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21st Century Ford 7,

Martyn Vaughan

In his latest interview Roger Ford hears about the trials, tribulations and challenges of train building from Martyn Vaughan of Alstom and discovers that our industry is run by gricers.

Train builders in Britain are operating in a uniquely difficult environment. Your customers ‘buy' the trains but rarely own them, usually getting a Rolling Stock Company to take over the contract. Design is hedged around with restrictions, including the Rail Vehicle Accessibility Regulations and Railtrack Group Standards. Meanwhile the infrastructure operator has an uncertain knowledge of what's out there on the track, whether it's the structure gauge or the types of track circuits in use.

And as for electrical safety cases…. One estimate puts the value of all those multiple units sitting around at Adtranz and Alstom and in store elsewhere at around £ ½ billion.

If coping with all that is not enough, the current franchise replacement programme means that what should be a booming market is a commercial desert. So that, although factories are full, they face the prospect of yet another feast and famine cycle – the very thing privatisation was supposed to have stopped.

Martyn Vaughan is responsible for steering Alstom Transport's UK operation through this commercial and technical chaos. He is a relative newcomer, having joined Alstom in March 1999 after being head hunted from agricultural equipment manufacturer New Holland.

Three years before he had joined New Holland as manager of the company's Basildon factory making tractors and the like, but then was promoted to be in charge of world wide information systems.

‘I didn't enjoy that job', he says with characteristic candour, ‘and I wanted a real challenge, a head hunter came knocking, I talked to Alstom and my life changed.'

He was not totally new to railways. In an earlier job he had supplied beds for the Night Stock Channel Tunnel sleeping cars which were built at Washwood Heath and were still sitting around looking for a home when he arrived.

Change mandatory

Vaughan came into an industry which had plenty of orders – and even more problems. From his incomer's perspective he believes that these post privatisation orders accepted stringent penalty clauses on the assumption that the way train manufacturers had done business with British Rail would be good enough to carry over into the new market. After a month in the new job he realised ‘we had to change'.

But why the problem? During the infamous 1064 day hiatus in new train orders after privatisation was announced, both Adtranz and Alstom used the pause to prepare for the revival of demand. But both firms focused on the product – Adtranz with the modular ‘Stars' and Alstom with the total train service ‘Juniper' concept. Production would depend largely on existing systems and procedures which both firms had modernised over the previous decade.

In fact, the industry was operating in a completely new environment. When Vaughan arrived the need for change was ‘slowly sinking in' but internal change had to be implemented in parallel with Alstom delivering orders with demanding commitments.

Vaughan sums up the process as ‘playing catch up' which, he adds, is always difficult. And while Washwood Heath was not in dire straights, ‘there were a lot of things which in other industries you would have been surprised had to be done'.

Deliveries

One factor that stood out immediately was the approach to short delivery times. As Vaughan sees it, on all the current Alstom contracts, the first train was generally delivered close to schedule, ‘but then the second and third weren't'. After the rush to get the test train out, the processes weren't there ‘to deliver what we signed up to'.

As a result of this slow start, Alstom is only now hitting the ‘running rates' it signed up to, but six to seven months too late. In retrospect, Vaughan , attributes this in part to the time needed to restart production after the 1064 day hiatus. And it's not just the train builders that suffered. With 80% of the content of a train bought out, the whole supply industry had run down.

Vaughan likens the industry to a flywheel that has stopped. ‘You have to put a lot of energy in just to get it moving again but less energy to keep it moving'. And as an outsider, he reckons the industry really had stopped.

Stability vital

Today, as John Prideaux pointed out in last month's article in this series, the early start of franchise replacement threatens another order famine. This worries Vaughan , whose experience in manufacturing industry tells him that ‘production systems work best when they are stable'. ‘They get routine, they get regular and there's a heart beat to it'.

Stability then is vital and he sees refranchising ‘as almost taking us back four to five years and we could be entering another lull just at the time we should be doing the opposite to meet Mk 1 replacement commitments and passenger growth'. To Vaughan , ‘every other indicator says the last thing we should be doing is actually slowing down production'.

Clearly it is up to manufacturing industry to respond and Alstom is already well advanced with plans for a pre-emptive build to keep the heart beating at Washwood Heath. ‘No one wants to lose what we (the collective train building industry) has gained over the last two years. That would be a tragedy', says Vaughan .

Nor would it be just the manufacturers who lost out. Vaughan sees Railtrack as having gone through ‘a huge learning curve' on safety cases and associated acceptance procedures. ‘The last thing the industry needs is for that flywheel to stop as well'.

He warns that ‘if we're not careful', the railway industry slow down. His nightmare would be that the next batch of orders could be so delayed that the experience with the current orders would be relived. ‘That would be criminal' he says bluntly.

Missed opportunity

Vaughan admits to some truth in SSRA Chairman Sir Alastair Morton's complaints about the current performance of the train builders. And ideally the industry could have seen it coming.

Alstom's power business had experienced the earlier privatisation of the UK electricity generation industry. Soon after taking over Vaughan went to talk to his new power colleagues and asked then what it was like in the immediate aftermath of that privatisation.

What they described was not dissimilar to the rail experience. ‘We could have learned from out parents and, had we been cleverer, perhaps we could have anticipated all this'. Then he adds, with a laugh, ‘whether that was humanly possible is another question'.

It would have meant someone having the wit during the 1064 days hiatus to go to their power colleagues for their advice on what the rail industry should be doing with privatisation coming up. In this ideal world the revived market would have been served by a ‘restructured, remodelled, new and improved train manufacturing company'.

That would have been ‘very clever'. Whether it would have been possible is debatable, as ever, hindsight is never there at the time you make the decision.

Train delays

So much for the broad sweep of history. But what about the lack of progress with the Class 458 fleet, for example, since limited running started in passenger service on 25 February? At the time of the interview in mid June there was still only a single eight car unit running off peak between Alton and Waterloo .

Having done the hard party and bagged the only DC safety case in captivity why can't the mighty multinational get more Class 458s running?

‘Good question' says Martyn Vaughan. ‘Everyone tells me that in the “old days” trains went into service with a list of modifications to be completed over a specified timescale. Subconsciously, we thought that was still going to happen'. Designers did not expect to get a new design 100% right.

This is a universal condition expressed in the Informed Sources Law that ‘Nothing new works out of the box'. It is a view that gets Sir Alastair Morton hopping up and down and claiming that the railway industry is uniquely incompetent.

But during Vaughan 's career, he was responsible for a new range of tractors. ‘I can assure you that the same thing happens on tractors as it does on trains and any new product is not absolutely right first time'. Despite this, imperfect products are launched, because ‘to wait would be commercial suicide'.

On top of which train delivery times meant there was not the luxury of endless prototypes, although, stepping in front of my subject for once, in my experience, ranging from DP2 to HST, all you learn from prototypes is that most changes for the better turn out to be for the worse.

Head-on

Anyway, the residual old mentality of ‘if it doesn't work we'll put it right' has run head on into the contractual privatised railway. Vaughan says that his long serving managers tell him that today's trains are a significant improvement in terms of being right first time than previous builds.

But, while they are better, they are not perfect and the contractual environment of the privatised railway means that the customer and builder can no longer agree that a train is ‘95% there, let's get it into service and sort out these remaining detail over the next couple of months'. Now, says Vaughan , ‘we have to identify what's wrong and put it right before a train goes into service'.

In the case of the Class 175 DMU, this culminated in a Contract Variation Order which laid down ‘in great detail' the specification for the train and what remained to be done to comply with the specification. And, because the nature of the new business environment had not been appreciated, the original specification had grey areas.

This process took a couple of months and produced a 60-70 page variation order which tied all the detail down – ‘what the train was, what it had to be, what modifications were going to be made and when and what this meant for the maintainer'. While this was being thrashed out the trains could not enter passenger service.

So there is no longer a communal desire to get a train into service. The Rolling Stock Company needs to protect its long term residual value, the Train operator may well face an increase in rental when old stock is replaced. As Vaughan puts it ‘everyone becomes very cautious'.

Since the manufacturer doesn't get paid until the trains enter service there is ‘tremendous pressure on us to get trains into service for purely financial reasons which are probably not shared by other partners'. Vaughan terms this ‘the two plus two equals three bit' where it ‘sometimes feels that nobody wants the trains'.

Now, I can envisage readers. And not just the SSRA Chairman, bridling at this special pleading. If manufacturers can't build a product that's right first time, they deserve to suffer the consequences. Financial pressure is what makes private industry perform and if you can't perform, the market ensures you lose the business to someone who can.

But, equally, I believe that we really do have a uniquely awkward regime in this country which foreigners often simply can't get their heads round, and that includes the overseas arms of our own multinationals.

Safety case anomaly

For example, Railtrack will not deal directly with manufacturers on safety case work. To obtain a train safety case you have to be an operator with a railway safety case.

For Alstom, which is likely to build for stock while franchise replacement process drags on, a way round this Catch 22 is essential. The preferred solution is to work with a potential end user ‘piggybacking' on their safety case.

Since only an extension to the existing train safety case, either for a new route or to accommodate technical enhancements, would be needed, the workload would be minor. In return, Vaugham expects both parties to benefit . Alstom gets its safety case in advance and the customer gets early experience of the new trains which would, ‘essentially', be free issue.

‘Big bang'

So that's where we've got to. The new train market faces a critical time, what with Mk 1 replacement, franchise replacement, a plethora of financial interests, the Regulator firing off consultation documents and big transport plans in the wings. ‘How do you see the next 12 months Mr Vaughan?'

After we've both fallen about laughing at this faux naïve question, Martyn Vaughan turns philosophical. Privatisation, he believes, was like the cosmic ‘big bang', with BR ‘splitting into lots of bits which are still flying around the universe ‘in various lumps and sizes and directions'.

While the SSRA ‘will really struggle to pull it together', Vaughan believes that the industry will eventually coalesce into a workble shape ‘one day'. ‘The trouble is I don't know how long it will take or what it will be'.

Most problematical is Railtrack's future. On the one hand you have a PLC, which means management is judged on shareholder value, on the other the company is expected to make long term investment for long term returns which can only reduce earnings per share in the short term.

Vaughan has been there in his own industrial career. If a PLC takes a decision to deliberately reduce its earnings per share ‘then you're in serious trouble', he says, because the City looks for continuous improvement.

‘If they see your earnings per share go down and you say it will come good in ten years' time, they're not interested'. So shares are sold, the share price drops and these short term penalties militate against long term investment.

He questions Railtrack's mission statement. The Chief Executive's objective is to maximise earnings per share. But Railtrack is also expected to improve the rail infrastructure over the next 10 years. Vaughan does not believe these two objectives are compatible.

Optimism

Yet, overall, Vaughan sees a promising future for his new industry. ‘The timescale is uncertain, of course, because of franchise replacement but, yes I am optimistic, I think the products we have are good and at the end of the day, whatever deals are done it is the product that counts and if you have a product that works, is reliable and has the features people want, to some extent it will sell itself.

At Washwood Heath, he says, ‘a lot of things have changed and are continuing to change – it's a case of climbing the learning curve'. Now, says Vaughan, change is happening faster ‘which gives me a lot of confidence'.

Take the workforce. They have lived through severaland famine cycles, including the traumatic year in the 1980s when Metro-Cammell was cut back to its core. Alstom has just negotiated a flexible hours deal which aims to even out the impact of future fluctuations in production on jobs.

In good times more hours are worked, in not so good times fewer hours are worked, but the pay stays the same. Or, as Vaughan puts it ‘We take away the fear of redundancy, we take away the stop go cycle'.

Total service

With the Northern Line deal and now the two Virgin contracts Alstom was an early player in the total train service provision market, where the manufacturer also maintains the trains. ‘Three years ago', says Vaughan ‘tenders were all about selling trains, maintenance now assumes a larger and larger importance' On recent tenders discussion on maintenance have often taken up more time than the specification of the train.

This raises an interesting point on the structure of the industry. Privatisation took the BR business sector engineering teams and turned them into consultancies - Train Engineering Service companies (TESCO).

TOCs are virtual businesses, buying in almost everything, including engineering in many cases. TESCOs were intended to fill the gap but, with total train service provision deals, the manufacturers are taking over this interface role between the operational/commercial railway and its traction and rolling stock.

According to Vaughan, while the TESCO function is becoming more significant, ‘we feel that we are almost becoming a TESCO in our own right, because we have to do that work'. For example the operator's 0maintenance processes are part of the train safety case.

Additionally the rise of the manufacturer as maintainer makes it harder for TESCOs to stay current with the latest train technology and maintenance techniques. ‘They get their information from us' Vaughan agrees.

This also applies to procurement. On one recent tender Alstom did all the journey time performance modelling which informed the type and number of trains offered. ‘As a result of that, we changed out mind on the best solution'.

It had been assumed that tilting trains were the obvious solution. The modelling showed that the benefit from tilt was marginal and that what really mattered was the train's acceleration.

Vaughan sees this as novel. But more years ago than I will admit to, English Electric regularly modelled the performance of locomotives and trains over customers' routes – using a hand cranked calculator. But tilt was not an issue.

Coming shortly

To finish, how will the product range develop. Currently Alstom has the 23m long Coradia DMU and the 20m Juniper EMU. What about a 23m inter city type EMU? ‘Of course;, says Vaughan ‘or a 20m commuter DMU'.

‘We will provide what the market wants, so long as it fits our product range. So, in the case of the fabled HST replacement, Alstom is offering choice in the form of the Class 180 Coradia 125mile/h DMU or a diesel train with a power car at each end feeding distributed electric traction. A Pendolino version of such a diesel is already at a preliminary design stage.

Vaughan sees the duties covered by the universal HST splitting into those for which the Class 180s is ‘absolutely adequate', while the new generation diesel train takes over the upper end of the market. This, of course, is parochial thinking. Alstom has other products developed in Germany and France, not to mention Italy, which could be a ‘big, big plus' long term in the UK.

As I put the notebook and tape recorder away, Martyn Vaughan sums up his 15 month career as a railwayman. ‘It's an industry that's great to work in, frustrating to work in because of where we all are and what's happening, but it's also one that's terribly dynamic with never a dull day' That's what attracted me in the first place'.