• LOOKIN1 IN AT NFC
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SINCE the Second War we have had a mixed economy in Britain. The National Freight Corporation represents the State's presence ip road transport, probably necessary for national, strategic reasons, but certainly a convenient umbrella beneath which some competitors manage to prosper.
It can also be said that the NFC is a creator of standards, in the general excellence of its vehicle maintenance, its stimulus to well-engineered vehicles, perhaps above all its joint consultative arrangements, which have certainly contributed to pretty good industrial relations. • The performance of the NFC, like that of all nationalised concerns, is of great interest to Governments, to politicians, to its customers, and to its free enterprise rivals. The fact that it exists, with a life and personality of its own, may be more significant than its business results.
Arguably, there will always be a State presence in road transport. Whether the NFC will continue to be the favoured instrument is a matter for debate. It is no longer the animal that it was at its inception in 1969. Inheriting part of the function of the Transport Holding Company, though with the added remit of achieving –integration'', at least within the publicly-owned freight sector, the NFC has been unable to match the £190m of profits earned by the THC in its six active years. (The THC's profits owed much to buses, travel and shipping.)
Indeed, the NFC's net loss since 1969 appears to exceed £21m, with three traumatic years from 1974-76 largely coinciding with the oil crisisproduced world-wide recession.
I do not propose here to discuss the merits, or implications, of the State's "'shareholding" and capital write-down of the NEC or to argue whether the Corporation runs companies with enough muscle to pay off loans at high interest rates, such as the re-cycled £10m which had to be re-borrowed at 141/2 per cent in January 1977.
The finances of the NFC seem to me to be something of a yo-yo exercise, with money whistling out to the Treasury through one door and rushing back, almost at the same time, through another door!
Depending on one's point of view — and I tend to be sympathetic to enterprising State
industry — it would not be difficult to catalogue some of the well-publicised business disasters of the NFC. The Corporation's timing was sometimes unfortunate, but few pundits — even the most highly trained Harvard Business Schoolmen — predicted OPEC, and what has since transpired.
It is a platitude to mention the vulnerability of the transport in• dustry to the general level of industrial output, but the fleet shrinkages forced on the most efficient of the NFC"s competitors bear witness to this.
The concept of nationalisation derives from Socialist thinkers in the early years of this century, and from trade union leaders who were generally incapable of making idealistic theories evolve into dynamic administrations when the Attlee Government established a clutch of nationalised industries.
Soon after the Road Haulage Executive was formed, a management decision to set up a system of road patrols somewhat analagous to AA road scouts, but with monitoring responsibilities towards RHE drivers, produced sporadic strikes. The RHE drivers would not have it. This early demonstration of trade union power cast a long shadow down the years sufficient to persuade BRS managers that a large degree of consensus was a must.
Many other industries, indeed entire Governments, have since come to terms with the reality of, at least, trade union veto power. And today, of course, we are all in the worker
participation ball-game, wl could lead to worker operatives, a la Meriden m cycles, to profit-shai schemes, to an injectior private capital into State or isations — even to the fragn tation of industrial giants.
I make this point to exr some of the problems management in a State dustry. Heaven knows, therE plenty of other realities, suc the need to persuade layer Government — the Departn of Transport and the Treasur of the need for investment c sions; the frequent change policy (five major statutes ween 1947 and 1953): regular vetting of managen performance and plans Select Committees of Pal rnent; and frequent constra on pricing policies. There is constant problem of public i tions with an often-critical mi coverage. So e of the outside critics of
e NFC who compare the Cor)ra ion's inadequate profit arg ns and return on net assets -npi yed, with those of the -ans ort Development Group, e ample, cannot imagine hat life in the public sector is ;e. I ven the need for a State iese ce in road haulage, the itic may be able to put forard a better formula for ov rnment /State industry ana ement.
In an outfit some 30 years d, uertain attitudes of mind ay ersist, at least in the lower nks There must be many predo ts governing NFC/ 'hit hall relationships and it is it-resting question whether ece ents still influence longrvi g staff at branches, as was ice he position.
It s said that there is a fre hingly frank relationship ew en the higher echelons in
e C rporation and their "field im enders— the md's in
e c mpanies. Almost all the
adi g managers were mp rtedfrom outside in,istr or distribution. State
ort needs to cultivate its rtiv talent.
It oes without saying that e FC could be described rou h various eyes The view )rn he top down is very difren from that from the iive s' rest room, the depotan-ger's desk or from the 3W head office.
M approach to this article as a request — readily granted i to meet a number of the FC' most senior men. It is so isy o write reams about the FC rom outside — its annual po s provide abundant pegs T di cussion — but I wanted to ?,t a sense. an impression, of ie N C, bearing in mind that to typi al driver, traffic manager, /en customer, a Corporation em remote, almost unknow)le. t was, guess, an Amenin ho said of a Corporation. "It's got no soul to damn, or backside to kick.Can that be said of the NFC?
At the outset. I put to a number of NFC people my feeling that the reduction in total staff from over 65,000 in 1969, to around 40,000 today, surely raised questions of morale, if not at Argosy House, then down the line. I was even bold enough to speculate on the need for an NFC! Would not the various operating companies continue to function without the Corporation's leading strings?
Barometer
On the question of morale, Victor Paige, deputy chairman, rightly pointed out that the NFC was a barometer of the road haulage industry. National recessions take their toll of a service industry like transport, and road hauliers of all sizes have had to contract activities and postpone expansion plans.
The NFC, with a very modest share of the market. certainly no monopoly position, had seen the need to develop a body of young managers, many of them graduates, who would develop the industry when times improved.
Nine out of ten road haulage graduates were being trained by NFC companies, said Mr Paige, a task from which the whole industry will benefit, for some good men will go to competitor firms. That likelihood did not dismay him. "We shall learn from it,he said.
I can accept that morale throughout the NFC empire is being improved by the active policy of decentralisation that is going on. Mr Paige called it "the pushing out of accountability.'' The "small is beautifulconcept matches the industry — a, , "people industryin Mr Paige's
words. He is fully seized of the need to motivate managers, giving them the scope — hopefully the pay — to encourage initiative and innovation. He stressed that by no means all decisions come to the "top floor".
Is the NFC really necessary? Mr Paige touched on the need for a public body to liaise with Government, something the individual companies in the Corporation could not do. He reminded me that the NFC had come pretty well out of meetings with Select Committees of Parliament, representative of the political spectrum, The Government were the shareholders_ Conceivably, a Government might be persuaded of the wisdom of public dividend capital which could greatly benefit the NFC by relieving it of the need to remit funds regularly to the Treasury, whether or not this made sense when profits were hard to make. At times, it might be sensible to spend money changing the shape of the business.
Mr Paige, with a background in personnel management in privpte industry including Boots, and the Co-operative movement, thought the NFC joint consultative arrangements were much in advance of the bulk of British industry. -You can't measure the results. We have a commitment to the concept and how well it is done depends on the people on the spot. I say, thank God we've got it. Let's make it more successful.''
Although it is understandable, the two negotiating structures persisting in the NFC for the road and partly rail-based trade unions seem to me a minor tragedy, mocking the intermodal road-rail integration enjoined on the NFC by the 1968 Act.
The return of Freightliners to the Railways Board, as a result of pressure from the NUR and TSSA, and sponsored MPs, will close an unhappy chapter. The Secretary of State has said categorically that National Carriers will stay with the NFC.
Mr Paige could not agree that the dual negotiating structures mattered. "The NUR people in National Carriers feel part of the road haulage industry. There would be no point in bulldozing the two streams together."
Mr Paige inherited the dual structure philosophy. Who can say how the NFC would have developed without the rigid constraints implicit in NUR/ TGWU rivalry?
He praised the forbearance of the unions in tolerating lower pay under Stage 3, than that general in the industry. Theclaim for parity of treatment _ lodged by the TGWU with the General Arbitration Committee under Schedule ll of the Employment Protection Act will pose some awkward questions, whatever the outcome.
Peter Thompson, the chief executive, brought to the NFC experience as transport supremo in British Steel Corporation, as well as varied experience in the own-account sector. His masterly Henry Spurrier Memorial Lecture to the Chartered Institute of Transport was a major service to the road haulage industry.
His call for some form of tariffication, at least for parts of the industry showing a poor — or negative-rate of return, and for entry constraints, is net too far removed in spirit from the THC proposal to the 1965 Geddes Committe. Geddes, sadly, plumped for virtually unrestricted entry to all comers, subject to minimal qualifications.
Specialisation The THC urged a two-tier system confining the more liberal tier to established operators who had "proved their worthinesswith a -detailed vehicle control for newcomers and probationers who could graduate in time to the higher echelon.Doubtless, even without the prop of tariffication, the probationers would not have graduated to the senior league without experience of vehicle costing and prudent business management.
Peter Thompson noted the increasing proportion, now over 50 per cent, of the total NEC business based on fixed contract or specialised operations. The drive to get away from un-,
specialised general haulage has led to the creation of a number of specialist companies offering dedicated services, and these innovatory developments provide a challenge to up-andcoming managers. In the parcels and smalls sector the NFC companies were particularly interested in consignments worth over £3 per delivery, since it now cost over a pound to stop a vehicle.
The NEC, said Mr Thompson, compared itself with the private sector. If the economy recovered to a reasonable shape, company operations could be profitable, though to break even under the reconstruction, the NFC needed to earn 15 per cent on capital. "Hardly anyone in the industry is earning enough to replace assets and pay a reasonable dividend," he declared. "Dividends are being paid out of capital. Road haulage is underpriced and this will lead to great problems in fleet replacement in future years."
The NFC's profit improvement over two years of £23m tended to make Mr Thompson optimistic. Real revenue had grown by one point last year against a loss of a point or two in previous years. Further development of specialist traffics and the marketing of transport "productswould help. As to staff morale — to which I could not forbear to return — "the rate of staff loss was less last year than the previous year. NCL's job reduction is declining and eventually the plan is to stabilise the labour force. Our top management team is doing well."
The biggest buy of the NFC is, fairly predictably, vehicles. Over £21m was spent on vehicles and associated equipment in 1977. Only 182 of the 3,068 vehicles acquired were of non-UK manufacture. A new contract hire deal could absorb £200,000. The limit of NFC expenditure, without reference to the Department of Transport, is £250,000. Above that, internal committees and the main Board of NEC would authorise the submission before referring it to the Department.
Tim Bolland who has been director of technical services and market development, but is shortly retiring, has numbered amongst his duties liaison with such bodies as the RHA and British Road Federation. He sees this liaison, which is paralleled at local level, as a useful bridge, keeping the NFC and its companies in touch with thinking in the industry, and providing scope for co-operative efforts where appropriate.
The NFC "input" has helped the industry. Mr Bolland paid tribute to the wisdom of Sir Reginald Wilson and Mr George Quick Smith in devising the concordat" with the Road Haulage Association. "It doesn't nobble us politically for we don't take part in any political lobbying or fund-raising."
Mr Bolland spoke of the NFC consultancy interests in the Middle East, hitherto principally warehousing and cold storage, with advice on the supply of a variety of mechanical handling aids, and staff training. A number of executives have spent time in Iran, Bahrein and Kuwait; the NFC possess expertise and would be foolish not to sell it hard.
Curiously enough, after talking to Walter (Wally) .Batstone, the NFC's chief engineer, I felt that his work related to the average lorry driver more immediately, and usefully, than that of any of his colleagues. For though all are concerned with policy-making, Mr Batstone's labours actually influence the performance and durability of tomorrow's vehicles.
Specification
Indeed, he is one of a considerable team of NFC and company people helping to ensure that if conventional fossil fuels cease to be available there are alternative power sources — probably electrical — to provide the sinews of transport.
The engineering function is built into the management system of the NFC and its companies down the line. The engineer has an important role in budgets, vehicle selection, maintenance efficiency and coordination, and the purchase of spares.
You might say that every fleet engineer in the country does the same! But that is only the start. At the NFC, Mr Batstone's department prepares a detailed vehicle specification analysis for the companies on an annual basis. The same kind of thing is done for large contract hire fleets. Much detail at the centre is concerned with standards, and with interchangeable equipment. Left wholly alone, without co-ordinating reins, standards and specifications introduced at company level would grow like weeds.
Mr Batstone is not only concerned with technical standards within the NFC. He monitors proposed legislation, domestic, EEC, even the United States MSS, because of its possible
implications. The ISO standards, whose role in making containerisation possible is often over-looked, also concern umbrella bodies like the NEC.
When proposals involving
controversial legislati,
which usually means legislat that will be costly to impleme such as that concerning smt emission, then Mr Batsto could set-up an NFC worki Party to sift the likely effects a shape a strategy.
Just as the NFC makes use inputs, and profits from I changes with trade associatic across a broad front, so, at 1 fleet engineer level, the N works closely with FTA and RI technical committees. Much tail has to be collated, parti( larly important with mechani handling. Some of the det such as the grease specificati for propane gas and forktrucks, may seem trivial. course, it bears on cost and p formance.
Although the venerable se truck continues to play a va able role in parcels work, t major operators within the N have a large investment mechanical handling aids carousel belts, etc, are r cheap. Because new devices introduced to the market all t time the NFC needs to moni and evaluate equipment, m( suring it up for size, so to spee
The possible utility of sor new sortation equipment c pends on -throughput"; if y could transform the depot n work overnight into units Ca able of using certain equipme; it might, or might not, be s( sible to do so. Someone Argosy House must at lee think about it.
The British Standards I stitution has been involved some time with packagii standards. This may sound dull subject but it has maj implications for transport, i deed for our whole life-styl and the NFC is part of the actio The compatibility of pallet siz to vehicles is only part of ; involved story.
Development
As a major buyer of comm, cial vehicles, you would exp( the NEC to enjoy a rather spec relationship with the manufe turers. There is a Design al Development Group, and sor special liaison committees. T NFC needs to know about pi posed new ranges of vehicl partly for its own interest as operator but, equally, on beh, of contract customers, prese or future.
The general concept of vehicle, its styling and acce tability to drivers is taki seriously. Indeed, two drive from different NFC compani serve as members of lanufacturing design commite. The nominations were lade y group managing direcnd Mr Batstone paid ibut to the drivers serving on B itish Leyland/NFC corm iittee
Na rally, as a large vehicle Deratbr, the NFC makes regular port to manufacturers as to ahic e behaviour and serceability. To the degree that le WC criticisms are construeye, and acceptable to the 3hicle designers and builders, le whole industry — drivers, aeraiors, fleet mechanics, the t — must benefit.
The NFC's ability to bring the hole business round to an Jequate level of profitability nges on the capital structure the exclusive shareholding by overnment — and the level of iterest charged on loans, and ie repayment dates specified. ames Watson, NFC's director finance, agreed that heavy Di-rowing to meet fixed interest -larges and cope with recycling loans at higher interest rates as a rare burden to bear.
iterest
en both the borrower and le I nder is the same Governen , or its agency, you could iy i was barmy! Even so, top
e experts in the Civil Serce solemnly set down repayen dates for the discharge of an made at very high — but res mably market-related — le St rates, and the NFC has D hoice but to soldier on, hi .tling to keep its spirits up! The over-valuation of the orline' business, combined with
generally very profitable usiness of Roadline UK Ltd — iPS Parcels Ltd in former days. Discussions with Government over investment projects involve making realistic cases for the balanced development of the whole business in future years. It is a ''synthesising'' job. Does this proposal make sense? Can it achieve the targets?
Peter Land makes the same point that other executives stressed, that the NFC is now following a "top down, bottom uppolicy. It is an odd conclusion to have come to after 30 years of State transport that it does make sense to consult the chaps on the ground and middle floors, but I give my applause to repentant sinners.
The NFC has two major instruments for charting the future. There is a strategic review and a corporate plan. In the first three months of a year company programmes are reviewed and a strategy is worked out as the basis of the Corporate Plan prepared in the middle of the year. The corporate plan, understandably, concerns disposition of physical and human resources. Does it make sense to have x sales outlets or y product centres?
The financial objectives of the business as a whole must be agreed with Government. Here, naturally, the objectives relate to the White Paper proposals. The decision of the Government to make the NFC pay commercial rates of interest — the Corporation has made it crystal clear that it is not very happy with the terms of the reconstruction proposed — is undoubtedly exercising the NFC and line management, and it will continue to do so. As Peter Land says, if the loan that provided an old investment has to be repaid at a higher rate of interest, you can't just abandon the human resources because the money
lender has -upped the ante-.
One cannot resist the analogy of the NFC as a colander, with inadequate engine power to get the ship to port, though, equally, one could say the Government should do as much for the NFC as it has for other public corporations with public dividend capital. (Meriden, that Utopian co-operative, has just been relieved of an interest burden).
Peter Land, always sensitive to comparisons with the private sector, says the paying-off of their shareholders is the analogy which he thinks is relevant in the context of Government shareholding in the NFC. "You don't see United Carriers paying off their shareholders every ten years and renegotiating capital at a new, going, rate of interest.''
The "product'' philosophy, now well advanced in the NFC, would pose problems in Peter Land's view. -There is a difference between a company structure and a product structure. Within the next ten years we shall have to face this as we become more successful and our market share gets much larger.'"
It is a nice thought and there would seem to be some way to go for the NFC have only 4 to 5 per cent of the UK freight market and only 7 per cent of the hire and reward market by volume Peter Land's is a world of economic surveys, strategic appreciations, marketing forecasts, of speculative — entirely notional I would guess — speed of run-down of limping businesses. He favours the quiet evolution approach as he did as a line manager though, I suspect, he must have wished at times to have had supreme power of decision-making in sorting out the wheat from the chaff. But the NEC, as its deputy chairman has said, is a people business. People count. The trade unions are a fact of life.
Communications are implicit in the "top down, bottom up" approach. The NFC have been in the van with separate employee reports for 22 companies — well produced and explicit. Chairman Sir Dan Pettit is a splendid communicator, and a good mixer, whatever the company. His skills and experience will not readily be replaced when his successor is appointed.
Information
As for my personal observations, I think the policy of the • maximum interchange of information, with all its risks, is one that will yield better results than cards held close to the chest. I see no reason why any employee should not see minutes of Board meetings. I think the NFC is not united on the type of industry it would like to see and the several different viewpoints should be kicked around in public.
As a political animal, it is convenient for Government if the NFC is reasonably docile and predictable, and trying to square the circle between unlimited free competition, tariffication, and a much more disciplined, entry-controlled industry, with the RHA and FTA pulling political strings — as is their right — will not be easy. But candour is everything.