The news that the French government is investing over €7 billion to increase the amount of freight moved by rail in the country, with SNCF contributing €1 billion of its own funds, has brought with it questions related to further cost and quality for carmakers and LSPs.
It is the biggest rail freight investment programme France has seen and is designed to increase freight moved by rail from 14% to 25% by 2022 but it comes with important consequences for the vehicle industry and could have implications for the future of France’s liberalised rail policy.
Carmakers have been decidedly cagey in their reactions. Renault, which is currently reorganising its supply chain with Nissan and attempting to build logistics collaboration, considers comment on the issue premature and envisages a long debate ahead. But Michel Faivre-Duboz, senior vice president, of Renault’s global supply chain, did tell Automotive Logistics that any decision has to take into account the level of rail maturity in each country.
He said that SNCF – the state-owned rail provider – recognises it is behind on what is required for the future of freight movements in the country and wants to catch up and challenge truck transportation.
“The major issue is cost, that means much added cost for rail freight, and also some quality concerns in the specific field of finished vehicles,” said Faivre-Duboz. “Today, Renault and Nissan are dealing with this context, being focused on the best operational efficiency.”
The impact on finished vehicle movements also concerns France's main rail providers. Those handling automotive freight stand to benefit from the investment but, with reference to the finished vehicle industry, one industry source told Automotive Logistics that it demands large scale investment in a block train network in which the customer purchases either part or full capacities. Currently the vehicles are transported through an isolated wagon system with few or no commitments by the customer.
Commitments by France's leading finished vehicle providers will have to be made in advance, with the customer required to anticipate the transport needed, which is likely to mean a huge amount of work compared with the current set up.
Based on previous form, when it comes to automotive freight, confidence in this sort of reform may be running thin. Renault reduced its use of rail previously because it was so unreliable and questions remain over whether SNCF and the rest of the French rail system are capable of using the money earmarked for the development to its best advantage.
This will be the sixth rescue plan over 12 years that SNCF has unveiled for its loss making freight division – SNCF Fret. The company has twice been bailed out by the French state and is expected to incur €600m in losses this year.
“Unless the company becomes more focussed on what its customers want, that is a more reliable and cost-effective service, then it will continue to fail,” said Transport Intelligence analyst Thomas Cullen. “In order to do this requires internal reform and restructuring, which so far it has been unable to achieve. Clearly, reform of working practices by key groups such as drivers in fundamental.”
This was brought into focus this week when rail union, CGT-Cheminots, and CFDT/Fgaac, a train drivers’ union, announced a strike to take place on 20 October, in part to protest over plans to reorganise the national rail operator’s freight business.
It has also been reported that 7% of the group’s activity accounts for two-thirds of its losses and it was “an absolute priority” to solve this according to Guillaume Pepy, SNCF’s chief executive.
Towards this, the company has said its own €1 billion investment will go to develop new rail truck shuttles, high-speed international services and improved facilities to transfer containers to and from major ports. It will include a network of expressways across special rail corridors modelled on the TGV high-speed passenger service; all part of Pepy’s plan to make logistics “one of the strong points of France”.
SNCF has been gradually losing business to trucking firms and foreign rail operators and is facing competition from new entrants into the liberalised rail market in France who are offering a more responsive and reliable service. In order to regain its competitiveness, SNCF Fret will have to re-organise its business internally, particularly when it comes to the workforce, which is expensive and inflexible according to Cullen.
Could this competitive and liberalised market eventually lead to the privatisation of SNCF as happened with DB in Germany? It does not appear the first intention of the French government said one leading industry source.
Could a move in the opposite direction be on the cards instead if SNCF is to meet the needs of its carmaking customers? The signs are there according to Cullen. “I fear that the response of governments to loss of market share to privately owned rail freight companies will be to buy-up the private companies. This is possibly what we are seeing with the purchase of Veolia and other rail companies recently.”
