Safety is everyone’s business

In 2016, Ermewa SA underwent a major reorganization with the opening of the Prague branch, the merger with CTC and SGW, and the closure of its Geneva branch. In March 2020, Mr. Cyrille Guyon was appointed as Regional General Manager Eastern Europe and we asked him to give us an interview.

Ermewa SA is part of the Ermewa Group, fully owned by SNCF but managed independently. The Ermewa Group has three key lines of business: leasing railcars (Ermewa SA), leasing tank containers (Eurotainer & Raffles Leasing - acquired in 2019 and originally based in Singapore) and operating workshops (Inveho). Ermewa SA is split into three geographical regions - South (headquartered near Paris), North (headquartered in Berlin) and East (headquartered in Prague).

Mr. Guyon, can you please first tell us a little about yourself and your experience?

As it happens, in August I am celebrating ten years with Ermewa SA. During this time, I held various positions in various European countries. My previous position was Director of Business Development, and I was responsible for mergers and acquisitions in both in Western and Eastern Europe. So in recent years the CEE region was part of my daily work. Before joining Ermewa SA, I worked almost 10 years in the UK and Benelux for Norbert Dentressangle, a major European transport, logistics, and freight forwarder (now part of XPO Logistics), and previously at DHL. I thus had many opportunities to gain extensive experience in logistics.

How many employees work in Ermewa‘s Eastern Europe region and what locations does it cover?

The total number of employees is now 36. About two-thirds of these work at the Eastern Europe office in Prague and the others are in Katowice (4), Budapest (3), Bucharest (3), Plovdiv (1), and Subotica (1).

Positions include sales managers, customer service, and technical support. Maintenance is 100 % subcontracted externally, which includes both traditional workshops and mobile teams. We strongly believe in having a local presence.

Are you planning to make any substantial changes to your strategy?

We have ambitions for the company, and have a clear business development strategy for the three regions . Basically, we will consolidate our position in our current locations and expand where it makes sense. We’ll be assessing all business opportunities on the market, regardless of whether they involve internal or external growth.

Compared to other companies on the market, we are somewhat more decentralized. A local presence is essential, for both cultural and technical reasons.

We needed to increase our physical presence in Poland and are now on track; we will continue in that directions in other parts of the region to ensure we can better serve our customers, although the coronavirus situation certainly didn’t help.

Our key markets are Poland, the Czech Republic, Slovakia, Bulgaria, Hungary, and Romania. Activities in other Balkan countries are also growing. We’re looking at Turkey too, but it’s not a priority for us in the next few months.

The strategy to remain a key partner: to offer alternative solutions for development of sustainable rail freight, with productive wagons and investment into equipment.

What is currently the size of the Ermewa SA fleet in Eastern Europe?

Ermewa has a global fleet of 42,000 wagons, of which more than 8,000 are operated in the Eastern region.

What types of wagons are these?

Ermewa SA offers a broad portfolio of wagons: tankers, wagons for transporting steel products, cereals, aggregates and powdered materials, or intermodal wagons, a segment where we are investing heavily.

I assume that wagons have no borders; is the fleet split along the lines of Ermewa SA’s territorial division in some way?

Leasing contracts are managed close to the customer, hence our local presence. However, we are organized as a network, so that maintenance, repairs, and other services are managed where these operations take place.

How many new wagons has Ermewa SA ordered recently, and what is your strategy in terms of fleet renewal?

For two years we’ve been buying from 1,500 to 2,000 new wagons annually. In 2020, deliveries of 1,800 wagons are scheduled.

In general, when considering a fleet renewal strategy, we need to think about development of relevant market segments, and whether fleet renewal is always necessary. The market may change and some parts of the fleet may not need to be replaced. Railway wagons have a long life, but no one knows, for example, what the oil business will look like in 30 years. Substantial changes in the energy sector could occur much earlier, consumption of coal and traditional petroleum-based fuels might change for various reasons, such as support for electromobility or even for unexpected reasons like we are experiencing now with the consequences of the coronavirus pandemic.

Safety is a critical reason for fleet rejuvenation. When seeking to increase performance, we cannot ignore safety. Following fatal railway accidents such as those in Viareggio in 2009 or Hitrino in 2016, safety features and monitoring have become even a greater priority for us. We’ve implemented a plan to renew our LPG fleet and worked closely with a manufacturer to optimize safety and operational performance. We will add several hundred brand-new LPG wagons to our fleet this year and the next.

Your fleet grows not just through new wagon purchases, but also through acquisitions. Can you summarize the events of recent years?

We acquired about 600 wagons from Macquarie European Rail at the end of 2018 and 154 from ROSCO Bohemia in early 2019. These two acquisitions have enabled us to increase our footprint to include intermodal activity as well as our presence in Northern and Eastern Europe. We also acquired a fleet of coil wagons from the Express Group in 2019 and grain wagons from MONFER in early 2018.

Are the capacities of your existing wagon suppliers sufficient to cover your demand with acceptable delivery times? Don’t you need to deal with new suppliers, such as Turkish ones for example?

We are currently not buying outside of Europe, although some parts do come from Turkey, for example. We are still working with our current, reliable wagon manufacturers. When one chooses a new and distant supplier, managing quality becomes difficult. The choice of European wagon manufacturers is currently limited, although demand is still high. There is room for improvement in terms of manufacturing capacity to reduce lead times and increase price competition, while maintaining order volume.

So then I understand that Chinese-built wagons are not an option at all.

Not at the moment. However, the Chinese industry is a standard partner on the area of tank containers, which are part of the Ermewa Group’s portfolio through Eurotainer. About 90 % of tank containers are currently supplied from China, with only some specific designs coming from manufacturers in Belgium and South Africa.

What is Ermewa‘s SA strategy for the CEE region – therefore actually your strategy for “your“ area?

Ermewa SA has always had a presence in the CEE region, though in the past it wasn’t that strong. We kept growing and engaged in external growth to expand our footprint.

Our strengths are our teams, our locations, and our expertise. Our leitmotiv is to provide customers with alternatives and solutions. We have to be able to offer the right fleet at the right time, with the highest level of safety.

However, the share of rail freight compared to other modes of land transport is too low and the rail freight industry needs to grow to compete on a level playing ground and to achieve climate objectives.

Rail freight still needs to implement performance-related measures and must offer value-added solutions for shippers to motivate them to switch from road haulage to rail freight.

Prior to joining Ermewa SA I was in the road haulage business and I know that major logistics companies are looking for alternatives.

So what will motivate shippers to switch to railways?

Railways are among the safest means of transport and are environmentally friendly, but rail freight needs to improve performance, hence the major investments we are making into technology and digital.

New issues have also appeared in recent years, such as shortages of truck drivers, carbon taxes, and greater public attention to environment impact and its causes.

Can we also discuss some specific cases of wagon design changes driven by experiences and new approach to safety issues?

The accident in Hitrino in December 2016 generated an internal discussion about RID products (dangerous goods) in general, and in particular gas wagons, such as chlorine and LPG. Even though none of our wagons were responsible for this accident, we decided to design, in partnership with a manufacturer, a brand-new optimized type of LPG wagon: many simulations and calculations were performed and much money was invested.

Increasing safety means a combination of operational optimization, passive safety measures, and active safety measures, all reflected in the new wagon design. Passive safety measures include traditional features such crash buffers, anti-climbing devices, or shields. There are new options in the area of active safety thanks to technological developments, as this is based on use of telematic devices. These can monitor crucial parts of bogies (such bearings), brake condition, or correct cargo weight, and send a warning message if a problem is detected.

A new 117 m³ 18 m long LPG wagon featuring a tank designed and built by CHEMET (a Polish manufacturer) is the result of two years of development. The key safety-related design changes are a reinforced shell bottom - when a wagon tips on its side and keeps moving, the side of the tank is exposed to the infrastructure on the ground, which can perforate it. Rather than anti-climbing devices, we’ve opted for shields, as these are more effective in case of accidents. The safety measures resulted in weight increases, which had to be compensated elsewhere, hence the brake is of CFCB type and wagon has no middle beam. A prototype was been built and tested, and the first wagons are due for delivery in the next couple of weeks.

Another example is chlorine wagons. Many on the market are quite old, meaning not just old design but also a maximum of 80 t gross weight. Once again, a new wagon has been designed, including both passive and active safety features, implemented after a thorough analysis of the market and customer feedback. This new wagon was exhibited at the Transport Logistic 2019 trade fair, and so far 230 wagons have been built, as customers have recognized that it offers a new level of safety measures that are worth using.

 Can we also discuss some steps taken to optimize operations?

We have a few projects aimed at operational optimization. One key project is to reduce downtime due to maintenance or repair. This is often longer than necessary due to insufficient planning or time management. If wagon operators send wagons to the shop later than agreed, a long delay may result as their “time slot” in the workshop will be lost and they will have to wait while other clients are being served.

Proactive planning, anticipation of needs, and information flow are key success factors. However, we must consider mobile maintenance from a different perspective to eliminate bottlenecks in workshops in general.

What is Ermewa SA doing to motivate all stakeholders to increase railway safety?

As has been already said, we are actively developing and implementing various steps to increase safety. We strongly believe that customers will acknowledge that increased safety also comes at a cost. However, it is worth it, as it brings peace of mind to the customer’s employees, as any serious accident is a true nightmare in many ways – human losses, liability, protracted litigation, negative headlines in the media for the entire industry, and financial losses. And most of this applies in some way or another regardless of the real cause of the accident and who was really at fault. Safety affects everyone, and is everyone’s business. Every day, we have to work to ensure safety standards are being met continuously.

We also provide other value-added services, for instance implementing systems for the use of telematic devices, and other IT tools such as shipment tracking, fleet management, incident management, and ETA (Estimated Time of Arrival). So it’s not just about safety, but also about other services that are related to safety.

Safety issues, especially in connection with the CEE region and Balkan countries, were emphasized at the conference held in Prague in February of last year. Do you plan to continue with conferences targeted to the CEE region?

We would like to continue with such events, where many people can offer interesting practical experience. However, due to the current situation we can’t confirm precise plans. So perhaps we could hold another conference in 2021.

Not just wagon design can be subject to innovation. Is Ermewa SA working on or taking part in some larger-scale technical projects?

Yes, there are a few such projects. One I am very excited about focuses on application of central automatic couplings in rail freight. Ermewa SA is actively participating in a project led by the Technical Innovation Circle for Rail Freight Transport (Technische Innovation Schienengüterverkehr - TIS) consortium.

The objective is the promotion and the deployment of digital automated couplings on freight wagons in Europe. Railfreight in Europe needs to increase in efficiency, competitiveness, and strengthen safety. The advantages of automatic couplings are well-known and some are becoming even more important today.

Automatic couplings replace job positions that are not only dangerous, but also unattractive, meaning we could experience workforce shortages. Automatic couplings as envisaged would enable transmission of important telematic information, which is another accelerator of efficiency and safety. And last but not least, automatic couplings can withstand higher tractive forces in comparison to standard screw couplings. This is by no means a new idea; Europe has been discussing automatic coupling for decades now, and there are already projects investigating technical capabilities and evaluating possible solutions and options.

Such an objective makes it important to attract as many big players in the field as possible and we are making progress in this area. The managing director of Ermewa SA is one of the spokesmen of the project, some of the other largest European railway companies and wagon rental companies have already joined the project, and more are due to join in the future.

There are other projects in the pipeline as well. The “Aero – Ferro” benchmark is a joint project of the railway and airline industries. The airline industry has achieved major improvements in efficiency, performance, asset management, maintenance, and safety over the last approximately twenty years. This project is taking place in cooperation with GATX Rail and the TU Berlin and École Central Lyon engineering schools.

This was about the future; before we part ways, at least one question concerning a very current issue. How will the coronavirus crisis impact Ermewa SA and the rail freight business in general? Such changes in demand for wagon rental, manufacturing capacity, purchase prices, rental fees, prices of components, material, and so on ...

We’re a service provider and we’ve already felt its impact, as some of our clients lost business and hence some of our rolling stock is idle, such as box wagons due to reduced coal or scrap transport. The ultimate consequences of this crisis remain quite unknown, however.

That being said, we do need to help and support each other in the customer-supplier chain so that we can all make it through this tough period.

We can only agree with that, so we wish you to overcome this difficult time and thank you for the interview!

Interview by Petr Kadeřávek