FINANCIAL EDGE, RAILWAY AGE JULY 2022 ISSUE: At Railway Age’s Rail Insights 2022 conference, a key group of industry stakeholders spoke about the state of North American rail.
Lance Fritz, CEO of Union Pacific, discussed the service recovery plan to manage UP’s current issues and accommodate future growth. Fritz described UP’s plan to reduce car supply to break up congestion and improve service. KPI: UP reduced the number of cars online by about 10% and increased speed by more than 10%. Fritz also discussed a plan to reduce dwell times, which would also show a concomitant increase/improvement in network fluidity and service, and said UP feels confident in the hiring pipeline and job he created to recruit, graduate and retain more staff. He was optimistic about the impact of AI (artificial intelligence) on rail technology and the future.
Eric Marchetto, Chief Financial Officer of TrinityRail, highlighted the improvements in overall railcar demand and the need to improve the value proposition for rail. In an environment where the cost of fuel is high and respectful of the environment, rail “should win all day”. Marchetto acknowledged that the growth of rail is facing service challenges. He noted that the price of railcars had increased by 30%, mainly due to input costs. Steel price increases translated into cost increases for specialty components. Marchetto sees inflationary pressure in the rental market due to rising railcar costs, demand and interest rates.
STB President Martin Oberman conducted his discussion with The age of the railway Editor Don Itzkoff stating that the railroads made short-term decisions that negatively impacted service and brought it to an incredibly low point. Armed with primary sources, Oberman tackled the “platitudes” provided by the railways about their ability to respond to post-pandemic traffic increases and the reality of current low levels of service. He contrasted the Class I outlook with short lines on hiring and job retention. He also denounced the transfer of wealth from rail customers to railroad shareholders, essentially noting that even at current revenue levels, a railroad that is unable to provide service to a shipper loses profits to cause of the losses of this shipper.
Paul Titterton from GATX talked to me about the rental market. He said the current railcar crunch is not due to demand but to external factors such as high scrap and new car prices, and slower speed times. He thinks there could be continued strength as long as the economy does not contract as the speed improves. Titterton noted that prices for new railcars are influenced by the price of specialty components, not just the price of raw materials such as steel. GATX tracks one metric, “baseloads”. Current statistics suggest that carload volumes have room to grow and the demand for growth exists. GATX is looking for a hub for the growth of North American rail. Unfortunately, Titterton also reported that progress on reforming the car rental system has slowed or stalled.
Watco CEO Dan Smith spoke of his company’s ability to work with its customer partners to develop solutions for growth, helping them become better managers of their Class I partners. I, Smith views shortline railroads as shipper partners that alleviate congestion at places like port terminals and in turn create a pivot for growth. Watco’s work in the terminal market has grown over the past decade as customers use Watco as an integrated logistics provider in their supply chain. Using the examples of a soybean milling plant and mixed-use industrial/warehousing space in Houston, Smith explained how a shortline railroad is a versatile tool for industrial growth. When hiring, Watco was able to use creative strategies to drive retention and continue to grow its workforce.
Amtrak CEO Stephen Gardner has promoted the need for a successful passenger rail system in the 21st century. Amtrak will use much of its $22 billion from the recent infrastructure bill to upgrade and modernize the Northeast Corridor. Gardner wants to expand the franchise and improve corridors where there is sustainable service demand. He wants to get more people on Amtrak lines. With higher gas prices, people want more public transit service. To do this, Amtrak will continue to need bipartisan political support.
CSX COO Jamie Boychuk focused on the need to maintain best-in-class staff to promote a comprehensive level of success at CSX. Creating a sense of value and opportunity is key to successfully delivering on that promise. This means adopting modern employment strategies to attract and retain a base of high quality employees. CSX strives to use technology that will help employees plan their schedules. The goal: to improve his lifestyle, including his commitments to work and family. Boychuk believes that by working more closely with local union representatives and employees directly, the success of the railroad can be improved. On the service side, CSX is considering improving schedules for bulk products to improve service overall.
Incredible industry content at the Eighth Annual Rail Insights Conference! Don’t miss the ninth.