TFGI/NDX merger to change European intermodal scene

NDX's intermodal routes (shown in red) will either be shut down or absorbed into Transfracht's network.

By Michael Babb -- Logistics Management, 10/1/1998

London--On Aug. 20, Manfred Riess, managing director of Transfracht International (TFGI), set the European intermodal industry on its ear. At a press conference held that day, he announced that his company was proceeding swiftly in its takeover of "all organizational and commercial operations" of

head-to-head rival NDX. The Frankfurt-based intermodal transport company, a member of the Deutsche Bahn (German National Railway) Group, operates 16 intermodal services throughout Western and Eastern Europe. TFGI will likely see its total volume increase by 14 percent to 800,000 TEUs this year as a result of the merger, which took place on Sept. 1.

NDX Intermodal was formed in 1996 as a three-way partnership between the cargo arms of Deutsche Bahn (50 percent) and the Dutch national railway Nederlandse Spoorwegen (NS) (25 percent). The third member was private operator CSX Intermodal, headquartered in the United States (25 percent). CSX has sold its interest in NDX to Deutsche Bahn; NS Cargo, meanwhile, is slated to merge with its German counterpart, which will give Deutsche Bahn total control over NDX's business.

Transfracht International has assumed operations of NDX's operations, including twice-daily shuttles between Rotterdam and Antwerp, a three-times weekly shuttle between Rotterdam and Munich, and a twice-weekly shuttle between Rotterdam and Barcelona. Service from Hamburg to Milan, where stiff competition has taken its toll, has been suspended. TFGI also is closing NDX locations and laying off most employees in Amsterdam, Munich, Hamburg, and Antwerp, where it already has its own offices. According to Riess, no further reductions in service are planned.

"The takeover of NDX fits within our strategy of increased internationalization and will allow us to offer our customers a number of benefits," Riess said at a press conference announcing the deal. Although it certainly will increase volume, the additional business is unlikely to boost Transfracht's profits for 1998--which doesn't appear to worry the German owners.

NDX never achieved great success. One major flaw in NDX's approach was that it could offer only European transportation and did not provide shipping services in the United States or across the Atlantic. Another reason is that the company pursued a cost cutting, door-to-door marketing strategy aimed directly at shippers--a tactic considered highly unusual for a European intermodal transport company and one that strained relationships with steamship lines and freight forwarders. Riess made it clear that TFGI wouldn't adopt NDX's aggressive price-cutting strategies, nor would it market directly to shippers. "In Europe this is not the normal situation at the moment, and that was one of the problems with NDX, because [it] tried to change the rules," he said.

Riess said he expected Transfracht would easily integrate NDX into his company's existing rail network without incurring substantial additional cost. NDX operated only three lanes, all of which connect with TFGI's existing routes. By eliminating redundancies and revising routes to take advantage of those connections, Transfracht should be able to cut operating costs, Riess explained. One example is the merging of NDX's routes from Rotterdam to Munich and from Rotterdam to Antwerp with TFGI's trains from Antwerp to Munich. "What we are trying to do now is make a circuit between these three places. That cuts costs, absolutely," he said.

Such consolidations sometimes exert upward pressure on pricing. Riess sought to allay any concerns about freight rates, saying that TFGI would remain competitive because it was competing against trucks rather than against other rail carriers. "The railroad price is not the market-leading price," he said. "The market leader in Europe is the truck. [Motor carriers] create the market price. Railroad operators have to beat that, or at a minimum, at least reach that price."