Archive for the ‘On Transportation’ Category

NS Lawsuit is About Playing for Rules, Not Money

April 14, 2018

Norfolk Southern fired a warning shot last week that it wanted all of its operating employees to hear.

It filed a lawsuit against two crew members who were operating a train in Georgetown, Kentucky, last March that collided with another NS train.

The suit, filed in a federal district court, alleges that the engineer and conductor were negligent in their operation of their train.

When I read about the lawsuit I was reminded of something I learned in an introduction of the legal system class during my undergraduate days. “You can’t get blood from a turnip,” said professor Charles Hollister.

As any trial lawyer knows, winning a judgment is one thing, collecting it can be quite another.

The lawyers in the NS legal department know this. Even if they prevail in the suit against the two crew members, NS lawyers know the company will see very little, if any, of the judgment.

Class 1 railroad operating employees may be paid well, but they don’t have the resources to be able to cover the cost of the damage that NS sustained in that head-on crash.

The defendant crew members might be able to escape the judgment by seeking bankruptcy protection.

NS is not seeking to win money even if that is the ostensible purpose of the suit. Rather, it is playing for rules.

Railroad managers more often than not believe the cause of a major incident that causes property damage, injuries or fatalities is the “fault” of one or more railroad operating employees.

Employees, their unions and even some regulators take a broader view of the cause of incidents.

They look at working conditions, conflicting directives of management, and organizational deficiencies as also playing a role in causation.

A report of the NS lawsuit by Trains magazine indicated that the crew that was sued by NS ran a stop signal.

The magazine reported an unnamed source with railroad operating experience as saying that it used to be that running through stop indication resulted in a 30-day suspension but now it leads to automatic termination.

The fired crew members through their union have a right to appeal that through an arbitration process. Sometimes employees get their jobs back, depending on the facts of the case.

A friend who worked as a Class 1 locomotive engineer says it is easy to get fired on the railroad but hard to stay fired. It is that reality that NS is seeking to change or at least title the scales more to management’s advantage.

NS might not even expect this case to go to trial. Perhaps it will offer to drop the lawsuit if the crew members agree not to go to arbitration and/or agree not to work for NS again.

A union official quoted by Trains correctly expressed doubt as to whether the railroad could win the case. Lawsuits such as this are uncommon and few, if any, railroad employees could afford the judgment NS is seeking.

But NS sees something of greater value at stake. The union official interviewed by Trains said that the lawsuit sets a precedent. Yes, it does, and NS wants its employees to know that.

NS is not necessarily going to sue every employee who is involved in a collision or derailment.

It probably chose this case because it sees the facts as in its favor because it has hard evidence to show a clear violation of company rules.

Ensuring that operating crews follow the rules all of the time regardless of circumstances is what NS is seeking to achieve, even if it means filing a suit seeking money it knows it won’t ever collect.

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They Sky is Falling, The Sky is Falling. Well, Maybe Not

March 31, 2018

The sky is falling, the sky is falling.

Or so some railroad enthusiasts would have you believe in the wake of a report that Amtrak has decided to ban charters and special moves.

The policy change was announced by Amtrak CEO Richard Anderson in a memo to employees that was leaked to Trains magazine and also posted on railfan chat lists.

In tandem with that, owners of private passenger cars are reporting that Amtrak has been rejecting many requests to move passenger cars.

This particularly has affected car owners who store their cars in the middle of a route because Amtrak has decreed that it will not accept a private car at a station in which the scheduled dwell time is less than 30 minutes.

The implications of this policy change are, indeed, ominous.

It means that such longstanding traditions as the fall New River Train in West Virginia will end.

It means no more Amtrak fall foliage, railfan or rare mileage specials.

It means mainline steam moves are in jeopardy because they operate in cooperation with Amtrak and its liability insurance and use private passenger cars ferried by Amtrak.

It means private car owners who have sunk thousands of dollars into making and/or keeping their cars Amtrak compatible have few, if any, options to run their cars. Seeing a private passenger car or two on the back of an Amtrak train will become an even rarer sight.

Two groups representing private car owners, the American Association of Private Railroad Car Owners, and the Railroad Passenger Car Alliance have urged their members to contact public officials and opinion leaders to protest the policy change.

It is unclear how much effect that lobbying will have. Owning and operating a private railroad car is a rich man’s game.

Because they tend to be affluent, private car owners might have better political connections than the typical railroad enthusiast or passenger train advocate.

But it is unlikely that public officials will view the Amtrak policy change as a pressing matter of public interest.

Some might see it as rich boys throwing a tantrum because they can’t play with their toys.

Some passenger advocates have applauded Amtrak, which has sought to frame the change as an effort to improve the on-time performance of its trains.

Anderson’s memo referenced trains being delayed due to switching cars and described special moves as a distraction.

He also suggested that specials and hauling private cars hasn’t been all that profitable, but the memo was clumsily worded on this point.

When he wrote that the moves “failed to capture fully allocated profitable margins,” I wonder if he really meant “failed to cover their fully allocated costs.”

The latter was a term railroads used a lot in the 1960s when they wanted to discontinue passenger trains. Using that standard could make a train appear to be losing far more money than the “above the rail” standard which meant that a train earned enough revenue to cover its direct costs.

Some of what Anderson said in his memo few people would dispute. Who would be opposed to Amtrak running on time, operating safely, having clean passenger cars, providing friendly service and offering “great customer-facing technology?” Anderson would have you believe that running special trains are hindering Amtrak’s efforts to do those things.

There is likely more behind this policy change even if Anderson’s memo hints at what that might be when it speaks of focusing on Amtrak’s core mission.

Amid all of the chaff that I read on railfan chat list about the policy change was a thoughtful observation by someone who has seen Anderson use this playbook before.

The poster contended that when Anderson was CEO of Northwest Airlines, it was struggling financially and he discontinued most of the charter flights.

Northwest was devoting seven aircraft to this service, which accommodated professional sports teams among others. Anderson apparently feared that the liability if one of those charters had a catastrophe might wreck the airline.

But the move didn’t turn out to be permanent. After Anderson felt he had sufficiently turned things around the charters returned.

Northwest was later acquired by Delta Air Line, which Anderson also headed. Today Delta is one of the most prominent operators of charter flights for professional sports teams.

The Cleveland Cavaliers, for example, are a regular customer as are many NBA teams.

So the Amtrak policy change might not be permanent, although you never know. One of the first moves that former Amtrak president David Gunn made after taking office was to get the passenger carrier out of the business of hauling mail and express.

Gunn used some of the same arguments that Anderson made to justify banning special moves and charters.

That was more than a decade ago and Amtrak trains still don’t carry any mail. It sold its fleet of express cars.

Anderson may have philosophical reasons for banning special move, believing that Amtrak needs to do more to focus on its core mission.

Yet it is not clear if ending special moves was even his idea. He might have heard from field-level supervisors who have always disliked having to do something that is a non-standard operation.

And Anderson must answer to a board of directors and we don’t know what “direction” they have given him.

There is some thought that Class 1 railroads will follow Amtrak’s lead and impose even more stringent standards on the movement of passenger cars and passenger trains.

We’ve seen how the Wheeling & Lake Erie has banned all excursion trains and with a few limited exceptions won’t move passenger cars in ferry moves.

But I’m reminded of something that W&LE chief Larry Parsons said when I interviewed him for an article I did several years ago for Trains magazine.

The Wheeling had just lost some iron ore traffic and in asking him about it I used the word “forever” as in the business was lost forever.

Parsons responded that “forever is a very long time.”

Management changes and so do situations. People change their minds about how they view things. Some have described the Amtrak policy change as a work in progress and we haven’t heard the last word on the new policy.

Anderson’s memo left an opening for some special moves if they meet the railroad’s strategic goals. Those can be defined broadly or defined narrowly.

We are entering an era in which special moves and mainline steam will be rarer than they are now. But not necessarily nonexistent. Forever is, after all, a very long time.

Surprised, Not Surprised at Indy Light Rail Ban Repeal Failure

March 14, 2018

I was surprised that a bill to repeal an Indiana law banning the spending of public money on a light rail system in Indianapolis sailed through the House of Representatives of the Hoosier State and not surprised that it died in the Senate.

Like all large urban areas, Indianapolis is surrounded by affluent suburbs that like being associated with the core city’s cultural and entertainment offerings but want to distance themselves from its crime and social pathologies.

Representing those suburbs are conservative and mostly Republican lawmakers who tend not to favor very much public transportation.

They are amendable to certain boutique public transportation such as transporting the elderly to medical appointments, but oppose large-scale regional public transportation initiatives.

In 2014 they flexed their muscles by adopting the light rail ban as part of a mass transit funding agreement that gave Indianapolis and surrounding counties the ability to raise income taxes for public transit by means of a ballot initiative.

Then Amazon put Indianapolis on its list of 20 finalists for its second headquarters.

The finalists were chosen from 238 applicants chasing the $5 billion project that Amazon has said will result in 50,000 well-paying jobs.

That gave Rep. Justin Moed, an Indianapolis Democrat, an opening.

One criterion that Amazon wants is access to good public transportation. That is not a strong suit of Indianapolis or, for that matter, Columbus, which also made the list of Amazon finalists.

Neither city has a rail public transportation system or even a shovel-ready plan. Moed apparently thought Amazon might notice the light rail ban in Indiana law.

The House overwhelmingly approved his bill repealing the ban but then Senate Republicans decided not to vote on the bill.

News accounts cited a proposed amendment by Senator Mike Delph, a Carmel Republican, which would have required Indianapolis to prove that public transit money isn’t needed to fill potholes.

That was a ruse to kill the bill. Delph doesn’t care about potholes on Indianapolis streets except those he drives over to get to and from the Statehouse.

Carmel is located in a cluster of affluent suburbs in Hamilton County northeast of Indianapolis. It’s the same region that made news last year when the mayor of Fishers proposed abandoning a former Nickel Plate Road branch line that in recent years had hosted the Indiana Fairtrain run by the Indiana Transportation Museum.

The mayor wants to convert the railroad right of way into a hiking and biking trail.

Many who live in such affluent places are not opposed to railroads per se. They just want them to run somewhere else.

They also have the education, the money and the political clout to do something about their NIMBY views.

The effort to repeal the light rail ban in Indianapolis reminded me of a comment I once heard about why efforts to transform the former Erie railroad line from Cleveland to Aurora into commuter rail have languished.

“Trains run both ways,” he said. Some who live in suburbs far from urban centers fear that criminals and other socially undesirable types will ride the trains to their pristine suburbs and cause all sorts of mischief and criminal activity.

However, the reasons why lawmakers from suburban and rural areas look askance at public transportation, particularly rail transit, are multifaceted.

Transportation is not something that legislators talk about much other than, maybe, highway development.

Yes, there is an anti-rail bias at work with some saying rail transportation is the technology and transportation mode of your grandparents.

Senate President Pro Tempore David Long, R-Fort Wayne, told The Indianapolis Star that light rail “feels like it’s just going to be a dinosaur technology in the very near future.”

Long, who denied that the proposed Delph amendment killed the light rail repeal bill, also said any light rail project was likely to be a boondoggle. By that he meant that it would require continuous public funding of its operating costs.

That goes to the heart of much of the conservative opposition to public transportation, including funding of intercity rail service. They don’t like spending public money in an open-ended manner on things they believe are not the responsibility of government at any level.

Being proponents of small government, they do not believe, generally, that public funding should not be used to pay operating expenses for any transportation endeavor.

In their view those who use transportation should shoulder all of its operating expenses whether it is a train, plane, bus or livery car.

Yet many conservatives in Florida fiercely fought against Brightline, a privately funded intercity rail service that uses tracks owned by a private freight carrier.

So the opposition is rooted in something other than ideology about the role of government in public affairs. There are some underlying prejudices at work that rail opponents don’t want to discuss.

Many conservative lawmakers are highly sympathetic to the highway lobby. They recognize there is only so much money to be had for transportation spending and don’t want any of that money diverted toward other modes of transportation.

Indiana Senate President Long insisted to reporters that the opposition in the Senate GOP caucus to the light rail ban repeal was not partisan.

There is some truth to that. The Senate sponsor of the light rail repeal ban was a Republican who is the chairman of the Marion County Republican party. Indianapolis is located in Marion County.

The interests of Marion County and its surrounding counties don’t always coincide. Merritt also has clashed with Indianapolis Mayor Joe Hogsett, a Democrat, over the condition of Indy’s streets.

The GOP caucus was split on the light rail ban repeal didn’t want to bare that in a public fight. Majority parties these days don’t like to have to depend on votes from the minority party in their chamber to win approval of legislation.

Yet another complication was that Marion County voters had approved a 2016 public transit ballot initiative to create three bus rapid transit routes, not unlike the BRT route in Cleveland connecting downtown with University Circle via Euclid Avenue.

There is some thought that many voters favored the initiative because its backers said the money would not be used for light rail.

Lifting the light rail ban had some support in the business community. The Indianapolis Chamber of Commerce said the city needs all mass transit options on the table if it is to attract major new employers such as Amazon.

Even if the light rail ban had been lifted, there was no assurance that a light rail line would have been developed.

Fights such as the one that recently played out in Indianapolis have occurred in every city in the country where rail transit has been proposed.

Rail transit proponents have won a few skirmishes and seen streetcar and light rail lines develop in some seemingly unlikely places.

Yet the United States remains a highway oriented transportation culture and there are few signs that that is about to change. The opposition to rail transit and expansive regional public transportation is too entrenched.

Reading Between the Lines of How CSX Management Projects Itself to the World

March 7, 2018

CSX executives revealed last week at long last their vision for their company. They were supposed to have done it last fall, but three top-ranking vice presidents left during a management shakeup. Then CEO E. Hunter Harrison died.

But things have now stabilized. CEO James M. Foote and his management team put forth the most optimistic and rosy scenarios that they dared to spin.

Hovering over those presentations in New York City, though was Harrison.

A year ago Harrison and the hedge fund Mantle Ridge were closing in on their takeover of CSX, a feat they pulled off with a relatively small amount of money and in a short amount of time.

Harrison had great plans for the hidebound CSX. He brought the precision scheduled railroading model that he had implemented on the Illinois Central and then at Canadian National and Canadian Pacific.

Foote and his team went to great lengths to show that Harrison’s vision is their vision, too. Harrison received the reverence normally reserved for a company founder or elder statesman of much longer tenure.

Harrison had a lot of work to do. Independent railroad industry analyst Tony Hatch and Trains magazine columnist Fred Frailey have described CSX as long hindered by adherence to the practices of its  predecessor railroads, meaning it was  averse to change and rather bureaucratic.

Frailey said ormer CEO John Snow as uninspiring and his successor, Michael Ward, sought to move CSX forward but was bewildered as to how to get it out of its rut.

No wonder the CSX board of directors gave Harrison a chance even if, to quote his successor Foote, Harrison engaged in “carpet bombing” the railroad with fast-paced changes that led to widespread service failures that drew the ire of shippers and the attention of the U.S. Surface Transportation Board.

But all of that is behind CSX now, or so management wanted those attending or watching the presentations in New York to believe.

Some have bought it. Writing in Progressive Railroading, Hatch quoted an  investor as saying this was the best CSX meeting he had seen in a decade of watching the railroad.

The current management team laid out  goal of a 60 percent operating ratio by 2020, described a new intermodal business strategy, and pointed to the huge buckets of money it will fill from sales of unneeded real estate and rail lines.

Having a plan and making it work are not always, though, the same thing. Truth is every railroad company talks about growing traffic and all of them are facing challenges finding it.

Hatch said that if CSX is to increase its carload and intermodal business it will have to provide consistent and improving service.

Frailey didn’t comment directly on the New York conference, instead referring readers to articles written by the magazine’s writer covering the story, Bill Stephens.

Those articles, Frailey correctly observed, did well in showing how CSX seeks to project itself to the world.

Yet Frailey said some industry observers with whom he regularly corresponds have been debating the endgame that CSX management is seeking and it isn’t necessarily to grow traffic and become North America’s best railroad.

Those observers think CSX plans to eventually liquidate the company.

Frailey said the case for liquidation goes as follows: “The railroad borrows money to buy back an astounding $5 billion of stock, making every dollar of profit worth more to shareholders who stick around because the same amount of earnings is spread among many fewer shares . . . Freight rates are being jacked up to cover fully allocated costs, a direction I’m told only Union Pacific has gone up to now—milk the cow until it collapses, the saying goes. Its carload business has been steadily eroding since the turn of the century.”

The veteran journalist who has written about railroads since the 1960s said  he understands that CSX has reduced its marketing staff to a hard core operation.

That hardly sounds like a railroad that will be able to aggressively go to find new business. Perhaps CSX expects that by offering a superior product that shippers will come to it begging to do business.

The word “liquidate” that some of Frailey’s contacts used to describe CSX’s endgame is unfortunate because it conjures up selling assets and going away.

Perhaps a better description might have been to break up the railroad much as Illinois Central Gulf slimmed down in the 1970s and 1980s until it emerged as largely a Chicago-New Orleans core with a few arteries connecting to it.

Yes, some rail lines were abandoned, but most wound up in the hands of short line and regional railroads.

It was that railroad on which Harrison first implemented his precision scheduled railroading model.

Frailey isn’t sure what to make of what CSX is doing, but doesn’t believe Foote isn’t prepared to do the job thrust upon him following Harrison’s death.

Foote was in the right place at the right time and for now CSX and its shareholders will let him sit at the throttle and take the EHH train a little further down the line. But it is Harrison’s train orders that Foote is following and not those Foote wrote himself.

Shareholders can be a fickle lot. Just this week Canadian National, a railroad described in most circles as highly successful, pushed out CEO Luc Jobin after the company hit a rough patch.

What I see happening at CSX is that management is trying to walk a fine line between pleasing investors and shippers and keeping at bay a few interested bystanders who have the ability to make life easy or miserable for a company.

Cost cutting and asset sales will only take a company so far in that endeavor. Of course growing traffic makes everyone happy, but is CSX prepared to spend the time and money needed to make that happen. It is so much easier to sell property and lightly used rail routes.

In theory, a company exists to serve its customers because without them you don’t have a company. But theory also says that a company exists to make money for its shareholders.

The two objectives are not necessarily in opposition. Arguably, you can’t make money for shareholders unless you provide a product or service that someone is willing to buy.

But you can’t improve your product or seek to sell more of it without spending money on that, too.

Management has always existed to reconcile those sometimes opposing forces.

The history of the railroad industry is filled with tales of financiers milking companies and leaving them behind. There is reason to believe that CSX is tilting toward enabling the financiers to make a financial killing before moving on to something else.

To quote a line from the John Mellencamp song Peaceful World, “These are just words and words are OK. It’s what you do and not what you say, if you’re not part of the future then get out of the way.”

We will know in time what the future of CSX is but take with some healthy skepticism how CSX projects that to the world.

The Politics of PTC

February 21, 2018

Much has been said during the past two months about positive train control, but one of the more interesting comments came from Bennett Levin, the owner of a pair of E8A locomotives painted in the livery of the Pennsylvania Railroad.

Levin told Trains magazine that he couldn’t afford the six-figure cost per unit to outfit his locomotives with a PTC device. Instead, he’ll probably sideline them.

Referring to a 2008 federal law that mandates PTC on many railroad routes, Levin described the requirement as “unfortunate and untimely” and suggested the requirement might not exist had a Metrolink commuter train engineer been doing his job instead of texting on his cell phone in the minutes before his train ran past a red signal and crashed head-on with a Union Pacific freight train in Los Angeles, an incident that left 25 dead.

Levin’s comments probably reflect the thinking of others in the railroad industry but it would not be good public relations, let alone good politics, for them to make similar comments.

The Association of American Railroads recently held a press briefing in which it fired an opening salvo on behalf of railroads likely to ask the Federal Railroad Administration for an extension of time to meet the PTC mandate.

The AAR expressed confidence that U.S. railroads will comply with the PTC deadline of
Dec. 31, but an AAR official later said it won’t be known until summer which railroads might seek an extension of time to install PTC.

Those requests for more time might not sit well with some at the FRA, the U.S. Department of Transportation or Congress.

The railroad trade group also was laying the groundwork for future fights concerning PTC by expressing concern that the FRA will micromanage PTC systems once they are in place and operating.

That concern is not without merit given the statements that have been coming virtually nonstop from the National Transportation Safety Board and Congress in the wake of three high profile accidents since December involving Amtrak trains that resulted in fatalities.

In two of those, the NTSB has said that had PTC been operating at the time, the accident likely would have been avoided.

Given what we know about the facts of those three Amtrak collisions, human error was at the root of all of them. The implication is that in at least two of those accidents technology could have overcome human foibles.

Perhaps, but the AAR also made the point during that news conference that PTC is not the magic bullet for rail safety that many are making it out to be. AAR Senior Vice President for Safety and Operations Mike Rush cited a 2005 study that found only 4 percent of mainline accidents could have been prevented by PTC.

Of course safety is paramount advocates will counter that one life lost is one too many.

It is hard to argue against that, yet far more people lose their lives in highway accidents than are killed in railroad accidents and we don’t see a movement to install some form of PTC on highways, the move toward self-driving vehicles notwithstanding.

Most highway fatalities don’t make the national news, only the local news and even then they might not get that much attention, let alone the type of lasting attention needed to prompt policy makers into action.

Society has become numbed by the high number of road fatalities, but expects the government to do something about accidents involving public transportation.

Make no mistake about it. Implementation of PTC is as much a political issue as it is a safety issue.

People who own railroad companies and, for that matter, airline companies, trucking companies, water transportation companies, bus companies, et. al, don’t like being told how to run their business. They don’t like being pushed around by government regulators and policy makers.

During the AAR news conference, Rush tried to make the case that PTC would likely have come about anyway without the government mandate.

He said the industry has spent decades researching PTC and conducted trials, one of which ended in failure.

But all of that got short circuited by the 2008 government mandate. Since then, the railroad industry has invested $10 billion in PTC and figures to spend millions if not billions more in maintaining it.

We’ll never know what the railroad industry would have come up with had it been left to its own devices in developing PTC. Nor will we ever know how many railroads would have installed PTC voluntarily on how much of their networks.

What we do know is that so long as public transportation conveyances continue to have accidents that leave people dead, there will continue to be government regulators and private citizen lobby groups trying to push the transportation industry around by telling them what to do to make travel safer.

50 Years Ago Today Came Penn Central

February 1, 2018

A fading Penn Central herald atop a Pennsylvania Railroad keystone adorns a covered hopper car on the Wheeling & Lake Erie in Monroeville, Ohio. Some former PC rolling stock is still in active service.

It was 50 years ago today that the Pennsylvania Railroad and the New York Central System merged to form Penn Central Transportation Company.

We all know that the merger turned out badly. There were clashes between the cultures of the two one-time largest railroads in the nation, leading to the terms “red team” and “green team.”

Five decades later, some railfans are still fighting the red-green “civil war” even if in jest.

Both the Pennsy and the Central had been struggling financially for years and the result was an even larger railroad that continued to struggle.

Just over four years later, Penn Central sought bankruptcy protection. It was at the time the largest corporate failure in history but has since been eclipsed by the Enron bankruptcy of 2001. A little over eight years after it began, Penn Central the railroad was gone.

We also remember how the PC bankruptcy played a role in nudging Congress into creating the National Railroad Passenger Corporation, a.k.a. as Amtrak; had a role to play in the creation of the Consolidated Rail Corporation, a.k.a. as Conrail; and helped set up passage of the Staggers Act of 1980, which was a major step in transforming how railroads in the United States are regulated by the federal and state governments.

I’m oversimplifying things here because the creation of Amtrak, Conrail and deregulation were complex processes that can’t be traced in any one single event.

But Penn Central played an out-sized role in all of those because of the sheer magnitude of its failure.

Much has been written about the woes of Penn Central, including three books and countless articles.

As I pondered the legacy of PC, I was reminded of a conversation I had with a fellow Akron Railroad Club member at a train show a couple of years ago.

Noting that there is a Penn Central Historical Society, my fellow ARRC member wondered why anyone would be interested in celebrating a failed railroad.

In its day, Penn Central was known for bad tracks; frequent derailments, including trains that derailed while standing still; lost shipments; hostility toward passenger service and financial losses.

I don’t belong to the PC historical group, but I can explain why a “failed” railroad would have appeal to some.

Penn Central came about during a time when many people were coming of age and starting to learn about railroad operations in some detail.

Although the problems that Penn Central had have been magnified due to its bankruptcy, it was far from the only railroad in the late 1960s and early 1970s that was struggling. Indeed Conrail grew out of the ashes of several bankrupt railroads.

Arguably, Penn Central and all of it problems needed to happen for America’s railroads to make the transition from a highly regulated era to one of relative economic freedom.

Of course, that meant that dozens of flags had to fall and thousands of miles of track had to be pulled up. Thousands of people would lose their railroading careers.

The railroad network of the late 1960s was not economically sustainable. The manufacturing economy of the Midwest and Northeast was crumbling and railroads were suffering with it. There was too much railroad infrastructure for the business to be had.

This is not to say that the industry was without fault in bringing about its own struggles. But it’s a complex story involving a multitude of factors.

We can always speculate about how things might have been different had Penn Central been given the freedom from government regulation that Conrail enjoyed.

Some of the route rationalizations that Conrail was able to pull off had been objectives that Penn Central sought to achieve, but was thwarted by the regulatory structure at the time.

The political climate in which Penn Central was created was not conducive to implementing those grand plans.

As bad as Penn Central was, I find myself at times looking back at it with a certain nostalgic longing.

I would not want to see railroads operate today as Penn Central did, but time has a way of putting things into perspective. Penn Central was the last gasp of railroading as our parents’ and grandparents’ generations knew it when they came of age. My generation was able to taste only some of it.

Every generation has one or more things that it laments having lost from its youth whether it is steam locomotives, a favorite railroad or a rail line that you grew up with.

And so it was with Penn Central. It was once a major presence in my life and then like so many other things it was taken away. These losses tend to have greater effect on you during your young adult years. They also tend to stay with you in ways that later losses in life do not.

Some might say “good riddance” about the demise of Penn Central, but I find it a compelling story and one worth remembering and even celebrating.

CSX Will, First and Foremost, Protect Its Own Financial Interests in Line Sales or Leases

January 23, 2018

Many years ago when I was a college student intern at the Illinois Department of Transportation, one of my co-workers in the Bureau of Planning schooled me on what CSX is seeking to do today.

The Illinois Central Gulf Railroad was slimming down its route network much as CSX is doing today.

ICG was seeking to abandon a web of former Illinois Central Railroad branch lines in Illinois whose primary commodity handled was grain.

My fellow planner quoted officials of the ICG as saying “we’re going to get that grain one way or another.”

Even if the grain was taken away from those scores of small town grain elevators that dotted the Illinois prairie like rural skyscrapers by truck rather than in covered hopper rail cars, it had a long way to go to reach its final destination.

Those trucks leaving the elevators were not bound for a port on the Gulf of Mexico or the Mississippi or Ohio rivers.

The grain traveled by truck a relatively short distance to a regional grain facility such as the one operated by Cargil in Tuscola, Illinois, where unit trains were made up to move the grain onward toward its final destination, whether for export or domestic use.

ICG would continue to make good money hauling grain while getting rid of the expense of maintaining hundreds of miles of branch lines and paying union scales wages and benefits to the railroaders whose trains ran once a day or less on those branches.

The routes that CSX is seeking to lease or sell are not necessarily 25-mph or 10-mph branch lines in need of millions of dollars of rebuilding as was the case with many of the lines the ICG abandoned in the 1970s. Some of them, like the New Castle Sub, are significant mainlines handling much overhead traffic.

But they do cost a sizable amount of money to maintain and the CSX employees who operate the trains on those routes make Class 1 union scale wages and benefits. CSX would rather see that money wind up in the pockets of its shareholders or used for other purposes, such as buying back its stock.

Like the ICG in the 1970s, CSX will do all that it can to keep most of the business generated by its “surplus” routes while not having to pay to maintain or operate them.

CSX doesn’t do much business in Akron. What business there is could be handled by the Wheeling & Lake Erie, which already has a considerable presence in town.

But the Wheeling won’t be hauling most of that freight to its final destination. How that freight reaches its destination will come down to how those sale or lease contracts are written.

The ICG also spun off most of the former Gulf, Mobile & Ohio mainline between Chicago and St. Louis to an upstart known as the Chicago, Missouri & Western.

ICG was careful to keep for itself the more financially attractive elements of the route, including ownership and operation of the track between Chicago and Joliet, Illinois.

CM&W quickly found the traffic it received from the ICG was not what it thought it had been promised.

CM&W had overpaid for the ex-GM&O and couldn’t earn enough to pay its debts and get back its investment.

There are, of course, numerous success stories in which a short line or regional leased or purchased a route from a Class 1 and was able to make a go of it due to lower labor costs and more attentive customer relations policies.

Such was the case when the late Jerry Jacobson leased some track from CSX for his Ohio Central System.

It remains to be seen how much, if any, of the New Castle Sub that CSX will be willing to part with.

Aside from whatever business there is to be had in Akron, there is considerable auto rack business at Lordstown and some business in the Youngstown area.

CSX is not going to put itself in a position where it is likely to lose most of that business to Norfolk Southern for the long haul.

We’ve seen this game played before. Route rationalization has been the modus operandi of Class 1 railroads for years. That is how the modern W&LE got started. We’re about to see it play out again.

Round and Round and Round the Toll Hike Wheel Goes. When It Will Finally Stop Nobody Knows

January 6, 2018

You might think that every penny that you pay to use a toll road would go toward the maintenance and operation of that road, including administrative expenses.

Maybe at one time it worked that way, but no longer. A toll road is an attractive cash cow to be milked by political officials for their pet projects or to pay expenses for which public funding is in short supply.

I’m not saying this is right, just that it is one of the many games that policy makers play in the budget making process.

For the 10th consecutive year tolls on the Pennsylvania Turnpike are increasing and a case could be made that the size of the hike is not entirely the doing of the Pennsylvania Turnpike Commission.

By law the Commission pays $450 million every year to the Pennsylvania Department of Transportation, which uses that money to help fund public transportation as well as highway and bridge projects not involving the turnpike.

The Ohio Turnpike and Infrastructure Commission also diverts toll revenue to uses that do not directly involve the turnpike.

The game involves raiding pots of reliable and considerable revenue to fund programs tangentially related to the source of that revenue that are hard-pressed to pay for themselves.

It is all the better if much of the revenue from those pots comes from those who can’t vote against those doing the raiding.

Here is one example of how it works. Back in 2013, the Ohio Turnpike Commission sold $1 billion in bonds for capital improvements, agreeing to set aside $930 million of the proceeds to fund 10 transportation projects in Northern Ohio that do not directly involve the turnpike.

One of those is the Opportunity Corridor, a boulevard linking East 55th Street and University Circle in Cleveland.

Portions of that project have included upgrading facilities of the Greater Cleveland Regional
Transit Authority. The transportation elements of the Opportunity Corridor notwithstanding, it is an economic development project seeking to revive financially distressed Cleveland neighborhoods.

A Cleveland area resident sued the Turnpike Commission in federal court, arguing that diverting toll money for non-toll road projects violated state and federal law.

A judge disagreed, saying there is a “nexus” between the turnpike and other transportation projects because turnpike users will benefit from those projects.

Maybe so, yet I doubt that many New Jersey residents, for example, traveling to Chicago via the Ohio Turnpike will ever use the Opportunity Corridor’s spiffy boulevard.

For that matter, many users of the Pennsylvania Turnpike will never use public transportation in the Keystone State. But they are paying for it anyway, often without knowing it.

This is not to say that endeavors such as the Opportunity Corridor or public transportation are without merit and don’t deserve public funding.

Nor is it to say that the policy makers who created the Opportunity Corridor or decided that public transportation users should be subsidized by taxpayers who don’t use that service made poor decisions.

It is to wonder how long the annual toll increase merry-go-round can continue spinning before it breaks.

Pennsylvania Auditor General Eugene DePasquale is wondering the same thing and has launched a review of the turnpike commission.

I’m not optimistic that any report that DePasquale issues is going to result in tolls being lowered on the turnpike let alone stopping the onward march of annual toll hikes.

The mandate that the Pennsylvania Turnpike underwrite some responsibilities of PennDOT is not the sole cause of that 6 percent hike that takes effect on Sunday.

At best that mandate simply adds to the size of the toll hike the turnpike probably would have imposed anyway even if every dime of it were to go directly to the turnpike.

The policy makers may pay lip service to DePasquale’s report and shave a few nickels and dimes here and there, but the allure of the cash cow and its daily torrent of toll-paying motorists is too irresistible to ignore as an answer to funding needs and the desires of policy makers without raising income taxes and sales taxes.

They’re simply raiding your wallet in other ways, including building automatic fee increases into toll roads every year in the belief that as much as you might gripe about the tolls you’ll continue to pay them because taking the toll road is more convenient than driving miles out of your way on two-lane highways without toll booths but which come with a multitude of traffic signals, lower speed limits and small town speed traps.

It is hard to love a highway that charges $7 upfront when you drive directly from the Ohio Turnpike onto the Pennsylvania Turnpike. Tomorrow it will cost you 45 cents more to enter Pennsylvania.

The Ohio Turnpike is also becoming more expensive. Back in 2013, the Turnpike Commission approved 2.7 percent toll hikes every year through 2023. It has learned well from its neighbor to the east.

Crystal Ball Look at 2018 and Railroads

January 3, 2018

With a new year upon us, it’s time to look ahead to what 2018 might bring in the railroad industry. Such predictions are fraught with peril given that unexpected developments can occur at any time that dramatically changes the trajectory of the industry or its individual components.

A year ago at this time we thought E. Hunter Harrison was living out his days as CEO of Canadian Pacific. Few knew that he was plotting with a hedge fund to take over CSX.

Even fewer knew that Harrison was in his final days of overseeing any railroad and would die before the year ended.

With that in mind I press ahead in reviewing four stories to watch in 2018.

What now for CSX? The patriarch of precision scheduled railroading left before his model could be fully implemented.

Look for CSX to continue the PSR model under new CEO James M. Foote, although with some modifications.

Much of the early months of 2018 will see Foote finding his way at CSX while assuring investors that he was a wise choice to replace Harrison.

Industry analysts have pointed out that Foote is thin in operating experience. Much of his industry time has been spent in marketing and sales.

That could turn out to be a good thing for CSX because customer relations was not Harrison’s strong suit. He was an old school operating man who wanted to dictate terms to shippers not the other way around.

Look for CSX to appoint an operations vice president so that Foote can focus on what he knows best.

Both Canadian National and CP have done quite well post-Harrison. Will the same be true for CSX? Perhaps, but if that is the case it will be due to Harrison having laid the foundation not from having built the house as was the case at CN and CP.

What now for Amtrak? Richard Anderson is firmly in control of the nation’s rail passenger carrier with Charles “Wick” Moorman having retired.

Anderson, the former CEO at Delta Air Lines, has hired a supporting team that includes former airline executives. It remains to be seen what that means.

These airline executives cut their teeth during the airline deregulation era when airlines learned ways to squeeze every last dollar out of passengers through such things as baggage fees and seat assignment fees, among others.

Remember the last time that an airline served you a not meal in coach as part of your fare? Yeah, it’s been a while.

Anderson won’t necessarily remake Amtrak in that model but look for him to move in that direction.

The name of the game will be maximizing revenue yield – something Amtrak has already been doing – as the carrier seeks to recover even more of its expenses from the fare box.

Anderson will have his hands full this year attending to matters that grabbed a disproportionate number of headlines in 2017. This includes the rebuilding of New York’s Penn Station and dealing with the aftermath of the derailment of a Cascades Service train in Washington State.

Much of the latter has focused on the fact that positive train control was not yet in operation on the route. Questions are being raised about the adequacy of training of Amtrak operating employees and the railroad’s safety culture.

These matters will continue to attract attention in 2018 and take up much of Anderson’s time.

Rail passenger advocates in places such as Ohio will continue to be disappointed in Amtrak in 2018. But that is nothing new.

Little, if any, progress will be made in terms of route expansion, new equipment for long-distance trains or expanding the frequency of such tri-weekly services as the Chicago-Washington Cardinal.

Perhaps the best that can be hoped for is that the aging Superliners will get a new interior look starting later in the year.

Will Railroads Make the PTC Deadline? The last day of 2018 is the deadline for the railroad industry to implement positive train control systems on routes that handle passengers and/or carry hazardous cargo. The deadline has been moved once already.

The Federal Railroad Administration has warned that waivers won’t be issued again, but that was during a different administration.

The Trump administration might be far more sympathetic to railroad industry pleas for a little more time due to the expense and complexity of PTC systems.

Some railroads will make the deadline, but others are going to be cutting it close.

Will the Trump Infrastructure Plan See the Light of Day? Candidate Donald Trump liked to talk about his big plans to revamp the nation’s infrastructure. President Donald Trump has barely mentioned it other than to pay it lip service on occasion.

The administration has been tight lipped about the scope of the plan other than a few broad details, such as $200 billion in federal funds will be used to leverage $1 trillion worth of infrastructure improvements.

Supposedly, the infrastructure plan was being held in abeyance until Congress passed a tax bill, which it did in late December.

In theory, an infrastructure improvement plan should have bi-partisan support. But in a hyper partisan environment during a midterm election year bi-partisan support might be hard to come by. Political hardball will be the rule.

There remains the question of how much the railroad industry would benefit from an infrastructure plan once or even if it is implemented. Few rail infrastructure plans come with a private developer other than than the railroad itself to provide matching funds.

Passenger rail should be a prime beneficiary of an infrastructure plan, but given the current political climate it might find little to feed on except for a few token crumbs that will be eaten by Northeast Corridor infrastructure needs, of which there are many.

Freight railroads might fare a little better in getting funds for some projects, e.g., enlarging tunnels or replacing bridges that they agree to help fund.

But don’t be surprised if the infrastructure plan winds up benefiting highways and even some areas that only a strained definition of infrastructure would incorporate, e.g., a veteran’s hospital. It will hinge on how the terms of the plan are written.

A lot of hungry government agencies and private companies are going to be looking for a slice of the infrastructure pie and might provide tortuous explanations as to how their project constitutes infrastructure.

I’m reminded of that famous response from bank robber Willie Sutton in the Saturday Evening Post as to why he robbed banks: “I rob banks because that’s where the money is.”

The infrastructure plan might make available money not available otherwise so there are going to be a lot of hand out seeking a part of it.

Conservatives in Congress will not necessarily offer automatic support for an infrastructure plan, which they might fame as a stimulus plan. That would remind them too much of something they despised during the early years of the Obama administration.

And conservatives absolutely, positively dislike spending federal money on passenger rail. They are not all that more supportive of public transportation even when it uses rubber tires on asphalt and concrete surfaces.

Harrison’s CSX Legacy Gets an Incomplete

December 17, 2017

Shortly after I learned on Saturday afternoon about the death of CSX CEO E. Hunter Harrison, I logged into Trainorders.com to get a sense of how railfans were reacting to the news.

As I expected, many, although not all, posters wrote harsh, bitter and even over the top comments along the lines of “good riddance.”

A poster who goes by the screen name Darkcloud wrote, in part, “While it might be sad for his family, he ruined a lot of lives of rail workers who didn’t have the safety net of wealth to fall back on that he and his family do. Good men with good records fired under false pretenses or minor errors. Fired to ‘send a message’ or to save a few more dollars to pay for [the] obscene salary he demanded when already a set for life multi-millionaire.”

The business press by contrast offered a more gentile and longer view of Harrison’s passing.

Typical of those accounts was one published at Bloomberg.com that described Harrison as a turnaround chief executive officer.

“By relying on a strategy of cutting costs and implementing procedures to make all parts of the operation more efficient, Harrison transformed Canadian Pacific Railway Ltd., Canadian National Railways Co. and Illinois Central Corp. into rail industry leaders. His reputation among analysts and investors was so strong that CSX shares jumped 23 percent on a single day in January 2017 when reports emerged that Harrison was in talks to take the helm,” Bloomberg reporter Frederic Tomesco wrote.

Can these disparate points of view be reconciled? Yes, if you keep in mind that how you view Ewing Hunter Harrison is shaped by the angle from which you view him.

History books are more likely to portray Harrison in the manner that Bloomberg did than with the emotionally wrought language often employed on chat lists.

And yet both speak to the same point. Harrison was a controversial but hard to ignore figure revered on Wall Street and respected by business writers and railroad trade journals, but often loathed by many who worked on his railroads.

There is no denying that Harrison will be remembered for his concept of precision scheduled railroading that he honed on the IC and then took to CN, CP and CSX.

There also is no denying that the tools that Harrison used to make his railroads more efficient included reducing payroll and demanding in no uncertain terms that workers and manager do things his way.

He lived by the credo of doing more with less; that meant fewer employees and assets, and pushing to get a little more out of both than his predecessors had done.

“Run a tight ship, and you can expect a reasonable return; manage it badly, and the sheer weight of assets will sink you,” Harrison wrote in his 2005 book How We Work and Why: Running a Precision Railroad

Harrison sought to frame himself as concerned with the welfare of his railroad’s employees and even hinted that he was pro labor. Yet at CP he ordered mid-level managers to learn how to operate trains in the event that the unions went on strike.

Likewise, Harrison sought to frame what he was doing at CSX as in the best interests of the railroad’s shippers even as many of those shippers flooded the U.S. Surface Transportation Board with complaints about shoddy service.

CSX acknowledged having service issues during the transition to the precision scheduled railroading model.

But Harrison was an old school manager who saw himself as being in the railroading business and not necessarily the transportation business, a viewpoint that was not unique to him.

He would never accept the premise of that statement, but even by his own words, Harrison acknowledged that CSX was trying to get shippers to change their behavior rather than the other way around.

A few weeks ago he dismissed shipper complaints as long-standing efforts by shipper trade groups to get the federal government to impose regulations on railroads.

This spoke to a paternalistic bent of “I know what is best for you” that no doubt irritated some CSX customers. What is best for shippers is not always what is best for CSX and vice versa.

Of late, Harrison and CSX executives had been touting the improvements that the railroad has made in such metrics as average train speed and dwell time of cars in classification yards.

Some of Harrison’s critics and even his admirers have wondered if precision scheduled railroading could work at CSX with its labyrinth route network and more complex mix of traffic than IC, CN or CP.

We’ll never fully know the answer to that question because Harrison won’t be around to see the process through. His CSX legacy is and always will be incomplete.

He led CSX for less than a year and although the surviving managers are likely to continue the precision scheduled railroading model, they won’t have Harrison around to lean on for guidance, leadership and inspiration.

Whatever successes or failures that CSX has in the coming months and years will be on those managers and not Harrison even if he established the direction that the railroad is going.

I’ve always believed that our society places too much emphasis on the efforts of individual presidents and chief executive officers.

We see them as larger than life figures and tend to attribute to them an organization’s good and bad behavior at all levels.

To be sure, the man or woman at the top sets a tone that percolates downward through the top managers that he or she hired and oversees. Some CEO’s do better at that than others.

Yet the focus on personality can overlook the context in which the top executive operates and might attribute to personality what is actually the work of culture and external forces and how an organization responds to those.

Yes, the personality, talent and skill of the CEO play a role in organizational behavior, but Class 1 railroads are complex organizations that engage in multiple juggling acts to seek to satisfy multiple masters.

Whether you thought Harrison did that well or not depends on your perspective as the commentary about his passing well illustrates. But critics and admirers both can agree that he was a towering figure in the railroad industry who stood over many of his peers and will be remembered for much longer than many of them because of his efforts to be a transformative leader.