The ties that bind rail intermodal and its customers may be frayed, but they remain strong. Just how strong was demonstrated in a curious way one day last month. UPS issued an earnings report that disappointed Wall Street, and its stock plunged nearly 14%. Almost at the same time, BNSF Railway issued an earnings report that exceeded analysts’ expectations. But its stock sank around 8%. The reason for BNSF’s fall, some analysts speculated, was the strong business relationship that exists between the two transportation giants. UPS controls the spending of more than $1.5 billion a year for railway service, and BNSF gets a big chunk of it. So when UPS sneezed, BNSF reached for a tissue.
That unwelcome sequence of events called to mind a prescient comment that UPS’s vice president for transportation, Burt Wallace, made recently at a Congressional hearing on the problems that vex railroads and their intermodal customers.
Said Wallace: “We’re in this dilemma together.”
The dilemma is simply that the rail intermodal industry is moving on a fast growth path and doesn’t have the money to pay for the trip. The experts say intermodal demand will rise n
UPS has got one long term hope. That hope is that the Teamsters can get FedEx organized. Otherwise, it’s over.
FedEx uses contractors with their own equipment. UPS has union labor. It’s no contest unless the Teamsters can organize FedEx. The Teamsters have a lot at stake here. They represent the UPS workers and the railroad engineers who will see employment levels decline, and wages decline, unless the Teamsters can organize FedEx.
Wallace makes some brilliant points here, brilliant of course because I said it here on this forum previously.[;)]
A. A rail infrastructure trust fund. Obviously makes sense, but is also repellent to the railroads because it bodes two things of concern: (1) to fund a trust fund usually means taxing fuel or Kw usage, and (2) a government trust fund is usually a give and take proposition - if we give you public funds, you must conform to certain public access issues. The railroads will drag this country kicking and screaming into the next Great Depression before they capitulate on that last one.
B. The anomoly of railroads moving slower on average today than they did a half century ago, while all other modes have increased average transit speed. Time is money, always has been, always will be. Why the railroads don’t get this is anyone’s guess.
C. The 1990 mergers were bad for the country, and unnecessary for the railroads’ survival, unlike earlier mergers. Having four Class I’s out West, three back East, and up to ten in the Midwest was the perfect balance between railroad survival and regional intramodal competition. Without that regional competition, service predictably suffers.
I wonder if UPS has any irons in the fire related to the talk of HSR systems? One thing is certain - UPS needs to shake itself free of that 25 mph dinosaur.
A rail infrastructure trust fund would be a tough sell in Congress since it would involve an additional tax, a notion that is anathema with conservatives. Also, many conservatives have a philosophical aversion to using public funding to aid private business outside of their own district or state.
As has been mentioned elsewhere, terminal congestion is the main contributor to slower average speeds, and this is going to be a very tough nut to crack.
The latest round of mergers happened in part because of the laissez-faire attitude toward business which was prevalent at the time. The ICC/STB would have been hard pressed to justify saying no to any of the mergers in that atmosphere.
I would doubt that UPS would be interested in High Speed Rail. The expense involved in running ultra-fast intermodal trains would be tough to justify unless it could shave an entire day off of door-to-door delivery times and thus also justify a higher rate.
Did the long depreciation schedules for the railroads in the IRS code ever get changed in the last 6 or 7 years? I remember back in the 1990’s that was one of the factors that was discussed as having a a major negative impact. I seem to recall the US DOT was for the changes but the trucking lobby, both companies and unions, prevented anything in congress from being done about it at the time.
UPS a major shipper of BNSF and you would think the rr would bend over backwards to provide top service, but it is not the case. An example of this is that everyday on one of the Willow Springs trains out of the Chicago area, there is a car for Amarillo that carries a Amarillo and a Lubbock trailer. UPS operates a large distribution center in Amarillo on BNSF. Set the car out @ AMA then have a yd job spot it later, right? No. Instead the car makes it to Albuquerque where it is unloaded and the trailers driven back to TX. Just one example of why UPS is looking at driving the freight themselves and taking it off the rails. Not good to hear.
I disagree with that last sentence, if only because UPS is probably in a constant research mode for improving time based deliveries. The current 25 mph rail system is not in UPS’s best interests, and given that intra-industry capacity investment greatly lags the consensus future capacity investment needs, the slowness problem is only going to worsen, geometrically and indefinitely.
Something needs to be done, ASAP.
HSR provides that one option for moving UPS’s aggregated time critical cargo optimally. I suppose it is possible to go the cheap route and just build a segregated conventional rail network dedicated to higher speeds. As long as the average velocity of that system is above 50 mph, UPS would probably be satisfied.
A railroad trust fund is nonsense. About the only organization behind it is UPS, and even UPS isn’t infalible.
There is no “trust” in Federal Government “trust” funds. They get looted by the politicians - and don’t blame Bush, this crap has been going on for decades.
A Highway trust fund makes sense. Since the highways are government things it makes sense to set up a fund sourced from user fees to build and maintain the highways. Ah, but that’s money and the politicia
A railroad trust fund is nonsense. About the only organization behind it is UPS, and even UPS isn’t infalible.
There is no “trust” in Federal Government “trust” funds. They get looted by the politicians - and don’t blame Bush, this crap has been going on for decades.
A Highway trust fund makes sense. Since the highways are government things it makes sense to set up a fund sourced from user fees to build and maintain the highways. Ah, but that’