Business Interview: Tim O’Toole, FirstGroup

There are some businesses that cannot avoid rubbing up the public the wrong way, no matter how well they perform. Power company bosses and bankers are never going to win popularity medals.

Tim OToole reflects on a challenging period for the bus and rail group. Picture: Getty
Tim OToole reflects on a challenging period for the bus and rail group. Picture: Getty

The same may be said of those who run the nation’s transport network.

Tim O’Toole is a veteran of the sector and has suffered most of the criticism that can be aimed at anyone trying to run a bus or rail company, though he says passengers complain about their bad experiences before accepting that, in general, the service is pretty good.

“It’s a reality of transport management,” he says.

O’Toole, who was speaking in Edinburgh ahead of a speech to the Scottish Council for Development & Industry, has been chief executive of FirstGroup for just over three years. He is an east coast American, born in Pittsburgh, who ran and sold a railroad company in Philadelphia where his wife maintains the family home.

He was lured to Britain to head up the London Underground, but there was one thing that former London mayor Ken Livingstone, who hired him, forgot to mention. “No-one told me about the trade unions,” O’Toole says, “and that was what I spent my time on.”

Livingstone viewed the unions as his friends, says O’Toole. He had his differences with his employer, who once said that “cattle had been transported in better conditions”.

Despite their run-ins, and dealing with the challenges of introducing a massive upgrading of the network, O’Toole looks back on his six years running the Tube as “a blast, a lot of fun”.

He returned to the US in 2009, but was brought back to Britain a year later to succeed Sir Moir Lockhead as chief executive of the Aberdeen-based bus and train company.

As one of Britain’s biggest transport firms, FirstGroup has faced its own challenges. It was caught up in the franchising debacle surrounding the west coast main line, something O’Toole would rather not talk about beyond describing it as “brutal for us”. He insists its bid was wrongly misrepresented as over-optimistic, but he wants to move on from the episode.

There was a problem with the bus division, caused by hiking prices and losing customers, and he is delighted that it has been “comprehensively repositioned” so that growth is back in the business. New buses have been introduced and some local operations sold. “We feel very good about what has happened in the UK bus business,” he says.

FirstGroup is a big business, employing 4,000 people in bus staff in Scotland and 4,700 in ScotRail, in which he takes a particular pride. “I could make a case that it is the most successful franchise in the UK,” he says, sweet music to the ears of Steve Montgomery, managing director of the rail operation, who is sitting across the table from his boss.

The franchise is up for renewal next year and FirstGroup will hope to retain it after ten years expanding operations and adding trains, growing passengers by 30 per cent and improving punctuality. Aside from tendering for ScotRail, he also hopes to have news on sponsorships that will consolidate its credentials on home territory. But a more immediate demand is lunch with Martin Gilbert, chief executive of Aberdeen Asset Management, who stood down as FirstGroup chairman ahead of a cash call on investors. “He did a great job and he sacrificed himself because of the rights issue. In truth, he wanted to leave a year earlier,” says O’Toole, who is also locked in a battle with Sandell Asset Management, a 3.1 per cent shareholder which has called for the group to be split up and the famous Greyhound bus company sold.

O’Toole won’t comment, but the markets have noted the board’s resistance to Sandell’s demands for a break-up, which were thought to have been considered among the options before it chose the rights issue. The ongoing and seemingly endless battle is with the image and reputation of train operators. Consumer groups consistently criticise UK train companies over delays, over-capacity and pricing, but O’Toole says Britain outperforms countries in continental Europe.

“Even with the carping in the UK, there is no rail operator in Europe that comes within miles of the UK by any measure. Statistically, we shoot the lights out compared with Europe. We are the safest and our passenger growth has been much higher.”

Other countries in Europe will be opening up their networks to competition over the next five years, and British companies are preparing to move into the continent.

O’Toole said it was no surprise that the likes of Deutsche Bahn in Germany and the French operator SNCF “are doing everything they can” (to protect their markets) and are tendering for UK business.

“They are having to learn,” said O’Toole, adding that services such as the Eurostar cross-channel trains and the French high-speed TGVs were the exception rather than the rule. “We all look at Eurostar and the TGV and say how fantastic they are, but if you look at the rest of the network, it is nothing like the UK.”

30-second CV

Job: Chief executive, FirstGroup

Age: 58

Born: Pittsburgh, US

Lives: Apartment in Aberdeen, home in Philadelphia

Education: Studied law at La Salle University, Philadelphia, and the University of Pittsburgh

Ambition while at school: Criminal lawyer, but ended up a corporate lawyer

Car: Not in the UK

Outside interests: Reading, travelling, golf. Plays off a 12 handicap. Member of Royal Aberdeen.

Can’t live without: Not knowing what is going on

What makes you angry?: I don’t get angry. I am big on execution. I get frustrated by complexity.