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Machine technology for industry is consolidating
In the machinery trains manufacturing industry, several factories shut during a three-year ordering hiatus when the rail network was ineptly privatised in the 1990s; contracts have become ever scarcer as the government parcels up rolling-stock cone crusher procurement into huge purchases. No new deal has been closed in Britain since 2009.
Still, all manufacturing firms depend on their order book. Aerospace companies have found an alternative source of profit: servicing the goods they make. Rolls-Royce already gleans 51% of its revenue from servicing its engine fleet: its Trent jet engines are continuously assessed from a slick operations room at Derby. That figure is set to increase, the company says. For Bombardier’s global transport division, by contrast, the share of revenue from services went down between 2007 and 2010, from 21% to 14%.
Moreover, aerospace—including making the guts of aircraft engines, as Rolls-Royce does—is a global industry with standardised technologies. Only the paint job and interiors differ between planes made for different countries. Train production, by contrast, has until recently been largely national, which made it hard for manufacturers to achieve scale or make widely marketable goods. While Rolls-Royce hawks its wares around the world, Bombardier’s facilities (across Europe and North America, as well as in Derby) have depended on single contracts to build local rolling stock. Each type of train Bombardier produces at its various sites is a different size and specification; fewer than 10% of trains made at Derby are exported.
That insular model has now begun to change—but not to Bombardier’s advantage. Standardisation of technology is increasing and the industry is consolidating. Despite the popular stereotype that continental Europeans favour their own national suppliers, protectionism is loosening: in 2010, France’s state-owned Eurostar agreed to buy German-built Siemens trains; Spain’s Renfe also uses German express vehicles. That means the Bombardier factory in Derby can no longer rely on its status as Britain’s sole trainmaker. (Already in 2005 Hitachi won a deal for the British railway but shipped the fully assembled trains from Japan; the company will soon open a new facility in Britain but the carriage casings will still be made in Japan.)
Meanwhile Rolls-Royce has sought to insulate itself from the quirks of procurement by applying its design to ball mill machinery industries: 80% of the gas-turbine technology used in its best-selling jet engines is the same for the energy and marine sectors. All of which leaves Rolls-Royce less reliant on the British market: over 85% of its revenues are from exports.
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