Privatisation of NZ Rail Ltd

Following on from the preparation for privatisation, this is a series of articles approaching and following the privatisation of NZ Rail Ltd.

In the first article (2 parts) John Goulter writes a brief history of how rail was restructured in the 1980s from a lumbering government department with a statutory monopoly on long haul freight to a competitive, lean and business oriented state owned enterprise ten years later. General Manager of NZ Rail Ltd Francis Small notes the public doesn't see much of the company, as 70% of its revenue was freight.  He notes that in 1984 Booz Allen Hamilton describe the NZRC as the "worst performing railway in the OECD", yet now it makes a profit from passenger services (excluding commuter services which are contracted for) and is still NZ's largest hauler of freight. 

Graphs in the article depict a drop in the number of wagons from around 28,000 in 1981 to 9,400 in 1992, largely reflecting scrapping a lot of small, four-wheeled wagons which had poor payload to net weight, and slow operating speeds.  Another graph depicts staff numbers dropping from around 21,000 to around 6,000 in the same time period. 

A pressing issue for privatisation is the capital needed for renewals. At the time, the three Interislander ferries were between 10 and 21 years old, with the Arahanga and Aratika needing replacement by the end of the 1990s. Locomotives and EMUs had an average age of 20 years, along with many freight wagons, noting also the long-distance passenger rail stock dated from the late 1930s-mid 1940s (except for the Silverfern railcars).  The Government of the day was keen to avoid needing to inject capital to replace old ferries, locomotives and wagons.

Notable was former Railway Minister Richard Prebble expressing concern of the risk of privatisation that rail would be run into the ground, and there were no guarantees that certain services would be kept in place. 

The second articles (3 parts) lists the six consortiums that were bidders for the purchase of NZ Rail Ltd. Bids were expected between $200m-$400m, with net assets valued at $290m. These were:

• Freightways and the Noel Group: Freightways was known as a major freight operator, but Noel Group was a US based investment company with investments in railways in the US
• Fay Richwhite and Wisconsin Central (the eventual winner) Fay Richwhite was investing to enable a public float, but Wisconsin Central is a major regional railroad in the US with a network at the time nearly the same length as NZ Rail.
• Sea Containers, Anschutz Corporation:  Sea Containers was particularly interested in the ferry business, but also rail. Anschutz owned Southern Pacific and the Denver & Rio Grande in the US (both later acquired by Union Pacific). 
• Mainfreight/Brierleys/Railroad Development Corporation: Mainfreight is a major NZ Rail customer, but Brierleys was seen as having interest as it was a part shareholder of the Union Shipping Group. RDC was a minor owner of railroads in the US and Argentina. 
• Port of Tauranga and Port of Lyttelton, Pacifica Shipping, National Mutual and AMP: At the time Port of Tauranga took 25% of rail freight, and Lyttelton was important for coal traffic.  Pacifica saw the acquisition complementing its coastal shipping operation, and the insurance/investment firms were there for the later stock float.
• Ports of Auckland and Wellington, Sofrana-Unilines and Stagecoach: Mirroring Port of Tauranga for competition, Auckland saw the investment as strategic. Wellington saw NZ Rail as its biggest customer with the Interislander. Stagecoach was seen as wanting to complement its bus business in Wellington. Sofrana was a French shipping line.

It was noted that removal of restriction on cabotage by foreign ships engaging in international trips (which enabled them to carry freight within NZ with their foreign crew and ships, as long as it was part of a trip that terminated or commenced at a NZ port) would add competition to NZ Rail, but that coastal shipping was slower than rail freight between Auckland and Dunedin. 

The article noted it was believed that 7% of NZ Rail's revenue was from transporting coal from the West Coast to Lyttelton. 

It was noted that around $1.6b was expected to be spent in new capital over the next 20 years on ferries and rolling stock. It was noted that there was some political opposition to ports acquiring NZ Rail Ltd as it would mean regional councils would be owning NZ Rail Ltd, retaining effective public sector ownership. Producer boards were also opposed as they thought it might hinder the efficiencies needed in the ports sector. 

The third article is the Evening Post editorial after the privatisation had been concluded, on 21 July 1993.  It hoped that NZers would still be able to travel by rail following privatisation, given the assurances the new owners had given. Noting NZers had had plenty of exposure to privatisation over the past five years and it appeared to be getting easier, plus those that wished could buy shares themselves.  The sale price was $328m, which was seen as relatively high. It noted NZers should be relieved that a specialist transport company has bought it, and that although it would cost billions to replace it, there was a lot of capital spending needed for it to remain competitive. 

The fourth article is by Mike Booker in the Dominion, summarising the history of NZ Railways, noting the Vogel era and the opening of the South Island Main Trunk in 1878, the North Island Main Trunk in 1908 and the West Coast connected to the rest of the network in 1923, and Whangarei connected to Auckland before WW2.  The peak of the network length was 1953. It noted NZ Rail Ltd had 5,100 staff compared to 25,000 in 1953.  It noted NZR has owned ships since 1902 (as the original owner of the Earnslaw, followed by Cook Strait Ferries) and buses from 1926 until sold in 1991.  The Railways Department was profitable for most of its existence, until the 1960s as minor branch lines became an increasing burden and competition from road freight had grown (even though much of it was limited to 40 miles distance until 1978).  The first talk of privatisation was in June 1989 under the then Palmer-led Labour Government, but it was carried out by the Bolger National Government.  A brief chronology was included. 

A related article next to it describes how Wisconsin Central was bullish about growth of traffic for NZ Rail Ltd, given it had generated 10% per annum growth in the US. This enthusiasm also applied to passenger traffic.  NZ Rail Ltd was Wisconsin Central's first investment outside the US. It noted that Wisconsin Central carried 2.5x as much freight per km as NZ Rail. 

The fifth article by Brent Edwards in the Evening Post describes how Wisconsin Central is in the NZ Rail investment for the "long haul". It noted that the Wisconsin Central consortium would pay around $400m for the business. Wisconsin Central President Ed Burkhardt believed that the focus now was on growth, as the staff cuts had largely been completed. Then Finance Minister Ruth Richardson said the bid was at the upper end of expectations and was the "best" and "cleanest" bid.  Winston Peters, who had only just launched NZ First, called privatisation "economic treachery", but Opposition Leader Mike Moore was critical but stopped short of saying a Labour Government would buy it back.  Wisconsin Central was destined to take 60% of NZ Rail, with Fay Richwhite 40% in order to float that shareholding on the stockmarket. 

The sixth scan is a series of articles as follows:

• Fay Richwhite used "Chinese walls" to separate staff that had been advising NZ Rail on the privatisation process, and being part of the bid with Wisconsin Central
• NZ Rail's new owners say it would continue to lease out its fibre-optic cable network to Clear Communications seeing it as a "valuable asset"
• The new owners of NZ Rail could cut commuter services by half before Government could require it to let another operator provide the service using its tracks.  
• Finance Minister Ruth Richardson saying the Government got the best deal with the sale to Wisconsin Central. It noted the Government would clear $72m in debt of NZ Rail from the sale, with the remainder $328m available for the Crown. It noted that NZRC would continue to own the land under the track and stations. 

NZ Rail ready for sale - Evening Post 1/03/93

Bidders for NZ Rail - Dominion 23/06/93

Evening Post Editorial - 21/07/93

21 July 1993 - Evening Post

Dominion 22 July 1993

Transition from NZRC to NZ Rail Ltd and preparing for privatisation

Following the establishment of the NZ Railways Corporation in 1982, and many years of restructuring, the next phase for railways in New Zealand was its reform into a fully-fledged State Owned Enterprise, in the model of other such entities set up after 1985, such as NZ Post, TVNZ and (subsequently privatised) Telecom NZ, Postbank and many others.  NZ Rail Ltd was formed in 1990. 

The first article is reporting the loss for the first half-year of the 1989 financial year, which is put down mainly to the financing costs of the NZRC's $1.1 billion of debt, all of which had been incurred since 1982, and was in part for the capital costs of the North Island Main Trunk electrification and the costs of redundancies and restructuring of the NZRC to remain a viable business after deregulation of land transport. 

The second article following on from the restructuring into NZ Rail Ltd saw the Government take over $1.3b of debt from NZRC to put it on a sounder footing.  The Chair of NZ Rail Ltd  and Managing Director were reported saying it "wanted" to be privatised as it was one of the most efficient freight railways in the world. It expected freight traffic to grow by 20% in the next three years.  It was noted that in the following five years (through to 1996) NZ Rail Ltd would need two replacement Cook Strait ferries.

The third article notes the privatisation of Intercity for $5.1m in 1991, with 60 coaches sold with all of its routes, to a consortium of Guthreys and Ritchie's Transport Holdings. It was noted that Intercity had lost $6m in each of the 1988 and 1989 years, and only $3m in 1990, with the provisional loss in 1991 down to $2m.  NZRC had already sold the Speedlink NZR Road Services freight/parcels business to NZ Post (essentially a transfer between government owned businesses).  The report concluded that the Government was unwilling to inject capital to expand the Intercity business and there was no further scope to restructure. It was also noted that rivals Newmans/Mount Cook (which had recently merged) had chosen not to buy the business (and that there was likely no other buyer than Guthreys/Ritchies).  The privatisation of Intercity was followed by the sale of the suburban bus business - Cityline - to the corporatised Wellington City Transport, which was subsequently privatised by Wellington City Council to Stagecoach.

The fourth article notes in 1991 then State Owned Enterprise Minister, Doug Kidd, reporting that NZ Rail Ltd would likely be sold within the next two years.  He said that it would be a good business and government was not the right owner. He said it was best to sell before it needed new capital for locomotives and ferries. He claimed government could not run railways as a competitive business.  It was noted as the last government transport and communications enterprise, as Air New Zealand, the NZ Line and Telecom had already been privatised. He noted that the rail corridor land would not be sold. It was noted NZ Rail Ltd made a profit of $32m in its first 8 months.

The fifth article from 1992 reports on NZ Rail Ltd's first full year financial results with a profit of $40.2m, which was a 33% improvement (annualised) on the previous year (which was a blend of NZ Rail Ltd and NZRC results). It noted that a scoping study on privatisation was being carried out. Staff were expected to be around 5297.  Sales had been $496m of which 69.5% had come from rail freight, 13.3% the Interislander and 11.4% passenger services (including both long-distance and commuter services, including subsidies for commuter services). It was noted that freight rates had dropped 2.72% and NZ Rail Ltd's fuel costs were only 6% of total costs, compared to 18-20% for competitors. Freight carried was 2.47b net tonne kilometres.  15% of freight was coal, 15-20% log and timber traffic. Passenger services averaged 50-60% full, but the Tranz Alpine was achieving 70-100%. $55m of capex would be funded from profits and debt.

The sixth article from 1992 reports on NZ Rail Ltd threatening to build its own ferry terminal at Lake Grassmere as it negotiates rent with the Port of Marlborough at Picton. It noted it bought land at Lake Grassmere to preserve the option of building its own port.  It noted that NZ Rail Ltd would save an hour on the ferry crossing, and trucks would save an hour of road travel time (and trains 90 minutes for travel towards Christchurch).  Grassmere port was to cost between $50m and $80m at the time, with a new Wellington terminal only $12m-$15m (NZ Rail was also negotiating with Centreport).  

The seventh article from 1991 further noted the earlier articles on NZ Rail Ltd wanting to be privatised, but noting the company was looking to make another 500 redundancies. Managing Director Dr Francis Small said as a private company NZ Rail Ltd could respond faster to major commercial deals.

NZRC General Manager optimistic in 1989, and NZ Rail Chair and CEO want it to be privatised 05/06/91

Sale of Intercity in 1991 - 17 July 1991

NZ Rail Ltd getting ready for privatisation 20/09/1991

NZ Rail first year profit of $40m 27/08/1992

NZ Rail may build its own ferry terminal 27/08/1992

NZ Rail to make 500 further redundancies 06/11/91

New Zealand Railways Corporation Annual Report 1984

In 1984, the New Zealand Railways Corporation (NZRC) completed its second year of operation, and its last profitable year before six hard years of restructuring before it was reformed into a fully-fledged State Owned Enterprise in 1990 (NZ Rail Limited). This highly pictorial annual report contains details of notable parts of the operations of NZRC over the 1984 financial year and some images reflecting some highlights.  At the time, the Chair was Mr Lyndsay Papps and the General Manager was Gordon Purdy.

The 1984 Annual Report saw it report a drop in rail freight tonnage, increase in ferry freight tonnage, but around the same net tonne kms of rail freight hauled in total. As it was the first full year of NZRC faces a fully competitive road freight market (with removal of the 150km limit of road competition with rail), it means NZRC was losing short to medium haul freight traffic, but retaining sufficient long haul freight and operating longer distance trains, to hold steady in total freight hauled. The locomotive and wagon fleet both reduced, reflecting greater efficiencies in operation.

On the passenger side both long distance and suburban rail patronage increased, but NZR Road Services lost patronage.  It is worth noting that at the time, NZRC received direct subsidies from central Government (Social Services Payments) to subsidise long distance and suburban rail services, as well as some freight branch lines and NZR Road Services routes. This arrangement continued until 1987 with restructuring of funding of urban transport that saw regional councils required to share the cost of subsidising urban passenger transport.

The 1984 financial year was also the year that the Booz Allen Hamilton (BAH) report on restructuring NZRC had been received, and so the impacts of that report are not reflected in that year.  It was noted that the North Island Main Trunk (NIMT) electrification project had been approved and was forecast to cost NZ$200m at the time (it would end up cost over 50% more). 

Subsequent years would prove more challenging for NZRC as it started to more clearly identify elements of the freight market that it was commercially viable for it to service.  It would also transition from being input focused (structured around supply of locomotives, rolling stock, right of way and buildings) to selling services to customers. 

Key statistics include:

• Net profit of $23.9m compared to $24.2m in 1983
• Reductions in revenue of around $30m compared to 1983.
• A reduction in staff numbers from 20 865 to 19 148.
• Wages comprised 55.6% of expenditure.
• Average rail freight haul distance was 298km, up from 285km in the 1983 financial year (this is a low average by today's standard).
• 1877 Cook Strait ferry round trips were worked compared with 2153 the previous year. 3.5% of sailings were stopped due to weather, urgent repairs and industrial action.
• 160km of new rail were installed and 16 rail bridges were reconstructed and strengthened.
• 471 locomotives in the fleet down from 504 the previous year

Highlighted changes to infrastructure and services include:

• Introduction of new overnight freight liner express goods services between Auckland-Wellington, Picton-Christchurch and Christchurch-Invercargill.  Train space sold on a "slot" basis to customers including freight forwarders.
• Introduction of the "Doorrail" door-to-door general goods service in partnership with road operators at 28 key stations.
• 69 new goods wagons entered service and 191 wagons were modified to handle specialised traffic.
• Patronage increased on the Silverfern (Wellington-Auckland), Southerner (Christchurch-Invercargill), Wellington-Gisborne and Picton-Christchurch Expresses.  At the time the increasingly worn-out Ac "Grass Grubs" had been replaced with refurbished 56ft cars with new seating, with the Grass Grubs placed on the Wellington-Gisborne route to replace 56ft cars with old-fashioned bench style 2nd class seats.
• The electrification between Paekakariki and Paraparaumu went live in May 1983
• 18 new long distance coaches entered service for Road Service and a programme to re-engine 45 coaches with more powerful engines was nearly complete.  Noted new coaches with air conditioning ( a first for NZR Road Services) and some with sheepskin seat covers
• 25% off peak saver discount for midweek and Saturday long distance rail services was introduced
• Ferry Aramoana was withdrawn from service in March 1983, but returned to service briefly to clear a backlog of traffic due to weather delays. 
• Its replacement, the Arahura was delivered in December 1983.  Arahura had capacity for 1000 passengers, 60 four-wheeled wagons or 130 cars on the rail deck, 100 cars on vehicle deck.
• Contracts awarded for Stage 1 of NIMT electrification
• New travel centres for Road Services opened in Wanganui and Opotiki
• New freight offices opened in Tauranga and Morrinsville
• New administration building and apprentice school opened in Wanganui
• New signals and apprentice school at Woburn
• Installation of radio communications in locomotives and trackside was completed for Wellington-Auckland and Christchurch-Picton
• Completion of the DC/DBR programme
• Contract awarded for the NIMT electric locomotives to Brush Electrical Machines Ltd of the UK
• Prototype DSJ locomotive entered service and work commenced on building four more at Addington Workshops
• Two of out three Silverfern railcars had been refurbished
• Makohine Tunnel daylighting on the NIMT (pictured)
• Refurbishment of English Electric EMUs at East Town workshops (these were the 1950s series stock that remained after the Ganz Mavag units replaced the 1930s and 1940s stock).

NZRC Annual report 1984 At a Glance

1984 NZRC Annual Report Chairman's Commentary

1984 NZRC Annual Report Chairman's Commentary including new Volvo B-10M coach

1984 NZRC Annual Report Chief Executive's Review of Operations

1984 NZRC Annual Report Chief Executive's Review of Operations

1984 NZRC Annual Report Chief Executive's Review of Operations

1984 NZRC Annual Report Chief Executive's Review of Operations

1984 NZRC Annual Report highlighting Freightliner trains

1984 NZRC Annual Report highlighting new rail ferry Arahura

1984 NZRC Annual Report highlighting rail infrastructure construction work on the North Island Main Trunk line

1984 NZRC Annual report highlighting new long-distance road coaches and refurbishment to the Silver Fern railcars

1984 NZRC Annual Report highlighting refurbishment of Wellington DM/D class electric multiple units and a train of fibrolite pipes

1984 NZRC Annual Report highlighting work on electrifying the North Island Main Trunk

1984 NZRC Annual Report highlighting new Railways Road Services passenger depots in Wanganui and Opotiki

1984 NZRC Annual Report highlighting main sources of revenue

1984 NZRC Annual Report highlighting main items of expenditure

1984 NZRC Annual Report including print ads for rail freight

1984 NZRC Annual Report back cover

Launch of Wellington railway electrification

Today's article is from the Dominion Post believed to be in 2008 as a flashback to the introduction of electric multiple units (EMUs) in the Wellington region in 1938. These were the first EMUs in New Zealand and until 1982 the only one, and until 2014 only the Wellington region had EMUs operating passenger rail services.  Most of the article highlights the reports of the day opening the EMU service to Johnsonville. 

The English Electric EMUs were revolutionary for the development of the Wellington region, essentially opening up both Lower Hutt and Upper Hutt, as well as Tawa, Porirua and ultimately Kapiti Coast as commuter suburbs. The article below highlights the introduction of the then blue and silver EMUs on the Johnsonville line in 1938.  Unfortunately the blue and silver livery w replaced with red in 1949 as an economy measure.

This was only one-year after the North Island Main Trunk (NIMT) had been relocated from the Johnsonville line route to the Tawa Flat Deviation, and so formally converted the Johnsonville line to a modern commuter railway.  The electrification also included introduction of fully automatic signalling.  The Tawa Flat Deviation and NIMT electrification as far as Paekakariki was not completed until 1940, but by 1938 "Ed" Class electric locomotives were regularly hauling passenger and freight trains through the long Tawa Flat tunnels as far as Porirua, although additional EMUs were not supplied until the late 1940s to enable them to be introduced on the Paekakariki section in 1949. 

The article notes that Wellington City Council was relieved that NZR had electrified the Johnsonville line, as it provided infrastructure to support the growth of housing in its northern suburbs, as it saved the Council from expensively extending its tram network north of Thorndon, or bus services (which in the 1930s were almost entirely feeders for tram services, with no major bus routes being operated by WCC). Additional stations on the line would be opened in the subsequent 25 years or so, at Raroa, Box Hill and Crofton Downs, to respond to growth in housing.

There were ultimately three sets of English Electric EMUs introduced in Wellington (the D/DM class) between 1938 and 1954:

• 1938 set (for the Johnsonville line) known as the "36 stock"
• 1946 set (for the Paekakariki line) known as the "42 stock" 
• 1949-1954 set (for the Hutt lines) known as the "46 stock".

The original 1938 set were all phased out by April 1983 with arrival of the Ganz Mavag Hungarian-built (EM/ET class) EMUs in 1981.  

Land transport deregulation comes to pass

From the 1936 until 1983, transport of freight within New Zealand was subject to fairly blunt distance limits restricting competition between rail and road.  Initially, road freight was only allowed to haul goods no further than 30 miles from the nearest railhead, whether it be the end of a line, or a railway station with freight service.  It was designed to save the economy money, primarily by ensuring that capital investment in New Zealand Railways (NZR) was not wasted and undermined by competition from road freight, as it was thought the country it would be wasteful to have to upgrade the highway network to handle long-distance road freight traffic, as well as maintain and develop the rail network. "Unnecessary duplication" was the catchphrase.  It gave NZR a monopoly on all medium to long haul freight, and limited truck operators to feeding the rail network, although there were parts of the country much further than 30 miles away from the rail network, so some trucking companies focused on the gaps. 

Some of the largest centres without rail access were (and are) Kaitaia, Taupo and Queenstown.  The 30-mile limit (50km) was extended to 40 miles in 1961, reflecting improvements in road and truck technology, and the shift of the rail network from steam to diesel traction, indicative of the inefficiencies of rail handling short freight movements. This saw some lines close not long after.  However, by 1961 exemptions based on types of goods were also being introduced.  Early exemptions included household removals and livestock, and the list of exemptions would grow over the subsequent twenty years. 

In 1969 US consultants Wilbur Smith & Associates published a comprehensive review of transport policy in New Zealand and recommended removal of the distance limit, but only if road user charging was introduced concurrently.  In 1978 this partly happened, when the limit was increased to 150km and Road User Charges were introduced for all heavy vehicles (over 3.5 tonnes gross vehicle weight) to recover the costs imposed by higher weight vehicles on the road network.  The shift to the 150km limit saw NZR abandon multiple branch lines almost overnight (see Methven, Waiau, Tuatapere), but it was only a short reprieve.  

After the Railways Department was restructured into a business as the NZ Railways Corporation from 1 April 1982, the then Muldoon Government proceeded to remove remaining distance limits on road freight.  The article below reports both on the merging of Trailways and ASC Flowers trucking companies. 

It also noted the curious way deregulation was implemented. Trucking operators had to buy licences based on capacity to operate further than 150km. This requirement was phased out over three years. 100,000 distance permits had been printed to be displayed in trucks.  Licences were available at Post Offices and MoT offices (when there were many of these).  The final stage was the abolition of quantitative licensing in 1984, replaced with qualitative licensing. Quantitative licensing meant that new trucking operators would have to demonstrate demand for their services due to insufficient capacity provided by existing operators and NZR.  Qualitative licensing simply meant that a trucking operator only needed to prove it met basic legal standards around safety and competence.

Restructuring - Coopers & Lybrand report damns main trunk electrification and writing off of NZR debt

This series of articles covers the restructuring of NZRC from 1985 through to 1990, specifically:

• NZRC announcing a loss for the 1985 financial year but predicting profitability in the 1990s, including a description of a wide range of restructuring measures following the Booz Allen report
• Coopers & Lybrand report in 1987 focused on the economics of North Island Main Trunk electrification, but also what else NZRC would need to do to become financially viable
• Agreement with unions to have single person crewing of most freight trains (removing locomotive assistants)
• 1989 article on review of governance of NZRC (which resulted in all of the non-land assets being transferred into a full-fledged SOE - NZ Rail Ltd) and disposal of non-core assets
• 1989 article on the possibility that some NZRC business units could be sold
• 1989 article on the $0.5b loss of NZRC, primarily due to writing off asset values, redundancy costs and interest on debt
• Government writing off $360m of NZRC debt for the cost of the North Island Main Trunk electrification.
• Government writing off the remainder of the $1.1b of debt as part of the process to convert NZRC into a state-owned enterprise. This debt was considered to be due to the cost of restructuring including redundancies.

Key points from the articles include:

• NZRC made a profit of $24m in 1983, but lost $20m in 1985 (this is after "social services subsidies" from government to cover losses for commuter passenger rail and bus services, long distance passenger rail services and marginal branch lines for freight)
• In 1985 NZRC believed it would be returning dividends to shareholders within five years
• 130 "repositioning projects" existed in 1985 to restructure the business
• Deregulation of land transport along with becoming a Corporation had had a traumatic effect on NZRC as it was simply not responsive enough to changes in demand from customers or in responding to competition more generally. "Inefficiency was built into the system". 
• In 1987 Coopers & Lybrand suggested some lines would need to close, RUC would need to increase and NZRC would need a major capital injection if it were to survive
• Coopers & Lybrand said the North Island Main Trunk electrification project should not have proceeded and would lose NZRC $100m over 35 years (even if electricity were free, it would still lose $76m over 35 years).  The main reasons being that deregulation of land transport had reduced demand below levels needed to justify the project, and forecasts that oil prices would rise sharply compared to electricity were wrong (oil prices having dropped 50% since the decision to proceed with the project had been made).
• Coopers & Lybrand also noted that while NZRC had responded to the challenges of reducing costs and becoming more competitive, it needed to do more.  This included having stronger drawgear to enable longer trains and to concentrate on markets where rail can be most competitive, such as haulage of containers.  
• In 1987, Minister of Railways Richard Prebble asked Cabinet for NZRC to get a $400m capital injection (this was subsequently approved for the write-off of debt incurred for the main trunk electrification
• North Island Main Trunk electrification was estimated to cost $337m in total
• NZRC lost $0.148b in the 1987 financial year, primarily due to debt servicing costs
•  NZRC lost $0.57b in the 1989 financial year, although it was only an operating loss of around $41m for the previous 15 months.
• Average train size had increased 20% between 1983 and 1989
• tonne-km of freight moved per staff member had increased 94% between 1983 and 1989
• Staff numbers had been cut 60% between 1983 and 1989