Thursday, March 5, 2009

Mainfreight vs KiwiRail: The sequel

The KiwiRail rort of Mainfreight Ltd [MFT.NZ] continues to roll on.

The trucking arm of Toll Rail (as it was known before its current name) was kept by Toll Holdings, an Australian logistics operator.

It was the only profitable part of the business.

It is still being subsidised by KiwiRail(the taxpayer) to compete against efficient truckers like Mainfreight.

The subsidy was due to expire 3 months ago but continues to this day.

KiwiRail is giving discounted freight prices and rentals for storage space at transport hubs so that Toll Trucking has a major competitive advantage over its rivals.

KiwiRail still rolls hopelessly on losing millions weekly, just so it can undercut private business.

I indicted back in May 2008 that this little scenario would cost Mainfreight dearly:

Long haul operators like Mainfreight are going to face intense competition from the new State run rail company. Subsidies to business who need goods hauled will give an unfair advantage to the rail operator when competing for business. Further government "protection" of a State rail system, in the form of "climate change" regulations and/or taxes can't be discounted with the current administration, who have shown that they are prepared to retrospectively pass laws to fit their socialist agenda, regardless of sensible business practices and outcomes. While Mainfreight have both long and short haul divisions and operate trucks from seaports, airports and rail hubs and therefore may be able to transform their long haul business and capital expenditure to focus on a possible busier short haul business-Labour have a goal of doubling current freight volumes, the cost to do this is clear. It will be large.

It looks like Mainfreight's managing director Don Braid has finally taken off the gloves because on Morning Report on Wednesday March 4 (1.5 MB mp3) he has applied pressure on the current National Government to do something about this anomaly. This is an unusual thing to do for Mainfreight management to take the media limelight, so they are clearly serious.

It is unclear how much of a discount Toll Trucking is getting but it is clearer than it was back in May that Mainfreight is losing out.

Customers and millions are being lost by Mainfreight. Other independent truckers have been forced out of business by these protectionist business practices and this is especially poignant given the dire economic climate.

Mainfreight shareholders might like to apply pressure by calling their local MP to give them the right message.

It is costing you as well.

Disclosure: I own Mainfreight shares

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