Small or seasonal shippers would loose rail service. They would either go out of business or need to find another way to move their product. Picture the High Plans with a lot less wheat, a lot more cattle and a lot more National Grasslands.
It does make sense. It sounds cheaper for the railroad to buy a whole bunch of locomotives and cars and lease it to companies that provide there own crew trainned and certified by the railroad for a load of green. Railroad can charge them with fuel fees and schedule keeping fees or fines if they mess up other customer’s services like Metrolink. They suspend them too if necessary.
Like a T.V network where shows and I believe purchase rights to be run and sponsers purchase the right to show their commercials at certain times; the railroad can have customers purchase time slots when they can run their trains also kind of like making an appointment.
If I read FM’s post correctly, he would set up his “infrastructure” companies as tightly regulated utilities, not unlike gas and electric companies until fairly recently. I’m sure that a regulated return on investment would serve as a major deterrent to new investment in such a firm. Being regarded as a “widow’s and orphan’s” stock with little more than a guaranteed dividend is not going to attract investors in today’s markets, especially when you can get a better return almost anywhere else, admittedly with greater risk.
The likelihood of new antitrust legislation to break up railroads into operating and “infrastructure” companies is quite low in today’s political environment and it would take a radical change for such a bill to even be proposed, much less make it out of committee.
For the most part, you did correctly comprehend the gist of the argument. And don’t dismiss out of hand the value of owning stock in a regulated utitlity. Historically, such stocks have been the safest bets, with decent ROI’s over the long term, while many unregulated companies have made one bet too many and gone belly up (along with the stockholder’s investments). That is why most financial analysts recommend a diversified portfolio, made up of a mix of high return/high risk stocks/bonds and safe return/low risk stocks/bonds.
What you need to consider is this: Take the typical railroad stock today. For the sake of argument, assume one share of railroad stock is worth $100. Divide it half and half between infrastructure and transporting companies via a legislated split. Now you own a $50 infrastructure share of stock (your “safe” stock holding) and a $50 transporter share of stock (your higher risk stock holding). If my idea of infrastructure companies getting a certain degree of public support via tax exemptions/credits/fuel tax receipts comes to fruition, then the value of the infrastructure stock suddenly goes up, since now the operating costs are being shared by the public, thus more of the revenue goes into the profit column. Even with a “measly” 10% regulated ROI, you are getting more value from your total stock portofolio than if the railroad companies were kept intact.
Most of the equipment is already leased by the railroads or the shippers. An SD70M is cheap compared to a 747, why would UPS lease one from the railroad as opposed to doing it themselves and painting it up in their own colors. Maintainence outsourcing already exists. One possibility might be integrated shipping companies and no more Class I’s. If a farmer wants to move his wheat he would call UPS or FedEx.
This is starting to happen. Ford and Chrysler has contracted out their set up auto distirbution to UPS.
…or Pacer, or Swift, or J.B. Hunt, or Tidewater, or Hanjin, or Matson…