Thursday, 26 May 2011

Macro Level Trends - Seeking UK Growth - "Hop on the Bus Gus...Get a New Plan Sam"

Recent UK economic indicators highlight the short-term problems the UK faces, a reality the coalition government and Whitehall well recognise, trying avidly to assuage media scrutiny.

Joblessness sits at a 30 year high, large corporates are in necessary 're-balancing' mode (as seen by the TATA Steel) so adding unemployment weight, input costs have risen thanks to commodity inflation, SME firms running 'lean' are concerned about additional borrowing before the green shoots appear even if Vince Cable threatens to admonish the City if it does not meet set lending targets, and (as investment-auto-motives predicted) the Asian contraction has started together with a loss of momentum in northern Europe, so undermining the wished for 'export effect' of a weakened Pound.

These items and more offer a gloomy picture to the likes of George Osborne and Gus O'Donnell facing respectively outward and inward of Whitehall, yet Nick Clegg hopes to brighten that picture with talk of the eco-investment push necessary providing technical and commercial solutions that David Cameron can in turn subtly promote as a 'proof positive' to his former trade tour of EM nations.

As an important adjunct, the newly formed Green Investment Bank will play a vital role in providing the funds for this new eco-driven era, news that Clegg is pushing for a rapid escalation of wholesale funding access and loan provision: ramping up from the Treasury's initial provision of £3bn in 2012 to a capital market assisted £15bn by 2015. A heated argument is already underway about just how 'self-strapped' Britain could be by its law-enshrined eco-policy . Philosophically, investment-auto-motives takes a techno-conventionalist stance, to ensure technical feasibility and thus smoother economic integration – yet no doubt the adage of our eco-challenge being the 21st century's equivalent to the 'moon rocket' challenge will be heard again and again into the future.

However, Kennedy's presidential words were spoken at a time of economic boom, early television adoption, mass enthrallment and broad western confidence. The similar rhetoric today, given the socio-economic reality, unfortunately does not have the same effect, any naïve optimism best balanced by a high degree of pragmatism – a trait with which the British have been historically imbued; its part of the nation's DNA.

The prescience of President Obama's visit to Ireland recounting his “Moneygall” roots was undoubtedly not lost on the Irish, many seeing their economic plight rooted in Wall St. Yet as Washington knows all too well, its self-generated 'blarney' is intended to maintain strong connections to the UK and Europe. But in reality those links have been under heavy tensile pressure, given the strain that the financial collapse put on the global economy and manner in which the US helped itself by creating an enormous level of $ liquidity. That supercharged commodities speculation to the woe of EM consumers and global corporations, aswell as rapidly boosting US equity markets, prognosis of a new tech bubble in the air after staggering IPO launches. Thus whilst the US rebounds EM nations face major FX headwinds which must in turn be countered by reactionary economic contraction; to the dismay of their peoples.

Britain's once 'Special Relationship' with the US is being rephrased as an ' Essential Relationship'. Whilst one cannot deny the essential links between both countries' financial centres of London and New York, the UK now finds itself less West-facing, the real-politik demands created by the re- balanced global power base – so evident in IMF Chairmanship talks – highlights that the UK must be as open to other 'Olde Worlde' powers and 'Next World' powers as to that with the once 'New World' power of the USA.

Britain is officially seeking to put the 'Great' back into its title, and so seeks a type of self re-invention, one that is both 'inward looking' as a value-creation mechanism appreciated by its own people, and an 'outward looking' persona as an exporting nation, recapturing its Georgian and Victorian heyday.

In this new growth orientated eco-age, the creation of new commercial platforms which in turn act as bridges to a new mixed 'intelligent industrialised' age, is the goal, both within the UK 'by itself for itself' yet also as a necessary parallel, in conjunction with a broader range of re-emergent and emergent international partners. Thus a more self-reliant yet globally networked attitude is key, one that shifts (uncomfortably or not) from the case over the last century, whence the dominance of the USA commerce and industry has led the world.

For all the rhetoric, the US is in undeniable flux, exemplified by the fact that the country's own deeply loyal public remains highly concerned about the future, the Tea Party reflecting an underlying consciousness that looking backwards to move forwards might have its own merit. One school of thought looks to greater state-levied powers, de-centralised from Washington. A re-working of the popular Paul Simon song “50 Ways to Leave Your Lover” leads to “50 states to leave their mother” reflects the fringe but growing attitude, even if seemingly highly unlikely in outcome.

The more typical ms-interpretation of the song's lyrics includes: “Get on the Bus Gus...Get a New Plan Sam”.

Whilst any such quarrelsome sentiment toward 'Uncle Sam' by Downing Street or Parliament is incomprehensible – especially after the speeches and BBQ - the very essence of the initial words may have some value, especially to Whitehall's #1. Sir Gus O'Donnell. A 'down to earth' man who although playfully signing himself as 'G.O.D' on internal memos, is reflected as a man of the people given his own modest up-bringing, and as such apparently does not think it demeaning to take public transport and 'the bus'.

His prime remit is to assist the slimming of the civil service to enable public expenditure cost savings, but the idea gleaned from TV coverage is that he also appears to hold sway regards general policy formation and execution; thus the year-old Coalition Cabinet apparently far closer to the civil service than previously under New Labour. This must surely be a good thing, the whole of the intra-governmental framework thus deployed to help re-build Britain.

And the lyrics “Hop on the Bus Gus” have more than a note of serendipity about them when we consider the economic role that the new London Bus is expected to play, both in the capital and across the land. Notionally titled the NB4L (New Bus For London), it is expected to provide a renewed identity to the city streets with an intentional resemblance to the classic Routemaster.

[NB. The few remaining Routemasters in service trundle the short 'Heritage Routes' across town].

The project - first aired in 2006 - was announced in 2008 and was set as a professional design competition, attracting entries from a raft of contributors spanning product designers, architects, vehicle designers, bus companies and even Aston Martin's own design department. The eventual winner, understandably given its capabilities in the sector, was WrightBus, a division of Wright Group based in Galgorm, Ballymena, Northern Ireland.

However, interestingly, Wrightbus is essentially a coach-builder, fitting steel / aluminium / composite body, the interior and the electrical and auxiliary systems onto a rolling chassis.

The Mayor's office publicised the fact that the new bus would be “the return of a great icon for London, and the cleanest, greenest red bus that goes around our city”.

But unfortunately investment-auto-motives believes that whilst TfL have opted for a safe easily 'project deliverable' option ready for showcasing at the 2012 Olympics, the new bus is a missed opportunity to wholly re-invigourate the UK's capabilities in R&D, conceptual thinking, engineering process development, advanced prototype testing, advanced tooling applications and large scale production and after-care monitoring.

Unfortunately the new London Bus was not ordained as a fully fledged new design, something that mimics the rationale and revolutionary bearing that original Routemaster brought.

This is a great shame, more attuned to a 2012 'Olympic deliverable' (as showcased at the Beijing Games) than a new economic pillar for London and the country at large.

It can thus be argued that this transport project, like the Barclays sponsored rent-a-bike scheme, was originated with good intent but limited vision, more of a Mayoral 'publicity machine' than long-term city or national asset, even though a TfL (Transport for London) venture.

However, though notionally called the New Routemaster its marketing-based origins are the very antithesis of that for the original 1959 bus that became a national treasure to this day.

That bus was 'visioneered' from scratch by and every aspect was considered. From the hard-wearing 'moquette' seat fabric to the introduction of cabin heating to the under-stair 'sentry box' for the conductor, to independent suspension to the direct influence of integral construction method and materials in mainframe and sub-frames that borrowed heavily from both WW2 aeroplanes and advanced small car design, to the dedicated overhaul facilities at Aldenham & Chiswick which proritised labour-force efficiencies. Modularity ruled from basic design to time and motion studies on the factory floor and so efficiency and thus investment rationale ruled.

Like that other London icon Tower Bridge, whilst it had a conventional 'look' for public acceptance, it was the engineering magic of its innards that made it so revolutionary. The New Routemaster in direct contrast intentionally looks like a 21st century update, visually fit for a futuristic movies, but actually uses a construction method which ironically predates its forebear.

However, to offer credit to TfL's 'Surface Transport' department who well recognised the achievements of their London Transport forebears (such as Durrant, Curtis & Scott) the package / layout has been designed from scratch “for London” utilising an innovative 3 door & 2 staircase approach, the stairs given 'flow windows' of their own to aid light, airiness and detract from stair-well vandalism. However the concept's rear open 'hop-on' platform – indicating the return of the conductor's role – will invariably be lost in favour of automatic doors and much needed reduced crew operating costs. The 'long-body' design appears to be dimensionally mid-way between the standard double decker and the extended 'bendy-bus', so offering a capacity of 87 passengers. The hybrid powertrain is acclaimed as offering 40% reduction in CO2 and 40% increase in fuel efficiency.

In an age of personal carbon footprints, as seen, the 'NB4L' offers a capacity of 87 passengers, which compares with 149 for a Daimler Citaro 'Bendy-Bus', 90 for a standard double-decker and original Routemaster's (comfortable)60 or so.

However, it would be disingenuous to compare the contextual origins of the Routemaster with that of 'NB4L', since the former was created under the whole-hearted stewardship of a powerful and centrally controlled London Transport body, with responsibility beyond strategy incorporating everything from product R&D (on buses, trams and tube-trains) to the everyday service needs such as conductor ticketing. Since the LT privatisation programme of 1986 the role of London Transport altered and 'diminished' to become far more strategic and as policy-formers, the operational aspect of the LT system run by private enterprise.

Hence, the previously impressive bus engineering and design section – at its peak in the early 1950s and envy of the world - was diminished and subsequently lost. Privateer companies understandably purchasing off the shelf buses from manufacturers and thus able to eradicate the R&D expense and focus on the in-service operational aspect of running a small localised bus fleet.

That necessary shift for LT (now TfL) born from big-budget contraction through the 1970s instigated the idea of commerce and competition, albeit bounded by LT regulations regards the level of service deemed minimal and the general specification of public-serving buses etc.

So whereas Routemaster was 'bred' from a lineage with strong nuclear family stock of core values and strong finance, today's NB4L arrives from a typically modern amalgamated family which must cater for 3 aspects: a) the public good – as directed by TfL, b) the commercial running of the service with profitability top of mind, and c) as a cultural identifier for London.

Given these constraints, the New Bus competition the 'pragmatic' outcome was hardly surprising.

Whilst investment-auto-motives was critical of the blank-sheet 'Boris Bike' project - concerned that the real per bicycle, or per journey costs would be far higher than publicised (the FT in accordance with its calculation of approximately £5) – the NB4L is a different matter entirely given its systemic infrastructure importance and as a wealth generator for the UK.

The web-log called 'Boris Watch' has been highly critical of the project, expected given its bias . Indeed it may have justification regards the manner in which the cost of the project was 'sold' to the public, highlighting low-value sums publicised that reflected the smaller 'front-end' design & development costs of the project compared to the final procurement costs for hundreds of buses.

It rightly states from official TfL documentation that the original 'Boris quote' of £3m was unbelievable given the project costs involved, and so highlights how the 'authorised monies' rose from £1m in 2009/10, to £1.1m in 2010/11 and grew to £10.9m in 2011/12.

Whilst investment-auto-motives is not privy to the project's exacting costings or accounts, the ramp-up in costs is typical of the nature of vehicle development work as manpower, activities, materials and overhead costs rise rapidly from conceptualisation stage to product launch. Furthermore it may be the case, as is typical with niche vehicle manufacturers, that their own budgetary planning means that they recoup initial phase losses – pitching for the project – from later stage income.

BorisWatch also states that the 5 deliverable buses in 2012 thus costing £2.27m per bus, versus the £350k or so for an off-the-shelf hybrid bus from Daimler or similar.

This is plainly ridiculous.

Those high upfront costs are of course intended to be amortised over far more than the first 5 buses, and if replacing the whole 'Bendy-Bus fleet' expecting to see another 395 or so units. Of these orders will probably come in batches of 50 or so, each batch expectedly seeing cost reductions as suppliers and assembler are able to provide contractual discounts on volume basis, which should have been woven into the NB4L agreement with Wrightbus.

Hence, BorisWatch is wrong to say that the project serves as little more than a Boris vanity project and is a 'money-pit' that serves Wrightbus.

Thus from basic project information available in the public domain, investment-auto-motives is far less scathing about the NB4L business case than that of the 'Boris-bike'.

However unfortunately the product aesthetic whilst seemingly born from the modernist idiom of 'form follows function' (ie staircase windows) that underpinned original Routemaster, and looks 'modern' to the untrained eye should have been far better resolved cosmetically.

It looks far too 'styled' all for the sake of visual impact (as many buses & coaches are) as opposed to 'designed' in a balanced manner for settled longevity. There were of course many entrants to the competition, their various backgrounds bring something different but useful to the party by way of their own concepts. The first was from Capoco Design run in collaboration with Autocar magazine, latter professional entries from the likes of Foster Architects and Aston Martin. Foster's effort picks up on the 'clean-modernism' of the Routemaster – a simple unfussy form peppered with engineering details such as rivets and roof ribs - which in turn gave it architectural gravitas. Whilst Aston Martin's submission included the visual sophistication born from a car-design studio and highlighted the friendliness of the original bus .

These 2 submissions were amalgamated into a JV concept that would have provided a 21st century re-interpretation. This and the first Capoco concept shared the competition win and the notional £25,000, which when split 3 ways would have hardly covered respective internal costs, thus £25k given to each party.

Unfortunately that 'perfect' JV concept suffered a 'still-birth' due to the commercial pressures that route operators face.

The route and fleet operators are of course shareholder directed, ROI & ROE maximised by cost reduction and scale maximisation, the bus sector's commercial dynamics invariably driven by consolidation. Thus such enterprises are naturally reticent at investing in such an idiosyncratic product created 'for London by London' when they seek to operationally rationalise region-wide, nation-wide and often international bus fleets.

This is the reason why 'Routemaster II' in its 'half-way-house' guise – born from disparate DNA - could never realistically meet the benchmark set by its notional predecessor.

But nonetheless, even with this caveat, given the UK's need for economic regeneration, it is a disappointment (and ongoing concern) that 'Routemaster II' was innately limited in its project scope from the very beginning. It is viewed by investment-auto-motives as a lost opportunity to have achieved something truly remarkable for the UK, something that could have better replicated the economic impact that the original bus made.

With greater 'national-interest' thinking the 'commercial challenges' that constrained a perfect outcome could have been been morphed into 'commercial opportunities' had their been greater vision and participant collaboration. To be frank, it seems faintly ridiculous that the fate of 'Routemaster II' was dictated by an Olympic bid instead of sound city-planning principles. Even so the case, far more could have been done far earlier, a full 3 years were lost since the initiation of the project relied on Boris' mayoral win in mid 2008, 3 years after the Olympic bid win. That true 7 year time-frame was thus shrunk to 4 years and so the integrity of the process ('decision-plan-build-delivery') at schedule and content levels was thus heavily compromised.

It was only 2 years ago this month that the 'Offer for Tender' were received by the bus manufacturers short-list, consisting of: Alexander Dennis, EvoBus (inc Mercedes-Benz Bus), Hispano Carrocera, Optare, Scania & Wrightbus. Volvo declined the invitation, and soon after EvoBus and Scania pulled-out recognising the near impossibility of undertaking such a task.

The retracted bidders may have thought the short timescale provided for a 'fait-accompli' to ensure a British winner, but the reality of the project teams' ability to form itself, create a design brief and identify suitable tender candidates, means that the overtly short timescale made available to manufacturers was a consequence of overall compressed project timing, not necessarily a pro-UK bias.

However, the short programme schedule begs the question as to how well designed and fabricated the eventual 5 showpieces will actually be? Critically, if those first 5 are perfectly assembled to very high quality (presumably at cost) as expected, will subsequent builds suffer a product quality shortfall, an important issue given the manufacture hundreds of buses.

Hence investment-auto-motives believes that the failing of 'Boris' Bus' is not a commercial one, like 'Boris' Bike', but instead a philosophical one that does not live up to the hype and could fail to deliver a true 'London Legacy'.

Yes, five supposed new 'Routemaster IIs' will be displayed for amusement of the Olympic visitors and will gain press coverage that bolsters the look and feel of the games, but when the athletes, trainers, officials and visitors have packed-up and gone home 2 weeks later, London won't have its new icon, and the 'Bendy-Bus' will eventually be replaced by little more than a 'Trendy-Bus'.

And fashion unlike classic design simply ages quicker and fades sooner.

The New London Bus (NB4L) project then appears to be a short-termist support pillar for the Olympics and medium-term social pillar for London. It could have been a long-term support pillar for the UK economy.

[NB infact investment-auto-motives believes that instead of a singular bus being designed, instead a family of modular based vehicles for nation-wide should have been conceptualised.

The 'family' consisting of 6 variants, double-deck and single-deck models available in MWB and LWB guises, each with the ability to fit a type of 'bendy-bus' rear trailer.

This then would have initiated a new revolution, new structural & powertrain concepts offering fleet operators the opportunity to 'pick and mix' standardised yet configurable vehicles attuned to variable scale needs and ambitions; aswell as regenerating UK Bus R&D, providing for a better integrated UK components supply chain and off-setting investment costs to UK manufacturers given a 'design for life' investment rational.

Such an initiative must still be considered if the UK is to be seen to lead 'intelligent eco-industry'].

Come this Saturday late afternoon a good number of London's famous red buses will be be even more colourful, their windows incandescent with a colour spectrum created by flowers, plants and general flora snapped-up by gardeners at the end of the RHS Chelsea show. That multiplicity of inspiration from the natural world spans the realms of perfect creation; including efficient bio-engineering, golden proportion, modular structures, functional efficiency and ultimately philosophically offering much more than the sum of parts.

Whilst certain garden BBQ's serve a political purpose by demonstrating the soft-side of hard-power, the UK's economic growth path and impetus must be perceptively targeted at projects of nation-wide importance. These in turn must be given the time-frame to provide for project integrity and thus meet ultimate objectives, not simply woven into the time-scales and agendas of political schema. Only this will create the economic roots critical to the appearance of mid-term green shoots and long-term flourish.

So, respectfully...

“Hop on the bus, Gus
You don't need to discuss much
Just turn the driver's key, Lee
And get yourself free”

Post Script

As an additional element to the NB4L programme, buses are of course mobile advertising hoardings.

At this time of infrastructure re-furbishment, TfL appears to face daunting cuts to its budget, the first obviously from central government funding, with a second stream from the expected upturn in infrastructure-linked advertising (via CBS Outdoor) looking poor. Today, out-of-date events are poster advertised to TfL customers, these items left in-situ to fill the advertising void.

One saving grace to this disenchantment with the poster advertising medium has been the advent of flat-screen technology, allowing for more impactful moving image adverts on tube-platforms and escalators, the 19th century and 21st century medium juxtapositions astounding

Yet this nascent application of the technology is not automatically suited to the side, front and rear elevations of London bus. Well recognising this TfL has commissioned a competition called the 'BigBusChallenge' aimed at eliciting ideas about the future of bus advertising.

The future of the London bus then as city icon, public service vehicle and communications device can be summed up in 'watch this space'.

PPS.

London radio news reports that NB4L is about to undergo testing at the Millbrook Proving Ground in Bedfordshire. investment-auto-motives hopes that the prototype vehicles 'pass muster' without major problems emerging. Good Luck to the engineering team and TfL. Though critical of specific aspects of the NB4L project, a smooth, swift delivery is now essential to make London 'bloom' in 2012.