Posts Tagged ‘Railway Age’

Harrison Eyes Taking Over CSX as CEO

January 19, 2017

E. Hunter Harrison is back in the takeover game and setting his sights on wresting away control of CSX from current CEO Michael Ward.

E. Hunter Harrison

E. Hunter Harrison

The Wall Street Journal reported this week that Harrison, who fought an unsuccessful bid in early 2016 to acquire Norfolk Southern, has teamed up with Paul Hilal, a principal at hedge fund Mantle Ridge, to prod CSX to make a management change.

Hilal was formerly with Pershing Square Capital. The latter is run by William Ackman, who played a key role in getting Harrison named CEO at Canadian Pacific in 2012 after winning a proxy fight.

Harrison, 72, this week said he is severing his ties with CP before his official retirement from the company.

He will be succeeded at CP by Keith Creel, effective Jan. 31. In the interim, Harrison is reported to be on vacation and Creel will assume Harrison’s duties.

Harrison has agreed to sell all of his shares of CP stock by May 31 and the CP board of directors agreed to provide him with a limited waiver of a non-compete clause to which he would otherwise be subjected.

In return for waiving the non-compete clause, Harrison will forgo all roles he had with CP and give up substantially all benefits and perquisites to which he was entitled. The total value of those forfeited benefits is $89 million.

The CSX takeover attempt would be Harrison’s second. CSX rejected his overtures in 2014.

The WSJ reported that CP will not participate in any effort that Harrison makes to gain control of CSX.

Hilal left Pershing Square last year to start his own activist fund, which has raised more than $1 billion for a single investment, according to the WSJ. Those investors reportedly have committed to keeping money in the fund for five years.

Harrison became the CEO of CP after Ackman led a proxy fight that resulted in the ouster of CP CEO Fred Green.

If Harrison and Hilal follow that same script at CSX, they will seek to oust Ward, who has indicated he plans to retire in 2019.

Hilal was with Pershing Square at the time of the CP takeover and recruited Harrison, who had been CEO of Canadian National.

Railway Age magazine quoted Cowen and Company Managing Director Jason Seidl as observing, “Hunter left C$118 million in equity awards on the table, which indicates to us he still has a burning desire to run a railroad. His reputation of being the most sought after manager in the North American railroad industry could make it very difficult for CSX to refute Harrison’s desire to run its franchise.”

Seidl told Railway Age that a CSX takeover would differ from what Harrison attempted at NS because the latter involved a merger whereas the CSX gambit would be just a management switch.

Railway Age quoted an unnamed railroad industry analyst as predicting that if Harrison is able to become head of CSX a merger with CP will not likely be one of his first priorities.

The analyst said that Harrison could be expected to change the CSX engineering, train operations and capital investments plans that Ward’s management team has been implementing over the past year.

Given Harrison’s track record, the analyst expects that he would impose at CSX a more aggressive capital expenditure downsizing and reduce its labor force.

Harrison would not be likely to institute more aggressive marketing and selling promotions, but would oversee creating more discipline in CSX train operations.

There is Intermodal Business for Railroads to Pursue But They’ll Need to Be Smart to Get It

November 5, 2016

Railway Age magazine recently asked its experts to look into their crystal balls and predict the future of freight by rail in America.

train image2The consensus was that coal is not going to be the cash cow that it once was, crude oil might bounce back a little bit, automotive traffic will continue to cyclical and grain is profitable but seasonal.

The magazine’s experts said the railroads have done well in lowering their operating ratios through reducing costs and being more productive.

But trimming expenses will only take the industry so far and although the financial community is enthralled with the religion of cost cutting, it seldom is able to see beyond the next financial reporting period.

Comparing a railroad to a tree, the Railway Age analysis said that it may be that dead wood needs to be removed, but if a tree is to survive and thrive, it must grow.

So what will be the sources of this growth? Some analysts argue that it will be intermodal, including the type of short-haul business that railroads have traditionally ceded to trucks.

In the current intermodal market, some see short-haul business as having untapped potential if the industry keeps its pencils sharp and its costs low.

That means no $100 million terminals or expensive lifts. Trailers need to roll on and roll off as quickly as possible. It also means running short trains on precise schedules.

“In my humble opinion, short-haul intermodal (250 to 700 miles) represents the only opportunity in the near future for railroads to increase their traffic, said Steve Ditmeyer, who writes often for Railway Age. “And they only need to capture just a small fraction of the total short-haul truck traffic to experience a substantial traffic gain.”

Beyond intermodal growth, though, the railroad industry may need to learn to adapt to a challenging economy.

“My thesis beyond coal: We’re in a 2 percent-growth economy where there is less stuff moving than in a 3-4 percent economy,” said Railway Age Contributing Editor Roy Blanchard.

“Finished goods from corn pone to white goods are less in demand, so you need less raw material to meet what demand there is. Lower demand for finished goods equals fewer goods moving to market, and what goods are moving are moving by truckloads, not carloads, in amounts more fitting for smaller inventory loads. So, yes, it’s a freight recession, and the bloom is off the railroad renaissance.”

Blanchard said that pricing to what the traffic will bear has evolved into order-taking and pricing by computer model to maximize revenue and minimize cost.

Consultant Jim Blaze said the days are gone when rail intermodal growth will come at two to three times the rate of GDP growth.

Railway Age Profiles INRD Founder Tom Hoback

March 11, 2015

He is described as a visionary leader who took a down at the heels branch line that the Class 1 railroad for which he once worked wanted to abandon and turned it into a regional railroad success story.

Indiana Rail Road founder Thomas Hoaback aboard one of his railroad's passenger cars.

Indiana Rail Road founder Thomas Hoaback aboard one of his railroad’s passenger cars.

“When the history of 21st-century railroading is written sometime in the far future, the accomplishments of Thomas G. Hoback—Founder, President, and Chief Executive Officer of the Indiana Rail Road Co.—will be chronicled as an example of the type of visionary leadership that made a notable impact on a resurgent industry,” wrote Railway Age magazine Editor in Chief William Vantuono in a profile of the INRD founder.

Today the INRD has 500 miles of routes stretching from Chicago to Louisville, Ky.

The magazine described Hoback as a “visionary entrepreneur and shrewd businessman, with great compassion for the community, responsible for myriad contributions to education, historic preservation, and the arts.”

Hoback was born into a railroad family in 1947 in Peoria, Ill. His father was a Santa Fe dispatcher and even now Hoback retains a keen fondness for the Santa Fe. He and his wife own one of the Santa Fe’s former business cars.

The junior Hoback worked as a summer track worker for the Santa Fe during his college years and after graduation was a rail shipper for Foremost-McKesson. He also worked as an economic analyst for the Western Pacific Railroad.

After returning to the Midwest in 1977, Hoback worked for a year for the Erie Western before joining Illinois Central Gulf in 1978 as director of coal marketing

Hoback saw the potential of the ICG’s Indianapolis-Effingham, Ill., line that the railroad had sought to abandon in 1977.

Nearly a decade later, he led a successful effort to acquire the “high and dry” line, which he knew ran adjacent to one of the largest undeveloped coal fields in the country.

Over the next 28 years, Hoback oversaw the diversification of the INRD’s traffic base and the rebuilding of its worn out track.

INRD attracted more than $180 million in private capital that it used to transform itself in what Railway Age described as a “heavy-haul, high-tech regional railroad.”

The railroad acquired Canadian Pacific’s Indiana trackage, which included rights to serve Louisville via a CSX route. The tracks and Louisville rights had originally belong to the Milwaukee Road.

Today’s INRD handles 170,000 annual carloads with 182 employees. To read the magazine’s complete profile, go to:

http://www.railwayage.com/index.php/freight/short-lines/entrepreneurial-railroader.html?channel=94

VIA Rail Canada’s CEO is Looking For Expansion

January 22, 2015
The Vancouver-Toronto Canadian is the best known train of VIA Rail Canada, particularly outside the country. A workers washes a dome car's windows during a service stop in Jasper, Alberta.

The Vancouver-Toronto Canadian is the best known train of VIA Rail Canada, particularly outside the country. A workers washes a dome car’s windows during a service stop in Jasper, Alberta.

First of Two Articles

We don’t think much about VIA Rail Canada here in Northeast Ohio. We never see its trains and because it “up there in Canada” it must seem to be a long way away.

But consider that the heart of the VIA network is much closer to us than Amtrak’s robust corridor operations in California, North Carolina and the Pacific Northwest, and about as close as Amtrak’s hallowed Northeast Corridor.

That’s because much of VIA’s network is focused on Toronto, which is about a five or six hour drive from Cleveland.

VIA and Amtrak has much in common. Both were created in the 1970s to relieve trunk line railroads of their economic losses in providing intercity rail passenger service.

Both have had to rely on stingy government funding that often seems to be given grudgingly.

VIA in some respects is in a more precarious position than Amtrak when it comes to federal government support.

Whereas Amtrak was established by legislation, VIA was created by executive fiat. Hence, VIA is more vulnerable than Amtrak to the political winds blowing through the executive branch.

Since starting in 1977, VIA has endured a serious of route restructurings that have left it with a network largely focused on corridor services in Ontario and Quebec, with three routes extending to the oceans that provide less than daily service.

During the winter, VIA’s best known train, the Toronto-Vanouver Canadian departs its endpoints two days a week.

Virtually every VIA train operates on tracks owned and dispatched by Canadian National.

Despite it all, some observers have noted that VIA’s staff has remained unfailingly courteous and the Canadian continues to receive high marks for its onboard service.

VIA chief

Yves Desjardins-Siciliano

Now VIA has a new CEO and he is talking about service expansion rather than contraction.

Yves Desjardins-Siciliano is a lawyer by trade and wants to build a new intercity network in Central Canada while restoring some abandoned regional services in the East and West.

“There is more of an opportunity for growth than there is a risk of downsizing,” he told Railway Age.

Desjardins-Siciliano has been on the job since May 2014. He spent four years as VIA’s chief legal officer and before that worked in what the magazine described as “business and government careers in the walnut-panelled aeries of Montreal’s and Toronto’s financial districts and the neo-gothic sandstone fantasies sheltering Ottawa’s governing class.”

A Railway Age reporter who interviewed him at VIA’s Montreal headquarters noted that Desjardins-Sicilian’s office is “refreshingly free of architectural pretension, with just a glass wall providing conversational privacy from the otherwise wide-open executive suite.”

The executive suite includes a mural depicting an overview view of a speeding steam locomotive.

“Our first role is to run the railway—with the assets we have today,” Desjardins-Siciliano said. “It’s not our role to make transportation policy.”

Like Amtrak’s Joe Boardman, Desjardins-Siciliano must respond to policies made by others.

If you give him a chance, Desjardins-Siciliano will lay out his own ideas of what that policy could or even should be.

His vision begins with doing something about a reality that also plagues Amtrak. VIA trains must share increasingly crowded tracks owned by freight companies.

“After 150 years, the mixed environment is no longer sustainable,” he said. “So, we might as well get on with the future.  The sheer number and size of freight trains are not going to change any time soon. We have to make our peace with that, which means: Either we accept it, which makes service extremely challenging for passengers, or we invest in dedicated trackage.”

Of course Desjardins-Siciliano knows that passenger-only tracks won’t spring up overnight and until they become reality VIA will have to co-exist with the freight companies.

“We will continue to work with our railway partners to ensure that wrong dispatching calls aren’t made too often,” he said.

In the meantime, he adds, VIA will work with the federal as well as provincial governments to find additional sources of funding. VIA will also be looking to the private sector.

The federal taxpayer in Canada now covers 53 percent of the average passenger fare and has invested $1 billion in capital improvements for VIA. “I think that’s enough,” Desjardins-Siciliano said.

One promising avenue for funding is to partner with the government of Ontario to provide VIA regional service in lieu of highway expansion.

“The corridor of any railway is a wealth-creation engine,” he said. “Industry and people want to get close to the tracks. Local governments that benefit from the deployment of high-efficiency, high-performance trains should make a contribution.”

The involvement of the private sector and provincial governments is critical to implanting Desjardins-Siciliano’s vision.

“In a perfect world, the Government of Canada should own the rights-of-way for passenger rail. Everything else, including trackage and perhaps rolling stock, should be funded privately,” he said.

In Part 2 of this series, VIA’s CEO will explain what ideas he has for expansion  of service and what other steps that the rail carrier must take to continue to grow its service.

2015 North American Rail Passenger Outlook Brighter than it Might Seem, Railway Age Reports

January 21, 2015
Much of North America's rail passenger growth is occurring in urban rail systems. Two Greater Cleveland RTA Blue Line trains pass in June 2013.

Much of North America’s rail passenger growth is occurring in urban rail systems. Two Greater Cleveland RTA Blue Line trains pass in July 2013 at the Lynnfield station.

If you focus on Amtrak, it might seem that passenger rail in North America is in jeopardy.

Amtrak faces a multitude of woes including falling ridership on some routes due to delays caused by freight train congestion and a new Congress that may be more hostile to funding the nation’s rail passenger network.

But if you take into account city rail systems, the rail passenger outlook in North America is much brighter than it might appear.

In an analysis published by Railway Age, the magazine reported that not only are North American rail systems growing, but so is the scope of those rail networks along with the size of their fleets.

That has resulted in strong competition among suppliers to meet the needs of those systems. In fact, the magazine reported, the number of global equipment suppliers seeking to cash in on the growth of North American rail systems is expanding, too.

That includes suppliers from China that have been courting the North American markets.

“The numbers counter pessimistic claims that North America’s rail renaissance had run its course in 2014,” the magazine observed. “Indeed, 2014 saw several huge orders for new equipment that added to a backlog of healthy equipment orders from previous years, judging by the numbers of Railway Age’s 2015 Passenger Railcar Outlook.”

The order books of rail car manufactures are filling up with orders from coast to coast, including orders from BART in the San Francisco Bay area and the Boston-based MBTA system.

New urban rail systems are being established in cities where no rail transit systems now exist. In some instances, city governments have gone forward with plans to establish rail systems without a corresponding or outside “agency” or even “authority” to do so.

That triggered grumbling by some old line transit systems about the manner in which the Federal Transit Administration has been encouraging these city government efforts.

How widespread are these efforts by cities to start laying rail and running streetcars and light rail transit systems?

A short list of cities eyeing streetcar purchases and/or new systems includes Anaheim and Santa Ana, Calif., Miami and Miami Beach, as well as St. Augustine, Fla., Grand Rapids, Mich., Minneapolis and St. Paul, Minn., Winston-Salem, N.C., Providence, R.I., and El Paso, Texas. On the brink of coming to fruition are systems in Oklahoma City, Fort Lauderdale, Fla., and Milwaukee.

Rails are being laid in Charlotte, N.C., and in Detroit. In Ohio, the Cincinnati streetcar system is under construction, having survived efforts by the newly-elected mayor to kill the project.

Some proposed city rail systems are likely to fall victim to NIMBY opposition and/or forces trying to kill rail transit for ideological reasons.

Rail systems are expensive and opponents have seized on that with a vengeance in seeking to scuttle proposed streetcar and light rail systems.

Anti-rail forces succeeded in killing a streetcar project in San Antonio and Tampa Bay voters rejected an effort to create a light rail transit system. The St. Louis Loop trolley project may be the next to fall by the wayside.

Much media attention was also paid to the challenges facing three rail projects in the Washington, D.C., area.

This included a pair of proposed streetcar proposals that died in Arlington, Va., the threatened status of the Purple Line light rail transit project spanning two Maryland counties northeast of Washington, and the District’s slow-to-open streetcar line on H Street.

Railway Age said that media accounts cited these examples and concluded that that U.S. urban rail transit growth had peaked.

“But such setbacks failed to encompass the full breadth of U.S. rail passenger progress,” the magazine said, noting that even as San Antonio’s streetcar plan faltered the project in El Paso continues to move ahead.

Urban rail projects as well as intercity and high-speed rail projects continue to face the challenge of obtaining federal funding.

The FY 2015 budget approved by Congress reduced TIGER spending from $600 million to $500 million. That means stiffer competition for those dollars.

The budget bill also funded Amtrak at levels comparable to what it received in FY 2014. Railway Age termed that a modest victory given how much flack Amtrak has taken over its long-distance trains.

Amtrak will be seeking to order new high-speed trains this year to upgrade its Northeast Corridor service.

Funding for passenger rail equipment also continues to come from state governments and regional compacts.

Last year California and some Midwest states added to their order with car builder Nippon Sharyo by adding 45 bi-level intercity cars to an existing 130-car order.

California will add 11 cars to its initial 42-car order while the Midwest states will boost their 88-car order by 34 cars.

With so much interest in passenger rail equipment, Railway Age observed that the days have ended when “build it new” was the only option for suppliers to North American passenger rail entities.

Suppliers are finding a brisk market for retrofitting existing rail cars while also building new equipment for transit agencies that will work alongside the existing fleets.

Such is the approach being taken by Kawasaki Heavy Rail Industries. It will build up to 440 R-188 cars at a factory in Yonkers, N.Y., for use in New York City. But Kawasaki will also be retrofitting numerous R-142 cars that have been in operation for several years.

Kinkisharyo will deliver 35 “mid-section” light rail transit cars to New Jersey Transit for use with existing rolling stock on the Newark Light Rail and Hudson-Bergen Light Rail lines. This will enable N.J. Transit to increase capacity on those routes.

Earlier, Kinkisharyo used a similar approach for Dallas Area Rapid Transit’s enhancement of its existing light rail transit fleet.

There remain, of course, plenty of new car orders to be had. Bombardier continues to work on building 300 new R-179 subway cars for MTA New York City Transit. It also won a BART add-on order of 365 rapid transit cars.

China’s CNS Changchun landed a Massachusetts Bay Transportation Authority contract to supply 284 rapid transit cars for Boston’s “T” system.

A bid is expected this year by at least one Chinese firm, likely in a joint venture, to manufacture high speed rail trains for California.