chain.

Prospects, whilst generally good and even excellent in terms of infrastructure and mass-transit rolling stock, are however less upbeat for mainline coaching stock and freight wagons.

Where the passenger business is concerned, the way international traffic develops will depend on how train paths are allocated (like flight slots), with quality of service and basic clockface timetabling continuing to be sensitive issues. Lastly, the picture with regard to the railway manufacturing industry as such is much patchier although prospects remain broadly good not to say excellent in the infrastructure sector, with the quasi-simultaneous launch of work on 3 high-speed lines, conventional-network upgrading plans, the announced quintupling of the short-line network size and, hopefully, the start of work on the Tours-Bordeaux HSL plus the Greater Paris project, providing of course the corresponding funds can be secured. These are all valid reasons for believing in the future. The same conclusion holds good for mass-transit rolling stock given the healthy state of urban transport whether in the Ile-de-France region or other regions nationwide. Conversely, the picture looks much gloomier where mainline coaching stock and freight wagons are concerned. Indeed the ongoing crisis has resulted in SNCF renouncing the tendering call for 200-300 TGV trainsets and cancelling  200 of the 400 diesel locos ordered from Alstom and Siemens. The dilemma for the regions, impacted by the crisis as they are, is whether they will succeed or not in sourcing the options pertaining to the last two ongoing major  SNCF rolling-stock contracts (for  multi-purpose vehicles, high-capacity vehicles, etc...).

How do you resist the appetites whetted by competition ? Is an Airbus-style European industrial cooperation model a valid proposition ?

Measures to improve productivity in the tracklaying field or  the joint-testing of rolling stock are an absolute necessity. The Franco-German initiative launched in the Seventies to set-up the Airbus Consortium to rival US giant planemaker Boeing and McDonnell Douglas has been fully vindicated. Today European railway manufacturers are in a different position. Until quite recently Alstom, Siemens and Bombardier were world market leaders, which lulled the European Commission into thinking that the world railway manufacturing industry boiled down to competition between these three giants. Times have changed, however, with the strong showing put-up by three Far-Eastern countries : Japan with Kawasaki HI and Hitachi, South Korea with  Hyundai Rotem, and China with its giants CSR and CNR for rolling stock, CRCC and CERC for infrastructure. The latter already match their western rivals for size while posting annual turnover growth rates of 30 to 50%! It is whispered in some quarters that the Chinese market could gradually close its doors to outsiders progressively as technology transfers are finalised. Once this process is completed, Chinese competition will switch its attention on to European markets.  Might the response to this challenge perhaps lie is forging Transcontinental or European alliances? Only time will tell!