1993: New Zealand Rail Sale

September 30, 2023

By AHNZ

Today in history, 30 September, 1993, National 4.0 privatised New Zealand Rail by selling it off to Pylorus Investments Limited. The re-branding came in 1995 with the new name of the old State railways now being Tranz Rail Limited.

The start of this digestive process was in 1982 during the National 3.0 Ministry of Robert Muldoon. The railways were made into what later we came to term a ‘State Owned Enterprise’ called the NZ Railways Corporation. This was Deregulation before the coming of Labour 4.0 who have the reputation for radical uncoupling of the State from being hands-on in the economy. The Government once set the prices for bus and train fairs but this was put an end to by The Transport Amendment Act 1983.

To the surprise of no economist, “Over the next few years the Corporation responded well to these changes by making dramatic gains in overall efficiency.” (Cavana (1995.) Yet, by the end of the decade NZ Railways Corporation was just about bankrupt.

The Labour 4.0 Ministry, now under Prime Minister Mike Moore, were voted out of office at the General Election on 27 October 1990.

The very next day, 28 October, 1990, NZ Rail Ltd. was established¹. Now a Limited Liability company the railways did better on its balance sheet. “Difficult regulatory issues” had been removed so the digestive process was ripe to continue despite a change of government.

Jim Bolger’s National 4.0 Government came to power on 2 November 1990 with NZ Rail Ltd. already a fait accompli. You have to wonder what business, or what mandate, Mike Moore’s Lame Duck Ministry had in making this big change in the short window of time they had. Shouldn’t they be busy shredding swindle sheets and burying bodies and nicking all the good parliamentary furniture and staplers for the move to Opposition office space? Wonder what else they got up to in those 3 days? Reminded about how Muldoon was heavily criticised by Labour 4.0 for not doing what they wanted in the short time before power was handed over. Speculate that Mike’s team were making a deal or paying off a favor that involved the coming new owner of the railways…

“New Zealand Rail carried its corporate brand until 18 October 1995, when Tranz Rail Limited was renamed Tranz Rail Holdings Limited and New Zealand Rail Limited was renamed Tranz Rail. ” – Wiki

“The NZ Railways Corporation was established on 1 April 1982 with the major objective of running its operations on a more commercial basis. This was followed by the total deregulation of the road transport industry in 1983…the Corporation was on the verge of technical bankruptcy. This resulted in the Government substantially restructuring the NZ Railways Corporation balance sheet in 1990 and the establishment of NZ Rail Ltd on 28 October 1990. By June 1992, NZ Rail Ltd had achieved profitability…” – Cavana, Transport Research Laboratory (1995,) TRB

“The new mood in Cabinet was an important factor in the sale of New Zealand Rail to a consortium lead by American company Wisconsin Central Railroad. I was especially pleased to bring off this sale…We ran an excellent process and received a very good round of bids. The most attractive bid was from a party with strong credentials in the rail industry and a commitment to adding value….Cabinet decided to sell. It was unlikely I would have secured that result earlier in the year, when political nerves were much weaker.” – p172, Richardson (1995)

C-3PO: Oh, dear. His High Exaltedness, the great Jabba the Hutt, has decreed that you are to be terminated immediately.
Han Solo: Good. I hate long waits.
C-3PO: You will therefore be taken to the Dune Sea and cast into the Pit of Carkoon, the nesting place of the all-powerful Sarlacc.
Han Solo: Doesn’t sound so bad.
C-3PO: In his belly, you will find a new definition of pain and suffering, as you are slowly digested over a thousand years.

And now to pay off my metaphor involving digestion….

Pylorus Investments Limited purchased New Zealand Rail. Ruth Richardson took the proceeds and paid off foreign debt.

The definition of ‘pylorus’ is the opening from the stomach into the small intestine. Was someone having a laugh?

Like being fed into the Sarlacc of Star Wars fame, New Zealand’s railways were slowly digested over 11 years. The agenda of Pylorus was to break-down, reshuffle, liquidate, sell-on etc. all the parts of NZ Rail and extract value out of it.

Muldoon was served railways on the plate and started up with the knife and fork. Mike Moore chewed and swallowed. Ruth Richardson’s acid broke down the company and passed it in a movement through the pylorus on 30 September, 1993.

So I guess that makes Tranz Rail (1995) the part that made it to the small intestine and then what was left after that for Toll Holdings (2003) is what moved through the large intestine.

That was over 20 years ago and remains the situation. However, we’d better stop writing about this story at this point as those who understand the next stage in the digestive process will well understand.

—
1 Legislation having put in place on 28 August, 1990:  New Zealand Railways Corporation Restructuring Act (1990)

Ref. Making a Difference, Ruth Richardson (1995)

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