Transport map redrawn

By PAM GRAHAM

Tranz Rail's suspension of asset sales yesterday underlined what industry executives know well. Their industry is in play. And like an unsolved puzzle, the pieces are not in the right place to reveal the final picture.

Australia's Toll Holdings "will take no prisoners" and has ambitions beyond Tranz Rail, says Owens Group shareholder Douglas Owens, son of transport entrepreneur Sir Bob Owens. He says the goal has always been linking road, rail and ports.

But Owens Group did not succeed in buying Tranz Rail at its 1993 privatisation and nor did Mainfreight, and they have had to compete with the rail operator's trucks ever since.

Now Owens Group is trying to buy Tranz Rail's road transport business, Tranz Link, to take out a competitor and connect better with rail.

That plan stalled yesterday when Tranz Rail put asset sales on hold after threats of legal action from shareholders contemplating alternative futures for Tranz Rail - a Toll takeover or a Government plan to buy the track and support the exclusive operator.

Meanwhile, Mainfreight has bought 15 per cent of Owens and the market awaits developments.

The corporate plays are just part of the puzzle. Other pieces are Government policy and global trends in the movement of goods.

The Government's attempts to regain influence over rail transport have pushed it into a battle for Tranz Rail.

But what it decides to do about a lobby to re-regulate coastal shipping will also affect road, rail and sea transport companies.

The companies dotted around Auckland airport know that puzzle goes well beyond who controls trucks, rail and ships in New Zealand.

Companies like Kuehne & Nagel, the world's largest sea freight forwarder, compete with the Mainfreights and Tolls.

"The local companies are saying we are not just trucking companies, we can handle shipping and airfreight," said Troy Hageman, Kuehne & Nagel's local manager. That explained why Mainfreight managing director Don Braid had told this writer: "If you call Mainfreight a trucking company I won't talk to you. We're a logistics company."

As businesses focus on manufacturing and marketing, they are outsourcing all product movement. The logistics industry has hierarchy from 1PL, a producer operating its own logistics, to a 5PL which outsources all the supply chain and electronic commerce.

Brokers in Australia estimate that only 10 per cent of Australian companies outsource logistics, compared with 38 per cent in the UK, so investors get excited about the possibilities. Toll was a $1.5 million trucking company when Paul Little and Peter and Mark Rowsthorn did a management buyout 18 years ago.

They turned the trucker into a logistics provider worth $2.2 billion and catapulted themselves up BRW magazine's rich list, which last recorded Little's wealth at $288 million and the Rowsthorn father and son team at $364 million.

The Toll annual report lists years in the transport industry after directors' names. Little has 35 years' experience.

His latest play has been in Australian rail. Australia has just privatised some rail operators and is trying to rationalise management of the traditionally state-based network.

The investment market is excited about the possibilities. Broker research predicts that rail will take a greater share of the freight transport market because of a shortage of truck drivers, environmental concerns, an expected lowering of costs from rationalisation of operators and improvements in service under new management.

They predict a growth in containers, cars and hazardous goods carried on rail.

Critics say the euphoria when Toll joined with Patrick Corp to buy A$1.2 billion of privatised rail assets in the Melbourne-Sydney-Brisbane corridor a year ago has faded because of competition from RailAmerica's Freight Australia and Queensland Railways.

Hundreds of millions of dollars of expected government spending on track that would allow faster, higher and heavier trains has been delayed.

Little answers the critics by saying the company's rail investments are making money.

He believes there is a renaissance under way in rail and that the solution to the transport puzzle is running a business across the whole supply chain.

Kuehne & Nagel would argue that the global supply chain providers are in a stronger position that the local supply chain providers.

It has 104 staff in New Zealand, up from 14 five years ago, but turnover of just $80 million is small compared with Mainfreight's and Owens' $400 million apiece. Hageman believes the locals cannot compete on technology.

Mainfreight's Braid argues: "Our technology is world-class and we have the credentials to prove it."

The global firms that use third parties in their local supply chain lose control and quality is eroded, Braid contends.