January 2006
EPA increases car delivery forecastsIn its new quarterly forecast, Economic Planning Associates is predicting delivery of 73,787 new freight cars in 2006, a number that is 8% higher than the 68,250 deliveries EPA was projecting three months earlier. EPA also is projecting delivery of 69,750 cars in 20,907, 62,750 in 2008, and 61,500 in 2009, all higher than previously forecast levels. In addition to favorable market factors, EPA said that carbuilders this year “will benefit from the fact that component capacity constraints and sharply escalating material costs will, for the most part, be behind them. This will serve to stabilized the pricing environment and motivate a number of potential buyers to move off the sidelines and into the market.”
EPA took note of a broadening demand base, commenting: “Even as demand for intermodal equipment eases, we are witnessing demand improvements in tank cars, coal cars, grain hoppers, cement cars, and plastic pellet hoppers. And we do not anticipate any significant curtailment of the demand for cars during the next two years or even the next five years.”
UTU, BLET join forces to fight crew-size reductionIn a rare display of solidarity, the United Transportation Union and the Brotherhood of Locomotive Engineers and Trainmen—two unions that have spent considerable time and resources conducting a war of words and turf—have decided to put aside their differences and join forces to combat what they say is a concerted effort by the railroads to reduce crew size in the current round of collective bargaining. At issue is the railroads’ interest in operating freight trains with one-person crews, which they say will be possible with Positive Train Control, a technology now under evaluation independently at several carriers and also the subject of an industry-wide pilot project (the North American Joint PTC Program). The railroads want to place one-person train operations onto the collective bargaining table. The unions want the subject off the table, claiming railroad worker safety and public safety is at risk.
It is not clear just how many trains would be reduced to one-person operation, or how many of the Class I roster of 66,698 operating (Train & Engine Service) employees (according to the most recent STB figures) might be affected. At a joint UTU/BLET news conference this afternoon, responding to a question from Railway Age, UTU President Paul C. Thompson and BLET President Don M. Hahs said that they had received various and conflicting estimates from the railroads. One estimate, they said, indicated that up to 20% of operating employees would be affected, mainly through attrition. Another indicated that up to two-thirds of trains could eventually be operated by one person.
In a joint letter to their collective membership released prior to the news conference, Thompson and Hahs accused the Class I’s of pursuing a negotiating strategy of “using past differences between [our unions] as a wedge to reduce crew size, thereby putting the lives of all rail workers and the public in danger and also seriously threatening the financial security of the Railroad Retirement system.”
“This is no longer about our unions, it’s about our members,” Thompson said at the news conference. The railroads are currently operating trains with two-person crews. “If that’s not an efficient crew, I don’t know what is,” he said. “Crew-size reduction has gone far enough,” he added, recalling the days when trains ran with four- and five-person crews.
Thompson, who says he has participated in national negotiating sessions for more than 20 years, called the current round of collecting bargaining “the most deplorable I have ever seen.” He said, and Hahs concurred, that the railroads have been privately and separately promising the UTU and the BLET that each would become the surviving union if, among other things, each would testify against the other during Presidential Emergency Board hearings. Thompson added that Bob Allen, lead negotiator for the National Carriers Conference Committee, “has been playing us like a banjo.”
Thompson said that, although all five of the U.S.-based Class I’s (UP, BNSF, NS, CSX, KCS) have been part of the negotiations, BNSF has been most aggressive in trying to play one union against the other. Railroads “have stonewalled us,” and “have not resolved a single issue,” he said. “They want an impasse, and a PEB” that might give them concessions they could not win in bargaining. Hahs added that, although he “doesn’t blame the carriers for being hard-nosed during negotiations—that’s just the way it is,” the railroads, by their actions, have undermined any sense of trust that may have existed.
“The carriers’ attempt to reduce crew size has nothing to do with new technology,” Thompson and Hahs told their members. “Indeed, the carriers have told the National Transportation Safety Board that implementation of PTC is many years away. Moreover, the Federal Railroad Administration has not conducted a study into the safety and reliability of reduced crew size, nor its impact on an already highly fatigued workforce operating trains through congested areas carrying highly toxic hazmat during this era of heightened terrorist threats to the security of our nation’s railroads.”
During the press conference, Thompson and Hahs provided several examples of why a one-person crew would be unsafe and impractical:
• If a train breaks down and blocks a crossing, one person cannot quickly cut the train in two to unblock the crossing if an emergency response vehicle (an ambulance or fire truck) needs to get through. This is a serious threat to public safety.
• If an air hose breaks far back in the train, one person cannot not be expected to handle the situation in a timely fashion, and without compromising their own safety.
• How does one person deal with a grade crossing collision?
• The railroads have said that relief personnel would be available in the event of a breakdown or other incident, but there are many places where it would be extremely difficult to get extra people out to a stranded train.
• Basic human needs: How does one person take a restroom break and run the train at the same time?
The railroads will have to “totally revamp” their operating practices for one-person crews, said Hahs. That means smaller crew districts and shorter in-service hours. Railroads cannot expect one person to be working twelve-hour shifts “day in and day out in an unscheduled environment,” with only five and six hours of rest in between shifts. (The FRA mandates a minimum of eight hours of rest in between shifts, but the unions maintain that employees rarely get a full eight hours of rest, taking transit time, family time, and other factors into account.) As for PTC, Thompson noted that the technology is “experimental,” and “proprietary” from supplier to supplier, and said that suppliers have made statements to the effect that PTC is intended as a safety overlay system, not a means to reduce crew size. He said that labor “needs to be a part of the development of PTC,” and that operating employees “would embrace PTC if it does what the railroads say it does” with regard to improving safety of train operations. Both union leaders agreed that neither UTU nor BLET will sign any documents pledging to support PTC.
In what Thompson and Hahs are characterizing as “a demonstration of good faith,” the UTU has withdrawn its application for a single-craft representation election at the Union Pacific, while the BLET has agreed to refrain from trying to organize UTU-represented properties. At this time, neither union is in a position to negotiate jointly, but are pursuing a joint strategy to deal with the one-person-crew issue.
“Our two organizations have had their differences, but when it comes to protecting our members’ job security and safety, we must stand together against the hostile attacks of the carriers’ expressed intent on eliminating jobs,” said Thompson and Hahs. The two unions say their joint effort has the support of the Teamsters, AFL-CIO, and other railroad unions. One part of their strategy will be lobbying a Congress that, in an election year, may be reluctant to deal with a railroad work stoppage and a Presidential Emergency Board. Both unions, they said, have received “letters of great concern” from Congressmen who feel a PEB at this point in time would be “premature.”
Otter Tail Power loses coal rate challengeThe Surface Transportation Board announced today that it has dismissed a complaint by Otter Tail Power Co. challenging the reasonableness of rates charged by BNSF Railway for moving coal from Wyoming’s Powder River Basin to the Big Stone Generating Station near Milbank, S.D.
Otter Tail filed the complaint on Jan. 2, 2002, after BNSF replaced a transportation contract with common carrier rates. The power company used the STB’s SAC (stand-alone cost) methodology in trying to prove the rates to be unreasonably high.
“The development of the evidentiary record in this case has been complex,” the STB noted in a lengthy decision dated Jan. 25 and posted on the Board’s website on Jan. 27. But, said the Board: “After all other disputed issues are resolved, we conclude that Otter Tail’s SAC presentation does not support a finding that the challenged rate is unreasonable under the SAC constraint. The evidence must demonstrate that, under the challenged rate, Otter Tail is cross-subsidizing parts of BNSF's rail network from which Otter Tail derives no benefit, or is paying for inefficient service. Here, however, Otter Tail has failed to demonstrate that it is paying for more than is needed for the 1,108 miles of infrastructure required to connect the Big Stone plant to the PRB. To the contrary, Otter Tail’s presentation relies on a cross-subsidy of that infrastructure by PRB traffic that does not use or benefit from that portion of BNSF's network, but instead moves south from the PRB region. Accordingly, its complaint against BNSF is dismissed.”
CN, CPR team up on service in VancouverCN and Canadian Pacific have extended an existing routing and switching arrangement in Vancouver, B.C., to ensure that rail shippers “have the best service possible” with “healthy competition.” Both railroads carried out separate capacity improvement projects in the area last year.
The railroads will operate direct-to-destination trains that bypass yards and eliminate interchanges, and extend their existing directional running zone in the Fraser Canyon west to the Gateway ports and terminals. (To view a map of the changes, click here.)
This will build on their long-established, 149-mile directional running zone extending west of Ashcroft to Mission, B.C., in the Fraser Canyon. Currently, all westbound trains operate over CN's line and all eastbound trains operate over CPR's line. Under the new agreement:
• From Boston Bar to Vancouver's South Shore, CPR will operate all trains using CPR crews. It also will improve train movement coordination and switch all traffic into and out of terminals on Burrard Inlet South Shore.
• From Boston Bar to Burrard Inlet North Shore, CN crews will run all trains. CN will coordinate traffic switched into and out of North Shore terminals.
• From Boston Bar to the Roberts Bank coal port, CPR will handle all coal trains to help improve efficiency for coal terminal operator West Terminals.
“By enhancing service as the Pacific Gateway ports and terminals expand, we are sending a powerful message along the supply chain that coordination and cooperation are critical levers for growth,” said Fred Green, CPR president and COO.
Last summer, CN announced that it would expand intermodal service by an additional 125,000 units a year across Canada with its “precision intermodal” IMX system. The project was slated to boost train capacity by more than 20% for overseas containers moving between the Port of Vancouver and Montreal and Toronto.
By year-end 2005, CPR anticipated running an additional four trains daily between the Prairies and the Port of Vancouver, made possible by the $160 million Westcap capacity improvement project between Moose Bay, Sask., and Vancouver.
Greenbrier lands huge order, acquires YSDThe Greenbrier Companies has landed the largest single order for freight cars in its history—13,000 new units, which, with approximately 50% of them articulated doublestack cars, equates to 7,400 cars. The remainder of the five-year, $800 million contract—which includes options for additional units—consists mostly of covered hoppers, filled out by centerbeam flat cars. The customer is undisclosed.
Greenbrier will deliver 5,300 units in 2006 and 2007, with the balance to be delivered through 2010. According to a Form 8-K the company filed with the Securities & Exchange Commission, “deliveries beyond 2007 are subject to fulfillment of certain competitive conditions. The contract contains provisions for potential changes in costs and pricing to provide protection to the customer and Greenbrier.”
Greenbrier stock shot up 12.22% today and as of 3:00 p.m. EST was at $34.62, a gain of $3.77.
In a separate development, Greenbrier has acquired the now-defunct YSD Industries' boxcar sliding door, plug door, and roofing product lines and related inventory and equipment. YSD, which had been in the railway supply business for 81 years, was shuttered by parent company Global Railway Industries Ltd. last fall, following its continued failure to break into the black.
According to Greenbrier, the equipment will be relocated to one of its North American facilities, either the Gunderson plant inLake Oswego, Ore., or the Sahagun plant outside of Mexico City. The components will be available to third parties as well as other railcar builders.
The acquisition, and the decision to make doors available to other carbuilders, “fits well with our strategy of protecting and enhancing our supply chain of critical railcar specialty items and vertically integrating on a select basis,” said Greenbrier President and CEO William A. Furman, who pointed out that "the number of boxcar component suppliers is very limited and these components are used both on new railcars and in the aftermarket.”
L.B. Foster to open new tie production plantThis summer, L.B. Foster and its CXT®, Inc., subsidiary will commission a new concrete tie manufacturing facility in Tucson, Ariz. It will “provide the capacity required to meet the growing demand for concrete ties throughout North America,” said Stan Hasselbusch, L.B. Foster's president and CEO.
The new plant, which will be equipped with Grimbergen long-line concrete tie manufacturing machines, joins L.B. Foster's existing plants in Grand Island, Nebr., and Spokane, Wash.
Lease rates rise and profits soar at GATX RailWith fleet productivity at 98% and lease rates up around 10%, GATX Rail reported 2005 net income of $81.7 million, a 35% increase over 2004’s $60.4 million. The increase in lease rates in 2004 was 3%. The company acquired 5,400 new cars in 2005 at a cost of $403 million for a net addition of 1,300, ending the year with a fleet of approximately 108,000 cars.
GATX President Brian A. Kennedy commented: “Looking ahead, we expect average lease rates to continue to increase vs. expiring rates in 2006. Based on this revenue momentum, complemented by a growing contribution from railcar investments in recent years, we expect a significant increase in Rail’s 2006 net income over 2005.”
Skanska wins WTC Transportation Hub contractSkanska AB of Sweden announced today that it has won a $358 million contract to participate in construction of the new World Trade Center Transportation Hub in New York City. Skanska is a member of a joint venture that was awarded a contract totaling $1.2 billion by the Port Authority of New York and New Jersey. Designed by architect Santiago Calatrava, the WTC hub is scheduled to be completed in 2009. Skanska last year won a $133 million contract to help build the Fulton Street Transit Center, which will merge 11 MTA New York City Transit lines and connect with the WTC hub.
YSD's boxcar-component lines go to GreenbrierThe Greenbrier Companies has acquired the now-defunct YSD Industries' boxcar sliding door, plug door, and roofing product lines and related inventory and equipment. YSD, which had been in the railway supply business for 81 years, was shuttered by parent company Global Railway Industries Ltd. last fall, following its continued failure to break into the black.
According to Greenbrier, the equipment will be delivered immediately to one of its North American facilities. The components will be available to third parties as well as other railcar builders.
“The acquisition fits well with our strategy of protecting and enhancing our supply chain of critical railcar specialty items and vertically integrating on a select basis,” said Greenbrier President and CEO William A. Furman, who pointed out that "the number of boxcar component suppliers is very limited and these components are used both on new railcars and in the aftermarket.”
CN operating ratio at record lowCN has reported exceptionally strong results for 2005, including a record fourth-quarter operating ratio of 61.8%, a 3.2-percentage point improvement over the prior-year quarter. Net income for the year was C$1.556 billion, an increase of 24%. The operating ratio for 2005 was 63.8%, an improvement of 3.1 percentage points.
CN said increased 2005 revenue performance was driven largely by “increased freight rates, including a higher fuel surcharge; the inclusion of a full year of revenues from the rail and related holdings of Great Lakes Transportation LLC and BC Rail, and a return to normal interposal volumes following a first quarter 2004 strike.”
In 2005, said CEO E. Hunter Harrison, “All the pieces came together—stronger pricing, gains from our acquisitions and solid returns from good service, cost control, and improved productivity.”
Norfolk Southern earns record $1.3 billion in 2005Norfolk Southern today reported the results of “an extraordinary year,” in the words of Chief Executive Officer Wick Moorman. Net income for 2005 was a record $1.3 billion, a gain of 39% over 2004’s $923 million. Excluding special items for both years, 2005 net income would have been $1.2 billion, 36% ahead of 2004's net of $870 million. The railway operating ratio in 2005 improved 1.5 percentage points to 75.2%.
“Railway operating revenues were the highest of any year in Norfolk Southern’s history,” said Moorman. “All our commodity groups set revenue records. We posted our best-ever income from railway operations, net income, and earnings per share. We set new carloading records.”
In the fourth quarter of 2005, net income was $362 million, or 87 cents a share, exceeding the consensus Wall Street estimate of 77 cents. The fourth quarter operating ratio improved 2.6 percentage points to 73.7.
Get ready for more safety inspectionsDoes your railroad have “safety hot spots,” areas where there may be a history of accidents, or where they’re more likely to occur than others? The Federal Railroad Administration intends to find out, and then deploy inspectors to those locations.
FRA turned the heat up on railroads a little with today’s announcement that the latest component of its National Rail Safety Action Plan (NRSAP) involves a new National Inspection Plan, which will deploy federal railroad inspectors to places FRA will identify as “safety hot spots.” It’s part of the agency’s goal of strengthening its Compliance and Enforcement Program, one of six directives spelled out in NRSAP. The inspection program “will use accident data to identify rail safety problems for specific railroads and states” and “will allow federal inspectors to focus their efforts where safety issues are most likely to arise so they can be corrected before a serious train accident occurs,” FRA said. Making “better use of data,” it is addressing specific railroading disciplines in stages. FRA began crunching data on track, operating practices, motive power, and equipment in October 2005. This month, it began work on signaling and train control. In March, it will take on hazmat.
The other five directives are “Reduce Human Factor Accidents,” “Address Fatigue,” “Improve Track Safety,” "Improve Hazmat Safety and Emergency Response Capability,” and “Further Improve High-Rail Grade Crossing Safety.” Over the next year, FRA will deploy two new track inspection vehicles, triple the number of track-miles inspected each year, propose a new federal rule to address human errors that lead to train accidents (for example, improperly lined switches), and undertake research into train operator fatigue, near misses, and the strength of hazmat tank cars.
Early this year, under Human Factor Accidents, a pilot site will be selected for what FRA is calling a “Close Call pilot project to learn from incidents that could have, but did not, cause accidents.” A Notice of Proposed Rulemaking is expected to be issued in September. A pilot project with BNSF to remotely monitor switch position in dark territory is under way. On tank cars, a program to test dynamic fracture toughness will begin in February. The first new track inspection vehicle is slated to get rolling in September; the second should follow in December.
CSX closes 2005 on an upbeat noteA particularly strong fourth quarter for its Surface Transportation segments (Rail and Intermodal) helped CSX Corp. close out 2005—a year in which the railroad sustained major damage and operating disruptions from Gulf Coast hurricanes— on an upbeat note. Fourth-quarter 2005 net earnings of $237 million, or $1.03 per share, were a 45% increase in EPS from continuing operations vs. the same quarter in 2004. In addition to stronger Surface Transportation operating income, net earnings were driven by higher real estate sales and lower interest expense. It was the eighth consecutive quarter of revenue and operating income growth for CSX. Revenue of $2.2 billion represented a quarterly record for the company. Fourth-quarter operating income of $415 million, up 32% from the same period last year, was also a record. A quarterly operating ratio of 81.3 was an improvement of 4.3 points from 2004.
For the year ended Dec. 31, 2005, CSX’s Surface Transportation operating revenues increased significantly, from $8.04 billion to $8.62 billion. Operating expenses rose slightly, from $7.05 billion to $7.07 billion. This yielded an operating ratio of 82.0 for the year, compared to 87.6 in 2004. Operating income increased to $1.55 billion, compared to the prior year’s $993 million. The Rail operating ratio improved to 82.1, compared to 87.4 in 2004.
“CSX delivered another quarter of strong performance in our Surface Transportation businesses,” said Michael J. Ward, CSX Corp. chairman and CEO. “Our operations team is gaining traction in executing the ONE Plan, even while reconstructing our storm-damaged infrastructure on the Gulf Coast. We enter 2006 with a strong foundation, an economic environment that favors rail transportation, and momentum behind our key strategies. In addition, we are on schedule with our capacity expansion plans to further drive value for our customers and shareholders.”
BNSF posts strong earnings, announces $2.4 billion capital plan for 2006Due to strong demand in 2005 with a record movement of more than 10 million units, BNSF Railway “achieved nearly $13 billion in revenues, exceeded $4 in earnings per share, and attained $669 million in free cash flow after dividends,” Chairman, President, and CEO Matthew K. Rose reported during today's full-year 2005 and fourth-quarter 2005 earnings announcement.
For 2005, BNSF recorded net income of $1.53 billion--a surge of 93% over full-year 2004's $791 million. Freight revenue climbed 17.4% to $12.61 billion from 2004's $10.74 billion.
BNSF's fourth quarter 2005 results were equally strong. The railroad posted net income of $430 million, or $1.13 per share, in the last three months of the year--a 23.9% rise from the year-earlier period's $347 million, or 91 cents a share.
Operating revenues of $3.55 billion were up 19.1% over fourth-quarter 2004 ($2.98 billion). The railroad's quarterly freight revenues also grew, jumping 18% to $3.45 billion vs. the same period in 2004 ($2.92 billion). While all business groups showed signs of improvement, three saw double-digit growth. Revenues for Consumer Products came in at 23%; Industrial Products, 21%; and Agricultural Products, 20%. Despite flat volumes, Coal revenues rose by a more modest 4%. According to BNSF, the increases stem from a 3% boost in units, 6% rise in price, and a 9% lift in fuel surcharges.
“These results further confirm our view that the railroads are in the midst of a multi-year secular re-pricing story that should result in the stocks outperforming the broader market over the next few years,” said Morgan Stanley's James Valentine. Morgan Stanley had expected core pricing to be up 5.2% and fuel surcharges to result in 7.3% revenue growth.
BNSF's operating ratio picked up in the fourth quarter, as well, reaching 76.8% vs. 77.1% in same 2004 period.
As previously announced, the railroad recorded a $71 million pre-tax loss in fourth-quarter 2005 on rail line sales to the State of New Mexico. Sale proceeds of $76 million will be realized over the next three years, BNSF maintained. Including this fourth-quarter loss, plus $210 million in higher fuel expenses and a 3% increase in units, operating expenses rose to $2.75 billion--a $440 million lift over fourth-quarter 2004.
BNSF's other big news of the day: the implementation of a 2006 capital program worth $2.4 billion--a 10% higher allocation than was seen in 2005. This includes an investment of $1.4 billion in track and other infrastructure maintenance and $550 million for 310 new locomotives.
“We are increasing our capital investment program in 2006 to meet anticipated future volumes because we are confident that our Return on Invested Capital (ROIC) will continue to improve,” said BNSF's Rose. “For 2005, ROIC was 10.1 percent, a significant improvement from 7.9% in 2004 and 6.6% in 2003.”
Among the major capacity expansion projects planned:
* Double- or triple-track another 40 miles in the Southern Transcon and build a second main line across Abo Canyon by 2007.
* Expand the Lincoln, Nebr., Yard and add about 50 miles of double- and triple-track along Wyoming's Powder River Basin Joint Line and in Nebraska.
* Expand intermodal facilities in Alliance, Texas; Houston; Chicago (Logistics Park); Memphis; San Bernardino, Calif.; Seattle; Los Angeles; and St. Paul, Minn.
* Extend sidings in Washington, Texas; and British Columbia; and
* Improve fueling facilities in Nebraska, Texas, Illinois, and New Mexico.
Goode passing the chairman’s baton to MoormanWhen Charles W. Moorman assumes the chairmanship of Norfolk Southern Corp. Feb. 1, as NS announced today, the railroad’s gradual and carefully thought-out transition process to new leadership will have been completed. Wick Moorman, to whom David R. Goode passed the presidential and CEO batons in 2004 and 2005, respectively, will continue in those positions. Goode will remain a member of NS’s board of directors until the company’s annual meeting of stockholders in May.
Moorman, who joined NS predecessor Southern Railway in 1970, has served in a number of management positions, including senior vice president-corporate planning and services, president of Thoroughbred Technology and Telecommunications, vice president information technology, and vice president personnel and labor relations. He was also a division engineer early in his career. Moorman is a native of Hattiesburg, Miss., and a graduate of Georgia Tech and Harvard Business School.
“Norfolk Southern is well positioned,” Goode, twice Railway Age’s Railroader of the Year (1998 and 2005), said. “Backed by the finest people in the transportation business, Wick Moorman and his team will guide us to even higher levels of safety and service. With tremendous pride and excitement, I look forward to a successful future for our company.”
On a bad day, American Railcar looks goodAmerican Railcar went public under the symbol ARII on Jan. 20 with an offer of 8.5 million shares priced at $21, well above an earlier forecast range of $16 to $18. At the end of its first day, the stock was trading at $22.995, despite the fact that the Dow Jones average sank 213 points on bearish corporate earnings news, its biggest percentage decline in nine months.
BNSF, CN partner to expand capacity“Smart railroading.” That’s how CN President and CEO E. Hunter Harrison described yesterday his railroad’s recent rail capacity improvement initiative with BNSF Railway. The two carriers have entered into an operating agreement they say will provide increased capacity and dispatching efficiencies in Vancouver, B.C., and Chicago, and between Memphis, Tenn., and Centralia, Ill.
Among the agreement’s provisions:
* CN will obtain operational, dispatching, and maintenance control of 12 miles of joint track between the Fraser River Bridge in New Westminster, B.C., and ocean terminals on the south shore of Burrard Inlet near downtown Vancouver. This trackage connects CN’s network with its north shore terminals, customers, and the former BC Rail.
* BNSF will obtain similar control of CN’s Corwith (Ill.) Tower interlocker, as well as trackage rights on CN for 30 miles between Corwith and Joliet, Ill., and on two miles of CN’s 49th Street line.
* BNSF will gain trackage rights on CN’s Memphis- Centralia main line. Also, CN will transfer its Memphis interlocker to BNSF.
“We now can tap CN’s surplus capacity between Memphis and Centralia to expand our ability to handle more traffic,” noted BNSF Chairman, President, and CEO Matthew K. Rose.
CN takes over three Alberta lines from RailAmericaCN today began operating three small Alberta lines it acquired from RailAmerica for $C26 million in cash and a possible future payment of C$4 million based on business development. CN plans to upgrade the lines over the next three years at a cost of around C$40 million.
The acquired railroads are the 600-mile Mackenzie Northern (MKNR), the 118-mile Lakeland & Waterways (LWR), and the Central Western (CWR), a 21-mile line in east-central Alberta used mainly for training that also carries a small amount of agricultural traffic. The MKNR runs north from Smith, Alta., about 130 miles north of Edmonton, to Hay River, North West Territory. LWR connects with CN in the Edmonton area and extends to Boyle, Alta., where it connects with the Athabasca Northern Railway. CN said the lines “are a good fit with our merchandise and bulk commodity businesses at a time of major energy project development in northern Alberta.”
The three lines, with a total of 130 employees, handled about 50,000 carloads of freight last year.
UP earnings exceed Wall Street consensus estimateUnion Pacific Corp. today reported fourth-quarter 2005 earnings of $296 million, or $1.10 per share, handily beating the Wall Street consensus forecast of 99 cents. On a comparable basis, per-share earnings were up 27% over the 2004 period.
Fourth-quarter carloadings rose 1% and ton-mile volume actually dropped 1%, but fuel surcharges and higher rates pushed per-carload revenue to a company record of $1,428. By commodities, UP reported the following fourth-quarter revenue increases: Industrial Products, 19%; Agricultural, 18%; Intermodal, 14%; Automotive, 8%; Chemicals and Energy, 6% each.
Morgan Stanley analyst James Valentine called it “an impressive quarter.” He noted that Morgan Stanley Equity Research’s own estimate had been a “high-on-the-Street $1.0-4.”
“Our Overweight investment thesis was confirmed in that UP’s pricing was up 5.9% vs. our 5.5% expectation, said Valentine. “We reiterate our Overweight rating and believe UP stock should reach $100 within two years and $130-140 within three years.”
At noon today, UP stock was up 5%, to $82.53, a 52-week high.
For the full year 2005, UP reported earnings of $1 billion, an 18% increase over 2004 earnings excluding special items. UP President and CEO Jim Young commented; “Union Pacific is operating more efficiently, enabling us to handle record volumes and recover more rapidly from challenges such as hurricanes, the Kansas washouts, and severe winter storms. We have gained traction throughout the year with our operating initiatives. I am particularly pleased that we converted strong revenue growth into a significant increase in operating income.”
CBTC ramping up on NYCT’s Canarsie LineMTA New York City Transit quietly entered an important phase of its pilot communication-based train control program on the Canarsie (L) line early yesterday morning when two eight-car R143 trainsets began operating in revenue service in ATP (Automatic Train Protection)-Manual mode, an interim step to full ATO (Automatic Train Operation). Between midnight and 5:00 a.m., the two trainsets are running between Rockaway Parkway, the line’s eastern terminus in the Canarsie section of Brooklyn, and Broadway Junction in the East New York section, a distance of approximately two miles. West of Broadway Junction, they revert to full manual control (Automatic Block Signals and trip stops).
In APT-Manual mode, the motorman is manually operating the train but is adhering to speed commands on a cab display. Looking down the track, the motorman sees flashing green signals, which indicate that the CBTC system is enabled.
Within the next two to three months, more revenue trains will be added in ATP-Manual mode. This will be followed by gradual phase-in of ATO, in which the motorman opens and closes the doors and presses a button to start the train moving. More CBTC territory will be gradually cut in, beginning with the westernmost portion of the L, Eighth Avenue to Third Avenue in Manhattan, and then from Third Avenue to Broadway Junction.
Once fully phased in, CBTC, according to NYCT’s Dr. Nabil N. Ghaly, is expected to increase train capacity by about 20% on the L, with rush hour throughput increasing from 28 trains per hour to 33.
The CBTC system is supplied by Siemens Transportation Systems and is based on a system installed on the RATP (Paris) METEOR line. ATSG (Advanced Technology Signals Group), a consortium of Parsons Transportation Group, ARINC, and Booz Allen Hamilton, is project manager/prime engineering consultant.
The key differences between NYCT’s and RATP’s systems are that the METEOR line is driverless and uses inductive technology for train/wayside communications. NYCT’s system uses a motorman, and train/wayside communications use radio. A conductor is not required, but the TWU (Transport Worker’s Union) has, through arbitration, so far been able to prevent NYCT from going to one-person train operation on the L.
The next NYCT line slated for CBTC is the No. 7. Design is to be completed this fall, with a contract to be awarded next year. As on Canarsie, ATSG is project manager.
Neupaver to succeed Kassling as Wabtec CEOAlbert J. Neupaver, president of the Electromechanical Group of AMETEK, Inc. for the last nine years, will become president and CEO of Wabtec Corp. on Feb. 1. He will succeed William E. Kassling, who will continue as chairman of the company’s board and a major stockholder.
In announcing the appointment, Wabtec noted that at AMETEK, Neupaver “drove the development of a lean manufacturing culture.” During his tenure, the Electromechanical Group increased its operating profit by almost 60%, more than twice the rate of its sales growth.
“Al’s mixture of analytical, managerial, and technical skills provides him with all the necessary capabilities to lead Wabtec into the future,” said Kassling. “The company has never been stronger financially, and I look forward to working with Al and his team to continue to build shareholder value.”
CN pulls out of CREATECiting a lack of a federal financial commitment and uncertain state funding prospects, CN has withdrawn from the six-railroad/city/state consortium formed to fund and construct the CREATE (Chicago Region Environmental and Transportation Efficiency) Program. CN chose not to renew its $17 million commitment to the $1.5 billion plan after Congress appropriated $100 million—$500 less than anticipated—in federal funds in last year’s TEA-LU transportation bill. The Illinois DOT plans on contributing $100 million, but even that may be shot down if Gov. Rod Blagojevich’s $3.2 billion capital spending proposal is rejected in the state General Assembly this spring.
CREATE, informally known as the “Chicago Plan,” is designed to improve freight and passenger rail traffic flow through the busy and highly congested Chicago region, eliminating bottlenecks and many grade crossings and building new right-of-way. The region, still the main freight rail hub of the U.S. with nearly 2,800 miles of track, handles well over 30,000 freight cars per day, an amount expected to double by 2020.
CN says it supports CREATE as a worthy concept but at this time cannot justify making an initial financial commitment without the prospect of receiving operational benefits. Without CN’s participation, industry observers say, the prospects for ever getting the project off the ground have dimmed considerably. CN, though, says it remains an operational partner with the railroads serving the Chicago region and is a member of the CTCO (Chicago Transportation Coordination Office).
Supporters of the project say that, without CREATE, the railroads could seek to develop other, faster routes through hubs like St. Louis or Memphis.
80,703 new freight cars ordered in 2005Orders were placed in last year’s fourth quarter for 26,569 new freight cars, bringing total orders for the year to 80,705, compared with 70,616 in the prior year. Delivery of 17,975 new cars in the final quarter of 2005 brought deliveries for the year to 68,667, up from 46,871 in 2004. On Dec. 31, 1005, the backlog of cars on order and undelivered was 69,408, compared 60,986 on Oct. 1, 2005, and 58,677 on Dec. 31, 2004. Freight car orders and deliveries are tracked by the Railway Supply Institute’s American Railway Car Institute Committee.
Wabtec ups earnings guidance, considering restructuringComing off a strong year in which it booked $400 million worth of new business, posted a multi-year backlog of more than $1 billion, and generated strong operating cash flow of more than $50 million, Wabtec Corp. yesterday affirmed its earnings guidance for 2005 of about $1.15 per diluted share and issued 2006 earnings guidance of about $1.50 per diluted share. The 2006 earnings guidance, however, excludes expenses for unspecified restructuring actions Wabtec says it “is currently evaluating.” 2005 results, which will be reported in late February, are not expected to include any material restructuring expenses.
“If taken, these actions would be expected to result in significant, ongoing benefits, but would require significant, one-time expenses, a large portion of which would be non-cash,” said Wabtec Chairman, President, and CEO William E. Kassling. “Through our strategic growth and operational improvement initiatives, we believe we have positioned the company for another strong year in 2006. We expect our earnings growth to be fueled primarily by higher margins, which will be offset slightly by higher expenses for raw materials, foreign exchange, and new accounting rules that require companies to expense stock options. Our margins began to improve in the second half of 2005, driven by steps we started to take last year to improve profitability and efficiency. These steps will continue in 2006, and we are also considering additional restructuring actions to help us achieve management’s long-term goal to increase gross margin to at least 30%.”
Kassling cited continued robust demand for aftermarket components; international opportunities in markets such as Australia, Europe and Asia; steady demand for new locomotives and freight cars, and full production on contracts for New York City’s R-160 subway cars as the drivers behind a projected strong 2006.
WMATA boss stepping downWashington Metro is on the hunt for an interim general manager and CEO. Richard A. White has decided to step down from that role in a mutual agreement with the Metro board of directors, according to a statement issued yesterday. Dan Tangherlini, director of Washington, D.C.'s Department of Transportation and a Metro board member, will serve as acting general manager and resign from his current duties. White will remain on board through no later than March 31, 2006, to “ensure a smooth transition.”
The new Metro leader “must provide the strategic vision and direction necessary to deliver quality service in an era of tight budgets, engaged customers, and questioning funding partners,” Metro pointed out. Among the challenges that individual will face: enhancing service for bus, rail, and paratransit riders; expanding regional mobility; using existing resources efficiently; and developing new funding sources.
During his tenure, White “helped stabilize the region's bus service and oversaw Metro's first significant rail expansion,” and “became a nationally recognized leader in guarding against terror attacks and has incorporated new technology into everything from fare cards to communicating with our riders,” said the Metro statement.
U.S. Rep. Peter T. King (R-N.Y.) to address Railway Security Forum and ExpoCongressman Peter T. King (R-N.Y.) will give a special luncheon presentation at Railway Age's 2006 Railway Security Forum and Expo on Jan. 31. Now serving his seventh term in the U.S. House of Representatives, Rep. King is Chairman of the Homeland Security Committee and serves on the International Relations Committee and Financial Services Committee. He has been a leader in the ongoing effort to have more homeland security funding based on threat analysis and is a strong supporter of the war against international terrorism, both at home and abroad. The luncheon is to be attended by Forum registrants and Simmons-Boardman Publishing Corp.'s Maritime & Port Security 2006 attendees in Washington, D.C.
Presented in cooperation with the Association of American Railroads, American Short Line and Regional Railroad Association, American Public Transportation Association, and Railway Supply Institute, the “Railway Security Forum and Expo” will tackle such issues as:
* What best practices can railroads use to secure vulnerable freight and passenger infrastructure?
* How can railroads work with state, local, and federal governments, and law enforcement officials on emergency preparedness?
* How can hazmat shipments be protected?
* What can be done to safeguard computer and control systems?
* How can the industry achieve vital, interoperable radio communications with emergency responders?
* What new security technologies really work? And how can railroads get the funding to purchase them?
Among the other experts onboard to address these topics are London Underground Managing Director Tim O'Toole (keynote speaker); Transportation Security Administration Assistant Secretary-Homeland Security Kip Hawley (guest luncheon speaker, Jan. 30); MTA Capital Construction President Mysore Nagaraja; CSX Transportation Assistant Vice President-Public Safety and Environment Skip Elliott; FRA Acting Associate Administrator-Safety Jo Strang; AAR Senior Vice President-Government Affairs Obie O'Bannon; and APTA Chief Counsel and Vice President- Government Affairs Daniel Duff.
The "Railway Security Forum and Expo" also will feature table-top exhibits from security technology providers.
For more information, please visit the "Railway Security Forum and Expo" website.
Building new bridges at AmtrakIt has never been easy for Amtrak to undertake a major capital improvement project, given that its funding is subject to an annual request to Congress that traditionally winds up having to go through a long, laborious, politically charged process. Even with a long-term state-of-good-repair plan in place, as was instituted by recently departed President and CEO David L. Gunn, longer-term capital projects often wind up in a queue, awaiting a time when there’s enough funding—both current and projected—to carry them out. The risk in this is that certain aging pieces of infrastructure, most on the Northeast Corridor, are put at risk for failures that will cause major service disruptions.
One such piece of infrastructure is the 1,389-foot, double-track, 87-year-old Thames River Bridge, between New London and Groton, Conn. The aging bascule lift structure, one of 10 moveable bridges on the NEC, sees about 2,500 openings annually and handles 40 trains per day. The bridge, which has failed several times in the past few years, is currently operated by machinery at the end of its lifespan, including three-foot-diameter, five-foot-long trunnion bearings. Failure of these bearings will make the bridge inoperable for an extended period of time, impacting not only Amtrak train operations but the U.S. Naval Submarine Base at Groton, the U.S. Coast Guard Academy, commercial marine facilities, and recreational boating—especially if the moveable span seizes up in a partially open position.
After ten years of planning, the Thames River Bridge will undergo a $76 million, two-year replacement of its bascule lift span under a construction contract between Amtrak and Cianbro Corp. of Pittsfield, Maine. Cianbro’s portion of the contract is $60 million. HNTB Corp. designed a new vertical lift span to replace the outdated, 188-foot-long bascule mechanism. The project is described by Amtrak as “the largest single capital improvement Amtrak will make to the Northeast Corridor during this time.” It will include fabrication and erection of two lift towers and a lift span; relocation of the bridge tender control house; and installation of new machinery, electrical systems, and underwater communications and signal cable. The project also calls for modification of the piers and marine fender system that protects the piers from marine traffic. Most of this work will be done while the bridge remains in operation.
Work begins this month on installation of seven new underwater communications and signal submarine cables. A major construction phase will occur over 12 days in late 2007, when the bascule lift span will be removed and replaced with a new, 188-foot-long, 35-foot-wide, 1,250-ton vertical lift span constructed by Cianbro. The new structure, which will have new track and walkways, will be floated into place on barges and installed during a four-day service outage in which Amtrak plans to establish “bus bridge” service connecting passengers to trains serving New York and Boston. Amtrak’s Bridge & Building department will assist Cianbro with relocation of the bridge tender’s control house and installation of new timber ties and tie spacers. Amtrak crews will install running rails, guard rails, joint bars, and tie plates; extend existing power and control cables and monitor installation of the new power control system; replace the navigation lights on the bridge; and install lighting on the new pier fenders. New signal system cables and telephone service to the control house will also be installed.
The Thames River Bridge is the first of three major movable-bridge replacements in Connecticut planned over the next 10 years. Remaining are the Niantic River Bridge and the Connecticut River Bridge, both built in 1907. Also in need of replacement is the 1906-vintage Miamicock River fixed bridge. Design work on the Niantic River Bridge is complete and construction is scheduled to start in 2008, with an RFP to be released next year. An RFP is expected to go out shortly for an engineering assessment to determine whether to rebuild or replace the Connecticut River Bridge. Construction could begin in 2010.
Amtrak Acting President and CEO David Hughes, who was hired by David Gunn as the railroad’s Chief Engineer, is currently overseeing these projects. Could the experienced railroad civil engineer take on the job of building bridges to Congress? During a press conference announcing the bridge project, Hughes was asked by Railway Age if he would accept the job of President and CEO. Hughes replied that he “would be pleased to take on the job” if asked by the company’s board of directors. A search is currently under way for Gunn’s replacement. Gunn was abruptly and unexpectedly fired on Nov. 9, 2005, in a move widely criticized by railway industry observers and members of Congress.
Funding available for training at TTCI emergency response centerThe Department of Homeland Security is making funds available to first responders nationwide to attend weapons of mass destruction field training at TTCI's Emergency Response Training Center (ERTC) in Pueblo, Colo. Responders can contact their state grants administrator to secure funding for this purpose.
Representatives from DHS's Office of Domestic Preparedness, firefighters, and the Colorado Division of Fire Safety met last month to discuss the training center's capabilities and the possibility of approving other courses offered at the center.
Colorado Sen. Wayne Allard and Reps. John Salazar, Marilyn Musgrave, and Bob Veauprez recently introduced measures in both houses to make ERTC part of the National Domestic Preparedness Consortium, a group of institutions that develop, test, and deliver training to state and local emergency responders.
Greenbrier earnings grow in fiscal year’s first quarterFiscal Year 2006 first-quarter earnings at the Greenbrier Companies increased compared to the same period in 2005, based largely on higher margins attributable to a shifting of railcar manufacturing to Mexico and increased sourcing of non-domestic components.
“Operating momentum realized in the second half of FY 2005 has carried into 2006, with both our Manufacturing and Leasing & Services segments continuing to operate with higher margins,” said William A. Furman, president and CEO. “Our strategic decisions to allocate more of our new railcar production to our Mexican operations and to emphasize global supply sourcing have driven cost efficiencies exceeding initial expectations. Recent debt financings have provided increased operating flexibility, particularly in our leasing operations, where growth in both the owned and managed fleet, as well as an increase in lease origination and syndication activities occurred during the quarter. These activities have all had a positive impact on earnings.”
For the fiscal first quarter ended Nov. 30, 2005, net earnings increased 49% to $8.0 million, or $.51 per diluted share, compared to net earnings of $5.4 million, or $0.35 per diluted share, for the same period in 2005. Revenues for the quarter were $186 million, compared to $218 million in the prior-year period. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter increased 35% to $23.4 million, or 12.5% of revenues. New railcar production of 3,200 units for the quarter was comparable with first quarter 2005 levels of 3,400 units. The new railcar manufacturing backlog was 7,100 units valued at $450 million, compared to 9,600 units valued at $550 million on Aug. 31, 2005 (the end of FY 2005’s fourth quarter). Greenbrier formalized its 2006 annual earnings guidance to a range between $2.30 to $2.45 per share.
“We continue to be pleased with our manufacturing gross margin and performance of our Mexican operations,” Furman said. “Increases in quarterly deliveries of new railcars and continued operating efficiencies during the year are anticipated to lead to even stronger quarterly earnings as the year unwinds. Our commitment to maintaining intermodal market share and to higher margin intermodal and conventional railcar business has led to a decline in our backlog. However, industry fundamentals remain strong. While the exact timing of major orders cannot be predicted with certainty, a strong foundation for major intermodal and conventional railcar orders has been developed. We are in advanced negotiations on several potential significant orders that would cause backlog to grow. Substantial engineering resources are being devoted in order to expand and enhance railcar offerings.”
Mercer Management Consulting acquires MultiModal Applied SystemsMercer Management Consulting, Inc., the surface transportation strategy and operations consulting arm of Marsh & McLennan Companies, Inc., has acquired MultiModal Applied Systems, Inc., a Princeton, N.J.-based supplier of railway systems planning and service design software. Terms of the transaction were not disclosed.
MultiModal, founded in 1992, is best known for MultiRail®, the freight and passenger railway operations and schedule planning software used by all North American Class I’s as well as other railways worldwide. Other MultiModal products and services include operating plan design, railway merger and privatization analysis, line capacity planning, real-time marshalling plan management, crew and locomotive optimization, yield management, and custom software development.
Mercer Management Consulting operates 23 offices in the Americas, Asia, and Europe. Its clients include many of the world’s largest surface transportation providers, both public and private, on six continents, as well as financial institutions, leasing companies, and suppliers that support the transportation sector.
Amtrak board appointments: Circumventing Congress—againTwo Amtrak board members appointed by President Bush during the 2004-2005 Congressional recess—Floyd Hall, a former chief executive of K-Mart, and Enrique Sosa, a former president of BP Amoco Chemicals—have been reappointed to another one-year term during the current recess in a move widely criticized as a tactic to circumvent Congress.
Hall and Sosa, neither of whom have any practical railroad experience, have been described by critics as Bush loyalists who support the Administration’s efforts to break up Amtrak and privatize some of its operations. They rejoin Chairman David Laney, a Texas attorney, and U.S. Transportation Secretary Norman Mineta on Amtrak’s board. Mineta reportedly has never attended a board meeting and has designated General Counsel Jeffrey Rosen to represent DOT at meetings. Though three seats remain vacant on the seven-member body, the board maintains the four-member quorum needed to carry out Amtrak business.
Hall and Sosa’s reappointments have been strongly criticized by the United Transportation Union, which represents a substantial number of Amtrak train and engine service personnel. UTU said in a statement that President Bush “chose expediency and political loyalty over competency and senatorial courtesy” in reappointing them. Recess appointments, though permitted by the U.S. Constitution, bypass the formal Senate confirmation process when the Senate is out of session. They are usually made during “extraordinary situations,” said UTU. “Bush used the unpopular process simply to put two loyalists on the Amtrak board whom he knows the Senate has no interest in confirming.”
According to the Center for Responsive Politics, Hall made $250,000 in political contributions to the Republican National Committee in 2002 (the most recent year for which data is available). CRP says that Sosa is also a contributor to Republican political campaigns. Laney is a George Bush “Pioneer” who raised at least $100,000 in election campaign contributions for Bush.
Passenger railcars: A multibillion-dollar marketNorth American passenger rail operators--intercity, commuter/regional, heavy rail, and light rail--are expanding and modernizing their railcar fleets at an average annual cost of around $2 billion a year.
Railway Age magazine's exclusive annual survey shows that builders delivered 1,212 new or substantially rebuilt passenger railcars to customers in the U.S., Canada, and Mexico in 2005, and were working on an undelivered backlog of 3,002 going into 2006. In addition, purchasing agencies expect to order up to 1,289 cars in 2006.
At an estimated average cost of $1.5 million each, the units delivered in 2005 were valued at nearly $2 billion, and the backlog on Jan. 1, 2006, was worth more than $4 billion. Since 2000, 8,000-plus cars were delivered.
The principal suppliers of cars for the North American market are Alstom of France, Bombardier of Canada, AnsaldoBreda of Italy, CAF of Spain, Siemens of Germany, and the Japanese contractors Kawasaki, Kinkisharyo, Kinkisharyo/Mitsui, and Nippon Sharyo.
Detailed results of the Railway Age survey, including projections for orders over the next five years, appear in the magazine's January 2006 issue.
The survey was conducted by Marybeth Luczak, executive editor.
PATH awards Wabtec contracts worth $65 millionThe Port Authority Trans-Hudson's 340 newly ordered rapid transit cars will be equipped with brakes, couplers, door operators and controls, and current collectors from Wabtec Corp. The transit agency recently signed contracts with Wabtec subsidiaries WABCO Transit and Vapor Rail to begin supplying the components, worth $65 million, later this year. Full production will take place from 2007 through 2010.
Kawasaki Rail Car is producing the new cars, with an option for an additional 125, which would increase Wabtec's contract value to $80 million.
“This project, combined with our previously announced contracts to supply components for new subway cars in New York City and to build locomotives for transit authorities in Toronto and New York, puts our transit business in a solid position through the end of this decade,” said Wabtec Chairman, President, and CEO William E. Kassling, during today's announcement.
According to Wabtec, in the past three months, the company has received contracts amounting to $400-plus million, including options. Its multi-year backlog, including options, for the first time exceeds $1 billion, compared with about $700 million last year.
CPR describes 2006 capital improvement programCanadian Pacific Railway is planning a 2006 capital investment program in the range of C$810 million to C$825 million. Principal expenditures will be C$570 to maintain and upgrade track and signal systems and build sidings; $160 million for locomotive acquisition, overhaul, and maintenance; C$50 million for information technology; and C$25 million for expanded intermodal and other freight facilities. Funds are also available for “targeted growth opportunities.” CPR’s 2006 capital program is smaller than the approximately $910 million invested in 2005 when the railroad completed a major western capacity expansion project.