GB Railfreight in 'locomotive acquisition' talks

[ac6000cw]

It feels like sometimes that (given DBs lack of use/interest in the 60s) that it would be a better idea all round if they sold all the 60s to an independent leasing/hire company (that was also responsible for arranging the heavier maintenance), then just leased/hired back the ones they needed. The others would then be available for anyone else who wanted to use them. The same idea might work for the 92s as well.

There are precedents for this sort of thing - the US railroads compete with each other for traffic, but nearly all of the intermodal freight cars they use are owned by a 'rolling stock provider' company (TTX) that is jointly owned by all the big railroads in the US, Canada and Mexico. This means the cars operate effectively as a continent-wide, pooled fleet which improves their utilisation. The railroads also have numerous 'run-through' agreements for motive power (so locos are not changed at railroad boundaries, and then sometimes get 'borrowed' for a while before heading back home). It's easy to track the usage of locos with modern technology, so the railroads just equalise the 'horsepower-hours' between themselves (or pay/collect usage fees instead, if that's easier). It effectively creates an ad-hoc, dynamic, nationwide loco pool (of just a small percentage of the total fleet though).

 

[daikilo]

It feels like sometimes that (given DBs lack of use/interest in the 60s) that it would be a better idea all round if they sold all the 60s to an independent leasing/hire company (that was also responsible for arranging the heavier maintenance), then just leased/hired back the ones they needed. The others would then be available for anyone else who wanted to use them. .

If you replace the last 2 words by "compete with them (DB)." you'll see the problem. The 60 has specific heavy-haul characteristics and availability, the last thing you would want to do is make them available to a direct competitor, who ultimately could capture the traffic on which you are actually using your working fleet.

 

[TimboM]

It feels like sometimes that (given DBs lack of use/interest in the 60s) that it would be a better idea all round if they sold all the 60s to an independent leasing/hire company (that was also responsible for arranging the heavier maintenance), then just leased/hired back the ones they needed. The others would then be available for anyone else who wanted to use them. The same idea might work for the 92s as well.

There are precedents for this sort of thing - the US railroads compete with each other for traffic, but nearly all of the intermodal freight cars they use are owned by a 'rolling stock provider' company (TTX) that is jointly owned by all the big railroads in the US, Canada and Mexico. This means the cars operate effectively as a continent-wide, pooled fleet which improves their utilisation. The railroads also have numerous 'run-through' agreements for motive power (so locos are not changed at railroad boundaries, and then sometimes get 'borrowed' for a while before heading back home). It's easy to track the usage of locos with modern technology, so the railroads just equalise the 'horsepower-hours' between themselves (or pay/collect usage fees instead, if that's easier). It effectively creates an ad-hoc, dynamic, nationwide loco pool (of just a small percentage of the total fleet though).

That sounds far too sensible!

I think there's also a challenge with such an arrangement with the state that EWS/DBC have allowed the majority of their stored 60s (and 92s) to get into in to in that there needs to be considerable upfront investment to get them working reliably again and I don't think anyone (e.g. Wabtec/Brush) would do that if all they could be "promised" is some loose pool hire agreement. They'd be wanting some firm commitments from potential customers before sinking £££ into these locos.

I think it's a more viable option for the more recently stored ones or even the operational ones that DB might be struggling (or unwilling) to invest in the upkeep and maintenance of. (I'm thinking particularly of their 6x 92s which are becoming increasingly fragile, but suspect there's 60s in the same boat.)

I could see such an arrangement working better with these in that at least those locos are operational and could be given proper overhauls etc. by a new owner before they got into a state of disrepair, and there's logically some guaranteed custom at the end of it as DB for starters would want/need to use them to the extent they were anyway, with any free capacity then being available for sale to other operators.

The 'sale and lease-back' also helps DB's finances/cash-position in the short term at least as they'd cash in for the sale and depending who had the maintenance contract (possibly them) the on-going hire costs (especially if only paying for what they used) could well be not that different from what it's costing them at the moment.

The other way this might go is through "market forces" i.e. the 60s (and 92s) that are already with, or end up with, the companies that use them and keep them in good order (e.g. Colas/GBRf with support from Brush) end up picking up DB's work as their 60s/92s get ever more run into the ground and ultimately GBRf/Colas take over that type of business from DB (or DB end up hiring the spare capacity of the decent GBRf/Colas examples and the utilisation gets maximised that way).

Slightly OT, but I can see this potentially happening with the 92s if not the 60s - DB's 6 UK ones are restricted to Tunnel/HS1 only now and appear to be getting increasingly fragile (2 have been in Crewe IEMD for some time and they were down to 1 fully working one a few weeks back). Meanwhile, GBRf are investing heavily in theirs and ultimately will have a fleet of 12 decent examples. DB are already spot-hiring GBRf's 92s and using some of their "spare" capacity whilst theirs were out of action. If DB don't invest significantly in their locos pretty soon I can only see that situation increasing - i.e. DB's locos become more and more unavailable and they're hiring in GBRf's (or whoever's) locos to the extent it either becomes a long-term arrangement or the customers just take the work to the other FOC and cut out the "middle-man".

 

[TimboM]

If you replace the last 2 words by "compete with them (DB)." you'll see the problem. The 60 has specific heavy-haul characteristics and availability, the last thing you would want to do is make them available to a direct competitor, who ultimately could capture the traffic on which you are actually using your working fleet.

I certainly think the competition angle was a 'blocker' for DB in the past, but I sense there's been a sea-change on that front.

They're starting to lose the business now anyway (other FOC's offering better service, reliability and/or price no doubt). I suspect they're now in the position that hanging on to scores of rusting locos just to prevent competitors not getting the work is no longer working as a strategy (if it ever was one) and they're needing to maximise these assets they do have (through sale) to help shore up the losses from the work that's going elsewhere anyway.

Also, DB have sold 10x 60s and 2x 67s to Colas (and rumoured to have almost sold 10x 60s to GBRf at the same time as the Colas ones but apparently that fell through for other reasons). They also quite regularly hire-out locos to other competitors, so there's also evidence that (these days at least) they'll consider selling/hiring locos to their competitors.

 

[CosherB]

I certainly think the competition angle was a 'blocker' for DB in the past, but I sense there's been a sea-change on that front.

They're starting to lose the business now anyway (other FOC's offering better service, reliability and/or price no doubt). I suspect they're now in the position that hanging on to scores of rusting locos just to prevent competitors not getting the work is no longer working as a strategy (if it ever was one) and they're needing to maximise these assets they do have (through sale) to help shore up the losses from the work that's going elsewhere anyway.

Also, DB have sold 10x 60s and 2x 67s to Colas (and rumoured to have almost sold 10x 60s to GBRf at the same time as the Colas ones but apparently that fell through for other reasons). They also quite regularly hire-out locos to other competitors, so there's also evidence that (these days at least) they'll consider selling/hiring locos to their competitors.

DB setting up as a quasi-ROSCO?

 

[TimboM]

DB setting up as a quasi-ROSCO?

Them and Wabtec/Brush


If HM Govt had actually sold all the freight locos/stock to ROSCOs at privatisation as they did with passenger rolling stock, rather than sell it on the (very) cheap to EWS, I don't think these locos would be in the state they're in now.

 

[mushroomchow]

G'won GBRF, take a punt on the 60s. I want to see Tugs stretching their legs in my neck of the woods again

 

[ac6000cw]

If you replace the last 2 words by "compete with them (DB)." you'll see the problem. The 60 has specific heavy-haul characteristics and availability, the last thing you would want to do is make them available to a direct competitor, who ultimately could capture the traffic on which you are actually using your working fleet.

I understand that, but if you are selling assets (to lease back part of), you could always try and negotiate the deal such that you get discounted hire/lease rates afterwards to still give you some commercial marketplace advantage (in exchange of course for a lower sale price - it's all about returns on capital at the end of the day for a leasing/hire company).

 

[TimboM]

I understand that, but if you are selling assets (to lease back part of), you could always try and negotiate the deal such that you get discounted hire/lease rates afterwards to still give you some commercial marketplace advantage (in exchange of course for a lower sale price - it's all about returns on capital at the end of the day for a leasing/hire company).

Agreed.

I get the impression it's becoming a "needs must" for DBC too. DBC (i.e. the freight operations) continues to make heavy losses, work is being lost at a rapid rate to their competitors (even with not letting them get their hands on their unwanted locos) and the new operational methods they introduced on 1 July by all accounts has added to the problems.

Whilst German Railways (DB) clearly aren't going to go bust, I suspect those running DBC and the UK operations in particular will be under significant pressure to deliver better results up the line.

So I'd think the approach of sitting there saying "we're not letting competitors have the locos we don't use", whilst the competitors rapidly take the work off them anyway(!) has worn thin and they've moved onto looking at how they can make the most out of the assets they have sitting there doing nothing but rotting/depreciation further week by week.

I know CosherB's tongue was firmly in cheek earlier about DB being a quasi-ROSCO, but if you look at it that's the big strength they have - i.e. the large quantities of locos that are (in part) back in demand - and as they don't appear to have the work/are losing it themselves, then selling/leasing the locos to those that do is the next best and pragmatic option of realising that asset and improving the numbers.

 

[richieb1971]

DBC seem to be the only FOC that lets their loco's deteriorate into a state of disrepair. I've not seen any FOC's (GBRF/DRS/Colas/Freightliner/ROG/EP or operating UKRL) locos go into any bad state. In fact, the opposite seems to be true that they are almost always gleaming.

I've also noticed its always Brush traction that gets neglected.

 

[TimboM]

DBC seem to be the only FOC that lets their loco's deteriorate into a state of disrepair. I've not seen any FOC's (GBRF/DRS/Colas/Freightliner/ROG/EP or operating UKRL) locos go into any bad state. In fact, the opposite seems to be true that they are almost always gleaming.

I've also noticed its always Brush traction that gets neglected.

I think that's down to the fact that at privatisation EWS (which was then taken over by DB) obtained the vast majority of the freight rolling stock at a very knock down price, including - given the timing - a lot of the late-80s/early-90s Brush locos (e.g. 100x 60s; 30x 92s).

They then had a load of locos they'd never paid that much for - and on top of that pretty complex locos (60s and especially 92s) that were very capable, but hungry on maintenance/repairs etc. so comparatively unreliable (especially if little was spent on them!) and high running costs.

These were predominantly heavy-haul locos, so when coal, steel etc. declined the demand for them decreased likewise. And even more so for the 92s with channel freight never materialising in any great volume.

It became cheaper for them to go out and buy a shed load of 66s rather than invest in getting the 60s/92s to perform reliable (and the 66s were more suited to the direction freight had gone).

It's not just Brush locos DB have rotting in sidings though, for balance they've plenty of BREL 90s at Crewe some in a very bad way, plus a good few 67s and a handful of 66s (although they've not deteriorated so badly). I think they may own the various 58s scattered around Europe too.

You're right though, I cannot think of too many other FOCs who let so many of their locos get in this state, although none of the others were in the position above or ended up with quite the surplus DB have.
They all have one or two "embarrassments" knocking around in bad ways and most likely stripped of many parts, though - e.g. Freightliner have 90050 at Basford Hall, GBRf have a shell of a 73 in 73134 at Loughborough, plus a couple of 92s sat on blocks in the car park (045/046) and two more in Coquelles probably not looking too great (021/040).

 

[CosherB]

DBC seem to be the only FOC that lets their loco's deteriorate into a state of disrepair. I've not seen any FOC's (GBRF/DRS/Colas/Freightliner/ROG/EP or operating UKRL) locos go into any bad state. In fact, the opposite seems to be true that they are almost always gleaming.

I've also noticed its always Brush traction that gets neglected.

And you sound surprised?

 

[Peter Sarf]

It feels like sometimes that (given DBs lack of use/interest in the 60s) that it would be a better idea all round if they sold all the 60s to an independent leasing/hire company (that was also responsible for arranging the heavier maintenance), then just leased/hired back the ones they needed. The others would then be available for anyone else who wanted to use them. The same idea might work for the 92s as well.

There are precedents for this sort of thing - the US railroads compete with each other for traffic, but nearly all of the intermodal freight cars they use are owned by a 'rolling stock provider' company (TTX) that is jointly owned by all the big railroads in the US, Canada and Mexico. This means the cars operate effectively as a continent-wide, pooled fleet which improves their utilisation. The railroads also have numerous 'run-through' agreements for motive power (so locos are not changed at railroad boundaries, and then sometimes get 'borrowed' for a while before heading back home). It's easy to track the usage of locos with modern technology, so the railroads just equalise the 'horsepower-hours' between themselves (or pay/collect usage fees instead, if that's easier). It effectively creates an ad-hoc, dynamic, nationwide loco pool (of just a small percentage of the total fleet though).

I wonder if in the US there are not many cases where railfreight companies are in direct competition. Given the geography "US, Canada and Mexico" I imagine these are for routes/operators that do not duplicate much. Whearas in the UK the various freight operating companies are in direct competition with each other.

As others have said. DBC inherited more locos than they need. When EWS ordered 250 66s to replace older traction I think they overestimated how many they needed. The result was so many 66s that the 60s are hardly needed. This was compounded by the fact that the heavy rail freight sector has declined.

The result of this is that DBC, and EWS before them, relied on the newer 66s which they have to lease anyway. The older locos (60s and 92s) were of little financial value on the accountants books. Well the even older locomotives (47s, 37s etc) were worth even less and got scrapped / sold. It was obvious that the 60s could be used in direct competition. However by keeping hold of these locomotives they could put one back into service as and when business required or to replace a badly failed class mate. Mind you it surprises me that EWS and DBC have not scrapped a lot more of the 60s over the years !.

 

[CosherB]

I wonder if in the US there are not many cases where railfreight companies are in direct competition. Given the geography "US, Canada and Mexico" I imagine these are for routes/operators that do not duplicate much. Whearas in the UK the various freight operating companies are in direct competition with each other.

As others have said. DBC inherited more locos than they need. When EWS ordered 250 66s to replace older traction I think they overestimated how many they needed. The result was so many 66s that the 60s are hardly needed. This was compounded by the fact that the heavy rail freight sector has declined.

The result of this is that DBC, and EWS before them, relied on the newer 66s which they have to lease anyway. The older locos (60s and 92s) were of little financial value on the accountants books. Well the even older locomotives (47s, 37s etc) were worth even less and got scrapped / sold. It was obvious that the 60s could be used in direct competition. However by keeping hold of these locomotives they could put one back into service as and when business required or to replace a badly failed class mate. Mind you it surprises me that EWS and DBC have not scrapped a lot more of the 60s over the years !.

If the Class 60 was a facsimile of the Class 59, which it should have been had politics not been behind the decision to go with Brush, then maybe they would have had continuous service under EWS and DB, and they would have only had to order 100 or so 66s. Oh if history had been written differently .....

 

[Peter Sarf]

If the Class 60 was a facsimile of the Class 59, which it should have been had politics not been behind the decision to go with Brush, then maybe they would have had continuous service under EWS and DB, and they would have only had to order 100 or so 66s. Oh if history had been written differently .....

Makes me wonder why GBRF etc do not run out and acquire some new 59s. Presumably the 59 is such an old design that it is no longer available ?. I bet emissions rules rule out the original 59. Also older style engines from outside Europe that could have been re-used in a new loco body would not be available now.

 

[simonw]

Them and Wabtec/Brush


If HM Govt had actually sold all the freight locos/stock to ROSCOs at privatisation as they did with passenger rolling stock, rather than sell it on the (very) cheap to EWS, I don't think these locos would be in the state they're in now.

There was little interest in buying the freight side of BR so they got what the market thought it was worth which was not a lot. It would be interesting to know if EWS and its follow on companies has cumulatively made money.

 

[Great_Western]

Makes me wonder why GBRF etc do not run out and acquire some new 59s. Presumably the 59 is such an old design that it is no longer available ?. I bet emissions rules rule out the original 59. Also older style engines from outside Europe that could have been re-used in a new loco body would not be available now.

Isnt that essentially what 70's are?

 

[TimboM]

Makes me wonder why GBRF etc do not run out and acquire some new 59s. Presumably the 59 is such an old design that it is no longer available ?. I bet emissions rules rule out the original 59. Also older style engines from outside Europe that could have been re-used in a new loco body would not be available now.

...because GBRf (or Wabtec/Brush more accurately it would appear) can buy 2nd hand Class 60s and do them up for less - and probably quicker than designing/testing/commissioning etc. a new loco (which it'd need to be as I believe all existing designs/specs of 59s/66s are permitted anymore).

I fully expect various options have been looked into (along with all the challenges with each - emissions regs, reliability, lead times etc. etc.) and GBRf (assuming they're involved in this) will go for what they think is the best option.

 

[TimboM]

There was little interest in buying the freight side of BR so they got what the market thought it was worth which was not a lot. It would be interesting to know if EWS and its follow on companies has cumulatively made money.

Certainly these days DBC make significant losses - not sure what it was like in the early days when there was more (heavy) freight and they were operating it with locos that hardly cost them anything...?

I'd be surprised if cumulatively they were in the black.

But I wonder how much of that is to do with them being such a dominant player for so long and having more stock than you could shake a stick at - and therefore not making the most out of what they had as they didn't have the competition for a long to force them to innovate, maximise utilisation of assets etc.

The likes of GBRf and DRS for example have shown you can be successful/profitable as a FOC and they've had to use what they had/were given to an extent and fight hard in the market to win business and it's resulted in companies that are on the up and now looking to expand.

 

[TimboM]

If the Class 60 was a facsimile of the Class 59, which it should have been had politics not been behind the decision to go with Brush, then maybe they would have had continuous service under EWS and DB, and they would have only had to order 100 or so 66s. Oh if history had been written differently .....

But then there'd have been even more of the dull shed-shaped locos which all look exactly the same and there are way too many of as it is :-x

 

[43096]

Isnt that essentially what 70's are?

59s built by GM/EMD.
70s built by General Electric.

A rather big difference.

 

[RichmondCommu]

Certainly these days DBC make significant losses - not sure what it was like in the early days when there was more (heavy) freight and they were operating it with locos that hardly cost them anything...?

I'd be surprised if cumulatively they were in the black.

But I wonder how much of that is to do with them being such a dominant player for so long and having more stock than you could shake a stick at - and therefore not making the most out of what they had as they didn't have the competition for a long to force them to innovate, maximise utilisation of assets etc.

The likes of GBRf and DRS for example have shown you can be successful/profitable as a FOC and they've had to use what they had/were given to an extent and fight hard in the market to win business and it's resulted in companies that are on the up and now looking to expand.

I would have thought that sooner or later DBC will start making a profit because they will simply get rid of what they don't need. I'd be interested to know how much profit GBRf, DRS, Colas and Freightliner make given that profit margins must be very low in the intermodal sector.

 

[Mordac]

Certainly these days DBC make significant losses - not sure what it was like in the early days when there was more (heavy) freight and they were operating it with locos that hardly cost them anything...?

I'd be surprised if cumulatively they were in the black.

But I wonder how much of that is to do with them being such a dominant player for so long and having more stock than you could shake a stick at - and therefore not making the most out of what they had as they didn't have the competition for a long to force them to innovate, maximise utilisation of assets etc.

The likes of GBRf and DRS for example have shown you can be successful/profitable as a FOC and they've had to use what they had/were given to an extent and fight hard in the market to win business and it's resulted in companies that are on the up and now looking to expand.

Of course DRS has guaranteed income in the form of nuclear contracts, and therefore can afford to play trains with museum pieces that any sensible management would have got rid of long ago. Let's not pretend DRS is a plucky small business taking it to the dominant players, they're essentially underwritten by the tax payer.

 

[fgwrich]

Certainly these days DBC make significant losses - not sure what it was like in the early days when there was more (heavy) freight and they were operating it with locos that hardly cost them anything...?

I'd be surprised if cumulatively they were in the black.

But I wonder how much of that is to do with them being such a dominant player for so long and having more stock than you could shake a stick at - and therefore not making the most out of what they had as they didn't have the competition for a long to force them to innovate, maximise utilisation of assets etc.

The likes of GBRf and DRS for example have shown you can be successful/profitable as a FOC and they've had to use what they had/were given to an extent and fight hard in the market to win business and it's resulted in companies that are on the up and now looking to expand.

DB's biggest problem, and EWS before that is simply down to itself - its shareholders. Barring many of its other issues and factors, EWS could have built itself onwards and upwards at a much steadier pace. However it came down to the shareholders view of Ed Burkhardt's business and decided that the the return wasn't coming in quick enough. Burkhardt Should have been allowed to do what GB and Freightliner have excelled at for many years - Providing dedicated locos for dedicated contracts - Hope Cement / Shanks 66s for Freightliner, Sorrento/Sense/ the Railtrack one for GB Railfreight. Sadly it seems it's been largely about the money for many years within DB and that's left them lurking in the situation they're in today - finding themselves getting caught napping left right and centre on contracts they should never have really lost - MOD to GB, South Wales Coal to FL, Aggrigates / Oils / NDS to Colas etc!

But I think we may be drifting a little too much here. I still reckon, if this is completely true, that these 60s will receive some form of re-engineering by BRUSH - possibly even replacing the fairly average for reliability Mirlees power unit.

 

[richieb1971]

How long do you think it will take to hear official news?

 

[TimboM]

Of course DRS has guaranteed income in the form of nuclear contracts, and therefore can afford to play trains with museum pieces that any sensible management would have got rid of long ago. Let's not pretend DRS is a plucky small business taking it to the dominant players, they're essentially underwritten by the tax payer.

Bit OT, but DRS whilst owned by the NDA (and hence tax payer ultimately) operate profitably on a stand-alone basis. The museum pieces they "played trains" with were all they had initially to work the nuclear trains the company was set up to run.

But as a result of maintaining and utilising these properly they were able to cover all the nuclear work and use the spare capacity to win other business and grow to the extent they're now a significant player in the freight and LHCS market with arguably the most modern fleet. Hence an example of how things can be done versus what DB have achieved with their assets.

 

[randyrippley]

........But I think we may be drifting a little too much here. I still reckon, if this is completely true, that these 60s will receive some form of re-engineering by BRUSH - possibly even replacing the fairly average for reliability Mirlees power unit.

When they were built it was a toss-up as to whether a Mirlees or Ruston power unit would be used. I presume there's no chance of getting replacement Mirlees units, but does anyone know how easy it would be to retrofit a Ruston?

 

[randyrippley]

Makes me wonder why GBRF etc do not run out and acquire some new 59s. Presumably the 59 is such an old design that it is no longer available ?. I bet emissions rules rule out the original 59. Also older style engines from outside Europe that could have been re-used in a new loco body would not be available now.

Emission regulations would bar the 2-stroke engine. Newer crashworthiness standards would bar the cab design on grounds of impact resistance and resistance to overriding. Finally there are big questions about noise and temperature control in the cab.
If you could find sufficient second-hand engines already in use in Europe then maybe you could legally build new bodyshells around them, but that would hardly be cost efficient - and the chances of finding the engines are slim

 

[Great_Western]

59s built by GM/EMD.
70s built by General Electric.

A rather big difference.

They are designed for the same purpose though. The 59's are no longer with us for a reason.

 

[daikilo]

They are designed for the same purpose though. The 59's are no longer with us for a reason.

??? most 59s still in operation I believe. Note: 66s also built by EMD.