[quote]
QUOTE: Originally posted by futuremodal
This country’s rail system is still a mess, albeit a much retrenched one. Look at how much has been lost in railroad employment, relative market share (especially in terms of $$ share), customer access to rail lines, railroad responsiveness to customer demands, etc. There’s enough evidence that railroading was in far better shape pre-Staggers than post-Staggers if you use these benchmarks. Indeed, if it wasn’t for PRB coal and free trade policies (which have given new life to COFC) you can almost make a case that Staggers has accellerated the decline of railroading in this country, perhaps by allowing monopolistic management to hang themselves with their own rope, a rope that exists soley due to lack of head to head competition. The point I am trying to make is that neither the pre-Staggers era of comprehensive regulation, nor the post-Staggers era of comprehensive retrenchment, is doing much to guarantee that railroading will finally achieve it’s promise.
The only way to guarantee railroading’s long term prosperity is to (1)make sure all rail customers have access to competitive rail rates and services (which will dramatically increase market share on the demand side), and (2) equalize the cost of constructing and maintaining the rail infrastructure with the cost allocation associated with constructing and maintaining highways, waterways, and airports, so that we may finally see if indeed railroads would assume a 70% natural market share.
My views on how to achieve this are well known on this forum: Separate the current Class I oligarchy into infrastructure companies and transporter companies, regulate the infrastructure companies as public utilities while providing public track construction via a share of the federal fuel tax (which would be paid by all transportation modes and then reallocated to better reflect intermodal realities) and maintenance support in the form of maintenance tax credits (plus a property tax exemp
I am not well enough versed to comment on what the current railroad rules and regs are…but I sell for a living and I completely understand the issues of costs and markets. I live it daily.
To me it is real simple about grain. There is very little natural competition for moving grain long distances, other than by water. Trucking is not an option. Thus, market conditions for pricing will exist.
When a company has leverage, it should utilize that leverage. You think BNSF’s pricing is bad, take a look at Microsoft. What about the current situation for Exxon Mobile? Compare to GM. Who has the leverage? And how long can that leverage last? Take it while you can.
Powder River Coal pricing has fallen in the past years. Why? Competition. Now with the possibility of another carrier entering the market, the pricing will fall even more. The buyers of this coal understand this. They also control as much of the process as they can buy owning their own fleet of cars.
One of my customers is ADM. They own or control over 13,000 railcars. Let me repeat that …13,000 CARS! No doubt to control costs and to have more leverage with the railroads.
As Bob indicated, the profit margins on various accounts and commodities run the gamut. That is the realities of business today. You take certain business because you must in order to cover overhead and keep the company moving. Other accounts you find are extremely profitable. A strong marketing and sales department of any company, any industry is constantly finding the right mix of services, products, and pricing to maximize profitability.
Part of that involves developing new business which is profitable which will allow you to replace the unprofitable accounts. In other words, increase your leverage to reduce the other party’s leverage.
Perhaps Open Access is the answer, in theory at least. In the practical world, I doubt if we will ever s
Comparing the revenue per unit on an intermodal shipment with the revenue per unit on a grain shipment is not valid.
Grain cars generally have at least a 100% empty return. They go out to the export elevator under revenue load, then return empty for no revenue. In contrast, intermodal equipment tends to move both directions under revenue load. The railroad must always produce a round trip. As many locomotives and cars must leave Portland, OR as arrive Portland, OR, otherwise they’d clog the place up. You’ve got to compare round trip revenue with round trip revenue.
The railroads run intermodal from terminal to terminal. There’s little switching involved.
Intermodal equipment utilization is extreamly high. Cars go from revenue load to revenue load within hours. This doesn’t happen with grain.
The railroads have “outsourced” virtually everything involved with intermodal except the actual train operation. Contractors operate the terminals, intermodal marketing companies do the selling, TTX provides the flatcars, and many times the customer provides the trailer/container. Some of this takes revenue away from the railroad, but it’s not the overall revenue level that counts. It’s what you keep.
That’s why “cycle time” is the important concept discussed above for grain, as it includes both delivery and return, compared to revenue earned, and that cycle time is extremely important to the quality of revenues earned.
[quote]
QUOTE: Originally posted by futuremodal
This country’s rail system is still a mess, albeit a much retrenched one. Look at how much has been lost in railroad employment, relative market share (especially in terms of $$ share), customer access to rail lines, railroad responsiveness to customer demands, etc. There’s enough evidence that railroading was in far better shape pre-Staggers than post-Staggers if you use these benchmarks. Indeed, if it wasn’t for PRB coal and free trade policies (which have given new life to COFC) you can almost make a case that Staggers has accellerated the decline of railroading in this country, perhaps by allowing monopolistic management to hang themselves with their own rope, a rope that exists soley due to lack of head to head competition. The point I am trying to make is that neither the pre-Staggers era of comprehensive regulation, nor the post-Staggers era of comprehensive retrenchment, is doing much to guarantee that railroading will finally achieve it’s promise.
The only way to guarantee railroading’s long term prosperity is to (1)make sure all rail customers have access to competitive rail rates and services (which will dramatically increase market share on the demand side), and (2) equalize the cost of constructing and maintaining the rail infrastructure with the cost allocation associated with constructing and maintaining highways, waterways, and airports, so that we may finally see if indeed railroads would assume a 70% natural market share.
My views on how to achieve this are well known on this forum: Separate the current Class I oligarchy into infrastructure companies and transporter companies, regulate the infrastructure companies as public utilities while providing public track construction via a share of the federal fuel tax (which would be paid by all transportation modes and then reallocated to better reflect intermodal realities) and maintenance support i
It should be noted, “intermodal” is not a profit center on BNSF. No such thing.
Grain intermodal exists, and is reported in the Ag Group, as a “grain shipment,” not in the Consumer Group. “Industrial” intermodal also exists, and is reported in the Industrial Group, not the Consumer Group. Indeed, grain, corn and soybeans, in containers, are uses for the Consumer Group containers on the return leg, as a credit to a “grain shipment.” The Ag Group gets the credit, not the Consumer Group. There is no “Intermodal Group.”
What is misleading is to say that “grain shipments” are entirely different than “intermodal shipments” because that is not true. Ag products ship intermodal on BNSF. The United States does not ship a lot of Consumer Group goods back insofar as Import/Export is concerned, but does ship Ag and Industrial. Ag and Industrial exports are what balance out Consumer imports, insofar as intermodal is concerned.
Now that the US Supreme court has loosened the rules against immenent domain, perhaps the states, counties or even a city or two can sieze the tracks in their neighborhood to allow public access and open access in order to increase their revenues.
arbfbe: huh? ? Maybe the local governments would be able to claim eminent domain on the existing tracks and sieze them, to sell them to a developer who would build tracks that would generate more tax dollars? I guess I’m following the logic on that line of thinking. Can you explain please? Thanks!
I think your correct about Congress not wanting to get involved untill there is a crisis. There was a lot of blah, blah, blah about the banckrupt Penn Central untill GM, Ford and Chrysler went to a Senate hearing and gave their lay off forecast if PC stopped operations. It was about 10,000 people in the first week with the collapse of the auto industry within 90 days. Since laid off UAW members tend to vote in their spare time, we got CR legislation very shortly after that hearing.
The ideas put into Staggers were just think tank stuff untill CR management told Congress deregulation would allow CR to stand on there own and thereby reduce the Federal deficit. Since that was back in a day when someone actually cared about the deficit Staggers was passed within a few months.
The 35 year soap opera concerning Amtrak funding is just absurb. Recently the Amtrak board put out a very good plan to start a serious discussion but everyone in the White House and Congress did the same old dance. I am
More than likely, the local governments would use this new right of eminent domain to take out a rail line and put in a strip mall. Commercial developments tend to generate more tax revenue than private transportation ROW’s.
But, in reality, I don’t think you can use eminent domain to take over property that originally came about via eminent domain. Whose right of eminent domain would the courts exonerate? Can one fight an edict of eminent domain with their own eminent domain edict? Back and forth, back and forth, and the winner is the one with the best paid lawyers.
The Supreme Court may have really opened up a Pandora’s Box on this one!
Here in Burlington, WI the CN’s former WC has a relatively small co-op elevator that ships 25 carloads of corn, twice a month to Chicago where it is trurned into corn syrup for Pepsi-Co. They are force to pay a $600 per train, fuel surcharge. Ths CN’s reason for this is that they have to send an extra locomotive down from Fon du Lac that would otherwise not be necessary. Plus, all of the cars owned by non-CN railroads or leased cars, that sit on the loading track, they are charged a fee for that as well. They are even considering extending the loading track to serve the loader faster, but CN is reluctant to pay for any of it even though it will mean faster loading, which will mean as many as 2-3 more trainloads per month. In Whitewater,WI, the same Co-op is served by the WSOR and they have no such problems. The WSOR picked-up almost the entire tab for the xtension to the loading track that was recently made there.
On a side note, the Co-op manager I talked too said they had similar trouble with the SOO when they owned the line, but had no trouble at all with the WC.
Well, intermodal is part chicken and part duck. Is it a unit, or two units? Is it one carload, or two?
BNSF I think has resolved the question in favor of treating intermodal in the same fashion as a carload. One unit equals a carload. This is no doubt a result of resolving the significant handling requirements for intermodal. Each container requires direct human intervention to load, and direct human intervention to unload. Each “carload” then requires four direct human actions to achieve railroad transportation, that is, getting the container on the vehicle that will transport it, and then getting it off at its destination, twice for two containers.
An accounting function is to rationalize human activities by translating them into economic terms so that they are comparable. Intermodal being labor intensive compared to, oh, say, grain haulage.
I would guess that in early discussions about whether to define the unit of economic activity as a “unit” or as a “carload,” in regard to intermodal, railroad accountants observed that intermodal was treated more accurately, both from a cost and a revenue perspective, as discrete units, and that these were comparable with a conventional “carload.”
The semantic problem is that two are loaded onto a “car”. But, as we see, railroads don’t treat that as a carload. The cost function is considerably different than for a conventional carload.
So, when we see “units/carloads” we see railroading’s effort to apply accounting consistency to two different ways of hauling things by rail. That is, an inte
Let us NOT get Amtrak into this argument, and remember that no country in the world really runs intercity passenger trains at a profit. Yes, the British have operators making a profit on running certain intercity trains, but that is only because the infrastructure is subisidized under a serparate account.
The idea that passenger trains cannot run at a profit is a quasi-myth, if only because we have few modern day equivalents of private passenger rail opertations in areas where there is a significant degree of cost equalization regarding the infrastructure. Passenger trains in the U.S. did make money until the speed advantage was lost to autos, buses, and airlines, and even now there are a few examples of tourist trains making money in the U.S., so it certainly isn’t impossible to have profitable passenger rail operations where the logistics and target markets are in line with realities.
There is no reason that the right kind of passenger rail operations cannot pay their fully allocated costs and still come up in the black. But we’re getting away from the topic thread…
Last week a man (old enough and of a background to know) told me that the UP was offering farmers in his area an extra ten cents per bushel if they would haul this season’s corn to the UP’s own granaries (elevators, I suppose) and bypass their local elevators.
If this rumor is true, it must make local elevator ops. really angry but might please the farmers (an extra dime for a bushel of any grain is a lot). While I feel for the local elevator owners, let’s not forget that a lot of these “local” facilities are owned by the likes of Cargill and Bunge; so that kind of competition vis-a-vis BNSF would not always be the David-and-Goliath battle we might at first envision.
I think your correct about Congress not wanting to get involved untill there is a crisis. There was a lot of blah, blah, blah about the banckrupt Penn Central untill GM, Ford and Chrysler went to a Senate hearing and gave their lay off forecast if PC stopped operations. It was about 10,000 people in the first week with the collapse of the auto industry within 90 days. Since laid off UAW members tend to vote in their spare time, we got CR legislation very shortly after that hearing.
The ideas put into Staggers were just think tank stuff untill CR management told Congress deregulation would allow CR to stand on there own and thereby reduce the Federal deficit. Since that was back in a day when someone actually cared about the deficit Staggers was passed within a few months.
The 35 year soap opera concerning Amtrak funding is just absurb. Recently the Amtrak board put out a very good plan to start a serious discussion but every
Farmers want access to competitive bidding for the movement of their agricultural output. That’s nothing less than what every shipper in a free market country deserves.