Will Railroads' Good Times Be Derailed?

There is a brewing storm out there against the main rail carriers.

I recently posted on Archer Daniel's (ADM) suit against the four major carriers, Union Pacific (UNP), BNSF (BNI), CSX (CSX), Norfolk Southern (NSC), and Kansas City Southern (KSU).

In yesterday's Wall Street Journal they reiterate my opinion saying that "lawyers involved in the class-action case (currently ongoing in the District of Columbia) said the entry of ADM, one of the world's largest grain processors, could herald similar moves from other large rail customers.

What is so important here is to note that the majority of the improvements in the financial fortunes of the railroads in the last few years can be directly related to their ability to pass along these fuel surcharges to rail users.

Should they be forced to refund a chunk of this money and should they suddenly come under increased scrutiny, they may find themselves in the same boat as the US trucking industry, being pinched by rising fuel costs.

How long do we think it will be before the American Trucking Association starts in earnest to rile shippers and lobby congress to begin to look into this?

This has not got much press lately but is will begin to snowball and one ought to expect other rail shippers to begin to pile in..

Disclosure: Long ADM.

Comments

[donato:]

lawyers will be the only ones to profit from such lawsuits. we the consumer will be strapped with higher cost from everything that is shipped by truck or rail. I personally think the government should stop such actions as only then can we control the cost. Let attorneys get involved and then complain because prices ultimately go higher.

2008 Apr 01 10:58 AM

[erics99:]

How many times are you going to write this article? Maybe next article your title will be even more scary sounding. Why don't you put your money where your mouth is, and short CSX or BNI for the next year or two.

2008 Apr 01 12:44 PM

[tom18:]

He got out of CSX and into Citigroup in November, sounds like a bitter man trying to justify a very bad decision.

2008 Apr 01 01:27 PM

[Railroader ...:]

This was posted on railroaderblog.com today:

The Evolution of the Railroad Manager

Think of the technology the railroads have today: Remote Control Locomotives, Distributed Power and Hybrid Locomotives to name a few. Some of the most advanced systems created to date; however, the advancement of the railroad screeches to a halt due to the stagnation of the railroad management. Everyone knows the reputation of Norfolk Southern’s hardcore management philosophy. Their corporate headquarters are situated on the Military Highway in Norfolk, VA, which is really appropriate due to their “drill sergeant” management mentality. CSX doesn’t have a stellar reputation either. Their Manage With Intimidation style causes resentment and lower productivity.

[More:]

The Union Pacific Railroad does take the trophy with their management style. When they started hiring managers off the street and expected them to understand how trains move, that’s when the trouble ensued. I’ve heard instances of managers who would write-up a conductor because he was using a four-point stance on a boxcar. The manager’s excuse was: “The rule book said to use a three point stance”. How humiliating is it for a conductor to be chastised because after throwing a switch he didn’t point hard enough at the switch point? So, the UP’s Manage with Ignorance wins the award for Railroad Excellence.

My point is: You can have all the advancements in technology, but unless the management practices evolve into the twenty-first century the railroads will still be considered less than adequate. Railroads are re-living the 1800’s mentality when it comes to their employees. Again, the equipment has evolved, but the managers may as well ride a stagecoach to work.

The evolution of the railroad manager starts at the top. When the CEO’s of the railroads decide that they want to release their grip on the past, then things will change. I would like to see the entire management structure scrapped and replaced with a more competent style. I’m not saying all managers are bad, but when it comes to business practice the railroads must do better.

2008 Apr 03 07:23 PM

[rcamp:]

It's obvious this gentleman doesn't know much about the resilience of the U. S. freight rail system and its ability to work with shippers over the long term for mutual benefit. With energy spikes and the inherent advantage of rail over other surface transportation, it's a no-brainer that the railroads will be strong in the long term.

2008 Apr 04 09:53 AM

[set:]

Why is it that most of the shipper complainers about the railroad rates earn for more on their equity than the railroads. Yet, they want the railroads to cut their revenues so taht the shippers can make more profits.


On Apr 04 09:53 AM rcamp wrote:

> It's obvious this gentleman doesn't know much about the resilience
> of the U. S. freight rail system and its ability to work with shippers
> over the long term for mutual benefit. With energy spikes and the
> inherent advantage of rail over other surface transportation, it's
> a no-brainer that the railroads will be strong in the long term.

2008 Apr 21 12:14 PM

[kevin p:]

Why would the American trucking association care about railroads fuel surcharges, they're charging them too . The ATA is trying to reduce speed limits in order to hurt small trucking companies ability to compete with their larger slower moving member companies. The ATA is not a threat to the rails.

2008 May 12 12:53 PM

[mwswi:]

Terrific post, informedrailroader. And thanks for the link to Railroaderblog.

2008 Jun 07 09:19 AM

[Stoop Davy ...:]

>>Their corporate headquarters are situated on the Military Highway in Norfolk, VA, <<

Bullcrap! They're located downtown, on Commercial place.

2008 Jul 25 05:42 PM