Fred Frailey Blog

The world according to McClellan

  • Comments 16

I enjoy Jim McClellan’s speeches. Hell, I enjoy Jim McClellan’s company. First of all, he has a finely developed sense of humor, which he likes to turn on himself. More important, Jim has this talent for distilling huge numbers of facts and ideas into simple truisms. Finally, like Zelig, he had this talent for appearing at so many critical junctures of railroad history the past half century. He was present at the development of what became Santa Fe’s Super C, the fastest freight train ever. He was present at the creation of Amtrak and later of Conrail. He was the brains behind Norfolk Southern brilliant (and savage) attack on the purchase of Conrail by CSX, an attack that succeeded in getting NS more than half of Conrail.

Jim has been retired from NS for about a decade, where he ended up as VP of corporate strategy, but that mind of his keeps churning. And it was on full display at this week’s annual meeting of the Lexington Group, in Peoria, Ill. Rather than give you a traditional report on his talk, I’ll just offer you his sound bites. Ladies and gentlemen, the world according to Jim McClellan:

“A simpler network runs most efficiently.”

“You make money by running big trains and keeping them in motion.”

“When railroaders talk merger, they don’t pull out their financial statements. They pull out their maps.”

“Railroads used not to think of themselves as profit making enterprises. They thought in terms of public service. Santa Fe and Seaboard Coast Line stuck with passenger trains way beyond the time they knew they shouldn’t be in that business, because they thought it their duty.”

“The goal of regulation [in the Interstate Commerce Commission era] was fairness, not efficiency. It was a convoluted, complex, and inefficient system. There were too many routes, too many railroads, too many junctions. In the end, the system was unsustainable.”

“Penn Central: Two drowning men clinging to each other.”

“Two railroads are all you need for competition. This idea once seemed radical.”

“The most important event in railroading in the Midwest during the 1970s was the liquidation of the Rock Island Lines. It sent shock waves through labor. Ten thousand jobs went poof.”

“. . . and Canadian Pacific acquired the Delaware & Hudson. God knows why they bothered.”

“Unit trains concentrated traffic on a few main lines, as did intermodal traffic.”

“Marketing guys now have to deal with what it really costs to run a railroad.”

“The decline in coal traffic is good for railroads. It will force them to find new markets. Railroads don’t like to do that, because they don’t have enough intelligent sales people.”

“There are a million ways to make railroads more efficient. But none of them are easy. It will require lots of singles, rather than home runs.”

“Transload and intermodal give customers a whole lot of alternatives to poor carload service.”

“Transcontinental mergers? I think not. The threat of reregulation is serious. And the economics of such mergers are not compelling. We’re down to about ten junction points between major railroads and they run well. The railroad network today is pretty efficient, rather than Balkanized.”

“Railroads thrive on density and velocity.”

That’s it, folks. Wish you could have been there. But for those who were not, you now have the best of McClellan. — Fred W. Frailey

|
  • They are all terrific!    My favorite is “There are a million ways to make railroads more efficient. But none of them are easy. It will require lots of singles, rather than home runs.”  The trouble is keeping people from thinking "we've arrived! No more improvement is needed."  

    The only one I'd take exception to is:  “You make money by running big trains and keeping them in motion.”

    He left NS before they figured out "you make money by keeping the cars moving", not so much trains and train productivity.  Equipment costs tend to swamp everything else, so reducing handlings and dwell are where it's at - at least in the realm of recent history.  

  • Rail Pundit can only second Fred's comments on the estimable Jim McClellan.  Though retired going on a decade, he still ranks as one of, if not the best, strategic thinkers in railroading.  His triumph on the Conrail transaction was masterful, even moreso because in almost every other rail combination it has been the lawyers who ran the strategy, something for which they really are not suited.  In the Conrail battle, NS had the good sense to let McClellan develop the strategy.

  • I love what he said about Penn Central.

  • And he whupped CSX's butt; he knew that Pennsy was the big prize, not the Central!

  • hey, I guessed the coal, PC and true-transcon answers ahead of time and got 2 out of 3!!  I blamed the PC debacle on PRR's financial shennanigans.  NYC was in bad shape, but drowning PRR (& the NH which was forced on them of course) pulled NYC down even faster.  I said getting the railroads off coal would be like getting an addict off his drugs, close enough.  And transcons, never.  Regarding PC, never forget that it hurt the other NE RR's too, RDG lost their 2nd largest interchange (Williamsport with NYC) due to PC, diehard RDG fan here.

  • One of my goals in life is to hear a presentation by Jim McClellan.  I missed him at Sandhouse Gang and didnt know of the LIvingston Group (not a member) in Peoria.  Ouch.

    Ed

  • I'm glad I was there Thursday hear him in person. But being able to read this summary is better because now we have a record. :D

  • Including last Thursday, I have had the privilege of attending several of Jim's presentations.  I have also had many fun conversations with Jim over meals and, of course, favorite beverages.  It was always a treat to exchanges stories of the times in the 1960s and '70's when we and most other railroaders were in the struggle to keep the lights on.

    For those who would like to see more, I recommend you go to Jim's web site at beachtrainman.com/speeches.html   There you will find the power point pages for many of his presentations.  From there go to his "documents" page and his Thomas B Deen Lecture at the 2011 Annual Meeting of the Transportation Research Board.  As special treat, you can follow the links to the video of his lecture.  There you will see why Fred, I, and everybody else think so highly of Jim.

    I understand that the Deen Lectures date back to 1992.  Mr Deen told Jim his was the best ever done.

  • Jay,

    Did you ride the train down to Havana?

  • What new markets does Mr McClellen think would be appropriate, now that the coal market is diminishing?

  • Do any Class I railroads have managers tasked with developing new markets?

  • bob wilcox:  Of course the Class I - all of them - railroads have units tasked with finding and developing new markets.  They stopped hauling buggy whips some time ago.  If you're looking for an example, just look at the fracking sand that is being hauled into the newly developing oil and natural gas production areas.  On a broader level, the development of the domestic intermodal business resulted from railrfoad market identification and development, not that of the customers.who still had to be convinced that they could trust their freight to railroads and still have it delivered where and when they wanted it delivered.

  • Almost a quarter century ago I was staff to a group that negotiated with NS's Jim McClellan to purchase an old NKP segment that NS was rationalizing.  McClellan ate our lunch during those talks (and also our breakfast, dinner, and snacks), but it was good to watch a professional work.  Rush Loving had it correct: McClellan really loves railroads and sees them clearly, unlike foamers.  His statements from Peoria demonstrate that.  

  • Well done, Fred. I've known McClellan for about as long as you have and we have touched on all these themes as one time or another. Frankly, I worry about my friends running short lines. Too many of them don't get any of this and they go on, head in the sand, thinking the single car business is coming back. It isn't, and these are the reasons why.  

  • Hey Roy,

    Thanks to your coordination of bringing Jim to the Union League a few years back with Rush Loving and Dave LeVan, I have my book signed by all 3 - a memorial and fantastic evening!

    Keep challenging us to change and lead our short line railroads into the next era.

    Remember the time-tested compelling economics of the steel wheel on steel rail....

The world according to McClellan