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So much for ambition

Written By: - Date published: 6:30 am, July 14th, 2008 - 40 comments
Categories: labour, national, spin, transport - Tags: ,

Yesterday on Agenda, SOE Minister Trevor Mallard said that the Government was undertaking an exploratory study to see whether the factory that currently repairs trains could also be used to assemble trains. If its economical, specialised parts would still be imported but a major manufacturing job would take place in New Zealand, building up New Zealand’s manufacturing skill base, saving money, and reducing the current account deficit.

This used to happen back before privatisation of rail. At the time the locomotive assembly industry was protected from foreign competition (local assembly was also required in a range of other industries). That was economically inefficient and meant, at the end of the day, Kiwis ended up paying more for manufactured goods.

There is no suggestion of returning to such a system. The Government is simply researching whether local assembly would be competitive with imports. It is fantastic to see them thinking in such an innovative manner to find ways of boosting the local economy and improving a vital, energy efficient transport system.

So, it is terribly disappointing that National has come out against the idea even before the report is complete. National’s Gerry Brownlee simply states that it would be impossible for Kiwis to assemble trains at lower cost that complete imports without protectionism. Automatically, National believes we can not do as well as other countries; that New Zealand can’t compete.

Guess that ‘ambitious for New Zealand’ thing is just so much empty spin.

40 comments on “So much for ambition ”

  1. max 1

    innovative for trev given hes likely to lose the hutt unless he can bribe the voters with some half arsed railways workshop scheme.

  2. It’s borderline offensive really. Of course we can!

  3. This move makes sense, given the rising and rising of the trade deficit as we export more and more jobs overseas.

    There is no economic rationale that justifies manufacturing non-perishable goods in New Zealand if transport becomes expensive…and it is becoming more expensive.

    You have to give the present government credit for looking forward and thinking about what may have to be done in a world that is changing.

    You have to wonder why the National Party consistently fails to see into the future….and doesn’t really understand the present or past very well either.

    Prudence used to be a conservative value. The very essence of conservative is to “conserve”…which makes it deeply and sadly ironic that modern so-called conservatives are racing to wreck and disperse, for short term gain, industries that maintain important engineering and manufacturing skills in sufficient quantity to allow the people who live here in this country to operate, maintain and support the daily operation of New Zealand.

  4. BeShakey 4

    Although I don’t know whether this will work for trains I do know that the New Zealand bus industry imports bus chassis that are then ‘built up’ within NZ. This is both cheaper and of a higher quality (for instance the NZ firms figured out how to construct a super low floor bus (the ones with no steps between the front and back doors) on a chassis that wasn’t designed for this, at no extra cost). Why on earth is the party that supposedly supports business so opposed in principal to this?

  5. Phil 5

    Steve’s argument is, in effect, this;
    We have lots of good automotive mechanics in New Zealand, therefore we should manufacture/assemble cars here. Can anyone see the problem(s) here?

    BeS,
    Designline is a great company, no doubt. But they are a one-off in the industry – we still import plenty of completed buses. I would also question the “higher quality, no extra cost” claim. Sure, a kneeling bus is kinda-cool, but is it a more elegant or practical solution than a simple fold-out ramp like many other buses have? I doubt it.

  6. RedLogix 6

    Phil,

    The compelling argument is that assembling these locomotives here will also build up the necessary knowledge and skill base to service them over their lifetime. These locomotives are not like cars. There is no established industry of distributors and trained service technicians to leverage off.

    Assembling them here is the best way to build a critical mass of people who know how they are put together and how to look after them.

  7. coge 7

    RedLogix, why is it necessary at all to have a critical mass of people here in NZ to build locomotives? Surely this is contrary
    to the logic of economy of scale. Especially as NZ does not have a requirement for a great number of locomotives. Don’t you think it would be superior financial sense to lease them from overseas producers?

  8. Peter Wilson 8

    New Zealand has designed, assembled, and maintained locomotives in New Zealand facilities since around 1900. Albeit, most locomotives designed and built here were steam, but since the 1950s at least, our railway engineers have had the at times unenvieable task of maintaining some fairly antiquated diesel technology. The bulk of the current locomotive fleet was built in the 1960s, and has undergone multiple rebuilds since then.

    So, when National rubbishes the idea it is knocking Kiwi workers. “New Zealand Sucks” – there’s a good campaign slogan for National.

  9. Building trains would be a very heavy carbon emitting industrial process now wouldn’t it?
    Surely the present govt wouldn’t want to be suggesting we do that now would they? 😉

    If you think agriculture is bad imagine what large heavy industry would be like! Not very Green!
    Such hypocrisy. Tut tut tut .

  10. Draco TB 10

    How many locomotives are bought every year?
    How many train carriages?
    How much competition?

    These are the simple questions that need answering – I suspect the answer for all of them is in the vicinity of low to SFA. Cars get replaced fairly often so the car industry can get a good profit on massive turn over. Trains have a decadal replacement period which will mean that the profit component of the price will be much higher. Throw in the fact that we’re in the middle of nowhere with transport costs rising and asking if we can produce our own rolling stock cheaper than importing it whole seems like a good idea.

    Am not surprised that National would oppose this – they show no indication of having any economic nous at all.

    Such hypocrisy. Tut tut tut .

    I don’t think this will really belong in the heavy industry category simply because their not looking at supplying the entire world with trains. Besides, I’m pretty sure that the report would take carbon pricing into account as well.

  11. BeShakey 11

    Remember that Labour isn’t saying that the trains will be built there, and people have given reasons why it might end up being a bad idea, all Labour has said is ‘Let’s see if NZ business can do this in a way that is competitive with overseas options’. National has criticised them for CONSIDERING it.

    Phil – I’m not sure KiwiBus would appreciate you describing Designline as a ‘one-off’. As far as urban passenger buses go, we import very few, if any, largely because of the cost. And in terms of the kneeling vs fold-out – yes kneeling is much much better, and is the preferred option of the industry, and people who need help accessing buses (including people like the elderly who could use help, but would refuse to use a ramp), and, since it adds no extra cost, is very cost-effective. While the NZ bus industry could do better in a range of areas, we are pretty much a world leader in bus accessibility and a large part of this has been driven by the fact that NZ based bus builders are very cost-effective and innovative.

  12. Peter Wilson 12

    The carbon footprint of assembling locomotives in New Zealand would be pretty much exactly the same as the current operation, so I’m not entirely sure where you are coming from there.

    Locomotive assembly does not emit large amounts of carbon, unless you want to get into minutiae like welding emissions etc. And then a comparison with New Zealand agriculture would be several orders of magnitude out.

  13. All those raising technical or other reasons why assembling of locomotives should not happen, you’ve got the dichotomy wrong – it’s not one side saying ‘let’s assemble them’ and the other saying ‘it don’t make sense’ – it’s one side saying ‘let’s see if assembling them here is feasible and economic’ and the other side saying ‘can’t be done’…. it’s the party that’s campaigning on being ambitious for NZ that is saying, without evidence, that we can’t do it.

  14. bill brown 14

    I thought we were doing it already. Most of the work done today is basically a full pull apart, make new bits and put together operation. Only difference here is the not needing to pull apart to start with.

  15. The only problem I have with such an idea, is that supposedly, such a concern would only assemble/produce components for domestic use. I don’t foresee that much demand for locomotives, even rolling stock – outside perhaps an initial capital upgrade.

    Any work offered would either be sporadic or employ very few people. However, the government is right to investigate whether such a concern is both profitable, and competitive.
    Of course, any assessment should naturally include the benefit of having a repair and parts facility located domestically.

  16. Nick C 16

    Is it just me or is Clark beginning to look more and more like Muldoon? First she decides to use his smear tactics, now she is adopting his policies.

    As much as you may fake offence at the suggestion the reality is that its unlikely New Zealand could compete when it comes to cheap assembly of trains. All of the costs would be higher. Not only do they have to pay the Labourers much more, but they all have to have things like 4 weeks annual leave, enforced daytime lunch breaks etc.

    So really its partly because of Labour policy that we wouldnt be able to compete (im not saying that we should oppose the policy for that reason, just pointing it out). We should be looking to do the things we can compete in such as agriculture. Are there any economically literate authors on this blog?

  17. So Nick C,

    are you therefore vicariously advocating that New Zealand needs Roger Douglas to swoop in, sell off all our assets, and save the day?

    Muldoon might have been authoritarian, corrupt, even senile, but at least he wasnt beholden to the New Right.

    I can cite “Someone Else’s Country” all you like. In fact, Nick, I suggest you watch it.

  18. Nick C 18

    “Are you therefore vicariously advocating that New Zealand needs Roger Douglas to swoop in, sell off all our assets, and save the day?”

    No, im saying that we shouldnt assemble the rail carts in New Zealand, so how about instead of puffing your chest and telling me to “watch it” you tell me how New Zealand could possibly assemble trains as economically as China?

  19. Nick C. How about waiting for the expert report rather than assuming New Zealand isn’t up to it?

  20. BeShakey 20

    Nick – as I’ve pointed out above, NZ can (and does) do something analagous to this for the bus industry, and they do it cheaper and better than importing them from China. It may very well be that NZ can’t do the same for trains, but that leaves two questions – a) how can you know without investigating? and b) why would the party that is ‘ambitious for New Zealand’ oppose CONSIDERING whether NZ businesses could do something cheaper and/or better than overseas competitors?

  21. “Nick C
    tell me how New Zealand could possibly assemble trains as economically as China?”

    I guess we have the low wage economy, and the lack of workers rights, but sounds to me like you are advocating for government sponsored slave labour (and lets me honest, thats how it is in China)

  22. Nick C 22

    Killinginthenameof thats a straw man if ive ever seen one. The only assersion I made was that it would be more efficent to assemble the trains in China. Nothing about getting rid of 4 weeks annual leave or the minimum wage. As to whether i support slave labour in China, I dont see it that way and niether does the government who have signed a free trade agreement with China so we can import more of those govt sponsered slave Labour goods.

    Steve im saying that the report is a forgone conclusion, theres simply no way we can do it more efficently then the Chinese. If we could then why did the private sector never choose to do so? Muldoon used to have a policy that all cars would have their parts imported and they would be assembled in New Zeland. It created some jobs but it wasted a lot of money.

  23. BeShakey 23

    Nick – if it is a foregone conclusion how come the bus industry does it cheaper and better here. As I’ve said, they aren’t the same thing, but it makes it harder to say it couldn’t possibly be done here. The reason the previous owners didn’t build them here is that they refused to invest at all. If you aren’t doing any upgrading there isn’t a question about where you would get the upgrades from.
    Finally, from the governments point of view there are a range of benefits to building here that don’t apply to the private sector. For instance, building here could reduce total government spend by creating jobs, building here could produce less CO2 emissions etc etc.
    But the key point is, what evidence do you have that it is IMPOSSIBLE that NZ could do anything more efficiently than China?

  24. Nick C 24

    Im not sure exactly how the bus industry works, but the reality is that this is a low end assembly job, no room for innovation as you talked about earlier. People working it would get close to minumum wage. Any other concieved benefits do not outweigh this, saying that you reduse government spending by creating jobs is nonsense.

    Given this I think a more relevant case study is when Muldoon made it the law that cars had to be imported in parts and assembled here. Besides do you have any relevant economic analysis to explain how we could be more efficent then the Chinese?

  25. bill brown 25

    Im not sure exactly how

    anything

    works

    but I’m gonna go on blathering anyway

  26. BeShakey 26

    Nick – good to see you admit you don’t know how the closest comparison industry works before telling us all how it works. In fact pretty much every claim you made was false. In terms of innovation, I gave a very significant example of innovation earlier. Not only a significant leap in quality, but at no additional cost. In terms of minimum wage – firstly, there isn’t anything wrong with that, but secondly, most of these people are highly skilled, and get paid well for it. The quality of the product also means that there is a growing export business to Australia and the US. So the volume is there to produce enough revenue to reward employees. Lastly, the point was hypothetical, but, given your desire to spout on about economics, surely you recognise that the value government can get from an investment is different from the value a business could get from the same investment?

    The Muldoon comparison shows you have no idea what you are talking about. No one has suggested legislating that NZ must build these things.

    Lastly, I don’t need economic analysis to show that. A business wouldn’t. They’d simply look at the options and (for instance) run a competitive tender. If a Chinese firm produces the best tender all well and good, and if not…
    Only someone with a complete lack of business know how would suggest ruling out providers from all bar one country based on an ‘economic analysis’ (I doubt anyone reputable economist would produce such an analysis).

  27. Andrew Hamblyn 27

    I think it is a great idea that the government are looking at assembling locomotives “in house” again.

    The last batch of locomotives assembled here was a fleet of shunting locos made by Toshiba in Japan, and sent out here in C.K.D form (Completly Knocked Down) for our workshops to assemble in the mid 80’s.

    To say that we dont have the staff to do the job today is very short sighted.

    Our mainline diesel loco fleet is getting old, the oldest still running today were “new” in 1972!

    Recently these locos have been getting a full rebuild at the Hutt workshops that involves stripping them right down to nothing more than their steel beam chassis.
    They then get re-wired with new computer controlled electrical gear and new cables throughout, installing new diesel motors (same as original ones, just new…) fabricating brand new cabs to replace the rusty old ones, and straighting out the carbodys.

    If the government were to import some of the basic components (diesel motor, traction motors, generator…) I am sure we would have the staff and skills to assemble new locomotives.

    We have the skills to rebuild just about anything. Have a look at the “Capitol Connection”, the Wellington – Masterton services or the Auckland suburban trains that are made up of ex british passenger cars rebuilt locally, once again stripped down to the bare bones and manufactured to our local designs….

    So, we have the staff and skills to do it….

    but, is it cheaper than importing ready made equipment – I guess thats what they want to find out.

    Brownlee needs to do more research before blurting out stupid statements like “its daft”….

  28. Swampy 28

    It’s a long long long time before privatisation since any significant number of locomotives were made in NZ. Something like 25 years.

  29. Swampy 29

    “Why on earth is the party that supposedly supports business so opposed in principal to this?”

    Because we’re not talking about a business, we’re talking about a government corporation that Labour wants to compete unfairly against private business.

    Remember the featherbedded old Railways department that lost hundreds of millions every year?

  30. Swampy 30

    Anyone who suggests NZ can compete with overseas builders experience needs their head read.

    Just for the person who mentioned our locomotive fleet built in the 60s, they were all built overseas.

    The last time any significant volume of locomotives was built in NZ was also in the 1960s, and there were about fifty of them of which few are still in use.

    The fact that the majority of what exists in NZ now was built in the US and a small number of other countries is simply because those plants use production line manufacturing that no one in their right minds would advocate be set up in NZ specially to manufacture just a handful of locomotives by international standards. This is why only those fifty or so locomotives were built in the 1960s at a rate of just a handful each year. They were Pommie locomotives and the Poms didn’t use mass production which is why today there is no Pommie locomotive industry because they didn’t learn the same lessons as the car industry did.

    If there is going to be any locomotives put together in NZ now then they will be manufactured overseas and shipped to NZ as a kit of parts to be assembled which seems like a dumb idea when they can also be shipped, probably for the same price, fully assembled and tested as well with the benefit of the existing experience that the overseas manufacturer has. That is why hundreds of locomotives over the past fifty years or so have been shipped to New Zealand fully assembled.

  31. Swampy 31

    BeShakey – the writing is on the wall for Designline as with every manufacturer due to our government policies pushing up the costs of doing business and exporting, the fact there are now numbers of Chinese buses being imported being evidence it is cost effective to bring them in.

  32. Swampy 32

    BeShakey – NZ hasn’t been able in the past (when fuel prices were as high as they are now) to do it better than even the US, Britain or Australia.

    The majority of locomotives have always been built overseas. There were some built in NZ but most of them were in an era of steam when the technology was a lot simpler and a signficant number of those were constructed by the private sector in any case.

    Compare that with coachbuilding which has always been a significant industry in NZ and you can see that the comparison you use is rather invalid.

  33. RedLogix 33

    Well Swampy, you seem to have confirmed our starting point… ‘so much for ambitious’.

  34. Swampy 34

    Andrew Hamblyn,

    the oldest locomotives in the fleet were new in 1979/80,

    the four or five Toshiba locomotives you refer to were probably imported to give the workshops something to do i.e. for political reasons, without cost consideration (it was strangely an election year when the deal was signed to produce them) and were very low tech (no computer equipment, just the basics).

    they were as you say “knocked down” which was how Muldoon made everyone run a “manufacturing” plant in NZ which on all counts was more expensive than assembling overseas and shipping to NZ fully built up and that’s why we have no car assembly in NZ today.

    and in fact all locomotives built in NZ in the last fifty years have been low tech stuff at a very low rate of output.

    I’m guessing here that the manufacturers could not certify their locomotive built overseas unless they have been fully assembled, they then have to dismantle them, crate them up and ship them to NZ to be reassembled, which I think would add to the cost compared to shipping them already assembled to NZ which is probably why nothing over 400 hp has been built in NZ since the days of steam.

  35. Andrew Hamblyn 35

    Dear Swampy.

    A wee bit of train nutter facts for ya…

    The oldest mainline diesels still in use today are the first batch of the DX class built by GE in the USA delivered here new in 1972.
    The last of them arrived in 1975.

    The youngest mainline diesels we have are the GM built DF class that were new in 1981. The DF’s were rebuilt at Hutt in the early 90’s with turbo’s and micro processors added and reclassified DFT.

    The mainline electric locos that run between Palmy and Hamilton were delivered new in 1988.

    You mentioned the fact that the small Toshiba locos assembled here in 1984 were “basic” with no computers.
    That was in 1984 and I think you would be hard pressed to find any locos in the world in 1984 that had computers in them…

    In the last two years, the DFT’s and the DX’s have been retrofitted with GE’s “Brightstar” computer control systems, again done locally.
    You can buy brand new locos that are equipped with exactly the same computers in them.

    As I tried to point out in my last post, the local workshops staff are basically building new locos out of the old ones we have here, installing the latest computer controls, and getting very very low rate of failures.
    The DX’s that have been rebuilt locally have been taken from 2750hp out to 3300hp after the rebuild.
    Problem is, you can only re-invent the wheel so many times.

    I would welcome the chance to build “new” locos from “new” gear here. Would create employment and boost the need for trade apprentiships.

    Lastly..

    “The last time any significant volume of locomotives was built in NZ was also in the 1960s, and there were about fifty of them of which few are still in use.

    The fact that the majority of what exists in NZ now was built in the US and a small number of other countries is simply because those plants use production line manufacturing that no one in their right minds would advocate be set up in NZ specially to manufacture just a handful of locomotives by international standards. This is why only those fifty or so locomotives were built in the 1960s at a rate of just a handful each year.”

    There were in fact 52 built in a 5 year period, from the ground up at two NZR workshops, designed by a NZR engineer. Out of that 52 there are more than 30 still in daily use, 40 years on.

    What is being proposed by the government is the ASSEMBLY of locomotives from locally made and imported components by the Hutt workshops to meet the (small by world standards) rquirement of our country’s rail system.

    Regards

    Andrew

  36. cheers, Andrew. very informative

  37. Swampy 37

    Sure, the workshops are rebuilding old locos using the manufacturers’s standard upgrade packages for that model of locomotive. I doubt they’re going out on a limb there.

    Most of the locomotives currently in NZ are just stock US models adapted slightly for our gauge which is also shared with parts of Australia.

    I would like to see if the proposal said that major parts like bogies and underframes were going to be manufactured locally, as these are the major cost saving areas (if any) due to their size and weight. Part of the reason I’m skeptical is that the workshops have not built new parts like these since the 1960s, and have substantially downsized since.

    Building major components locally is going out on a limb, because that area has been a real source of trouble for many an assembler where they don’t have the experience of locomotive building.

    As I noted no mainline locomotives have been assembled in NZ new since the steam era. It only happened before because the workshops were run politically without any regard for cost. If it happens again then it is probably going to be for political reasons because that’s what the railways are going to be set up like again.

  38. Kevyn 38

    So Mallard thinks the railways should do what the truck and bus industry does. Will wonders never cease? Only real question is will it work efficiently and effectively with only one company doing the work and only one company buying the product?

  39. Swampy 39

    I did all that foamer thing for quite a few years, got sick of it, posting in forums like these is much more interesting. the rail community can be very insular. Who wants to talk numbers all day long.

    Now some foamer’s facts, the oldest mainline locomotives in NZ were brand new in the mid 1960s, the Queensland locomotives rebuilt as DQ which operate various services and some of those DAs rebuilt as DC class go back that far.

    In the same era the old NZR built 52 of the DSC class shunter which was pretty much a local effort as a lot of the steelwork and bogies and the like were all built in NZ and the electrical parts were imported. These things trickled out roughly at 10 a year and were built in two shops so from that it is a reasonable assumption that each shop was only building one at a time. One of those shops was Addington which no longer exists.

    In bringing a kit of parts from overseas to assemble a locomotive the heavy parts are things like the engine, bogies, traction motors, and probably the underframe which are all specialised bits that could be very hard to make in NZ and for which the local capacity may not exist any more given the state of our engineering industry. If these are all imported fully built then there is perhaps a small space saving but not a lot of weight saving so how much would you actually save on the shipping cost.

    The workshops are geared up to overhaul all these components and the sheet metal parts like the carbody/hoods/cabs are relatively straightforward to manufacture as it already happens in the NZ workshops as we know. Whether the workshops have enough capacity to get these things into service as quickly as they are able to be built overseas and shipped to NZ, given the builders have big factories worldwide that do this sort of thing all the time, is one of the biggest questions of the whole equation. We are told that these things are desperately needed but I guess a few more years won’t hurt as long as Mallard can get the votes of local people in his electorate.

    And that really typifies what sucks about this whole rail buyback deal, that is the political stratification of it, the fact that it cost so much money, there was no limit, there is no limit on how much money Labour is prepared to spend on the rail system because they like taking our money and spending it on everything under the sun. The rail went into the sunset back in the 1980s when the politicians realised they couldn’t continue to prop up an inefficient monopoly. Labour is going to try to shut out that reality by creating a new political railway system again, Mallard can buy votes in Hutt by promising a new subsidised scheme at the workshops there.

    I’m quite looking forward to National’s rail policy. Probably something like contracting out the running of the operation. There’s a big company out there that has the expertise to do it. The Labour party hates them but they’re just a bunch of politicians so who cares.

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