Aurizon will deliver a new phase of cost reductions and efficiencies in its Engineering & Maintenance business through a proposed long-term maintenance and parts supply deal with Progress Rail Services, part of Caterpillar’s global group of companies.
Under the arrangements, Aurizon aims to deliver a significant reduction in its operational and capital expenditure on non-core rolling stock maintenance through to 2024.
During a visit to Caterpillar’s global headquarters in Peoria, Illinois, Aurizon Managing Director & CEO Lance Hockridge signed a Memorandum of Understanding (MOU) with Progress Rail’s President & Chief Executive Officer Billy Ainsworth. The non-binding MOU is expected to be converted to finalised commercial agreements ahead of an expected implementation from 1 July 2016 to October 2024.
The initiative is part of Aurizon’s ongoing transformation program to reduce costs and achieve efficiency gains across the company, which targets $380 million of efficiency benefits for the period FY2015 - FY2018.
Under the MOU, a range of Aurizon’s non-core maintenance work is proposed to be undertaken at the current workshop facilities at the Redbank Maintenance Facility near Ipswich. This will enable the site, which was previously earmarked to close in June 2017, to continue operating under the new proposed arrangements. Further, the companies have proposed that a majority of the current workforce transition with the service agreement, subject to consultation with employees. The impact of the transition is expected to be minimal because of the installed equipment and the skilled employee base.
In addition to cost savings, the deal will facilitate a long-term strategic partnership between Aurizon and a global locomotive original equipment manufacturer (OEM) that supplies rail equipment and solutions to a range of international customers including the Class 1 North American railroads. Aurizon and Progress Rail will also collaborate on development of more efficient, cost-effective supply chains for the delivery of parts and componentry for Aurizon’s national rolling stock fleet.
Aurizon conducted a competitive tender process for the new contract through a select group of Australian and offshore companies who have established rolling stock overhaul and component capability.
Aurizon VP Engineering and Maintenance, Patrick O’Donnell said a key part of Aurizon’s operational transformation was to delineate between core and non-core maintenance services, and drive value through outsourcing partnerships.
“We’re delighted to form a mutually-beneficial partnership with one of the world’s leading railroad equipment and services providers. This agreement will enable us to extract significant cost savings and productivity enhancements over the next decade as we continue to transform our operations.
“The deal is also an exceptional outcome for the community of Ipswich, setting in motion a new era for the historic Redbank rail workshops,” he said.
“We are excited at the potential to work with Aurizon and expand our quality service offerings and aftermarket parts availability to this region of the world,” said Marc Buncher, Senior Vice President of Aftermarket, Purchasing and Supply Chain Operations, at Progress Rail.
The non-core maintenance work includes locomotive overhauls of Aurizon’s narrow gauge fleet, and components such as traction motors, diesel engines and air conditioners
Those activities are currently being undertaken through a mix of in-house activities or they are currently outsourced to specialist national and international providers.
Implementation is expected to occur around June 2016, in readiness for a proposed, formal commencement of work on 1 July.