Reading Roy Blanchard’s article on shortline/CSX relationships he mentions a $2/hour car hire rate. Can someone explain the basics of car hire for me?
How is it different from per diem. Isnt per diem where the carrier possessing the car must pay a daily rate for the use of the car? Wasnt the cut off at midnight? Therefore there was motivation to deliver cars prior to midnight to another carrier.
How does this affect shipper owned cars? Lets say a corn syrup manufacturer such as ADM has a shipment of LF Corn Syrup from one of their plants to a Coca Cola bottler. ADM provides the cars and the railroads provide the transport. Is there a payment made back to ADM for the use of the car?
Per Diem means “Per Day”. It used to mean the same as car hire because it was charged at a daily rate payable by the railroad having the foriegn line car on its line at midnight. Car hire was changed to an hourly rate instead of a daily rate about 25-30 years ago. So it’s no longer “Per Diem”.
Shipper controlled cars aren’t subject to car hire. There was a standard mileage allowance given to the shipper, but that’s gone away and now rates and payments are subject to negotiation.
An example of sandardized “Per Diem” was $7.05/day for each foriegn line TOFC trailer on line at midnight. This went away with deregulation of intermodal and each railroad negotiated payments with other railroads.
Car hire is just the modern day equivalent of per diem, except it is by the hour instead of by the day. Yes, the usual cutoff used to be at midnight, but now it is to the nearest hour.
Private-owned cars pay no car hire to the railroad or the railroad to the car owner. The car is simply furnished gratis by the shipper (who pays the car owner, which might be himself) and the shipper pays the railroad to move the car.
The reason railroad-owned cars have car hire is because the car is in effect pooled between all the railroad companies. Car hire is simply a way of accounting for the time that the car is “borrowed” by another railway. If every railway company contributes equipment equally to the pool according to the amount each railway withdraws from the pool, then all the car-hire accounts zero out, and no one pays anyone anything. Car-hire is not under normal circumstances a way to pay for the capital or operating cost of the car; it is only a way to account for withdrawals and contributions to the pool, except in the case of a railway who makes more contributions to the pool and than it does withdrawals. In that case, the railways is being rei
Thanks for the replies. The hourly rate would make much more sense. On another thread (Missouri - Illinois) a comment was made about the MI making considerable money with their car rentals, and sure enough on their income statements there was a very large amount listed as credits. Correct me if I am wrong, but it seems they would generate outbound loads on their own cars and then collect the per diem from the other railroads.
Which now brings me to another point. RWM, you mentioned pools of cars. Lets just say that CN has box cars for handling paper products. A load is generated from an Ontario paper plant for lets just say Dwight, Il. CN moves the load to Chicago and hands off to the UP at Proviso Yard and it is loaded to Bloomington, Il where the local then delivers it to Dwight.
The paper is unloaded and the consignee releases the box car. What happens at that point? Does it generally move back by reverse routing to CN? If so, would it be required to return to CN at Chicago or could UP move it to East St. Louis and interline with CN there? (To me a Proviso - Bloomington - Dwight movement is complex for UP, but perhaps not). If it is returned to EStL, then what does CN do with it? Release it into the pool for assignment or return it to Ontario (this is not specialized equipment, but simply a 60’ box car).
How are the return mt’s managed to place the equipment where needed? What happens as it nears the destination…does it sit in a local yard until assigned for loading? With my trucking background, mt equipment was fairly simple, find a load and move the load. The road system made it fairly easy. With the railroad system, it is a bit more complex.
Not an answer to your specific example of CN/paper car, but I learned a little about pool equipment from the 60’s doing a little research for my model RR. When GE built the appliance mfg facility in Kentucky railroads that wanted to participate in the haulage provided box cars specifically for this task. The number of cars in the pool (by RR) was asertained (I think) by the expected amount of traffic on that railroad. I know that the Seaboard Air Line had cars in that pool. The shipper could use any of the cars in that pool to ship appliances anywhere they needed to go. Another reason that cars from any railroad could be anywhere in the US/Canada. Since they were pool cars assigned to a certain service they probably (I initally said always, there but I’m sure they are examples where that was not the case) traveled back to GE empty.
I’m pretty sure RRM or some of the “true” experts can fill you in on this a little more.
Car hire is just the modern day equivalent of per diem, except it is by the hour instead of by the day. Yes, the usual cutoff used to be at midnight, but now it is to the nearest hour.
Private-owned cars pay no car hire to the railroad or the railroad to the car owner. The car is simply furnished gratis by the shipper (who pays the car owner, which might be himself) and the shipper pays the railroad to move the car.
The reason railroad-owned cars have car hire is because the car is in effect pooled between all the railroad companies. Car hire is simply a way of accounting for the time that the car is “borrowed” by another railway. If every railway company contributes equipment equally to the pool according to the amount each railway withdraws from the pool, then all the car-hire accounts zero out, and no one pays anyone anything. Car-hire is not under normal circumstances a way to pay for the capital or operating cost of the car; it is only a way to account for withdrawals and contributions to the pool, except in the case of a railway who makes more contributions to the pool and than it does
Is the storage in transit aspect of plastic pellet distribution due to batch production of the product with anticipated usage in geographic areas? In other words, do the manufacturers only manufacture a certain grade of plastic pellets at certain times of the year, instead of a steady production?
I have a trucking customer in the Chicago area that has built a rather nice railyard with about 150 car capacity. They receive orders from the plastics companies to deliver a load to a customer. The pellets are transfered and then delivered. Nice business. He has a captive customer, based on the yard he built and the service provided.
It would be interesting to look at the supply chain costs for storage in transit vs warehouses and ship. Does most of the plastics industry use this method?
Most plastic seems to be batch production, storage in transit, (rolling warehouse) moving as you describe. We have one customer that gets a special kind of plastic, nylon maybe, that travels in specialized cars, some extra piping. ACFX 426xx. Over a while, you see the same cars showing up, reloaded. This customer also leases a yard track for storage, so we dig out the requested cars twice a week when they get a switch. They have between 20-50 cars in the yard at any given time, and up to 20 on-spot at their facility. No apparent rhyme or reason behind the cars they request, either.
As railroaders, we have no ‘real’ knowledge of our customers business and inside details that go into producing their specific products. Trying to read the placement of rail cars in their plant beyond the grossest of terms is impossible. Plastics have an almost infinite variety of compositions and as railroaders we have no idea of what the specific composition of a particular load may be and what it’s ultimate finished product will be. All we can do is place the specified cars in the specified locations.
I work in the natural gas distribution industry. Most ng distribution piping is made from polyethylene plastic these days. A large utility which does quality control testing of the pipe they receive found a batch of pipe that fell outside their specifications, and in investigating the cause, it turned out that the carload of resin (pellets) that was spotted at the pipe manufacturing facility was really meant for the production of garbage bags, not gas pipe. The resin had different properties and was not suitable for gas pipe.
The comment that was made was “someone, somewhere, got some really good garbage bags”.
I have no idea if this is true, but I consider the source of this tale to be reliable.
At the customer’s plant they want certain cars with certain types of product in certain places, other cars can go most anywhere. Nylon cars get spotted in 1 of four places, other cars can go in 8 other spots, one track has to have things lined up just so.
In the yard, sometimes they order cars that just arrived, other cars have been sitting for months. Just when you bury them with newer cars do the older ones move.
