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Episode 051: Transit Unplugged Podcast - Paul Cox
Paul Cox – Tower Transit

“We’re nothing without [our] people.”

The role of a public transport provider has unique challenges depending on authority, city, or region. Our guest today, Paul Cox, has been in the transport business for 25 years and experienced transport’s role in Australia, Europe, and Asia. Currently, Cox is the CFO at Tower Transit, a privately-owned operator, and he is presently focused on operations within London and Singapore.

In this episode, Cox talks about the unique aspects of how London often contracts per route, the challenges that can bring, and how that differs from their operations within Singapore. He also discusses the transition of employees after a successful tender. Finally, he shares the importance of creating a fulfilling job constructed via culture and value.

If you want to know more about Tower Transit, check out their website.

Remember to check out transitunplugged.com to learn from top transit professionals and stay up to date to catch all the latest episodes.

Show Transcript

Paul Comfort : This is Transit Unplugged, and I'm your host, Paul Comfort. Welcome to another episode in our special series of Transit Unplugged in the United Kingdom. Today we talk to a private provider of bus service in the London area, Paul Cox, who is Group CFO for Tower Transit.

Tower Transit is a company that largely operates out of Australia, and now has moved into the United Kingdom, and it's also working its way into North America. In the United Kingdom, they operate about 400 vehicles for the Transport for London, and they have nine hydrogen buses among them. These are under contract, which is different than how it's done outside of London, as I mentioned on a previous episode, where private for-profit companies come in and set up their own routes. In the city of London, there's a lot more control of the bus service, and the companies that operate it under private contract do so at a subsidy from TfL.

We'll talk about what's going on there in London and what the future is for companies like Tower Transit as they continue to grow and expand their services in the United Kingdom, and around the world, in this special edition of Transit Unplugged in the United Kingdom.

Intro: What does it mean to be a successful public transit agency? What are you doing to lead the way? It's time to learn from the top transit professionals in North America. This is Transit Unplugged, with your host, Paul Comfort.

Paul Comfort : I'm Paul Comfort and welcome to a special edition of Transit Unplugged. This week I'm in Britain and meeting with a number of great leaders of transit systems across the country. And today I'm excited to be with Paul Cox, who is the Group CFO of Tower Transit, one of the major transit providers, not only here in Great Britain, but around the world. I'm sitting in his office in London. Paul, thanks for being a guest on the show today.

Paul Cox : No, thank you for the invitation, Paul.

Paul Comfort : Yes. So, tell us a little bit about Tower Transit. A lot of our listeners in North America at least may not be familiar with the company, but you are a big operator of transit services under contract with government agencies around the world.

Paul Cox : Yeah. Okay, so the providence of the business comes out of an Australian... So, the shareholders who started their business over 20 years ago and have grown it to be the largest operator of public transport in Australia. And a few years ago, they had an opportunity to expand overseas. So, raised some more finance, bought part of the FirstGroup London business and we run [inaudible 00:02:09], but there was obviously a good amount of corporate knowledge that was brought with it.

We, in London, have a portfolio of over 20 contracts, which are on a five-year churn, which is the London model. And in our six years now since we were formed, we've had a couple of corporate acquisitions in other aspects of transport. But the big corporate development was when we won a contract in Singapore, which is a very exciting marketplace, and we were the first company invited to take a contract there outside of the local businesses. So, first mover in that area.

Paul Comfort : Oh, that's good, yeah.

Paul Cox : And it's been a particularly interesting and rewarding exercise to be part of that. At the moment, we are working in Los Angeles, working with the Los Angeles Department of Transport to hopefully provide them with services starting later in the year. That's a very exciting development for us.

Paul Comfort : Fixed route or demand response?

Paul Cox : No, fixed route. There's an element of demand response, but it's a relatively small part of the total. But in the Australian business, they have a product for the demand responsive platform.

Paul Comfort : I was just there in Australia. I interviewed seven of their top CEOs there, yeah.

Paul Cox : Yeah. It was a product called BRIDJ, which we [crosstalk 00:03:36].

Paul Comfort : Okay. B-R-I-D-J?

Paul Cox : That's the one. Yeah.

Paul Comfort : Were you all involved with a company called BRIDJ, which is running micro-transit in Boston and Australia?

Paul Cox : Only in a sort of Phoenix arrangement.

Paul Comfort : Okay.

Paul Cox : Because it went into receivership, I believe.

Paul Comfort : Yes, it did. Yeah, yeah.

Paul Cox : And then our guys bought it.

Paul Comfort : Oh. Okay, okay.

Paul Cox : Yeah. And they've been developing it then subsequent to that.

Paul Comfort : Interesting.

Paul Cox : So, we're just putting through agenda Singapore.

Paul Comfort : Oh, okay.

Paul Cox : And our staff, bus movements, and that went live this week actually.

Paul Comfort : Really?

Paul Cox : When I get back into the meeting I've stepped out off to do this I hopefully will have a bit of an update on that, so that's very exciting.

But in terms of our expansion aims, it's very much probably areas which we can understand and add value to government, sort their problems out, whatever, that type of thing. It's making things work, hopefully, better than they do at the moment.

We have aspirations to roll out big time in the US with our first members of staff coming on board this week, and it's all very exciting.

Paul Comfort : Congratulations.

Paul Cox : For the last 12 months or so, we've been looking at projects over there. We have had a look in South America as well. That is actually rather more challenging. Not that the US won't be, but I think it's at least we can talk the same language, which is a big step forward.

Paul Comfort : Yes. I have a good friend, Mark Joseph, who used to be CEO of Transdev in North America. When they entered into Columbia, I think he was in and some other South American markets, to run rail service and bus, and he was telling me the massive amount of people that ride transit in South America, they've got a different issue.

In North America, and I understand here in Britain too, bus ridership is on the decline in a lot of cities. It's a different game in some other places in the world.

Paul Cox : Absolutely. I was in Santiago last year. I'm sorry, year before last, looking at a project there. And yes, very well-bused and a huge amount of people traveling.

Paul Comfort : Yeah. So, tell me about your journey and how ended up here at Tower Transit and how long have you been here? That kind of thing.

Paul Cox : My career started in the bus industry in '94, so this will be my 25th year.

Paul Comfort : Congratulations. Silver anniversary!

Paul Cox : Bit of a milestone. I'm proud of that. I had trained in public practice as a chartered accountant and then moved into the motor industry in retail, so I spent five years wandering around Europe as financial controller of a BMW retail organization. So, I did a lot of travel, two weeks in Germany, a week in France, a week in the UK every month.

Paul Comfort : That was your routine, yeah?

Paul Cox : Yeah, yeah. It sounds glamorous, but no.

A great company, that was for Inchcape, so they're a big listed business here. And then ultimately, moved into a business, which had done a management buyout out of the public sector, a Birmingham bus organization.

Paul Comfort : Okay.

Paul Cox : And they were looking to beef up their financial support to enable listing an IPO, but as the timing wasn't quite right for it and ultimately it was bought by National Express.

Paul Comfort : Ah. Yeah.

Paul Cox : So, that put me into the National Express fold, and I was there for about eight years in various roles, European FD, FD in Australia, and deputy CEO over there. And that was for rail as well as bus, so expanded my expertise from bus into light and heavy rail, which is-

Paul Comfort : Where you based out of in Australia?

Paul Cox : Melbourne.

Paul Comfort : Oh yeah. I love Melbourne.

Paul Cox : Yeah. It's a lovely city.

Paul Comfort : Yeah, it reminds me of Chicago - it has the same vibe. And Chicago's one of my favorite American cities. Yeah, Melbourne was amazing.

Paul Cox : I got to travel around a bit there because we had operations both Perth and in Sydney, so I got a good flavor of that.

Paul Comfort : Yeah. PTV, I met with all their guys.

Paul Cox : Yeah. So, we had three franchises over there, which was a difficult, challenging commercial environment. Again, something that you learn from, and I made a good number of contacts there. Came back to the UK and for the next three, or four, years I actually ran my own consultancy business for various bits, both transport and non-transport related.

And then, I was approached by an investment bank to help with the due diligence project in a transport business. And they ultimately bought the Stagecoach London business, which was an interesting carve-out from a PLC. And I was there for five years before we then sold it back to Stagecoach, so the private equity backers done what they wanted to do with it and came out the other side.

So, Stagecoach put it back, and at that point, another child came along, so I had a bit of time off and helped my wife with that. And then I read about the Transit Systems acquisition from FirstGroup, and I thought, "Oh, I've come across transit systems before." I literally picked the computer up, got on LinkedIn and emailed Clint Feuerherdt, the CEO, and said, "Done some of this before if you'd like a chat." Started the following week.

Paul Comfort : Really? Wow!

Paul Cox : It was that quick.

Paul Comfort : And how long ago was that?

Paul Cox : That was in 2013.

Paul Comfort : Okay.

Paul Cox : It's such a great bunch of guys.

Paul Comfort : Yeah?

Paul Cox : Really enjoy working with them.

Paul Comfort : That's great.

Paul Cox : So, we've had a rollercoaster journey over the last few years including refinancing the facilities, and all that good stuff that us accountants get involved in. But it's a blend of finance and commercial, really, because we're a very thin team here with an executive chairman, a chief operating officer, myself, a legal director, and that's the top tier.

Paul Comfort : Oh, is that right? So, your G&A is very small for this, yeah.

Paul Cox : Yeah. And also, we have a local MD in Singapore, but I've been there three times this year so far, so it's a relatively well-trodden path over to assist.

Paul Comfort : Well, that probably puts you in a position to bid low a lot. Right? When you don't have all that G&A overhead?

Paul Cox : Yup, indeed although there's probably more than we would like and we're still a little bit subscale in certain areas, so we got to spread it even thinner, will make us more competitive.

Paul Comfort : I like how you've been in a bunch of the companies that are doing the work over here, so that gave you a very broad perspective. I just mentioned to you earlier, I've worked for a number of companies in North America. I feel like I have a broader industry perspective than just one company.

So, tell us about the model of how it works here in London? Since you're the CFO, but you're still involved in the day to day operations, a follow-up question is, how it works financially for private companies? How do you actually make a profit over here?

I'm familiar with how it works in America. The margins are very thin when they operate in America, these companies, but in Great Britain, Australia, and other countries, most of the transit service is outsourced. Unlike America, where it's usually just commuter rail, commuter bus, and paratransit demand response.

In North America, most of the fixed route bus, the light rail systems, or the trams, and the subway systems are all operated directly by government employees. So, I was CEO of MTA in Baltimore, and I had 3,300 employees. And then I had 2,000 contract employees, but they just ran, like I said, commuter train, commuter bus, and paratransit. So, tell us about the model here in London, especially, and how it works for you all?

Paul Cox : Yeah, I suppose, the first thing to do is to say that actually, London is different from the rest of the country.

Paul Comfort : That's right, yes.

Paul Cox : So, the model elsewhere in the country is it's a fully deregulated market.

Paul Comfort : Right.

Paul Cox : So, the operators plan the routes, set the fares, collect the money, and make a profit.

Paul Comfort : Yeah, that's very interesting.

Paul Cox : But it's all quite real-time stuff because you can register a route in a matter of six, seven weeks. And you can come off a route in the same time frame.

Paul Comfort : Really? Okay. But, in London, it's more regulated, right?

Paul Cox : Yeah. And it's because of the need for a common ticketing system across modes and sensible timetabling, so you get connections with all the various railway stations and so forth. So, it makes an absolute load of sense to have done it this way.

Paul Cox : It's about 800 contracts, I think, in London at last count.

Paul Comfort : Wow!

Paul Cox : Something of that order. And these vary from 60 vehicles down to maybe one, in terms of their scale. And we got a blend from the largest to the smallest, so we run about 400 vehicles here.

The model is that the assets are, for the most part, operator side. We have a couple of projects with Transport for London, for instance, for their hydrogen project where they actually own the vehicles and lease it to us for a peppercorn and we-

Paul Comfort : Hydrogens, you say?

Paul Cox : Hydrogen bus. And we've been running those for I'd say seven or eight years now.

Paul Comfort : Really?

Paul Cox : And so they've been excellent, they were run by First originally. And then we've taken those on.

Paul Comfort : How is that working? I've got a friend, Lauren Skiver, who runs SunLine Transit in California and she's a leader in hydrogen fuel. She's actually building a hydrogen power plant at her transit facility and is going to sell the fuel. How is it working here for you in London?

Paul Cox : Yeah, so again, it's a very small-scale operation.

Paul Comfort : Yeah? But how many vehicles would you say?

Paul Cox : We've got nine.

Paul Comfort : Nine vehicles, okay.

Paul Cox : But the important thing is that when we started, it was very difficult to get a whole day service out. They're as efficient as a diesel when they're out for a full day without any difficulty. So, we've refined the whole thing and got it working quite smoothly.

Paul Comfort : Very clean, right now. No emissions? Yeah, that's great.

Paul Cox : Yeah. Just water comes out the back, which is great.

Paul Comfort : That is neat, yeah.

Paul Cox : And yeah, so for the most part, we own the bus assets, but they finance them from our lenders, of course.

But we have a mixture of real estate with some of it owned by ourselves. This one we own, what I'm sitting in at the moment. And we have another one leased from Transport for London actually in the east side of London quite close to the Olympic Park. So that's how it works here.

Paul Comfort : So you've been on a tender?

Paul Cox : Yeah.

Paul Comfort : And how many contracts you said you had?

Paul Cox : We've got about 20, 20 to 25.

Paul Comfort : 20 to 25 contracts running 400 buses?

Paul Cox : Yeah.

Paul Comfort : Okay. And they overlap?

Paul Cox : Yes.

Paul Comfort : They're not all the same time?

Paul Cox : No.

Paul Comfort : What's the average time of a contract over here?

Paul Cox : They're all five years.

Paul Comfort : Five years, okay.

Paul Cox : Unless it's something specific that's worked into a tender. So, they're generally a five-year term, two-year extension if you hit year four's operating metrics. You really need that lead time to re-tender it if you don't meet the targets obviously. And, I suppose, roughly half get extended, and half don't. It very much depends on the traffic congestion incident in the route area.

Paul Comfort : Yeah. How are you judged when you do these evaluations? Is it price plus other factors, like how you've been operating? Do they look at the quality of the work?

Paul Cox : I suppose the quality of work is the threshold to get you into the discussion in the first place, rather than being part of the evaluation, is my understanding.

Paul Comfort : Oh, I see.

Paul Cox : Unfortunately, with the fiscal issues we have here in the UK, there's not an awful lot of premium that can be brought into any transport contract, so it tends to be the price is the key driver of it, yeah.

Paul Comfort : Interesting, yeah.

Paul Cox : Yeah. And here in the UK, we have a piece of legislation called the Transfer of Undertakings (Protection of Employment) rules, which means that staff move when the contract moves.

Paul Comfort : Unionized?

Paul Cox : Very.

Paul Comfort : Yeah. And what are the names of the unions that you work with here?

Paul Cox : We're working with Unite most of the time. We have a-

Paul Comfort : Unite?

Paul Cox : Yeah. They have a very large number of transport-related employers within their ambit.

Paul Comfort : Do you have to pick up the same collective bargaining agreement from the prior contractor?

Paul Cox : Pretty much, yeah.

Paul Comfort : Yeah, so the salaries, are they known when you bid on this stuff?

Paul Cox : Not very well, in fairness, and that's a little bit of a difficult situation.

Paul Comfort : It's the same in North America. It's sometimes difficult to know even what the price is you have to pay.

Paul Cox : Exactly, yeah.

Paul Comfort : You think that there'd be a rule where they have to share that information because that way everybody could bid flat.

Paul Cox : Yeah. All of the London operators have made that point, but unfortunately, we haven't had any traction [on that].

Paul Comfort : You can talk to your MP.

Paul Cox : So, I suppose, it's more local government here.

Paul Comfort : Oh, okay.

Paul Cox : So, it's the mayor's office that's essentially sitting at the [end] of it.

Paul Comfort : Yeah, the mayor's office runs TfL. Right?

Paul Cox : That's right.

Paul Comfort : Yeah.

Paul Cox : So, that's how the system works here. And if we'd move to Singapore, that's slightly different.

Paul Comfort : Tell us about that. How was it in Singapore?

Paul Cox : Well, in Singapore, it's the total government assets, so we're just have a contract to operate and maintain.

Paul Comfort : Ah.

Paul Cox : So, we haven't had to raise any finance for the vehicle stock. They provided us with a stunning depot.

Paul Comfort : Oh, really?

Paul Cox : I've seen a lot of bus depots in my years and-

Paul Comfort : Very nice, huh?

Paul Cox : Yeah, you could probably rebrand it as an airport lounge.

Paul Comfort : Really? Wow, I'd love to see that. That's interesting.

Paul Cox : It's wonderful. And the model there is it's a single contract covering 25 routes rather than individual contracts by route. And the same operational metrics that you see anywhere else in the world in terms of reliability and [crosstalk 00:17:10].

Paul Comfort : Yeah, OTP and all that stuff.

Paul Cox : So that's all been very good.

Paul Comfort : Do you have the employees work for you?

Paul Cox : Yes.

Paul Comfort : So that you're basically hiring all the employees and management, but using the asset, facility, and buses, and fuel?

Paul Cox : Yes. Yeah, we buy the fuel, but it's passthrough.

Paul Comfort : Passthrough? Okay, yeah.

Paul Cox : So, we're not exposed to any of the volatility.

Paul Comfort : That keeps your price very stable, I find.

Paul Cox : Yeah.

Paul Comfort : And how was it here in London? Can you passthrough fuel?

Paul Cox : No. There is an indexation mechanism, but it's not a very good match to the underlying price of the commodity.

Paul Comfort : Interesting.

Paul Cox : So, we take on financial hedges too to try and bridge the gap between what we will naturally get under the indexation basket and what we'll be exposed to in the fuel. And I normally try and keep it hedged out by year and a half to two years.

Paul Comfort : Yeah. Now is Tower Transit publicly traded, or are you a private company?

Paul Cox : Private company.

Paul Comfort : Okay, very good. But you're competing against other publicly traded companies right here?

Paul Cox : Yes.

Paul Comfort : Yeah. That's interesting. Interesting angle on it. And what are some of the challenges you face here as a private operator working under a contract with TfL?

Paul Cox : Well, again, while we've got quite a small management structure that's still an overhead that's significant in the terms of the small scale of the operation. So, we've got probably about 5% market share here in London. We're looking for to expand that.

But the biggest challenges, I suppose, to expansion, apart from the pricing dynamic, is the planning dynamic. Actually getting further infrastructure built in London is really, really difficult. And we have tried various ways of expanding into further operational sites, but getting planning permission, which is really difficult, and we achieved a small-scale success. But unfortunately, there was a time limit on it, which meant that we had to have all the vehicles home to roost by about 11 o'clock, which is not practical for most TfL contracts because they go on much later than that.

So, yeah, we eventually decided that was not going to be one that we could actually deliver against. But we're keeping our eye open for other opportunities to expand it because, yeah, there are a number of big players and obviously they have far greater economies of scale that can be brought to us.

Paul Comfort : That's interesting. Yeah. So where do you see the company going in the next few years? Both here in London and around the world?

Paul Cox : I'd like to see the London operation expand. We got excess capacity here at the moment, and we'd like to fill that.

Paul Comfort : Excess capacity in what way? What do you mean?

Paul Cox : Parking infrastructure.

Paul Comfort : Oh, yeah, facilities-wise, yeah.

Paul Cox : Yeah. Specifically here, in the east of London, we're probably at capacity. There's not much we can do over there.

Oh, the big challenge for operators in London at the moment is emissions control and improvement thereof.

Paul Comfort : Yes. That's a big push from the mayor's office, right? To control the...?

Paul Cox : Oh, yes, yeah.

Paul Comfort : I saw all kinds of different buses out there right in front of your facility. I saw one that was hydrogen-like you mentioned. What other types of fuel usages are you doing?

Paul Cox : Well, we got mostly hybrids in the operational fleet. And we've got a couple of electrics under evaluation, but they're not mainstream technology for us yet. We are looking to put a substation into this property so that we'd be able to-.

Paul Comfort : Electric?

Paul Cox : Yeah. But, I think with the powers-that-be I've yet to really grasp is the size absorbed by the electrical infrastructure in a garage. So, almost for every ten diesel buses you'll only be able to operate eight electric, so that's an interesting statistic when you then gross it up over the dozens and dozens of operational sites that are in London and what that means to the actual bus capacity. Then you get back into the planning argument about, "Oh, where are we going to put the rest of them?" Because they still need them. There' not going to be any fewer people traveling.

Paul Comfort : Right.

Paul Cox : So that's the big challenge.

Paul Comfort : Interesting. Yeah. And so because you have excess capacity, you're hoping to win extra contracts.

Paul Cox : Yeah.

Paul Comfort : Did you say they're bidding at one route at a time on these contracts?

Paul Cox : Yes.

Paul Comfort : Interesting. And a route might have how many buses?

Paul Cox : I suppose they typically between ten and 20. So, with that range from 60 to one.

Paul Comfort : Yes.

Paul Cox : There are a few big ones around as well.

Paul Comfort : And is there common frequency of service for the headway? So, in North America, we consider high-frequency transit any route where the buses are coming every 15 minutes or less. Is high-frequency transit a big thing in London?

Paul Cox : Most.

Paul Comfort : That's what I figured, yeah.

Paul Cox : Most of it is. And obviously, we're geared up to deal with that as well. I think we've probably got two low-frequency routes. All the rest are high-frequency.

Paul Comfort : Do you operate your own operations control center with dispatchers, controllers, et cetera?

Paul Cox : Yeah. We do, yeah, 24/7.

Paul Comfort : Okay.

Paul Cox : Yeah because we have a lot of vehicles out overnight, so it's, yeah, very labor-intensive control center as you might imagine. And then we've got these guys sitting in front of very large screens seeing the positioning of the various things.

Paul Comfort : Some of these control centers are just amazing. They look like Star Trek. When I was in Sydney, Howard Collins, the CEO of Sydney Rail, took me to their brand-new rail operation center. It wasn't quite operational yet. I've never seen anything like it. They had the world's biggest television screen up front. Even bigger than the Texas State, Dallas Texas Cowboys' big screen, which they're very proud of. I got to sit in what he called the Captain Kirk chair because it does look like you're on the bridge of the Star Trek. Phenomenal.

Paul Cox : There you go.

Paul Comfort : So, as a company, what are you looking for to get an operation? Don't tell me any secrets obviously, but to win in this market and to make some money as a private, because you're a for-profit company, you're looking at what? Improve efficiencies and use fewer operators to do more service? What is it that makes your company and the private sector in general? What is making you tick, so to speak, and improve?

Paul Cox : I would like to think that we would, so as we operate a forensic analysis of how things are done at a very, very low level. Our chairman is a scheduler beyond all schedulers, and he understands it because it's in his DNA. And whenever we have an intractable problem, he's the person you deploy.

Paul Comfort : Oh, is that right? That's great, that's a good role for him. Yes. What's his name?

Paul Cox : It's Neil Smith.

Paul Comfort : Okay, yeah, yeah.

Paul Cox : Yeah, great guy. I suppose, if we take a look at London as a case study with the routes that we took on, we went systematically through each route. We worked out where the pinch points were, where the operational issues were and tried to fix them. And it meant that by going through a process of discussion with Transport for London, we were able to seek changes to the routing, whatever the pinch points were to try and resolve them with them to make the whole thing run significantly better. And I think they found that rather a refreshing approach.

Paul Comfort : Yeah, that is interesting.

Paul Cox : Yeah, and I do think that's one of the hallmarks of a Tower Transit operation. We like to think we fix things for government and if we look at the Singapore case study, there was, I suppose, a bit of a malaise around that. Well, and we came in and we definitely had a change to the labor relations and the way that staff was paid.

There's an issue in Singapore where the reliance on foreign nationals doing work is carefully controlled by the Ministry of Manpower and the Ministry of Transport. We negotiated with them a higher threshold for foreign workers for the period of this privatization process. So, the baseline for all other organizations is 40%, and they moved it up to 60% foreign workers for the first three years.

So, we took a slightly different approach when we went in there, knowing that there was this agenda on hand, so we had about 350 staff move across from the incumbent operators and the rest we had to hire ourselves. 100% of the new hires were all Singaporeans.

Paul Comfort : And that's what they want eventually, right?

Paul Cox : That's what they wanted, yeah, which means our dependency ratios, it's called, was about 17%. And they're all just people we inherited.

Paul Comfort : And how did you do that? How were you able to get so many?

Paul Cox [NF1] : It was a change in the market perception of what a bus driver's role in life would be, and the ability for progression, and soft stuff like introducing maternity and paternity leave, and that sort of things, which were really, as you would expect them from other operating environments. And making it a job that was seen to be something of value and putting a bit of a respect culture around it, I suppose, and that was why we achieved it. And at one point we had 7,000 people wait-listed for interview.

Paul Comfort : Wow!

Paul Cox : Which was an amazing feat from an HR department.

Paul Comfort : Yeah? Now does Tower Transit... And again, if it's some corporate secret, don't tell me obviously, but are you all interested in growing only organically? Or do you try to buy companies as well, acquire companies? Or what's your strategy?

Paul Cox : Well, I prefer to acquire contracts because of the model-

Paul Comfort : Sure, just bid on the contracts and win, yeah.

Paul Cox : Yeah, bid on the contracts because we've got fairly well-trodden path in terms of our BD approach to these people, but given that the more progressive authorities keep the assets on their balance sheet rather than ours, bidding the contractors are relatively low cost of entry from a financial perspective.

Paul Comfort : Right exactly.

Paul Cox : Whereas if you're buying somebody's profitable business, you're paying a multiple of earnings with an expiring contract. In my mind, it doesn't make a lot of sense to pay any more than the net present value of the future earnings stream plus where they might modify that for the asset base, but you're going to be talking about a lot of money and it's not as accretive to the shareholder value as going into a new-start situation and relying on our ability to do the transitions well and effectively.

Paul Comfort : Yes.

Paul Cox : So it is a much better way for moving the business forward, I think.

Paul Comfort : Why don't we talk about that to close out the interview? I think this is a fascinating interview, by the way. Paul, you're giving me stuff that I've never heard before on one of the shows.

I've done this in my career, but I've never heard anybody really talk about it publicly. When you win a contract, and then you come in, and you take over the employees, and you have to then, like you say, transition. Talk to me just for a few minutes about a successful transition, and how do you do that? Again, no secrets, but just in general, how does it work?

Paul Cox : I think the key thing is this, is getting some respect for the people because so many organizations don't do that. [NF2] If we were to take a walk around the garage, I don't have an operational role here obviously, but most people know who I am and I'm very happy to wave, say hello, all of that sort of thing. And it's been a real change over the time that we've owned it, and people seem to be a lot more open to ideas. Obviously, that comes from walking the talk, doesn't it?

Paul Comfort : Yes.

Paul Cox : You've got to do that, but -

Paul Comfort : So when you come in though, which positions do you normally replace with your people? Is it just the general manager or other positions?

Paul Cox : No. It'd be low down as well.

Paul Comfort : Yeah, I thought so, yeah.

Paul Cox : So if we take Singapore as a case study – at one point, we probably had six people over there in different roles from diagnostic technician all the way up to operations director.

Paul Comfort : Out of how many people in the whole operational?

Paul Cox : Well, the back office and middle Office would account for about 100.

Paul Comfort : Okay.

Paul Cox : Yeah, so there's a bit of a cultural exchange.

Paul Comfort : Yes, right.

Paul Cox : And, obviously, every jurisdiction is different, but there are certain things there, you need to have it done the way you want it done. Otherwise, you're not going to be able to deliver the product as you sold it.

Paul Comfort : Yes.

Paul Cox : But in the same way, you got to respect the local ways of doing things, but try and just, like the supertanker, move it to the bit that you want really.

Paul Comfort : Yeah. That's interesting.

Paul Cox : Our guys have been very, very successful at doing that. And the engineering career path in Singapore is very different to here, and so you don't tend to find people who have been trained in the workshop moving into management. The management folk all come from university. Whereas here, there's a much more of a progression through the various things. So, that would be an example where we would need actually to step in and try and give those folks a bit of a career path, and they welcome it with open arms.

Paul Comfort : So, you would say that your primary focus in a successful transition is focusing on the people, the employees, and making sure that they're well taken care of and they feel an affinity for your company, so to speak.

Paul Cox : We're nothing without the people. [NF3]

Paul Comfort : Yeah, that's a great angle, Paul. Anything else?

Paul Cox : Yeah, we could go on - .

Paul Comfort : Yeah, yeah.

Paul Cox : But yeah, no, thank you for the opportunity to talk. I love talking about our business. It's such a great place and now heading towards the end of my career, and I think this has been the most rewarding place I've ever worked. [NF4]

Paul Comfort : That's wonderful.

Paul Cox : I think it's probably the testimony to the people I work with, right from top to bottom.

Paul Comfort : Very good. Well, Paul Cox, thank you so much for being with us today on Transit Unplugged, and we wish you much success as you go forward.

Paul Cox : Thank you very much, Paul.

Outro : You've been listening to Transit Unplugged, powered by Trapeze Group. To stay up to date, subscribe on iTunes or Google Play, or join the conversation at transitunplugged.com. Thanks for listening.


[NF1] Might be able to string together a quote from here

“It was a change in the market perception of what a bus driver’s role in life would be…making it a job that was seen as valuable and putting respect and culture around it.”

[NF2] Possible quote

Might need to change a bit

“I think the key thing [with transitions] is getting respect for the people because so many organizations don’t do that.”

[NF3] Possible quote.

[NF4] Possible quote

Potentially change to

“I think [Tower Transit] has been the most rewarding place I’ve ever worked.”

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