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The new boss of Hitachi’s global rail business has said the Japanese electronics and infrastructure giant’s decision to locate the division in London would have taken him by surprise a few years ago.
Hitachi announced last month that it will make London the headquarters of its global rail business. The company is to shift its global rail headquarters from Tokyo, a move that comes after the firm won a £1.2 billion deal to build the next generation of InterCity trains at its new factory in Newton Aycliffe, County Durham.
Alistair Dormer, who has run Hitachi’s rail businesses in the UK and Europe for more than 10 years, said the decision by Hitachi Rail to relocate its headquarters outside Japan was “groundbreaking”.
“A few years ago I wouldn’t have anticipated this move happening, but it is a signal that Japanese companies are becoming more international,” he said. “It’s a great endorsement for our team in London, which is held in high regard in Japan. They trust us to lead the organisation going forward.”
Speaking to PE exclusively from Warwick, where the interior for the new fleet of InterCity trains is being designed, Dormer said: “We can really increase our sales efforts not just in the UK but in mainland Europe.” He said the long lead times in the rail industry meant “now was the right time to build up our resources so we can win new business at Newton Aycliffe”.
The purpose-built factory in Newton Aycliffe is expected to be operational from 2015, with full production starting in 2016. A total of 270 IEP (Intercity Express Programme) carriages will be manufactured at the new plant, enhancing the factory’s ability to win rail contracts across Europe, said Hitachi. Dormer said: “So far, we have moved 36,000 lorry loads of earth to level the site and we will see the structure start to go up next month. The whole site will be finished by the middle of next year.”
He said the company was a major player in rail in China and Japan but that it wanted to “balance its business by growing in Europe and other markets”. The building of the factory in County Durham was one of the reasons for seeing the UK as a good place to base Hitachi’s rail operations. “People speak the international language of business, English, and partly because we are building trains here, it was seen as the logical place to base our business,” he said. He added: “London is the biggest financial centre in Europe, and it’s important to be close to the financial community to grow our business”.
Newton Aycliffe has spare capacity for new orders, Dormer said. “There is the potential to expand the Newton Aycliffe site, and we have that in our back pocket. We would like to win some new orders on top of IEP.” A large training and recruitment drive would need to take place before the IEP trains are built, he added.
If the UK decided to leave the EU and trade barriers were erected as a result, “that would clearly be a concern to us”, said Dormer. “It is a concern for Hitachi, but it is a concern for many other businesses. We would urge the government that if there is a referendum result that means an exit from Europe, the government continues to work closely with the EU – even if it is outside it.
“Europe is the biggest export market for the UK, so it is of fundamental concern to British business that it is easy to do business with the EU.”
Dormer has been with Hitachi Rail for more than 10 years, most recently as executive chairman and chief executive officer of Hitachi Rail Europe. He has also served as the CEO of Agility Trains – the consortium of Hitachi, John Laing, and Barclays Private Equity that was awarded the contract to design, manufacture, and maintain the InterCity fleet of long-distance trains to replace Britain’s InterCity 125 fleet as part of the Department for Transport’s IEP.
Meanwhile, Hitachi has been giving technical information and advice to the HS2 rail programme. Dormer said that the company ultimately wanted to build those trains in Newton Aycliffe.
“As they design the route and, in particular, tunnels and infrastructure, our advice helps them understand the rolling stock that could one day operate on it. Many other manufacturers have been giving them advice,” he said.
“We know a lot about high-speed operation and how to operate a high-speed network in densely populated areas. In terms of aerodynamics and noise, Japan is
at the leading edge of design.”