Category Archives: Europe

ANOTHER POORLY TIMED LARGE GE ACQUISITION

Guest article by Ken Kinlock

One of the major problems for a US company having manufacturing in France and other European countries is that you can’t layoff people to conform to market and industry changes.

GE’s acquisition of Alstrom is an excellent example. The market is declining but you can’t reduce the workforce. “Positions in France won’t be affected due to stipulations in an agreement when GE bought Alstom SA’s energy business in 2015, the GE spokesperson said.” Even worse, GE Power will add 1000 jobs in France to meet the agreement they made when the French government approved the deal. So, every other location will reduce employment while France increases, even when the market is declining. Does this make sense?

This reinforces my previous note that “GE has made many poor LARGE acquisitions over the past fifty years and Altrom has many of the same problems that Machine Bull acquisition had for GE and why it lost the computer game against IBM.

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European Champion In The Rail Industry

The engineering giants Alstom and Siemens are to tie up their rail operations. Alstom of France and Germany’s Siemens say that the merger will create a new “European champion in the rail industry”. The new group,which will be led by Alstom’s chief executive Henri Poupart-Lafarge will be called Siemens Alstom and is expected to compete against China’s state-backed operator CRRC. Alstom makes TGV trains in France while Siemens makes the equivalent ICE inter-city trains that run on German long-distance routes. The French government,which owns around 20 percent of Alstom will shed its stake as part of the deal.

Gotthard Base Tunnel In The Alps Begins Passenger Service

Regular passenger train services through the Gotthard Base Tunnel begin. The longest rail tunnel in the world, it is the centrepiece of the planned AlpTransit rail network that will speed people and cargo through Switzerland and under the Alps. It was inaugurated on Jun 1.

The 57km (35-mile) tunnel is expected to service 65 passenger trains per day reaching speeds of 250 kmh (155 mph), along with up to 260 freight trains. It cuts the 3.5-hour travel time from Zürich to Milan by an hour and reduces the journey from Zürich to Lugano to one hour 40 minutes.

A parallel service, running hourly, begins in the same month on the original Alpine railway link, which involves countless bridges and loop tunnels and passes through the old 15 km (9.3 mile) Gotthard tunnel, which was built in 1882.

Engineers broke through the final barrier in the new Gotthard in Oct 2010. With rock cover up to 2,300 metres (7546 feet) in depth, it is also the deepest rail tunnel in the world. It has overtaken Japan’s 53.9 km (33.5 mile) Seikan rail tunnel as the longest in the world and pushed the 50.5 km (31.3 mile) Channel Tunnel linking the United Kingdom and France into third place.

What Happened In Nice, France?

July 14 Holiday in resort of Nice, France. Big fireworks display. Piece of trash Tunisian take giant white truck . Drives along main beach road: the Promenade de Anglais. Kills 84 and wounds 331. Half killed not from Nice. Two Americans. Quite a few children.

Yes you saw it on your television! There were over 60 news agencies covering the story. Not repeat story or get into why we did not pubish our blog for a whole week.

Our thrust is HOW DID A HUGE TRUCK GET ON PROMENADE????? All vehicles were banned! At first, we were the only “news agency” raising the question!!!

Police officers and rescued workers stand near a van that ploughed into a crowd leaving a fireworks display in the French Riviera town of Nice on July 14, 2016. The mayor of the French city of Nice said dozens of people were likely killed after a van rammed into a crowd marking Bastille Day in the French Riviera resort today and urged residents to stay indoors.  / AFP / VALERY HACHE        (Photo credit should read VALERY HACHE/AFP/Getty Images)
Police officers and rescued workers stand near a van that ploughed into a crowd leaving a fireworks display in the French Riviera town of Nice on July 14, 2016.
The mayor of the French city of Nice said dozens of people were likely killed after a van rammed into a crowd marking Bastille Day in the French Riviera resort today and urged residents to stay indoors.
/ AFP / VALERY HACHE (Photo credit should read VALERY HACHE/AFP/Getty Images)
Police officers and rescued workers stand near a van that ploughed into a crowd leaving a fireworks display in the French Riviera town of Nice on July 14, 2016. The mayor of the French city of Nice said dozens of people were likely killed after a van rammed into a crowd marking Bastille Day in the French Riviera resort today and urged residents to stay indoors.  / AFP / VALERY HACHE        (Photo credit should read VALERY HACHE/AFP/Getty Images)
Police officers and rescued workers stand near a van that ploughed into a crowd leaving a fireworks display in the French Riviera town of Nice on July 14, 2016.
The mayor of the French city of Nice said dozens of people were likely killed after a van rammed into a crowd marking Bastille Day in the French Riviera resort today and urged residents to stay indoors.
/ AFP / VALERY HACHE (Photo credit should read VALERY HACHE/AFP/Getty Images)

Publicity was handled by the government in Paris. All they were talking about was what brand of  Islam did the killer come from. Finally the head of the police union talked. Simply there were not enough police “available” for the huge crowd.

This consisted of 20 French Army soldiers (walking in groups of 4); 64 National Police and 42 Municipal Police. Most of the National police were CRS (Compagnies Républicaines de Sécurité).  The task for which they are best known is crowd and riot control and re-establishment of order.

 Remember the police killer in Baton Rouge, Louisiana? He was armed with an “assault rifle”. What does it take to stop a big truck? Right! an “assault rife”. Or a grenade. Only police in Nice with “assault rifles” were the Army.
At the point the truck entered the Promenade (rue Gambetta) there were wooden barricades. Truck just drove around them. It took a National Policeman to climb on truck and shoot driver.
Truck finally stopped outside “our” office at La Canne à Sucre. Two kilometers past the barricades

American Memorial Day 2016 – Rhone American Cemetary, Draguignan France

Been here before and always loved it. This year a little different: Thunderstorms rolling through the region. Ceremony moved to high school gym. But still impressive. Congratulations to Mrs. Alison Libersa who manages the cemetary for the American Battle Monuments Commission. It still was a roaring success. 

It is a bi-lingual event. Some speakers are more bi-lingual than others. Mr. Richard Strambio, Mayor of Draguignan, is one. Besides his staff serves a great lunch.

Highlight of the event is United States of America participation. This year was General Arlan M. DeBlieck who is the “mission support” guy for US in Europe. He brought the Navy European Band with him. A great choice!

Like most ceremonies, all kinds of presentations. For instance, the Riviera Chapter of Democrats Abroad France lays a memorial wreath.

Thank you also to the French Ministries of Defense, Foreign Affairs and Interior, including regional, departmental and communal governments.

Forwarders report zero freight on wretched Asia-Europe trade

Forwarders are reporting a growing number of enquiries for zero freight rates on container shipments from Asia to North Europe, even as spot rates on the trade and on Asia-Mediterranean this week matched the lowest levels ever recorded.

Asia-Europe rates hit $205 per TEU, a level it fell to on June 19, and spot rates to the Med dropped to $195 per 20-foot container, the level it hit on Oct. 16 last year, according to the the Shanghai Containerized Freight Index.

Even though March is the slack season, the year-over-year comparisons are ugly. Asia-North Europe is almost 70 percent down on the same week last year, and Asia-Med is down 76 percent. The comparisons can be found on JOC.com‘s Market Data Hub, along with rates and volumes from all major east-west trades.

JOC.com contacted several forwarders, carriers and shippers about the zero freight reports and no one was prepared to go on the record because of the sensitivities around talking freight prices. However, there was widespread concern about falling rates.

A forwarder with offices in Hong Kong and China said two customers shipping about 100 containers a year to Europe out of three cities in the mainland said they had received a quote for zero freight and wanted him to match it.

“It is absolutely ridiculous. I still don’t know if a carrier actually offered this rate, but if zero freight gets into the market, that would be a disaster,” he said.

The head of ocean freight for a top 10 global logistics provider confirmed the trend of customers asking about zero rates and he warned the market was currently so unstable it was heading for a meltdown.

“Something dramatic is going to happen. The question is not if, but when, and it will hit everyone like a ton of bricks with service disruptions as carriers merge or go out of business,” the Shanghai-based logistics executive said.

The Asia-Pacific head of a European forwarder said he was seeing requests for spot and long term rates of between $50 and $100 per container. “We are not taking up this business, but today average rates offered by shipping lines are around $75-100 per TEU and 150 per 40-foot container,” he said.

“We have no intention to go below cost and we still sell with a profit in most cases, but indeed the margins are very much under pressure.” The forwarder said it was clear from meetings with carriers that they are ready to do whatever it takes to raise rates. “They cannot survive at today’s levels.”

With carrier profitability at such precarious levels, he said bankruptcies were becoming a very real possibility. “Imagine what happens to a sailing schedule if one of your alliance partners suddenly becomes insolvent. Looking the situation today, there is a real possibility of this happening. It is not a desirable situation for anyone,” he said.

For forwarders to quote zero freight rates, it would have to either be offered by container shipping lines, or the rate would be low enough to enable forwarders to offer zero freight and recover the difference through excessive haulage and delivery charges. However, it is worth bearing in mind that in China, the Ministry of Transport forbids the offering of freight rates of below $50 per TEU, with the Shanghai Shipping Exchange monitoring tarrifs and deals on behalf of the MOT.

The three major container carriers contacted by JOC.com said they had no hard evidence of lines offering rates at such give-away levels. An executive from an Asian shipping line said there were rumors in the market that zero freight was being quoted, but he said such a trend, if real, would not be sustainable and would result in problems for the shipping industry.

“Carriers would be better off laying up ships and shippers would not be in a position to maintain a smooth operation in their supply chain,” he said.

Another carrier executive agreed that rate levels have now reached the point where laying up vessels has become financially attractive. “It is getting quite ugly, but as long as we have carriers going for market share and others are subsidized by their governments, things will not necessarily improve,” he said.

The continued operation of loss-making carriers was also questioned by a major Asia-North Europe shipper, who pointed to new rumors of debt-wracked Hyundai Merchant Marine being merged with loss-making Hanjin Shipping.

“I just don’t understand the reasoning behind that. Why merge a loss with a loss in the hope that it becomes a positive?” he said, expressing frustration with the extreme volatility that has consumed the market in the past two years.

“We contract 70 percent of our cargo for the year and every week the rate drops. That means me, and everyone else in the business, has to continually explain our position and defend the contracts. These days we don’t even know where the vessel will be next week — it could be idled, or cancelled, or even scrapped.”

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

Will Europe really back more passenger rail competition?

THE announcement last month that the 26 transport ministers of the European Union (EU) have finally decided to open up the domestic passenger rail market in each member state to competition from 2020, and to reform the way loss-making passenger services are funded and procured, could herald a passenger rail revival in many countries provided private operators are given the chance to compete fairly.

The current situation in Europe is a hotchpotch. Open-access competition ranges from a fully-liberalised market in Sweden, partially-open markets where competition is allowed on certain routes in countries such as Austria, the Czech Republic and Italy, or countries where the market is supposed to be open but there are so many obstacles to private operators that access is in reality very difficult, such as Britain and Germany, to the majority of EU member states where access is currently denied.A similarly fragmented picture emerges for the concessioning of passenger services which require subsidy. While Sweden and Germany put all such services out to tender, the Netherlands and Denmark currently grant their incumbent national operators exclusive access to a defined core network of services, while tendering all other rail services. Netherlands Railways (NS) has a 10-year contract which expires in 2025, and this will be affected by the new legislation. Some countries tender a portion of their services or are starting to introduce concessions, while others have made no such changes. France allows regional authorities to plan and specify local services but they are often frustrated in trying to implement change as French National Railways (SNCF) is the sole operator and all rolling stock must be procured through SNCF.

Britain has a unique system of franchising passenger services where franchisees bear the revenue risk for the services they provide and either have to make premium payments to the government or receive a subsidy. These payments are determined for the life of the franchise as part of the bidding process. Two open-access operators compete with the franchisee on the East Coast Main Line, and a third has been granted access for a Blackpool – London service on the West Coast Main Line. But the process of applying for access is long-winded and tortuous. Access is only granted for a specific route, such as Hull – London, a defined number of paths per day, and for a fixed period of time. Despite these restrictions, there is still a thirst from the private sector for greater access. Stagecoach and Virgin, which jointly operate the West Coast and East Coast franchises, have suggested doing away with franchises on these two important corridors and auctioning batches of paths to the highest bidder.

While incumbent railways have generally been opposed to open-access operators for fear of losing traffic and revenue, and often use their dominant position to put obstacles in the path of private operators, in most cases direct competition has expanded the overall rail market and led to an improvement in quality and performance. The advent of NTV on the Italian high-speed network spurred incumbent Trenitalia to up its game by relaunching its services under the Frecciarossa brand. As a result, Italy now has some of the highest-quality high-speed services in Europe.

Concessioning has usually led to a reinvigoration of local and regional services, with new or refurbished trains and higher-frequency services which attract more passengers.

So why are some governments still opposed to private operators? The reasons include strong opposition from trade unions, protectionism, fear of change, and political opposition. Some countries would rather see rail services wither away and die than allow someone else to have a go.

The EU proposals, which will form part of the Fourth Railway Package, will now go to the European Parliament for further deliberation which could result in changes or compromise. Each member state then has to transpose the directive into national law, which takes several months or even years. Some member states have a poor record of applying EU legislation even when it is adopted, and too many politicians pay lip service to new EU directives but have no intention of applying them, knowing that it will be years before the European Commission takes legal action against them.

If European politicians are serious about opening the domestic passenger market in each country to competition, it will take more than legislation to make it work. Governments need to ensure that the rules of the game are fair, and that incumbents do not obstruct private companies from competing fairly. Train paths and access to stations and maintenance facilities must be granted equitably and at an affordable price. Regional procurement authorities must be given the tools and expertise to be able to issue tenders, judge them dispassionately, and monitor the performance of the contracts when they have been awarded.

Private operators should be allowed some freedom to innovate. This is a major failing of the British franchising system where the contracts are so tightly controlled by the government that innovation is stifled and making any changes to services becomes so difficult that they often have to wait for a new franchise.

Competition is usually a spur to improve performance and achieve growth, and Europe’s incumbent railways should not be afraid to embrace it. Yes, rail competes with road and air transport, but it is not quite the same as having another train company on an adjacent track. Europe’s railways must not lose sight of the main goal: to grow rail’s market share.

California’s high-speed rail should look like Germany’s

By Joe Mathews

Will California’s high-speed rail system be German enough?

That may sound funny, but it’s a more important question than the ones Californians have been myopically asking about the costs, funding and construction deadlines of the state’s controversial project.

The value of high-speed rail lies not in costs or speed, but rather in how such projects anchor deep connections — between transportation hubs, cultural attractions, cities and jobs. And German high-speed rail excels at connections.

The secret is German rail stations, hubs that double as vital public spaces where people can gather, shop and be entertained. Many stations are built as bridges — over railroad tracks, or highways — literally connecting neighborhoods.

If California high-speed rail can reproduce the German style and create a system that deeply binds the state together — and that’s a big if — then even a $100 billion project might be a bargain, given the economic and cultural benefits. But if high-speed rail can’t create robust connections, then the worst predictions of high-speed rail critics — that this is an epic waste of money — could well prove true.

In his must-read report for the German Marshall Fund, Eric Eidlin, a community planner with the Federal Transit Administration, compares California’s plans with high-speed rail systems around the world. German cities have integrated planning of rail stations and city centers, and Eidlin praises Fresno for considering its high-speed rail station alongside a remake of Fulton Mall. The report also warns Bakersfield about putting its station outside downtown and away from its existing rail station. And it argues for “blending” high-speed rail tracks with other trains — an aspect of the California proposal that has been criticized for slowing trains down — so they can use the same station platforms and make transfers easier.

I got my first taste of German-style rail connections last month after landing at Frankfurt Airport, where the station mixes shops, restaurants and departure points for buses and regional and long-distance trains. I needed to get to Cologne, which is exactly the same distance as the trip from Los Angeles to San Diego, which I often make on Amtrak.

The Frankfurt to Cologne section of Germany’s ICE high-speed rail service is considered a good model for what California wants to do, since it is a relatively recent construction. A one-way second-class ticket cost me 62 Euros, or $68.

While my Amtrak trips to San Diego take nearly three hours, the equidistant ride from Frankfurt to Cologne takes 56 minutes.

The train was a little dirty, with trash in the seatbacks — just like on Amtrak back home. The real difference was the speed, and — confession — I was spooked. On turns, it felt like the train was going to take off like a plane. The train also psyched me out with screens at the end of each car showing our speed, which reached “300 kilometers per hour” — or 180 miles per hour. (California’s is supposed to be faster, at more than 200 mph)

The first stop was Siegburg-Bonn, a bustling station with a movie theater and connections to local trains and buses. Cologne’s station was much bigger — with the retail offerings of a mall — and right on the Rhine. The station was just a few steps from the Cologne Cathedral, a Gothic masterpiece from 1248, and walking distance to central Cologne’s hotels, museums and offices.

High-speed rail doesn’t require saintly public officials; Cologne is famous for its corruption. But high-speed rail does require vision, governance and collaboration between different agencies and cities.

The bad news: Collaboration and governance are hardly strengths of today’s California. The good news: High-speed rail offers us another chance to develop those capacities. And if we struggle, we can always import Germans to show us how.

Joe Mathews wrote this column for Zocalo Public Square.