Streamlining of Westrail operations approved

28/4/93

State Cabinet has approved a package of changes for Westrail that will save Western Australian taxpayers at least $28 million a year and open the way for dramatic improvement of Westrail's commercial performance.

The biggest single saving of $19 million a year will come from closure of Westrail's Midland Workshops by March 4, 1994 under a voluntary severance scheme open to all Westrail employees.

The balance of the $28 million saving will be achieved over three years following a review of the management, administrative and services functions within Westrail.

Cabinet has also decided that:

·         Western Australia's status in the National Rail Corporation be converted to that of non-shareholder, which would allow Westrail to charge commercial rates for services and facilities contracted to the NRC.

·         Westrail be incorporated.

Transport Minster Eric Charlton said the decisions followed an assessment of Westrail's commercial future.

Corporatisation of Westrail was the logical next step in a commercialisation process that had been going on at Westrail since 1974, and the process would take 12 to 18 months.

"The projections showed that Westrail could not compete in a fully deregulated transport market unless it was able to respond quickly to market needs and conduct its affairs in a fully commercial way," Mr Charlton said.

"For that reason, Cabinet decided on a package of changes to allow Westrail to stand on its own feet."

Mr Charlton said the major burden on Westrail was an operating loss of $18 million a year at Midland Workshops.  In addition, the previous Government had approved in principle the spending of $27 million over the next four years for equipment upgrading - without any real prospect of stemming the annual loss.

"To justify the upgrading and the present size of its workforce Midland would need to win at least $30 million a year in outside contracts, in competition with private engineering firms," he said.

"The odds against that happening are impossibly long and it would be foolish to risk $27 million of public money on the outcome.

"The sensible course is to close the workshops under a voluntary severance offer on terms equal to those of the 1991 public sector redundancy scheme, which the previous Government had to close-off because of the overwhelming response.  Though 800 Westrail employees expressed formal interest in that scheme, only 350 could be released before the scheme was terminated."

The special voluntary severance offer will be open for nine months from May 1, 1993 and available to all Westrail employees.

It is expected that 500 Westrail employees will accept the offer. Those of Midland's 749 employees (excluding apprentices) who do not accept the offer will be redeployed within Westrail or, if possible, elsewhere in the public sector.  Westrail will continue the employment of apprentices or arrange the transfer of indentures to private industry for those who wish to do so.

The total cost of terminations, including severance packages, leave and superannuation entitlements will be about $36 million, which will be recouped within two years.

The Government recognises that closure of the workshops will end almost 90 years of tradition at Midland.  But disposal and redevelopment of the 78.8 ha site will open exciting opportunities for commercial development, heritage-based tourism and residential development for about 2,000 people in the next few years.

At the same time, a number of country railway centres will be given a new lease of life by decentralising maintenance of the Westrail wagon fleet and the letting of supply and service contracts will create about 250 jobs in private industry.  The centres for wagon maintenance will be Picton, Narngulu (Geraldton), Avon, Kwinana, Merredin and Kalgoorlie.

"In making these decisions, the Government has given substance to its promise of better public sector management," Mr Charlton said.

"It recognises the need for Western Australia to maximise the use of its railways and the need to equip Westrail to improve its share of the total transport market on equal terms with its competitors."

Media contact: Dean Roberts 321 7333 or 222 9595