Inappropriate for Government to intervene in process

The Hillside Engineering workshops have a prominent place next to Carisbrook. Photo by Gerard O...
The Hillside Engineering workshops have a prominent place next to Carisbrook. Photo by Gerard O'Brien.
I'm well aware of the strong heritage of the Hillside Engineering workshops in Dunedin. I grew up three blocks away from the workshops and my grandfather was a boiler maker there many decades ago.

News of planned redundancies at Hillside and Hutt workshops while KiwiRail sources wagons from overseas is very disappointing for Dunedin, and some have attacked the Government for not supporting New Zealand workers.

I was a member of the working group set up to promote Hillside through the tender for electric trains for Auckland and, more recently, for flat-deck wagons. The group comprised MPs, the rail unions, industry groups, the Chamber of Commerce and the Dunedin City Council.

South Dunedin MP Clare Curran has accused me of saying one thing in those meetings and another now the decision has gone against Hillside.

This is not true. I have consistently maintained this would be a commercial decision, not a political one, and that cost, quality and ability to deliver volume would be the key determinants of the tender. So it proved to be.

The Government has made a commitment to support the KiwiRail turnaround plan with $250 million of operational and capital funding this year alone.

Part of that plan involves the procurement of 4000 flat-deck wagons to meet projected freight demand. I understand these wagons cost about $100,000 each, representing a $400 million investment by KiwiRail in the next 10 years.

I completely understand the disappointment and anger at the Hillside Engineering workshops' failure to secure that business when it was beaten into third place during a recent tender for 300 of those wagons by larger and more efficient overseas manufacturers.

Tenders are confidential and the tender prices were not made public but I understand Hillside's price was about 25% higher than the successful bidder. The Government is prevented by the State-Owned Enterprises Act from interfering in operational decisions of this nature.

The public of Dunedin is asking the Government to intervene and enable Hillside to build those wagons by effectively subsidising that price difference.

Whether or not building 4000 wagons in over a 10-year period is within Hillside's capacity, the effective subsidy for such work could be as high as $100 million or more. Given the substantial investment already being made by the Government in rail, it is quite inappropriate for the Government to do so and that $100 million investment can be better made.

Comparisons have been made by Labour MPs with the Government's decision to support The Hobbit movie being made in New Zealand. The comparison is flawed. New Zealand is effectively exporting its movie-production capability and the Government removed regulatory red tape and ambiguity to help that industry compete.

Comparisons have also been made with the Government's commitment to water schemes in the South Island to assist in boosting our primary industries.

Again, the comparison is flawed, as the Government is doing much more than that for rail. The Government would be equally averse to subsidising the construction of those water schemes at an uncompetitive price, in order to retain Kiwi engineering jobs.

Ms Curran should also explain the inconsistency of her strident criticism of the Government's regulatory settings in the ultra-fast broadband rollout, which she claims reduces competition, with her expectation that the Government should interfere with a competitive tender process to favour an organisation in her electorate.

Hillside certainly can have a future. The maintenance requirements for the KiwiRail rolling stock will be significant and this is a competency Hillside has. KiwiRail's thinly veiled suggestion that that work should more appropriately take place near Auckland is unnecessary and there are good reasons Hillside and Hutt workshops can continue to be the most cost-effective maintenance hubs for KiwiRail.

As a country we need to focus on producing and exporting the things at which we are competent and cost-efficient, and also on ensuring best value for taxpayers' investment in KiwiRail. It isn't appropriate to expect New Zealand taxpayers to further subsidise Hillside to the tune of $100 million.

- Michael Woodhouse is a list MP and the National Party candidate for North Dunedin

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