I remember reading President Murphy of the CB&Q looked at economic down turns as a maintenance opportunity. Murphy’s counter part at the C&NW did the opposite. Perhaps Mr. Murphy had more resources at his disposal. The results showed.
In current context, railroad balances sheets are healthier than in decades. “Experts” are saying recession looms. If traffic levels decline, or fall below growth projections, will railroads take this as an opportunity to invest in their physical plant?
Are there capital improvement accounts being built up to be untilized during slack periods? Has the demand for quarterly results by the controlers of capital markets made this more difficult?
It’s still ruled by the balance sheet. The keywords are “expected earnings”. BNSF and UP have already started scaling back from last year. An awful lot of future design work is now on hold at BNSF, UP, CSX and CN.
Borrowing money from outside sources and borrowing against the future not spoken here.
I am unfortunately in concurrence with Mr. Mudchicken.
Someone else is welcome to marshall numbers to make a case to agree or disagree with this question, but not me, I have to work today. My broad observation of the business is that railways have a longer-range viewpoint on capital spending and maintenance than many other industries, but that they are under intense market pressure to maintain earnings, which was not the case in the regulated era of the CB&Q.
RWM
Excellent points. Taken one step further improve transit times and you may get permanent new business. we must note however the problems CSX is having with that Children’s fund corporate raider
In an ideal world, it would be nice if Carriers could ramp up track maintenance in times of slack traffic as track time is more readily available, however, since railroads are profit making organizations and responsible for providing earnings to the shareholders that is not reality. As revenues decrease the carriers have to decrease expenses and the most readily available area to chop expenses is the maintenance budget.
What did the results “show”? Murphy was at the Burlington what, 1949-1965? The Operating Ratio during that time deteriorated from 66% in 1950 to 82% in 1965, worse than CNW (79.6%), MILW (79.4%) or GN (75.5%). MOW expenditures, as a percentage of revenue, declined steadily the entire time and, adjusting for inflation, actually declined in absolute dollars the entire time. The Burlington engaged in relentless deferred maintenance and that’s about all you can say about the Burlington under President Murphy.
In the year of Q’s biggest traffic decline, 1954, revenue dropped from $270 million in 1953 to $252 million, a 9.4% decline, but MOW dropped from $43.7 million to $30.4 million, a 30% decline. President Murphy apparently hadn’t read the book.
By 1965, CBQ was spending, total MOW/mainline mile, $7,054. CNW was spending $11,665, MILW $9,018, NP $9,772, GN $7,544. “More resources”? Than who?
When there was a slowdown, it appears as though maintenance of way decreased too. Where did you read this? It sounds like a purely PR piece … like somebody just made something up, because it sounded good. Which renews my question – how did this alleged maintenance policy “show” … something?
[Click to enlarge]
