Tomáš Ignačák: Rolling into Germany, Turkey and China

25. 10. 2016 | Source: BusinessInfo.cz

Pilsen-based engineering group Škoda Transportation does more and more business abroad. While committed to its ongoing conquest of Germany, the company is also trying to make its mark in Israel and has no qualms about collaborating with Chinese businesses. "Our closed contracts just now are for deliveries abroad," says group CEO and board chair Tomáš Ignačák.

Tomáš Ignačák. Foto E15, Michael TomešA  Škoda Transportation has walked away as the victor from an arbitration dispute with Czech Railways [ČD]. Has the dispute not done you more harm than good when it comes to your company’s image among your customers and the public in general?
It certainly has. But that was not down to the outcome of the arbitration, it was all the fuss surrounding it. There have been way too many half-truths and unsubstantiated claims. We are a company that employs 5,500 people and sends more than half of its production out of the country, and a company that has been investing billions in the development of its products. Added to that we are a company with a longstanding history. The campaign that did the rounds in the media was quite defamatory while we did in fact make every effort to avoid the arbitration in the first place. And even after the verdict was announced, we were still trying to achieve a conciliatory solution.

You even threatened a lawsuit against transport minister Dan Ťok over some of the statements that appeared in the media. Did you pursue that step?
Our legal representatives conducted a thorough analysis of the statements and recommended suing the ministry instead. According to the lawyers, taking the ministry to court would stand a better chance of success as opposed to suing Mr. Ťok as a private person. Having considered all the pros and cons, we eventually decided to let it pass. There was a good possibility that such a lawsuit would by far exceed in its duration the tenure of the incumbent minister. Plus there are many genuine experts working at the ministry whose work we greatly appreciate and whose circumstances we also took into account when pondering potential legal action.

Are you keeping an eye on new developments surrounding the disputed set of locomotives and the possibility of them operating in Germany? Or have you left it all in the hands of ČD?
We fulfilled our end of the contract and supplied the operating permits and their equivalents for all the countries requested. When it comes to the actual operation of the locos in any particular country, well that is entirely up to the operator. I would prefer not to comment any further. Although the arbitration has concluded, court action is still ongoing.

The biggest order Škoda has received to date is one for the S-Bahn urban and suburban railway in Nuremberg. In that instance you are to supply trains to National Express. Has that business case made any progress?
That is truly a sizeable project, worth almost 10 billion crowns. The order is for a total of 39 five-carriage trains for suburban service in the wider Nuremberg area. We succeeded in winning the tender in early 2015 and National Express confirmed our bid. Unfortunately, Deutsche Bahn appealed to BEG [Bayerische Eisenbahngesellschaft, the Bavarian railway company wholly owned by the Bavarian Government]. The current state of affairs in this case is that an appellate court is to convene in October and hopefully deliver a final verdict. It is the final instance available for an appeal.

When will the first train carry passengers in Germany?
I would stop short of divulging a date. We will do that together with Deutsche Bahn. At any rate, there will be plenty of opportunities to see the trains in motion next year as they will undergo testing on circuits in both the Czech Republic and Germany.

Škoda Transportation has traditionally been perceived as a  supplier for whom Czech Railways is more or less the sole customer despite attempts to eliminate that perception. What proportion of your business does ČD account for?
I am unable to give you an exact number right now but in general more than half of our output is destined for abroad. Our closed contracts just now are for deliveries abroad. We have recently signed a contract to supply trams to Eskişehir in Turkey and we will do the same for Riga in Estonia and Chemnitz in Germany.

Is it your first contract to supply trams to Germany?
Yes, it is a breakthrough, as it is our first opportunity to get references for our trams in Germany. Germany is a major country when it comes to using trams and as such it offers unprecedented potential. We have also submitted our bids in a number of other tenders in Germany.

When it comes to doing business with Western European countries, Czech exporters often complain that despite there officially being a single market, open to all EU member states, foreign manufacturers are often discriminated against. Is that your experience as well?
I can certainly confirm it. There are countries where we don’t bother trying, such as France or Spain. It would simply be a waste of time. Germany also used to be quite self-protective but it is getting better gradually as shown by our success in Bavaria and by the mentioned Chemnitz project.

Does it feel good to gain a foothold in Siemens’ backyard?
We feel good about every new project, such as the Eskişehir contract. We have already delivered 70 trams to Turkey and another 14 will follow.

Does the current political situation in Turkey affect you?
It is not perceptible in any way in negotiations. Of course, when it was right, left and centre in the media we were asking ourselves whether to submit our bid at all. But we have not felt any actual effects on business.

Web news server MotejlekSkocdopole.com recently ran a story about giant Chinese state-owned rolling stock manufacturer CRRC expressing an interest in Škoda Transportation, initially in the form of a joint venture. Can you provide any details?
As I have already mentioned, we have several projects in China and we greatly appreciate our collaboration with local companies abroad. Regarding your question, I can give you a piece of news hot off the press. At the end of September, we submitted our bid for electric units to be supplied to the Israeli state railway operator. If we win we will cooperate with CRRC Sifang in seeing the project through.

Originally published in E15 weekly, economic and business newsmagazine. Author: Jan Šindelář. Foto: E15 Michael Tomeš

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