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New Zealand Herald Online
Thursday November 09, 2000
Former Tranz Rail chairman Ed Burkhardt says he has plans to transform
the company into a top performer. Herald Picture
Tranz Rail proposals on wrong track: Burkhardt
09.11.2000 - By DANIEL RIORDAN
Tranz Rail management and the institutional shareholders who support
the company's restructuring do not understand the railroad business,
says Ed Burkhardt, the former chairman who is angling for control of
the company's biggest shareholder.
Mr. Burkhardt, ousted as president and chief executive of Tranz Rail's
23.7 per cent shareholder Wisconsin Central in July, has set up a
shareholder committee of dissatisfied Wisconsin investors keen to
regain control of the Chicago-based company.
One of the options for the group is divestment of Wisconsin's poorly
performing international assets, including Tranz Rail.
In what some US analysts saw as a move to allay shareholders' concerns
in the face of Mr. Burkhardt's challenge, Wisconsin last week hired
investment bank Goldman, Sachs & Co to advise it on strategic options,
including selling its assets in New Zealand, Britain and Australia.
Mr. Burkhardt owns 7.2 per cent of Wisconsin and has support from its
biggest institutional shareholder, Southeastern Asset Management,
which owns 14.4 per cent.
He told the Business Herald yesterday that he could not quantify his
total support, as some of it was indicative rather than binding.
He said his shareholder group had this week filed its proxy material
with the US Securities and Exchange Commission, a step it is required
to take before it can solicit other shareholders for their support.
The paperwork should be approved within a week and shareholders then
have up to 60 days to return proxies. The earliest Mr. Burkhardt
expected that to happen was Christmas.
Assuming the group was successful, it would take several months to
establish a new board and decide on its investments, including Tranz
Rail.
"We can then make our views known to Tranz Rail's management and board
and see if they will adopt some proposals from us. If they don't, the
only choice we would have would be to dispose of our interests."
He said the proposals would relate to good management of a
traditional,
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vertically integrated railway.
"That's the way to achieve the greatest value for shareholders. I'm
trying to put this as nicely as I can. I don't think the current board
knows the railroad business and I don't think Mr. Beard [managing
director of Tranz Rail] knows the railroad business.
"I've been in railroads for 40 years now and I think I do know the
business."
Members of the local investment community have expressed concern that
Mr. Burkhardt's group might reverse the restructuring process Tranz
Rail has embarked on under Michael Beard, managing director since May.
They are also concerned that a decision by Wisconsin to sell its stake
might stall the restructuring while potential buyers do due diligence
on the company.
They say it is "extremely rich" for Mr. Burkhardt to criticise the
company's performance when it finally appears to be emerging from a
long period of stagnation under his chairmanship.
But Mr. Burkhardt said it was not too late to reverse the process.
Some of Mr. Beard's ideas had validity but his preference for
contracting was misguided. "If he is looking for greater efficiency in
maintaining locomotives, for example, I think that could be achieved.
But I think it could be done better by the company attacking that
problem internally, rather than by outsourcing in the belief it will
save them money.
"I know a lot of railroads have tried to outsource locomotive
maintenance and it has wound up costing them a lot more money.
"What Mr. Beard needs is some professional people who know how to run
a railroad. He doesn't have any of them there. Tranz Rail is
fundamentally an excellent railway. With some improved management in
some areas it can do quite well."
In his time as chairman, he was often blocked by the board from
implementing policies which would have helped the company.
Those views? "Very good management of a vertically integrated railway
at all levels, intense control of costs, and a strong effort to
improve customer service."
(C)Copyright 2000, NZ Herald
