KiwiRail has been under intense scrutiny in recent months after its plan to replaceits ageing ferry fleet with two mega ferries was left dead in the water. The Government refused to fund a cost blowout of $1.47 billion for the portside infrastructure needed to support the larger ships.
Ministry of Transport officials were already considering whether Interislander could be separated into a new state-owned enterprise (SOE) or sold when the Aratere ran aground last month.
Treasury has released a document inviting applications for positions on KiwiRail’s board.
It said the main task for the board in the short to medium term was to urgently improve the company’s financial performance and reduce the level of dependency on Crown funding.
Expectations from shareholding ministers included ensuring ferry operations remained safe at all times.
“And KiwiRail executes a maintenance programme that is aligned with best practice and responds to the reviews into serious issues that have arisen in recent years.”
KiwiRail chief executive Peter Reidy (left) says he is not worried about losing his job. Chairman David McLean (right) is retiring early. Photo / Mark Mitchell
They wanted KiwiRail to achieve commercial self-sustainability for its above-rail assets, which include its rail freight and ferry businesses.
Ministers also expected safety initiatives and cultural programmes would result in “drastically improved health and safety outcomes”.
Treasury also told potential applicants that KiwiRail was undertaking a “Transformation Plan”, supported by global management consultants McKinsey & Company, to help with strategic decision-making to achieve commercial sustainability.
“In particular the FPA (Full Potential Assessment) is identifying major areas of opportunity across the organisation with bankable plans to improve service reliability, customer satisfaction and pricing to grow volumes and revenues,” the document said.
“All while achieving cost savings and efficiency gains required for it to be more competitive.
“The board of KiwiRail will have the opportunity to drive the implementation of initiatives formed from this work with McKinsey.”
Consultant spend ‘excessive and not justifiable’- Willis
Willis said she didn’t think an organisation with highly paid executives such as KiwiRail should have to spend a sum as big as it did on external consultants for advice on how to run its core business.
KiwiRail maintains the cost is commercially sensitive but a legal expert has questioned that position and the Herald has complained to the Ombudsman, arguing the figure should be made public officially. Newshub reported it understood the cost was $8 million.
Asked to justify the cost of the McKinsey report, McLean previously said the board expected KiwiRail to lift its performance.
“KiwiRail currently moves around 18 million tonnes of freight a year and we want to grow our share of the freight market by improving our reliability and competitiveness.
“Similarly, we want Interislander to take a bigger share of the Cook Strait market.”
KiwiRail’s corporate teams affected by proposed restructure
Meanwhile, KiwiRail has met with staff to start consulting on a proposed restructure affecting some of its corporate teams.
Chief people and communications officer Andrew Norton told the Herald KiwiRail was changing the way it worked. This was “in order to improve efficiency, focus on the needs of customers, and meet the expectations of our shareholders, and ourselves, to grow our business. Our transformation involves many initiatives, developed by KiwiRail.”
KiwiRail would not comment on the number of jobs affected until the consultation process was completed.
Asked whether the restructuring was the result of the McKinsey consultants’ work, a KiwiRail spokesperson said: “The restructuring is the result of plans developed by KiwiRail”.
Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.
