April 2005
Boardman confirmed as FRA chiefThe Senate has confirmed Joe Boardman, New York's former transportation commissioner, as the new Federal Railroad Administrator.
In a statement, AAR President and CEO Edward R. Hamberger congratulated Boardman, saying that the association "looks forward to working with him as he assumes this important new role as administrator of FRA."
BNSF gets the nod from South Dakota BNSF Railway has exercised an option to purchase the 368-mile Core rail line from the State of South Dakota. The Class I has operated the line since 1981, and will pay $41.64 million (reduced by the value of state-retained properties) to control it.
The sale, which is subject to Surface Transportation Board approval, includes an agreement to “protect and expand” line access for state shippers and settles two pending lawsuits. South Dakota-based short lines will have certain access rights to the Core line, allowing state agricultural shippers to enter additional markets. As an example, access will be expanded through the BNSF transfer point in Aberdeen. (The line runs from Aberdeen to Mitchell, Mitchell to Canton, Canton to Sioux Falls, and Mitchell to Sioux City.)
The acquisition will “enhance service options for shippers in South Dakota and support our continued investment in the Core line,” said BNSF Vice President-Network Development Peter J. Rickershauser, during today's announcement.
BNSF contracted with the State in 1981 to upgrade and operate the once-abandoned line. In 1986, the railroad was given the opportunity to purchase it “under specific conditions at a time of its choosing.”
New Canadian container terminal to open in 2007A Port of Prince Rupert container terminal is set to launch in first-quarter 2007. CN, Maher Terminals of Canada Corp., and the Prince Rupert Port Authority have joined forces to “create a new North American gateway” for goods moving between Asia and markets in Canada and the United States. Initial throughput capacity is expected to reach 500,000 TEUs (20-foot-equivalent containers) a year.
The group has secured $60 million in project funding from the Canadian and British Columbian governments. CN is contributing an additional $30 million, which includes $15 million for the port's intermodal yard, $10 million for terminal trackage, and $5 million for infrastructure improvements to accommodate doublestacks along CN's B.C. North line.
Next month, Maher Terminals will put forward an RFP for the acquisition and installation of three large container cranes at the terminal and supporting container-handling equipment and technology, at a cost of approximately $60 million.
The Port of Prince Rupert is now completing bank financing for its $25 million contribution.
Because congestion at major ports along North America's west coast remains a “significant issue,” all parties are confident that a new terminal in British Columbia will be advantageous.
“CN has the capacity, service, and transit times to make Prince Rupert a true success,” commented President and CEO E. Hunter Harrison, during today's announcement. “CN's network will offer fast access from Prince Rupert to the key markets of Toronto, Montreal, Chicago, and Memphis.”
In the future, it's hoped that the facility will handle some 2 million TEUs a year.
Greenbrier teams up with Babcock on railcar leasing ventureThe Greenbrier Companies and Babcock & Brown Rail Management, LLC, have partnered to lease more than 3,500 new railcars in the North American market. Valued at $250 million, the cars will be syndicated and managed for third-party investors. More than 80% are already under contract, with deliveries expected this year from Greenbrier and three other manufacturers. Additional cars may be offered in the future, according to Greenbrier and the U.S. subsidiary of Babcock & Brown, Ltd.
“This new relationship expands each company's access to new equipment,” said Greenbrier President and CEO William Furman, during today's announcement. “We believe it will provide our customers with a broader range of products.”
Due to Greenbrier's “capacity and strength in fleet management” and Babcock & Brown's “structuring expertise and access to a worldwide investor market,” the joint venture should “enhance our returns on leased railcar assets,” added Victoria McManus, president of Babcock & Brown Rail Management, LLC.
CN, UTU agree on new labor dealUnited Transportation Union members employed by CN in Canada have ratified a three-year collective agreement, retroactive to Jan. 1, 2004. Under terms of the deal, 2,600 conductors, assistant conductors, yard service employees, and traffic coordinators will see “wage, benefit, and quality of work-life improvements.”
Rail traffic continues to climb in 2005The growth path continues for U.S., Canadian, and Mexican intermodal and carload traffic, according to an Association of American Railroads report. For the first 16 weeks of the year, U.S. roads handled 3.44 million trailers/containers, up 7.3% from year-ago levels, and 5.45 million carloads, up 2.6%. On a revenue ton-mile basis, total volume rose 3.5% to 506.3 billion. During the same period, Canadian trailer/container loadings rose 4.2% to 668,358 and carloads increased 0.9% to 1.12 million. TFM, Mexico's largest railroad, reported a 9.4% gain in originated intermodal traffic with 60,454 trailer/container loadings, and a 3.8% jump in originated carload traffic, with 138,073 cars.
One-time gain sends CSX profits surgingCSX's sale of its International Terminals business provided a substantial boost to first-quarter 2005 profits, the railroad reported today. Net income rose to $579 million, or $2.56 a share, from just $30 million, or 14 cents a share, during the same period in 2004. Excluding the sale's net after-tax gain of $425 million, or $1.88 a share, the company earned 68 cents a share--well-above analyst expectations of 45 cents a share, according to Reuters Estimates.
“CSX continued on its path of consistent, continuous improvement producing year-over-year growth in core earnings for the fifth consecutive quarter,” said Michael Ward, CSX Corp.'s chairman, president, and CEO, during an earnings announcement.
Surface Transportation operating income was a record $351 million vs. $151 million a year earlier, which was reduced by a $53 million management restructuring charge in 2004. Operating expenses for Surface Transportation came in at $1.76 billion, falling slightly from first-quarter 2004's $1.77 billion.
The quarter's Surface Transportation revenue ($2.1 billion) was up 11% over the same period a year earlier ($1.9 billion). “A strong pricing environment resulting from high demand contributed significantly to the company's year-over-year revenue growth with CSX's value pricing and yield management initiatives, along with the fuel surcharge program, driving the top-line improvements,” said Ward.
CSX's operating ratio of 83.3% in 2005's first three months improved by 6.1 percentage points over first-quarter 2004.
CPR shows “exceptional performance” in first quarter Earlier today, Canadian Pacific Railway reported that its first-quarter 2005 net income surged 240% to C$80.5 million or 50 cents a share vs. first-quarter 2004's C$23.5 million or 15 cents a share. Analysts polled by Thomson First Call estimated a more conservative 42 cents a share.
“CPR's performance in the quarter was exceptional,” said Rob Ritchie, the railroad's president and CEO, during an earnings announcement. “Yield continued to strengthen. We delivered greater operating leverage, taking more of the revenue growth to the bottom line. Productivity and fluidity continued to improve as freight car velocity increased and our team handled more freight than any previous January-to-March period.”
Revenues for the quarter grew 14% to C$1.01 billion compared to C$886.6 million in first-quarter 2004. Meanwhile, operating expenses increased 8% to C$835.4 million vs. C$770.6 million during the same period last year. This was a result of high fuel prices, business growth, and the impact of rising share prices on stock-based compensation programs, according to CPR.
“There will be ongoing focus on expense management and railway fluidity as we continue to grow our business,” Ritchie maintained. “The base of business covered by fuel surcharges will continue to expand in 2005 and, together with fuel efficiency measures and hedging, will further offset the impact of high oil prices.”
CPR's operating ratio of 82.4% for this year's first three months improved by 4.5 percentage points over first-quarter 2004's 86.9%.
The railroad reported a foreign exchange loss on long-term debt of C$3 million (C$4 million after tax) in the first quarter--down 77% from a loss of C$13 million (C$14 million after tax) during the same period a year ago.
Revenues are expected to grow 12% to 14% in 2005, according to CPR. “Diluted earnings per share, excluding foreign exchange gains and losses on long-term debt and other specified items, are expected to be between C$3.15 and C$3.25, assuming oil prices averaging $55 per barrel and an average exchange rate of C$1.23 per U.S. dollar.”
Capital investment in 2005 is slated to be in the range of C$900 million and C$920 million. This includes the C$160 million cost of CPR's capacity expansion program between the Prairies and the Port of Vancouver (see April 19 breaking news update). This program, in its first full year of operation following completion, “will translate into incremental earnings per share of 25 cents to 40 cents,” CPR said. Free cash flow after dividends is expected to be about C$50 million to C$100 million this year, according to the railroad.
First-quarter profits rise sharply at BNSFBNSF Railway has posted record first-quarter earnings with double-digit freight revenue growth. In today's announcement, Chairman, President, and CEO Matthew K. Rose said that his railroad “continues to leverage unprecedented market demand from its customers with operating efficiencies.”
With 145,821 revenue ton-miles in 2005's first quarter, volumes grew 8.6% over the same period last year, and revenue per thousand ton-miles was up $1.65 to $19.88.
Net income of $321 million, or 83 cents a share, rose 66% over first-quarter 2004's $193 million, or 52 cents a share, handily beating Thompson Financial-polled analyst estimates by 10 cents a share. Total operating revenues reached $2.98 billion-20% higher than the first three months of last year ($2.49 billion).
Operating expenses increased as well, coming in at $2.35 billion vs. $2.09 billion in the year-earlier quarter. But this was due primarily to “a 9% increase in gross ton-miles and 30% higher fuel prices after hedge benefit,” according to BNSF.
The railroad reported more good news. Its operating ratio of 78.1% showed a 5.2 percentage-point improvement over first-quarter 2004.
UTU ends brief strike at BNSF RailwayThe United Transportation Union began and ended today a work stoppage at BNSF Railway. The strike of 8,000 UTU-represented employees was in response to BNSF's "violation" of a union agreement providing that “engineers with train-service seniority can only use that seniority if they cannot hold an engineer's position,” according to UTU. This month, the union alleged, BNSF permitted engineers, who could hold an engineer position, to remain in train service.
The strike ended shortly after it started, when a federal district court judge in Minneapolis agreed to UTU's motion for a preliminary injunction seeking "a return to the status quo under its agreements."
In response to the strike, BNSF told Railway Age: "This is an unlawful work stoppage over a minor dispute that affects a portion of the BNSF system."
The work stoppage did not affect any passenger operations hosted or staffed by BNSF, and UTU members continued to perform all passenger-related functions on BNSF and Amtrak, according to the union.
UTU also noted that the Atchison, Topeka & Santa Fe Railway, which merged with the Class I in 1995, was not affected because an agreement in place provides that “junior engineers would be forced to vacant engineer positions if senior engineers wanted to remain in train service.”
NS reports record revenuesNorfolk Southern's solid first-quarter performance reflects “robust volumes and revenues,” Chairman and CEO David Goode told analysts during today's earnings announcement. In a quarter “punctuated by challenges,” including the Jan. 6 derailment in Graniteville, S.C., Goode said that he was encouraged by improvements to the railroad's operating ratio, which came in at 79.4% vs. 79.6% in first-quarter 2004. This was particularly impressive considering some $35 million in pretax expenses related to the derailment were included in NS's first-quarter results and bumped up the ratio by 1.7 percentage points. (NS expects $6 million in additional derailment-related costs, including higher insurances expenses, for the remainder of the year.)
Net income of $194 million, or 47 cents a share, was up 23% compared with $158 million, or 40 cents a share, during the same period last year. It was reduced by some $21 million, or 5 cents a share, due to the Graniteville derailment.
“While we experienced some modest degradation in our average train speed and terminal dwell time, quarter over quarter, we were able to handle 6% more volume (or 106,000 units)” with just 3% additional train starts, said NS President Charles “Wick” Moorman. “I will say that our operating metrics for on-time train performance, connection performance, and shipment performance all improved as the quarter progressed.”
Operating revenues of $1.96 billion reached record highs for NS, improving by 16%, vs. the year-earlier period's $1.7 billion. Operating expenses of $1.6 billion were up 16% over the year-earlier period, primarily due to costs associated with increased traffic volume, higher diesel fuel prices, and expenses related to the Graniteville derailment.
Moorman also announced several service improvement initiatives under way:
* In addition to ordering 50 more locomotives in first-quarter 2005, NS accelerated its locomotive overhaul and car repair programs “to accommodate increased business demand and improve customer service.”
* NS has increased overall employment, primarily as a result of continued hiring of T&E (Train and Engine Service) employees and some additional hiring of mechanical department employees to “keep up with growth in our business volumes” and “attrition of our workforce.”
* The railroad is expanding its TOP (Thoroughbred Operating Plan) beyond the parameters of the general merchandise network to include the intermodal network-which represents NS's “fastest-growing” business segment. The project is slated for completion this summer.
* NS is “poised” to implement its Unified Traffic Control System (UTCS), which will “unify and standardize dispatching systems, coordinate and optimize train movements, and provide rapid disaster recovery capability.” Moorman noted that the system “will take a while to roll out across the system.”
New York MTA trims capital budget planThe New York MTA's five-year capital budget plan has been scaled back to $21.15 billion. The new proposal cuts $6.6 billion from the original-which included some $17.2 billion for essential investment in existing properties and an additional $10 billion for expansion. Last December, New York State's Capital Program Review Board rejected the MTA's 2005-2009 spending plan, forcing the agency to come up with and resubmit this latest alternative.
The plan now calls for $16 billion in core capital programs. New railcar funding has been slashed $62 million to $1.81 billion and subway station rehabilitation took a $400.6 million hit, falling to $1.69 billion. Signals and communications funding decreased by $29.5 million to $1.84 billion. According to MTA, this reflects an increase of $56.3 million in signal investments for three new signaling projects (replacement of the interlocking and relay systems damaged by a 2005 fire along the 8th Avenue line; measures to address conditions at similar unmodernized relay rooms; and replacement/upgrade of two interlockings on the Queens Boulevard line) and a $85.8 million decrease in communications work (including the deferral of the Culver line and Lexington line's communications-based train control projects). Track program funding was unscathed at $1.14 billion. Also unchanged: security funding at $495 million--for which MTA says it will seek federal funds--and the No. 7 subway line extension on Manhattan's West Side at $1.99 billion. East Side Access, the Second Avenue Subway, and a rail link to John F. Kennedy International Airport from lower Manhattan didn't fare as well. They were trimmed back from $7.9 billion to $2.5 billion.
Wabtec: No “material liability” in Amtrak's Acela woesWabtec Corp. responded today to numerous inquiries about its role in the construction of Amtrak's now sidelined Acela trains. During its first-quarter earnings announcement, Wabtec said that it “did not design or supply the braking system” for the high speed passenger cars, but it did “provide and machine approximately one-third of the brake discs.” The company is currently assisting Amtrak in an evaluation, “as requested,” and “does not believe it has any material liability with respect to its work.”
On the heels of a strong first quarter, Wabtec reaffirms 2005 outlookWabtec's net income nearly doubled, as sales jumped 30% in first-quarter 2005, the company reported today.
Earnings of $9.2 million or 20 cents a share were up sharply from first-quarter 2004's $4.8 million, or 11 cents a share. Revenue topped $244.9 million in this year's first quarter vs. $188.2 million during the same period last year. Wabtec attributes this growth to “strong demand” for locomotive and freight car components in both the aftermarket and original equipment market; its acquisition of Rütgers Rail S.p.A. assets by CoFen S.r.l., a new Wabtec subsidiary established in first-quarter 2005; and the “ramp-up” of Wabtec's contract to supply complete locomotive cabs, including such components as electronics, air brake controls, and radiators, to Electro-Motive Diesel, Inc. Wabtec estimates that the EMD contract will generate revenues of some $50 million in 2005.
The company's first-quarter 2005 operating expenses ($39.3 million) were 9% higher than the year-earlier quarter ($36 million), “due primarily to write-downs of $1.1 million and the addition of CoFen,” according to Wabtec.
“We are off to a solid start in 2005 and expect our momentum to continue through the year,” said Wabtec Chairman, President, and CEO William E. Kassling, during today's earnings announcement. This is based on several factors, he maintained, including “continued growth in rail traffic and strong orders for new freight cars and locomotives.” Kassling reported that “carloadings and revenue ton-miles are both up about 3% year-to-date, and intermodal loadings are up more than 7%. Orders for new freight cars were about 40% higher than in fourth-quarter 2004 and first-quarter deliveries hit their highest level in five years.” In addition, he noted that Wabtec's “internal growth strategies and efforts to improve our cost structure will benefit us in 2005 and beyond.”
NCRR to launch $18 million capital improvement programThe North Carolina Railroad Co. will embark on an $18 million capital improvement program this fall. Between Raleigh and Goldsboro, N.C., three sidings, totaling six miles, will be constructed, and a new CTC (Centralized Traffic Control) system installed.
The 317-mile NCRR is “committed to making rail improvements that will increase capacity, safety, speed, and reliability for both freight and passenger trains,” said Scott Saylor, president of NCRR, which carries more than 60 Norfork Southern-operated freight trains and eight Amtrak trains each day.
The program's first phase includes two new sidings in the Auburn and Powatan areas of western Johnston County, plus two yard tracks and a siding east of Selma. In addition, the existing NCRR yard and siding tracks will be upgraded and extended. Traffic control signaling will be installed between Raleigh and Pine Level, and the sidings will be connected to the main line by high-speed electronically controlled switches.
Norfolk Southern is overseeing the program.
RELCO unveils new locomotive shopIn a move to provide “better service” and “become a dominant player in the high-volume” locomotive rebuild and service segment of the industry, RELCO Locomotives, Inc., has completed a new facility in southeastern Iowa, according to Chairman and CEO Donald L. Bachman. The facility will not only increase RELCO's manufacturing capacity, it will complement the company's smaller Minooka, Ill., operation, where corporate headquarters are located.
Construction on the 95-acre site began in second-quarter 2004. Features include a 90,000-square-foot main locomotive shop, a self-contained blast and paint shop, office space, and 10,000-plus feet of track. The main shop houses five tracks, six overhead cranes with a capacity of up to 50 tons each, two raised rail pits, a drop table, fabrication and component rebuild areas, and nearly 30 miles of track for locomotive run-in and testing. The facility interchanges directly with BNSF Railway and IC&E, and offers close interchange with Union Pacific.
Northern Lines Railway takes over BNSF track in MinnesotaAnacostia & Pacific's newest rail line, Northern Lines Railway, LLC, has leased 22 route-miles of track from BNSF Railway in the St. Cloud, Minn., area. Dan Rickel is president of the short line, which is now one of nine A&P subsidiaries.
NLR serves existing and potential new customers along the leased track, which includes related yard, industry, and main line trackage rights. It also provides switching service for customers located on the east side of BNSF's main line in St. Cloud, and the two roads interchange there for traffic originating or terminating on the leased trackage.
Commented BNSF Vice President-Network Development Pete Rickershauser: “This kind of service partnership has become an important part of BNSF's ongoing effort to provide the most effective service for its customers and to ensure the most efficient use of its network assets.”
Japanese commuter train derails, slams into apartment complexA seven-car Japanese commuter train derailed near Osaka today, killing at least 100 and injuring more than 450, according to the Associated Press. The train, operated by Japan Rail West, was carrying 580 passengers. But it's unclear how many of the victims were riders, bystanders, and/or apartment residents. The AP is reporting that the train crashed into an automobile before hitting a nine-story apartment complex, which was located just 20 feet from the tracks. Five cars derailed. The accident is under investigation, but according to the AP, train speed and/or the actions of an inexperienced engineer may be to blame.
How Amtrak's new “reform” plan would affect laborSeveral labor reforms are recommended under Amtrak's new FY 2006-2010 strategic plan, which proposes various operational, structural, and financial changes (details, April 21 news update). And not everyone is pleased. UTU International has criticized the plan, claiming it will result in “sacking assistant conductors, scrapping coverage of the Federal Employers' Liability Act, canceling Railroad Retirement for new employees, opening some routes to private operators using non-union crews, and negotiating wages, work rules, and working conditions free from provisions of the Railway Labor Act.”
Amtrak told Railway Age that it “wants negotiations to be meaningful,” and it's hopeful that “all parties [will] engage in a serious discussion of the merits of the various proposals being publicly debated.” Following are railroad company's responses to UTU's specific points:
* “There is no sacking going on” of assistant conductors, Amtrak said, pointing out that it has “attempted for the last five years to negotiate a change in crew consist-which is preserved in the UTU/Amtrak negotiated agreement.” Amtrak is seeking a rule change, authorizing it to assign conductors to trains, as needed, not by the number of cars on a train. (Currently, one passenger car requires one conductor; after one, an assistant must be used, and after six, another assistant, on some trains.) “We have made it clear to the UTU that we would reduce the number of conductors through attrition, not furlough, but we need a work rule change to do it,” Amtrak explained.
* The reform initiatives “recommend that only new employees be covered by Social Security instead of Railroad Retirement,” according to Amtrak, maintaining that it is “canceling nothing.” The railroad company is “asking Congress to enact legislation to accomplish this-providing new employees with the same contribution to Social Security as RRTA, and the opportunity to negotiate a pension plan that is more flexible and portable than the existing benefits under RRTA.”
* “Competition does not open routes to non-union crews, unless the unions are unable to organize them or the employees do not want the unions to represent them,” according to Amtrak, which added that “no employee of a competitor is obligated to be represented by a union when they work for a competing transportation company. Conversely, no such employee is prevented from electing union representatives.”
* Amtrak proposes that “the unions and Amtrak negotiate under the RLA under a new provision that requires the agreements to terminate on their last day.” This would allow Amtrak to “impose new terms” or the unions to “engage in self-help.” The change, Amtrak told Railway Age, “would put Amtrak rail unions under provisions similar to federal labor law that governs most all other unions and private sector employers (e.g., the National Labor Relations Act.) No less a requirement would exist for collective bargaining under the proposal. What would change is the protracted, incremental, and lengthy periods between agreements now existing under the RLA that permits contracts to extend without end unless renegotiated.”
UP posts first-quarter resultsThe “network challenges we continue to face as well as the West coast storm” impacted Union Pacific's first-quarter 2005 earnings, said Chairman and CEO Dick Davidson in an announcement on April 21.
For the first three months of the year, net income dipped 22% to $128 million, or 48 cents a share, from $165 million, or 63 cents a share, during the same period last year. The results were off by some $34 million due to the storm, according to Davidson, and high fuel prices and demand also contributed. But they still beat Wall Street estimates by a penny. In a Thomson Financial survey, analysts expected 47 cents a share for the quarter.
The railroad's operating revenue in the first quarter grew by 9% to $3.2 billion-a UP record-compared to $2.9 billion last year. Operating income was down slightly at $313 million vs. $314 million during the 2004 period.
UP's operating ratio remains high at 90.1%--a percentage point increase over first-quarter 2004. And average train speed and terminal dwell time were down. For 2005's first three months, trains averaged 21.1 mph vs. 21.9 mph during the 2004 period, and spent about 29.5 hours in terminals vs. 29.8 hours in the 2004 period.
Watco Companies leases BNSF line in MissouriKaw River Railroad (KAW) has leased BNSF Railway's 15 route-mile line between Kearney and Birmingham, Mo. The transaction includes related yard, industry, and main line trackage rights. The short line, a Watco Companies affiliate, will serve customers primarily in the paper and plastics business.
“The KAW currently serves a diversified customer base in the Kansas City area, so we are looking forward to expanding our operations in Kansas City,” said Watco CEO Rick Webb, during the announcement.
Amtrak unveils its own “reform” planIn what it is characterizing as “a series of bold and comprehensive strategic reform initiatives,” Amtrak today unveiled its own plan-“Fiscal Year 2006-2010 Strategic Plan”-for reforming operations and how the railroad is structured and financed. The plan contains elements of the U.S. DOT's much-panned reform plan, but phases those elements in over time. It also calls for $1.82 billion in FY 2006 federal support for capital investment programs and national operations, as well as a stable source of long-term funding.
Amtrak Chairman David Laney and President and CEO David Gunn presented the plan during testimony today at an Amtrak oversight hearing before the Senate Subcommittee on Surface Transportation and Merchant Marine.
In a nutshell, the Amtrak plan, which it characterized as a response to the DOT reform plan, “seeks to transform the funding and development of passenger rail service, and introduce competition, efficiency, and cost-savings.” There are four “fundamental objectives”:
1) “Development of passenger rail corridors utilizing a federal/state matching approach common to all other modes (generally 80/20). States, not Amtrak, would lead the development of the corridors, a number of which have already been federally designated, and Amtrak may, among others, competitively bid to provide the service.”
2) “Return of the Northeast Corridor infrastructure to a state-of-good-repair and operational reliability, with phased-in financial responsibility for capital and operating costs assumed on a proportionate basis by all users, including Amtrak, freight and commuter railroads.”
3) “Establishment of phased-in financial performance thresholds for Amtrak's existing 15 long-distance trains and any future similar proposed service. Amtrak is initiating a series of actions to improve the financial performance of these trains. Services falling below the thresholds could be continued through support by states or other authorities, reconfigured, or eliminated.”
4) “Creation of markets for competition, private commercial participation, and industrial reforms in various rail functions. This includes competition among operators, including Amtrak, for new corridor routes.”
Amtrak acknowledges that the fourth provision will be resisted by its host freight railroads, but said that “the market for services now almost exclusively supplied by Amtrak must be open to competition if intercity passenger rail service is to regain a viable position in the U.S.”
“Despite the record number of passengers being served by the railroad today, Amtrak cannot continue business as usual, nor can the snail pace of passenger rail development continue to lag behind the growing need in high-demand regions of the country,” said Amtrak. “These initiatives will both continue fundamental reform at Amtrak and help spur a rational and much-needed growth of the passenger rail network. It is Amtrak's belief that the leadership of such development is the role of states and the federal government-not Amtrak. Instead, Amtrak must in the long run transform itself to a competitive provider of passenger rail services, with the recognition that in the near term it will remain the steward of the national passenger rail system as it is today.”
Amtrak says that the groundwork for restructuring has already been laid. Under David Gunn, the railroad “eliminated its unwieldy business-unit structure and began a series of other reforms: reduction of management layers, zero-based budgeting, strict GAAP accounting, and other cost controls, including the reduction and elimination of several routes.” Amtrak also “returned its focus to the railroad's core business of passenger service and asset rebuilding. More than 5,000 positions were eliminated and the growth in operating costs was brought under control.”
Building on these efforts, Amtrak will for FY 2006 “align financial accounting, planning, and management accountability along five business lines to facilitate future decision-making: Amtrak-owned infrastructure management (principally the Northeast Corridor; NEC operations; state corridor operations; national long-distance operations, and ancillary businesses. These lines are not a return to the business unit structure and do not separate NEC operations and capital project management. Amtrak has reviewed various proposals to separate the management of NEC operations and infrastructure, but concluded that complexities and risks of separation outweigh the benefits, and therefore that such a separation is not advisable at this time.”
The “wide range of reforms” include “clarification of individual business activity costs, increased outsourcing, and the initial facilitation of competition for selected routes and functions.”
Public sector and legislative reforms are also required, Amtrak says, as well as ”strong federal and state leadership” Among the legislative changes called for:
1) “Establishment of a federal/state capital match program for passenger rail development, comparable to other modes of transportation. This long-proven federal transportation funding mechanism through which the U.S. Department of Transportation annually provides more than $40 billion for highway and transit projects.”
2) “Designation of a federal agency to oversee the transition to a competitive passenger rail environment, including the distribution of federal funding, se-lected assets and rights of access.”
3) “Revisions allowing the transition to a method by which all users of the NEC fund their proportionate share of its costs.”
4) “Ultimately, extension of Amtrak access rights on freight railroads to qualified competitors for state-managed services.”
5) “Targeted revisions to allow labor agreements to terminate at the conclusion of the term of their agreement.” These include “labor flexibility similar to 1981 legislation that transferred commuter operations from Conrail.” Two legislative changes would “make all intercity passenger rail operators subject to the same labor law, and allow Amtrak and other intercity passenger rail operators' labor contracts to terminate at expiration;” and “transition out of the Railroad Retirement System by allowing all new intercity passenger rail employees to be placed in Social Security, with the possible added option of 401(k) retirement plans."
Amtrak is seeking federal funding in FY 2006 of $1.82 billion. This request in-cludes $787 million for capital infrastructure projects, $560 million to support train operations, $278 million for service on existing debt, $175 million in work-ing capital, and $20 million for “transition costs associated with the reforms. Little reduction in the need for federal support will be realized in FY 2006,” Amtrak said. “In fact, funding for operations, critical assets such as the Northeast Corridor, and other needs are essential to the success of the reform initiatives. Current federal funding (FY 2005) is $1.2 billion. However, an appropriation at this level would be insufficient in FY 2006 to sustain operations and the backlog of capital projects we are working to erase."
Full details of Amtrak's plan, “Amtrak Strategic Reform Initiatives,” is available in the Government Affairs/”Other Reports” section of the Amtrak website (www.amtrak.com) in downloadable PDF form.
Greenbrier takes orders for 1,300 railcarsThe Greenbrier Companies reported today that it has received orders for 1,300 railcars, worth $100 million. The cars include 900 center-partition cars for the North American market and 400 sliding wall cars for the European market. Greenbrier expects to "maintain efficiencies of long production runs," since the car types are "in current Greenbrier production."
The return of the MetrolinersA venerable name in passenger railroading-Metroliner-is making a strong, albeit temporary, return to the Northeast Corridor as a substitute for Amtrak's grounded Acela Express service.
Amtrak's 20 Acela Express trainsets, taken out of service earlier last week after cracks were found in 300 passenger coach disc brake rotor hubs, may begin re-turning to service this summer, following repairs. In their stead, Metroliner trains-Amfleet coaches hauled by AEM7 or HHP8 electric locomotives-will be used to fill New York-Washington and New York-Boston runs.
Amtrak plans to provide on-the-hour Metroliner service between Washington and New York each weekday departing both end-points nearly every hour be-tween 6:00 a.m. and 6:00 p.m., effective April 25. Metroliner service increases to every-hour-on-the-hour weekdays from Washington and New York starting May 2. Metroliners will be supplemented with 20 Regional service roundtrips between Washington and New York, with most departing at five minutes past the hour from their origination point. Starting April 25, Amtrak will offer Bos-ton-New York weekday trips at 100% of the existing Regional service, nine roundtrips per day. Beginning May 2, four daily weekday Metroliner depar-tures will replace some former Acela Express train slots.
Amtrak Senior Vice President- Operations William Crosbie said the railroad is working with the Bombardier/Alstom consortium on a plan to return the Acela Express trains to service. The plan includes inspection of the discs with a revised and approved inspection procedure, agreement on the life-cycle of the brake discs that meets Amtrak's approval, and a “steady and reliable supply chain of replacement discs.”
"The trains are under warranty, and it is the responsibility of the manufacturer consortium to come up with a plan for service restoration," Crosbie said. "We will work with the consortium and federal rail safety officials to be certain the trains can be safely and reliably operated. If these issues are resolved, a gradual return to service may occur. Based on what we know at this point, it is our hope that the manufacturer will be able to resolve these issues and that the Acelas will gradually return to service this summer. But it will depend on these things happening - and nothing else happening to delay this process."
CN earnings remain strongCN posted strong first-quarter 2005 earnings, with an operating ratio of 69.2%--a 3.3 percentage point improvement over first-quarter 2004. This performance was driven by “a solid economy, revenue gains from CN's 2004 acquisitions, a higher fuel surcharge, freight rate increases, and a return to more normal traffic levels following the first-quarter 2004 Canadian Auto Workers strike,” said E. Hunter Harrison, CN president and CEO, during the railroad's earnings report on April 20.
Net income rose 42% to C$299 million, or C$1.04 per share, during first-quarter 2005 vs. C$210 million, or 73 Canadian cents a share, in the same 2004 period. Analyst predictions had been more conservative at 78 Canadian cents a share, according to a Thomson First Call poll.
Revenues jumped 19% to C$1.7 billion from C$1.4 billion in the first three months of 2004. CN benefited from revenues of C$121 million brought in by the rail and related holdings of Great Lakes Transportation, LLC, and BC Rail, whose operations CN consolidated last year. These operations also contributed to CN's increased operating expenses, which were up 13%, coming in at C$1.18 billion vs. C$1.04 billion during the same 2004 period.
CN's C$526 million in operating income saw a 33% boost over first-quarter 2004's C$395 million.
“The continued appreciation of the Canadian dollar affected the conversion of its U.S. dollar-denominated revenues and expenses,” CN said. For this reason, the company's revenues, operating income, and net income were cut by some $60 million, $25 million, and $15 million, respectively.
Harrison commented: “By staying focused on cost control and asset utilization, we continue to be well positioned to convert revenue gains into strong bottom line growth.”
CSX: No hazmat rerouting, for nowStating that it needs more time to study the legal issues, a federal appeals court has temporarily banned Washington, D.C. from enforcing a law requiring CSX to reroute hazmat traffic around the city.
The U.S. Court of Appeals for the D.C. Circuit reversed a decision by the U.S. District Court in Washington, D.C. upholding the city council's law. The appeals court said that it is not “in any way ruling on the merits of the case.”
CPR gears up for $160 million expansionCanadian Pacific Railway will complete a $160 million expansion project in Western Canada this fall, translating into a capacity increase of 12% or 400-plus railcars a day. Twenty-five separate tasks are on the drawing board: 10 between Moose Jaw, Sask., and Calgary to extend sidings and lay sections of doubletrack; three between Edmonton and Calgary to extend sidings and build a new siding; and 12 between Calgary and the Port of Vancouver to extend sidings and lay sections of doubletrack.
CPR decided to undertake this massive project due, in part, to “positive developments in our customers' markets,” said President and CEO Rob Ritchie in an announcement April 18.
CPR and its largest customer, Elk Valley Coal Corp., recently signed a five-year contract, providing for an increase in coal volumes and rates through 2009 (see news update dated April 5). In addition, three major CPR-served potash producers plan to increase production by 2.6 million tons a year between second-quarter 2006 and fourth-quarter 2007.
CPR found “sufficiently encouraging signals in the federal government,” as well, Ritchie said. Bill C-44, as drafted with amendments to Canadian transportation law, is expected to provide a stable regulatory environment.
According to the railroad, the project will support the Vancouver Port Authority's expansion plans and the British Columbia government's port growth strategy.
“Canadian shippers and ports want to participate in growing global markets,” Ritchie said. “They want us to expand track capacity, and we are encouraged enough to take the initial step.”
As for future expansion projects, Ritchie said they would be determined “by ongoing market conditions and the future policy environment in Canada.”
Amtrak: An axle here, and axle thereIn the automobile restoration field, it’s known as “parting out”: taking parts off unusable cars to create something that’s roadworthy.
That’s what Amtrak is doing to try to get at least some of its Acela Express trains back in service on the Northeast Corridor—pulling good axle assemblies (those without cracked brake rotor hubs) from 18 out-of-service trainsets to assemble two defect-free consists.
Amtrak said it hoped to have at least one Acela Express trainset in service by today, and is also substituting Amfleet-equipped Metroliner and Regional trains for approximately half of the cancelled Acela Express trains between Washington, New York, and Boston, re-accommodating passengers on these trains as seat availability may permit.
Industry responds to D.C. court rulingThe U.S. District Court in Washington D.C. has upheld a Washington D.C. law requiring the rerouting of hazardous materials around the city, forcing CSX to appeal the decision to a higher court.
“The D.C. law will improve neither security nor safety.” The Association of American Railroads said today. “The ruling creates a clear conflict between the court decision and the legal opinions of the U.S. Departments of Justice, Homeland Security, and Transportation, and an order from the Surface Transportation Board. . . . If this decision is allowed to stand, it could disrupt the shipments of many hazardous materials. This would make it difficult if not impossible to ship these products by rail to points where they are needed to purify water supplies, manufacture pharmaceuticals or for manufacturing processes.”
The federal agencies have all weighed in against the city’s ban, and interference with interstate commerce is just one of the arguments being presented. The other arguments have mostly to do with exposure to risk. The U.S. DOT, for example, said that when local governments ban hazardous materials from their communities, “it raises everyone’s risk and clogs the transportation system." The Departments of Justice and Homeland Security said that D.C. law would “result in a dramatic increase in the total miles over which such materials travel and the total time the materials are in transit” and “increase their exposure to possible terrorist action.”
For Amtrak, brake problems, and some Congressional actionThe annual debate in Congress over Amtrak funding appears to be in full swing following legislation introduced today by both the House of Representatives and the Bush Administration. Meanwhile, technical problems are again plaguing the popular but problematic high speed Acela Express equipment.
Amtrak has removed all 20 of its Acela Express trainsets from service on the Boston-New York-Washington Northeast Corridor after cracks were found in the braking system on many of the trainsets’ coaches during routine inspections. Cancelled are 15 New York-Washington trains and 11 New York-Boston trains, which will remain out of service until the problem is resolved.
That could take a considerable amount of time. The cracks have been found in the spokes of the axle-mounted hubs that support the coaches’ inboard disc brake rotors. There are three inboard rotors per axle, four axles per coach. Multiplying that by six coaches yields 72 hubs and rotors per trainset. That’s 1,440 integral hub/rotor assemblies in the fleet of 20 trainsets. The only way to replace the hubs is to drop every wheelset, remove every wheel, and remove every hub/rotor assembly.
Much is unclear at this point: Whether the hubs can be replaced without modifications or if a redesign is needed, and how long that will take. Whether there are enough spare hubs in inventory (probably not). Whether Amtrak will be able to substitute Amfleet-equipped trains to protect NEC service. In any case the spoke-cracking problem most likely means the Acela Express will not be in service for a while. That service accounts for 53,000 NEC seats—over $6 million in revenue—weekly.
Cracked brake hub spokes are the latest in a long series of technical glitches that have plagued the Bombardier/Alstom-built Acela Express since testing began in 1999. Revenue service was delayed almost a year as truck-hunting and excessive wheel wear problems were resolved. Several months after the trainsets entered service, power car yaw damper brackets began cracking. The trainsets were removed from service while new, beefier brackets were designed and installed.
There have been numerous other problems, all since remedied: Power car upper carbody shrouds that came loose and peeled back at high speeds. Problematic restroom doors ("crapper doors that don’t work," Amtrak President and CEO David Gunn quipped). Software glitches. EMI interference problems. The mounting problems led Amtrak (under George Warrington, Gunn’s predecessor) to sue the Bombardier/Alstom consortium, which had also contracted to maintain the trainsets. The consortium countersued, claiming, among other things, that Amtrak had misrepresented the condition of NEC track. Under Gunn, both parties dropped their suits, agreeing to transfer Acela Express maintenance to Amtrak. Whether the current brake problems resurrect old claims remains to be seen.
In the face of all these problems, the Acela Express service has been enormously popular with Amtrak’s NEC passengers. "Amtrak certainly doesn’t need this problem and those trainsets to be out of service at this time, especially when the Bush Administration is trying to zero-fund it," said one observer.
The Administration, led by barnstorming DOT Secretary Norman Mineta, on April 14 sent to Congress its reform plan, which would turn Amtrak into a private operator, with a 50/50 federal-state partnership supporting a company that would focus on running trains and not maintain infrastructure. The federal government would cease subsidizing Amtrak and instead share only maintenance costs with the states. Those states choosing to support intercity rail passenger service would have the option of contracting train operations to private contractors of their choice, forcing privately owned freight railroads to accept other intercity train operators on their tracks.
The Administration’s reform plan was a non-starter in Congress two years ago and by most accounts will die quickly in this Congress. What Mineta has called "a lifeline to a dying railroad company" was dismissed by Sen. Jon Corzine (D-N.J.) as "the latest gimmick by the President--to claim fiscal discipline by lowering numbers and shifting the cost burdens to states and communities." The bill "is ill-fated, ill-conceived, and just plain wrong," Corzine said. The Association of American Railroads has also dismissed the reform plan, citing that only Amtrak should have the statutory right to operate intercity passenger trains over freight railroads.
"Amtrak reform?" said another observer. "David Gunn has already accomplished that."
These perspectives reflect those of many federal and state legislators on both sides of the aisle. Among them is the leadership of the House Transportation & Infrastructure Committee and its Railroads Subcommittee, which today introduced H.R. 1630, bipartisan legislation that would authorize Amtrak annual funding of $2 billion over the next three fiscal years (through FY 2008) to finance capital and operating expenses and excess railroad retirement expense. The Secretary of Transportation would be required to set aside a reserve to ensure that Amtrak meets all of its contractual obligations related to commuter rail and state-supported rail services. Amtrak would be required to submit to the Secretary comprehensive business plans and followup reports with a separate accounting for its various lines of business, and reports related to capital projects expenditures. Amtrak says this level of funding "would be sufficient to begin to address critical needs outlined in our five year capital plan, which is geared to restoring the Amtrak system, including the Northeast Corridor, to a good state of repair."
H.R. 1630—viewed as the first major component of a Congressional debate over Amtrak funding that could drag on for months—was introduced by Reps. Don Young (R-Alaska), Chairman, T&I Committee; James Oberstar (D-Minn.), Ranking Democrat; Steven LaTourette (R-Ohio), Chairman, Subcommittee on Railroads; and Corrine Brown (D-Fla.), Ranking Democrat, Railroads Subcommittee.
"Although serious disagreements still exist about Amtrak's long-term management strategy and structure, there is a common understanding of the need for near-term funding," said Young, an Amtrak supporter. "This bill, at its requested level of $2 billion per year, will allow Amtrak to continue with critical work under its current five-year plan. The legislation also contains funding accountability procedures closely modeled on those already in effect under the current appropriations laws. It is my hope that the funding authorized in this bill will allow a window of opportunity for a last-chance Amtrak turnaround."
"Without Amtrak, millions of passengers—many of whom cannot afford to drive a car or buy a plane ticket—would be stranded, millions of travelers would be added to already congested roads and airports, 20,000 workers would be out on the streets looking for new jobs, communities and businesses that depend on passenger rail service would suffer, and states already under tight budget constraints would be forced to figure out how to pay for new service," said Oberstar. "It is our responsibility to ensure that Amtrak survives."
In addition, the House T&I Committee today reintroduced RIDE-21 (Railroad Infrastructure Development and Expansion Act for the 21st Century), legislation that would provide $60 billion for high speed rail and rail infrastructure projects The current version of RIDE-21 is H.R. 1631.
Quick carload prices from CNCN customers can now obtain "instantaneous" carload prices 24 hours a day, seven days a week from the railroad’s website, www.cn.ca. Prices are available for all carload traffic moving anywhere on the company’s North American rail network; all destinations on CSX Transportation; and for selected carload commodities to destinations served by BNSF Railway, Union Pacific, and Norfolk Southern. Prices to Canadian Pacific Railway destinations are expected to be available by mid-August 2005.
"Railroads are continuing to work together to expand universal coverage for this new pricing tool," said James Foote, CN’s executive vice-president, sales and marketing. "It significantly increases the speed at which we can quote rates for our customers, and makes it much easier for shippers to do business with us. In years past, the manual, time-intensive methods of quoting single-line and interline prices could take days or even weeks. That’s something CN and the rail industry can no longer afford in today’s fast-paced business environment."
CN-BLET reach tentative agreementCN has signed a tentative labor agreement with the Brotherhood of Locomotive Engineers and Trainmen (BLET) that is slated to take effect Aug. 1. It applies to 400 locomotive engineers working on CN’s former Illinois Central lines in the United States, but further details are being withheld pending ratification.
CN was pleased with the outcome, according to the railroad’s Vice President-Labor Relations Kim Madigan, who noted that it "preserves the flexible work rules and hourly wage structure of the existing contract."
"This tentative agreement confirms my belief that the hourly agreement has been the right way to go in the rail industry," added BLET General Chairman John Koonce, during the announcement on April 12.
BNSF receives customer service awardFor its daily shipment monitoring, proactive notification of service exceptions, and strong commitment to service improvement, BNSF Railway has received Toyota Logistics Service’s Logistics Excellence Award for Railroad Customer Service.
"We are extremely honored to be recognized for the second consecutive year," said Steve Branscum, BNSF’s group vice president-consumer products, in today’s announcement.
In 2004, BNSF transported 90,000-plus Toyota and Lexus vehicles, originating from Toyota’s North American plants in Cambridge, Ontario, Canada; Georgetown, Ky.; Princeton, Ind.; and Fremont, Calif.; and Toyota’s ports of entry in Long Beach, Calif., and Portland, Ore.
In previous years, Toyota has presented BNSF with Excellence in On-Time Performance and Excellence in Quality awards, as well.
CSX leases Florida branch line to First Coast RailroadFirst Coast Railroad (FCRD) is now operating CSX Transportation’s 32-mile line from Yulee to Fernandina, Fla., and from Yulee north to Seals, Ga. Under terms of the lease, the Genesee & Wyoming subsidiary will handle some 15,000 carloads annually and interchange with CSXT. Much of the business, which includes pulp and paper, and chemicals and agricultural products, comes from three customers.
"We are pleased that CSXT has chosen us as the successful bidder," said FCDR President Jim Benz, during the April 11 announcement.
Northstar commuter rail project on track Minnesota’s Northstar project took a big step forward today when Governor Tim Pawlenty signed into law a 2005 bonding bill that includes $37.5 million for the new commuter rail line between Minneapolis and Big Lake.
Securing this state funding, which matches $44 million in local funding, is critical to the future of the project, whose total cost is estimated to be $265 million.
"The action by the Minnesota Legislature and Gov. Pawlenty allows us to proceed into final design, significantly improves our standing with the Federal Transit Administration, and keeps Northstar Commuter Rail on schedule for beginning service in late 2008," said Commissioner Dan Erhart, chair of the Anoka County Regional Railroad Authority, during the announcement.
Northstar service will run on 40 miles of existing freight track, with six stations proposed for Big Lake, Elk River, Anoka, Coon Rapids, Fridley, and Minneapolis. There will be feeder buses to stations and connections with Hiawatha LRT in downtown Minneapolis.
Kawasaki Railcar lands a big onePATH (Port Authority Trans-Hudson), one of the oldest rail rapid transit systems in the U.S. (it opened in 1908 as the Hudson & Manhattan Railroad) and operator of the oldest railcar fleet in the nation (average age: 33 years), will replace its entire 340-car fleet by 2011 as part of an $809 million modernization program.
The Port Authority of New York and New Jersey has awarded Kawasaki Railcar, Inc., a $499 million contract for 415 new cars (340 plus an option for an additional 75) to be built at Kawasaki’s Yonkers’ N.Y., plant. Carbodies will be fabricated at the company’s Lincoln, Neb., plant. Deliveries are expected to begin in 2008. The cars will replace PATH’s aging PA-1, PA-2, and PA-3s, as well as PA-4 cars built by Kawasaki in the mid-1980s. The optional 75 cars are expected to be needed to handle expanded system capacity as well as a proposed new link from Newark Penn Station to the monorail at Newark Liberty International Airport that would provide PATH customers from Lower Manhattan with a one-seat ride to the airport (they currently have to change to an NJ Transit or Amtrak train at Newark, or travel uptown to NY Penn Station and board an airport-bound train there).
PATH’s new railcars will feature many improvements over the existing fleet: improved lighting and HVAC systems; cantilevered seats with room underneath for passengers to store items; prerecorded station announcements; better signs; and three door sets on each side to allow for faster loading and unloading and reduced station dwell time.
In addition to the new railcars, PATH’s $809 million modernization program, described as "one of the largest single investments ever made by the bistate agency" and "the largest single investment in PATH since the Port Authority acquired the Hudson & Manhattan Railroad in 1962," also includes car maintenance equipment, renovations to PATH’s Harrison Consolidated Maintenance Facility, and preliminary work on a new communications-based signaling and train control system.
Overall, the Port Authority has been investing billions in the PATH system since the 9/11 terrorist attacks destroyed its World Trade Center infrastructure. During the past three years, the PA has invested $566 million to rebuild Exchange Place Station in Jersey City, N.J., and the rail tunnels connecting New Jersey and Lower Manhattan, and construct a temporary WTC PATH station. The PA is expected to break ground this summer on a $2 billion transportation hub at the WTC site, which will include a permanent PATH terminal. This project will for the first time connect PATH with ferry services and with 12 MTA New York City Transit subway lines that will feed into NYCT’s planned Fulton Street Transit Center. The MTA and PA projects in Lower Manhattan are being financed with federal disaster-recovery funds.
FreightCar America now on the NASDAQShares of FreightCar America, Inc., the carbuilder formerly known as Johnstown America, is now trading on NASDAQ National Market under the symbol "RAIL." The company’s IPO of 8,500,000 shares of common stock was issued yesterday and was priced at $19.00 per share.
CN, NS place new locomotive ordersCiting continuing business growth, CN and Norfolk Southern have announced orders for up to 200 new locomotives.
Through mid-2006, CN will take delivery of 50 4,400-hp ES44DC locomotives from GE Transportation Rail and 25 4,300-hp SD70M-2 locomotives from EMD (Electro-Motive Diesel, formerly the Electro-Motive Division of General Motors). Both models are d.c. traction and are compliant with EPA Tier 2 emissions regulations. Deliveries will commence in the fourth quarter of this year and be completed by mid-2006. The units will allow CN to replace 100 older 3,000-3,600 horsepower road locomotives.
The orders include options through 2008 for an additional 25 ES44DCs and 50 SD70M-2s
CN President and CEO E. Hunter Harrison said the locomotive acquisitions "will upgrade CN’s motive power fleet at a time of continued growth in all of our businesses across the network. The options to acquire a further 75 locomotives, if exercised, would permit CN to accommodate potential traffic in excess of current expectations."
Norfolk Southern is acquiring 50 more locomotives than it initially figured in its 2005 capital plan. Record volume growth over the past 18 months has prompted NS to order 50 ES44DC units from GE, adding to the 52 SD70M-2s is has al-ready ordered from EMD. The acquisitions will bring the NS fleet up to almost 4,000 units.
EMD now "Electro-Motive Diesel"One of the oldest names in railway supply and locomotive building has changed ownership and its corporate name, but retains the acronym most closely associated with it—EMD.
After several years of attempting a spin-off, General Motors has completed the sale of its Electro-Motive Division to a consortium of investors led by Greenbriar Equity Group LLC and Berkshire Partners LLC. The company is still known as EMD, but the initials now stand for Electro-Motive Diesel.
In a sense, this is the fourth generation of the company that in the 1930s introduced essentially off-the-shelf, standardized diesel-electric locomotives that (along with locomotives from other builders like General Electric and Alco) by 1960 had completely replaced steam locomotives in North American freight and passenger regular revenue service. Electro-Motive Engineering was founded in 1922 in Cleveland, Ohio, by H.L. Hamilton and Paul Turner. In 1925, it changed its name to Electro-Motive Corporation. EMC, along with Winton Engine, was acquired in 1930 by General Motors, which formed the Electro-Motive Division. EMD’s LaGrange, Ill., plant opened in 1935.
The Greenbriar/Berkshire acquisition covers substantially all of the Electro-Motive businesses, including North American and international locomotives; power, marine, and industrial products; the spare parts and parts rebuild business; and all of Electro-Motive’s locomotive maintenance contracts worldwide. Both the LaGrange and London, Ontario, manufacturing facilities are included.
John Hamilton is EMD’s new president and CEO. Hamilton, who worked with Greenbriar and Berkshire on the EMD transaction for more than a year, is described as "having served in senior management roles leading the successful turnaround of several manufacturing companies in the transportation industry over the past decade." Jerry Greenwald, a founder of Greenbriar and formerly vice chairman of Chrysler in the 1980s and more recently CEO of United Airlines, is non-executive chairman of EMD.
EMD’s new website is www.EMDiesels.com.
CPR and Elk Valley Coal agree to five-year contractCanadian Pacific Railway and Elk Valley Coal Corp. have discontinued all legal and regulatory proceedings related to their previous contract dispute over the transportation of coal from Elk Valley’s five mines in southeast British Columbia to Vancouver-area ports for export. On April 5, the two companies signed a new five-year transportation agreement--retroactive to April 1, 2004, and extending to March 31, 2009.
"This contract provides clarity and stability in our operational and financial relationship," said Rob Ritchie, CPR president and CEO, during the announcement. "Both parties can now work together to take full advantage of the increasing global demand for metallurgical coal."
Among the elements of the contract: an increase in base coal volumes to be moved, in line with Elk Valley’s planned capacity increases; a framework for the movement of additional tons above the base volume during the 2006-2008 coal years, with a rate premium on the additional tons; fixed coal year rates for the first three years of the contract, with the 2004 rate being about 20% higher than the 2003 rate, and the 2005 and 2006 rates being some 60% higher than the 2003 rate; rates for the 2007 and 2008 coal years will be linked to Elk Valley’s price for coal with a floor and ceiling rate, both of which will be higher than the 2004 rate; and a fuel cost adjustment mechanism for the last two years of the contract.
ASLRRA presents small-road marketing awardsThe American Short Line and Regional Railroad Association selected California Northern Railroad Co. (CFNR), Red River Valley & Western Railroad Co. (RRVW), and R.J. Corman Railroad Co. as winners of its annual marketing competition. The awards were presented at ASLRRA’s annual meeting in Anaheim, Calif., on April 4.
CFNR partnered with Union Pacific to more than triple its volume of pumice traffic while beating direct truck and other rail/transload competition. The two railroads performed track work at a Napa County, Calif.-based Owens Corning stone veneer manufacturing facility, and more than doubled the cars in the equipment pool. Apex Bulk Commodities, Owens Corning’s transload operator, constructed a new rapid discharge pit, conveyor system, and enclosed stockpile surge area at the plant of CFNR customer, Napa Pipe Corp. Napa Pipe was closing its plant, eliminating between 2,500 and 8,000 carloads per year for CFNR. The dramatic increase in pumice carloads has helped offset the steel pipe traffic loss and led to CFNR and Apex being named Owens Corning "Carriers of the Year" for 2004.
Facing a potentially large loss of its most important commodity, coupled with the possible demise of many small online elevators in North Dakota, RRVW convinced BNSF Railway to make an exception to its policy of only locating 110-car unit train shuttle facilities along its main lines. The carriers established a joint shuttle network, which located or expanded five large shuttle elevators, using a collector program to transport grain from small elevators to RRVW-served shuttle facilities. In 2004, a record 12,237 carloads were handled in BNSF shuttle trains. This amounted to 45% of RRVW’s total grain shipments for the year, with one out of every four coming from small elevators.
R.J. Corman captured 11,000 annual truckloads of Alcan’s aluminum ignot business by collaborating with CSX Transportation. The ignots are shipped from Alcan’s plant in Berea, Ky., to a facility in Russellville, Ky., via three 35-car unit trainsets of flat cars, which were modified to carry two 55,000-pound ignots per car. R.J. Corman purchased the cars, plus spares, and two SD40 locomotives for the move. Using its own crews and equipment, R.J. Corman operates the trains over both CSXT lines and its own lines from Berea to Louisville. A CSXT crew takes the trains from Louisville to Bowling Green, and returns them to R.J. Corman, which delivers the trains to the Russellville plant.
Montana Rail Link engineer named "Safety Person of the Year"The American Short Line and Regional Railroad Association has recognized Montana Rail Link’s Richard E. Dawes as its 2005 Safety Person of the Year. Dawes, a locomotive engineer, was selected for his work with newly hired switchmen to improve workplace safety. ASLRRA presented the award on April 4 at its annual meeting in Anaheim, Calif.
Dawes has helped write new programs for switchman training and assisted in classroom and field instruction for the last three years. He also has spearheaded programs to identify and correct poor lighting, difficult-to-throw switches, and switch stands that pose close-clearance hazards. Most recently, Dawes identified derails with indiscernible blue flags, which resulted in the development of a highly visible blue signal swing arm attached to the derail.
"The MRL cumulative casualty rate for years 1997 through 2004 stands at 2.90, in large part to Richard’s efforts in identifying and solving safety-related problems," said Thomas J. Walsh, president of MRL.
Dawes joined the regional railroad in April 1995 as a maintenance-of-way employee and was quickly promoted to switchman, switch foreman, and engineer. He serves on MRL’s safety audit team and on the safety committee. In addition, he is a member of the Billings-Laurel Area Safety Committee, a member and captain of SAFE (Safe Assessment of Fellow Employees) safety audit teams, serves on the Remote Control Locomotive Safety Committee, and helps plan and execute periodic, staged, on-site hazardous material drills with MRL’s hazmat team.
U.S. ton-miles continue on growth pathU.S. railroad ton-miles are projected to increase 3.2% in 2005, adding more than 50 billion ton-miles to 2004’s total, according to market analysis firm Rail Theory Forecasts (RTF).
“In addition to intermodal traffic which has continued to grow at a high annual rate for the last two years, the energy and materials industries are straining the capacity of the railroad industry, and the additional ton-miles should preclude any short-term improvements in train speed and freight car utilization rates,” reported RTF President Toby Kolstad.
The Portland, Ore.-based company estimates that at least 600 new high-horsepower locomotives will be needed to accommodate the ton-mile growth, and new car deliveries will increase 30% this year even as steel costs drive up railcar prices.
Until traffic stabilizes, the "artificial" demand for additional freight cars to compensate for the lengthened car-cycle times will remain high, according to RTF.
Bombardier Transportation releases FY2005 resultsBombardier Transportation’s financial results for the fourth-quarter and year-ended Jan. 31, 2005, “continue to improve as the ongoing restructuring initiative progresses,” according to the Montreal, Quebec-based company.
The total restructuring cost is expected to reach $617 million—slightly higher than the $583 million originally anticipated. In 2005, it included the closure of three plants, as well as site improvement measures. Additionally, a detailed procurement “action plan” was implemented to reduce costs and supplier numbers. There had been a net workforce reduction of some 4,000 as of Jan. 31, 2005.
Bombardier Transportation was awarded $4.4 billion in new orders for the year: $474 million for French National Railways' 324 high-capacity, AGC-type trains; $320 million for Yong-In of Korea's fully automated rapid transit system; and $263 million for the Chinese Ministry of Railways' 20 eight-car high speed trainsets.
Company backlog reached $21.3 billion by the end of January--$2.4 billion lower than the same period last year. This decrease reflects “an excess of revenues over order intake, partially offset by the positive impact of a foreign exchange adjustment of approximately $800 million, mainly due to the weakening of the U.S. dollar compared to the euro and other western European currencies.”
Going forward, Bombardier Transportation's sales efforts will be “intensified” in countries of the European Union, the Middle East, and Asia, with emphasis on the “fast-growing signaling and services segments.”
Highlights from FY2005:
* Revenues of $2.1 billion for fourth-quarter 2005 vs. $1.9 billion for the same period last year; $7.6 billion for 2005 compared to $7 billion for the previous year. According to Bombardier, the increases were mainly due to “higher revenues on mainline contracts and the positive effect of foreign currency fluctuations resulting from the weakening U.S. dollar compared to the euro and other western European currencies.”
* Special items of $38 million for fourth-quarter 2005; $172 million for FY2005. These items relate to severance and other involuntary termination costs, as well as site closure costs.
* EBITDA of $94 million ($56 million after special items) for the fourth quarter--an increase from the negative $98 million recorded during the same period in 2004. This is attributed to “revisions in estimates for the completion of certain contracts and the charge related to the settlement of all outstanding claims in connection with the Amtrak Acela high-speed train contracts.” For FY2005, EBITDA before special items amounted to $171 million vs. $197 million for the previous year. The decrease primarily is due to “the deterioration in the profitability of certain significant contracts during fourth-quarter FY2004 and first-quarter FY2005, which are now accounted for at a lower margin, partially offset by lower operating expenses, resulting from the positive effects of various restructuring and cost reduction initiatives.”
* EBIT of $61 million ($23 million after special items) for fourth-quarter 2005; $33 million (negative $139 million after special items) for FY2005.