EUROPE VIEW BY BRUCE BARNARD: RAILROADS ON SLOW TRACK TO GROWTH

EUROPE VIEW BY BRUCE BARNARD: RAILROADS ON SLOW TRACK TO GROWTH

European governments are getting serious about boosting the railroad industry's share of the continent's freight market by investing in new track to make rails more competitive with trucks. Trouble is, railroads don't seem inclined to take advantage of the states' largesse. In fact, recent statistics show that the industry can't even maintain its current depleted market share.

France and Italy recently approved preliminary plans for a 32-mile rail tunnel and high-speed track under the Alps costing around $6 billion. The project is part of an $11 billion high-speed route between the industrial cities of Turin and Lyons.The projects are intended to double the volume of rail freight over the next 10 years from 10 million tons out of a total 50 million tons traveling between the countries every year. The governments have little option: Traffic is expected to double, threatening gridlock on the roads.

The Dutch, Belgian and German governments are examining seven alternatives for a route to revive the Iron Rhine, the old freight rail linking the Port of Antwerp to Germany's industrial hinterland.

Meanwhile, work is proceeding on the $5 billion Betuwe rail freight corridor from the Port of Rotterdam to the German rail network.

What are the railways doing with all this going for them? Still losing out in potentially promising markets. The industry's share of the 4.4 million TEUs moving through the Rotterdam facilities of European Combined Terminals fell to 13 percent last year from 14 percent in 1999, despite an increase in capacity. The industry's poor performance is partly to blame for Rotterdam's slower growth in containers compared with rivals Antwerp, Bremerhaven and Hamburg.

The port has succeeded in reducing the dominance of trucking, which is largely to blame for the terminal congestion that is driving some business to competitors. The trucking industry's share of ECT's traffic fell by 2 percent to 48 percent last year, the first time it has fallen below 50 percent. It's down 18 percent from 1993. But most of the slack has been taken by barges, which boosted their share of container traffic from 36 percent to 39 percent last year.

The railroad industry's share has increased from 8 percent in 1993. But that growth was driven as much by ECT as the rail operators. Indeed, the shipping lines themselves mounted some of the most successful services, especially a shuttle to Milan that showed the traditional operators how to run a freight railway. And the lines would have had more success if their applications to start new routes didn't get bogged down in the bureaucratic approval procedure.

To be sure, rail freight will benefit from the completion of the Betuwe line, probably at the expense of barges. But this will have little to do with the industry's marketing verve or performance and all to do with the availability of subsidized infrastructure.

Ironically, the first stirrings of a more commercially oriented railway system could spell disaster for government plans to shift more freight from road to rail. The simple fact is that increasing market share doesn't always deliver profits. In fact, one of the reasons Europe's state-owned railways are underperforming is that they are carrying unprofitable bulk goods not as a commercial operation, but as a public service.

As governments turn off the subsidy tap, open up markets to competition and ponder privatization, Europe's state railways are starting to behave like any private company saddled with an unprofitable line of business: They're dropping it. It's only just beginning, but European railways within a couple of years likely will be withdrawing from certain sectors of the freight market. And they will probably demand a subsidy to return to them.

That's happening in Britain, where private passenger railroads are subsidized to run services previously operated by the state-owned British Rail. Freight operators however don't get any handouts and their trains often are delayed to make way for passenger services.

Bruce Barnard can be reached at brucebarnard@compuserve.com.