GEC and Fiat to unite in bid for pounds 600m train order

Fiat of Italy and GEC are to announce the formation of a consortium today to bid for the pounds 600m contract to build a new generation of tilting trains for the InterCity West Coast line.

The huge contract from Richard Branson's Virgin Rail is expected to create 5,000 new jobs in the UK, and, the new consortium believes, will lead to lucrative export orders from abroad in the future.

Virgin Rail has drawn up a shortlist for the contract for the high-speed trains, which it hopes will revitalise the ailing West Coast line, and reduce the London-Scotland journey times by 90 minutes to four hours.

Mr Branson had let it be known that he would favour the contract going to a company that could guarantee creation of jobs in this country. The main rival to the Fiat/GEC alliance is thought to be Swedish company AD Tranz, which took over the British Rail engineering works in Derby.

Fiat has already produced tilting trains for Italy, Switzerland and Finland. It has also received orders for them from France and Spain. ADT has manufactured the high-speed trains for networks in Sweden and Germany.

Virgin will receive a first-year subsidy of pounds 76.8m to run InterCity West Coast but by the end of its 15-year franchise it will be paying the Government pounds 220m a year.

Mr Branson believes the high-speed trains will lure passengers back from air travel. He has already introduced fare reductions of almost 50 per cent for off-peak passengers.

The Fiat/GEC consortium is believed to be ready to offer rail passengers airline-style travel with carriages equipped with facilities such as seat-back video screens.

An industry insider said: "This is a pretty dramatic step by Fiat and GEC, and it shows both the companies believe there is a bright future for the railways in Britain.

"It is also felt that Britain can actually become a viable manufacturing base to supply tilting trains abroad.

"Richard Branson has been keen to ensure the company which gets the contract would create jobs in this country. If Fiat did not enter into this alliance its chances of getting the order would have been slim."

Fiat's and GEC's desire to bid for the contract has been boosted by the recent decision by Railtrack to plough pounds 16bn into Britain's train network.

Separately, Sir George Young, the Transport Secretary, gave the go-ahead for the sale of British Rail's Channel Tunnel freight business, Railfreight Distribution, to English, Welsh and Scottish Railway.

The sale completes the privatisation of BR's former train-operating firms. Railfreight joins 25 passenger businesses and five of BR's six freight companies already in the private sector.

Rail operators' hazardous journey, page 24