THE reputation of Italian rolling stock manufacturer AnsaldoBreda has taken a battering in the past year following the fiasco with the V250 high-speed trains supplied to Fyra, a joint high-speed venture between Netherlands Railways (NS) and Belgian National Railways (SNCB).
"The food may be good, but don't buy trains from Italy" is the damning verdict spray-painted to the fascia of one V250 high-speed train driving trailer which, like the rest of the fleet, now lies desolate at Amsterdam Watergraafsmeer depot.
The depot is where the trains have spent much of their short but eventful existence, which has been marred by certification issues and problems during testing that preceded the delayed delivery of the first trains in 2009.
Following the failure of the trains while in service in early 2013 and their subsequent withdrawal, an agreement was reached on March 17 to return the nine trains delivered to NS to Italy and for AnsaldoBreda to repay the operator e125m. This brought legal proceedings with NS to an end, although it remains in dispute with SNCB, which ordered three V250s but cancelled its contract last May (p5). The manufacturer encountered similar difficulties with the delivery of IC2 and IC4 dmus to Danish State Railways (DSB), with these sets finally entering service in autumn 2013, over 13 years after the order was initially placed, although no additional problems have been reported.
While AnsaldoBreda has had some successes in securing orders for driverless metro trains from Hawaii and Copenhagen, domestic success in Milan and Brescia, and signing a licensing agreement in China, in recent years, the company's financial performance has suffered. This led to the owner of the company, Finmeccanica, which itself is 30.2%-owned by Italy's Ministry of Economy and Finance, to explore a sale.
Rumours of a potential international takeover of the group have circulated since 2012 and Finmeccanica CEO Mr Alessandro Pansa announced publicly that the company was available for sale in 2013.
However, delays to the offload have led credit agencies to downgrade AnsaldoBreda to junk, with the company's heavy debt burden appearing to be the major obstacle to any sale. AnsaldoBreda reported a loss of e300m in 2012, which caused Finmeccanica to miss its core earnings target for the year with the company only making a profit following the sale of its Ansaldo Energia division.
Finmeccanica subsequently decided to group the sale with Ansaldo STS, which is profitable, in order to attract buyers for a sole transport unit as it refocused its efforts on aerospace and defence. Establishing a "bad company," which would be held by Finmeccanica to the point where deals with NS and SNCB are concluded, is considered a solution to the problem of attracting the right bidder.
"We believe that it is necessary to act firmly and promptly to minimise the absorption of cash by AnsaldoBreda by the group," Pansa said in November 2013.
Despite the obvious political implications, reports in the Italian media in late February seemed to hint that Finmeccanica was getting closer to the deal it desires.
Chinese suppliers CNR and Insigma, with whom AnsaldoBreda and Ansaldo STS have respective technology sharing agreements in China, are the latest companies to submit a letter of intent to Finmeccanica, joining General Electric (GE) as the apparent frontrunners to acquire the company. Mitsubishi Electric, Thales and Hitachi have all been linked with bids in the past, and although no further developments were apparent as IRJ went to press, the mood in Italy indicates that something could be forthcoming in the next few months.
With Finmeccanica clearly seeking to rid itself of AnsaldoBreda as soon as possible, one might be forgiven for speculating that its long term prospects might be bleak.
Yet it was apparent during a visit to its plant at Pistoia in December that the company's knowledge-base and manufacturing capacity is still strong and that a significant amount of work has taken place behind the scenes recently to improve working practices with the aim of ultimately returning the manufacturer to profit.
A major step in the right direction appears to have followed the appointment of Mr Carlo Cremona as head of human resources. Cremona, who was previously senior vice president for human resources at Ansaldo STS, joined AnsaldoBreda in December 2011, and took responsibility for reorganising the company's human resources division.
Cremona, who worked for Breda during the 1990s, says a major initial step was to restructure the management of the company. The number of managers was reduced from 57 to 38, eight of whom are new to the company. This has cut the average age of the management by three years, which according to Cremona, "has rejuvenated our team."
However, it was not just at the top where work was required, but throughout the organisation.
"When I arrived I found a de-motivated company, whose employees had lost their teamwork feeling," Cremona says. "The first objective was to reduce absenteeism, and increase productivity and motivation.
"To do this we attempted to develop a strong programme of communication. By inviting responses to surveys to see what the employees thought, we got some food for thought on how to structure our subsequent actions. As a result we emphasised making direct contact with all workers, and gathered together in "town hall" meetings, borrowing a concept from the English colonies where the local governors met citizens in the town hall. These events took place in our plants and allowed all workers to see and listen to the managers and the CEO, often for the first time."
Cremona says the company also identified the employees recognised as the company's "top 100 talents," with these individuals entrusted with new positions and responsibilities to make the most of their capabilities. An evaluation system is also planned for all job positions - from the executive to the worker - while the adoption of working practices which emphasise issuing clear objectives, a technique Cremona says he imported from Ansaldo STS, is in the pipeline.
"The company has improved in terms of its industrial capabilities, and above all this is due to a "want to do" approach among our personnel which has established a favourable climate," Cremona says. "We are one of the few Italian companies to build an organisation chart that includes all of our 2260 employees in Italy. This allows everyone to understand what everyone else is doing and is helping to encourage a strong sense of belonging to an historical Italian company."
While Cremona has attempted to harness improved productivity from the company's employees, he has also worked to bring HR spending under control by identifying the company's "most striking wastes." He says labour costs are now "under control," with the emphasis on management rather than worker turnover, resulting in no layoffs.
"For example 2012 business travel expenditures have been cut by a million Euros compared with 2011 and the same amount has been spared in 2013 from 2012," he says. "Despite this saving, our employees have travelled a lot more than before."
In spite of the apparent early successes, Cremona is adamant that the work is not yet finished. He says the future depends on achieving results from new research and development practices, a viewed shared by Mr Giuseppe Marino, senior-vice president with responsibility for all operational activities, including promotion and engineering.
Marino, who joined AnsaldoBreda in 2009, says the company is attempting to regain its competitiveness and return to profitability in a market where customers have raised the service levels required in terms of a reduced time to market, reduced total cost of ownership, all while demanding a higher degree of product customisation.
AnsaldoBreda has a dedicated R&D unit and collaborates with research institutions, such as the University of Pisa. Marino says the company is focusing its strategy on driving innovation in the products on offer as well as in its industrial processes and business model. It is also working to attract and retain the right calibre of apprentices.
"Continuous improvement of AnalsoBreda, inspired by the lean principles applied to all phases of product development process and production, has resulted in a rationalisation of the product portfolio, a clear roadmap of technological leadership, a development platform and standard modules, and strong investment in innovation in production processes," Marino says. "Today AnsaldoBreda can rely on a range of products and references that are ideally suited for developing markets, especially in metropolitan transport, particularly driverless metros, and high speed trains."
AnsaldoBreda's work on the new Frecciarossa 1000 high-speed train for Italian State Railways (FS), in which it is the lead contractor in partnership with the train's developer, Bombardier (IRJ July 2013 p30), is reflective of this approach. AnsaldoBreda is supplying the bodyshells and carrying out final assembly work on the train at Pistoia.
Marino was speaking to IRJ during a tour of the plant and he says the facility is achieving high-production rates, with automatic welding on bodyshells taking place on two production lines, and installation of electrical cables taking place on another four, from which the bodies are painted. He adds that this process is reflective of the company's capability to produce the latest state-of-the-art products in an efficient manner.
"Our investments in innovation have focused on technological updates to the plant and its processes," Marino says. "For example the automated welding process ensures a train of high-quality but with shorter machining times than with traditional welding. The assembly of the electrical components is also done at the work bench rather than directly on the train, which optimises the ergonomics of the work, and because of the parallel activities, there is a strong reduction in lead times."
This optimisation and increased flexibility of the industrial set-up is also integrated into all phases of procurement and materials management. Marino says procurement policies have been modified to ensure that the right materials are available at the right place at the right time. For example the containers of screws for the production line are placed on electronic scales at night, which calculate the quantity available. If the supply is short, an automatic email is sent to the supplier requesting more materials which are added the following morning.
AnsaldoBreda hopes its manufacturing capability and research and development expertise will provide the basis for its long-term future. CEO Mr Maurizio Manfellotto admits that the decision to devolve the powers for rolling stock procurements to the Italian regions has caused prices to rise in its domestic market in the past decade, but that the company remains well positioned in international markets. He says in particular in its capability to deliver automatic metro vehicles, after supplying 10 of the 30 systems now in use across the world, is a natural target for development.
"We do not intend to focus on a specific area, but we are estimating the demand, which in my opinion is positive in the area of heavy and light metros," Manfellotto says. "In the United States for example there are considerable investments for metros. Brazil, Peru, and the Middle East are also very interesting markets which we are looking at very carefully."
Other target markets include Turkey and the Balkan States, while Manfellotto is hopeful that an independent inquiry will identify who was responsible for the technical failures to the Fyra trains. Yet with the Dutch parliament set to launch a parliamentary investigation by the end of the year, and the dispute with SNCB continuing, this sorry saga is set to continue well into 2015.
Despite the difficulties of the past few years AnsaldoBreda's management is certainly keen to emphasise that it remains open for business, and the signs are that it is benefiting from the significant structural changes that have been instituted. And while the company's long-term future obviously depends on how the sale, when it finally happens, is structured, it is evident to any potential suitors that AnsaldoBreda's manufacturing capacity and capabilities remain in place, while a reinvigorated workforce, led by astute management, is hungry for success.