Yahoo Finance How Hitachi's plan to replace Britain's train fleet went off the rails
Chris Grayling was not afraid to heap praise on Japanese conglomerate Hitachi as the inaugural InterCity Express service prepared to leave Bristol Temple Meads station.
Glossing over the fact that water was pouring out of air conditioning units onto his fellow passengers, the Transport Secretary proclaimed: “These are the smartest trains in the country, probably the best we have ever had in the country.
“This is going to be a fantastic service, really regular trains and far more capacity."
That declaration in 2017 would come back to haunt him. The 6am service left at 6.25am and arrived 41 minutes late at London Paddington.
Hitachi’s InterCity Express trains grabbed the headlines once again last weekend.
Late on Friday evening, cracks were identified in a metal jacking point by maintenance workers. Further inspections on Saturday morning found that the issue was widespread.
More than 150 trains were pulled out of service, sparking mass cancellations on the Great Western Railway to the west and Wales, and east coast main line, known as LNER, that links London with York, Newcastle and Edinburgh.
Last weekend’s crisis was just the latest calamity that has beset the £7.5bn InterCity Express Programme (IEP) that was dreamt up by the Labour party in the final months as it prepared to bow out after 13 years in power.
Lord Andrew Adonis selected Agility Trains, a consortium of Hitachi, John Laing, an infrastructure investor, and Barclays, as the preferred bidder for the IEP in February 2009. The first of the trains were due to come on track in 2013.
The Labour peer would later blame the credit crunch for his decision to put the deal on hold until after the 2010 General Election. Former Audit Commission head Sir Andrew Foster was ordered to review whether the scheme was still value for money.
Foster concluded that the tendering process had not been run properly by the Labour government and told its Coalition replacement to recut the deal. A revised proposal to provide fewer trains at a lower price was agreed.
In the meantime, debate raged in Whitehall and across the rail industry over whether to fully electrify the two lines on which the Hitachi trains would run. It was not until July 2012, by which point Justine Greening had replaced Philip Hammond as Transport Secretary, that the revised programme was finally agreed. The revised project was now worth £4.5bn with an option to buy more trains for £1.2bn.
Hitachi could not build the trains until it had first built a factory. The £83m site in County Durham, Newton Aycliffe was opened in September 2015 - two years after the first train was due to be in service - by David Cameron and the Coalition Government’s latest Transport Secretary, Derby Dales MP Patrick McLoughlin.
“This new train facility will not only provide good jobs for working people but will build the next generation of intercity trains, improving travel for commuters and families,” the Prime Minister said.
Compatibility problems
Two years later, Hitachi's trains, taking inspiration from the famous Japanese “Bullet” train with its long nose, took to the tracks with an inauspicious first journey from Bristol to London.
The east coast mainline was gearing up for its own version of the Hitachi trains as it yo-yo-ed in and out of public ownership throughout the 2010s. Its version would be called the “Azuma”, which means “east” in Japanese.
Originally scheduled to start in 2018, LNER was hit by “compatibility problems” during testing. The locomotives’ electric-diesel engines were interfering with trackside signalling equipment.
Adonis, an ardent remainer who had quit as Theresa May’s infrastructure adviser in 2017 over Brexit, let rip at the delay.
"They had 10 years to get these signalling issues right," he said. "They'll be much more expensive to operate, they'll be slower, they'll have less capacity and hundreds of millions of pounds of public money has been wasted again."
Alexander Jan, a former Arup economist who led the analysis of Britain’s rolling stock for the Government’s McNulty Review in 2011, says many of the IEP’s difficulties can be blamed on the meddling from Whitehall.
Both the Labour and Coalition administrations felt that they were being “ripped off” by the owners of the trains - so-called roscos, or rail leasing companies - he says. So ministers came up with a new type of contract.
“But they had to go the long way around to do this. Ministers ended up with an unbelievably complicated PFI contract. For the type of train in question, it is probably the most expensive in Europe if not the Western world.”
Whitehall meddling
Recent analysis by industry commentator Roger Ford in magazine Modern Railways sheds light on the costs.
“When I was chasing the costs back in 2014, I obtained the total cost of the then current fleet of [InterCity] 125 and IC225 trains, which was £85m. Corrected for inflation, this was £96m or £18,320 per vehicle per calendar month.
“For the Azuma fleet the all-inclusive cost is £196m per year, or £32,890 per vehicle per calendar month.”
Foster predicted the IEP was on track for a difficult future 11 years ago. In his June 2010 report, his appendices include a scathing assessment of how short-termism in Whitehall had set the project up for failure.
“A number of interviewees likened [the Department for Transport] strategy to a moveable feast, and one to a slippery bar of soap," he said.
“One or two people suggested that policy instability, which can be especially damaging in a sphere of operations that involves long term investment and long life infrastructure, might reflect the frequent changes there have been in the Department’s political leadership.
“There have been 33 Secretaries of State for Transport since WW2 including eight since 1997, and this report will be presented to the fifth Secretary of State to have served during IEP’s lifetime.”
Now Hitachi, whose motto is "Inspire the Next", is being left to pay the consequences with ministers demanding that the company picks up the multi million-pound bill for passenger compensation for its latest faulty trains.
Reflecting on the history of Hitachi’s IEP programme, Jan has sympathy for the Japanese firm “IEP is a textbook example of central government thinking ‘we know best' and imposing a top down solution on the rail industry,” he says.
“Hitachi, along with the others, were just trying to build trains.”
