tutorial themes

[Anonymous]

tutorial: themes
several of the recent threads have spoken of executive ability,
scraping decisions and row. i would be interested in asking if the forum
would be interested in establishing a set of themes which could act as on going tutorials regarding business aspects of the railroads.
for example:
what strategies go into the ordering of various locomotives, ie,
how is power matched to costs, train size and route? what are the markets
and self interests which characterize up , bnsf, csx and ns, ie, who are
these corporations and what are their relative strengths and weaknesses?
where and how do they compete and earn?i realize that these topics are
touched upon frequently but there is no easy way to track them down and
pull them together. as of now these ideas are scattered throughout a number of threads.
maybe if such "business strategy" topics as these were specific threads
which were kept alive and easily identified they could be used to as
tutorials on such issues.
i would ask that some of the more knowledgable members consider suggesting
and maintaining a handful of what they see as key practical business topics to post.
thank you

[Randy Stahl]

Go ahead..... ask the questions !
Randy

[Anonymous]

"Go ahead..... ask the questions !
Randy"

thank you.
it was actually your initial response to gabe's scrap thread regarding matching hp to tonnage and locomotive reliability requiring multiple units which sparked my request.
it is these types of questions concerning strategy of behaviors which i would like to ask.

not sure exactly where to start. would it be reasonable to look at divisions within a carrier's territory? when a railroad orders locomotives and other equipment does the railroad try to make choices on the basis of serving a particular route and task or do economies of order scale require a more general attitude toward specifications?
could you randomly choose two routes known to you and compare their profiles, freight carried and equipment demands etc. and point out how the given parameters determine varying corporate responses to the situations presented? i suggest running the thread as a venue for asking about general principles to be highlighted by concrete examples which can be used as "case studies".
randy, this is a first shot at this. if you have a better way of approaching the discussion, please follow your own intuition.
much appreciated,
cbt141

[Randy Stahl]

Lets do it this way, to encourage forum involvement , we/ you are on the board of directors of two different railroads. One railroad is the Illinois Central, the other is the Rio Grande. I am a locomotive dealer and can supply you with any locomotive you want.
Gentlemen: place your orders and give me the reasons why you desire a particuler locomotive.
Randy

[Anonymous]

genius at work. great idea!
thank you

[espeefoamer]

I am in charge of motive power for the Rio Grande.I have heavy coal trains ,and other slow heavy trains,for which I need AC locomotives.I want SD70MACs in this service. I also need SD70Ms for other through freights. I need SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service.
I am sticking with EMD because I need good reliable power,and can't have trains breaking down on the Front Range or over Soldier Summit.

[Anonymous]

"I also need SD70Ms for other through freights. I need SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service."

why AC?
what are the specific uses to which each of these engines will be put? what characteristics of each engine matches to what particular demands of service and route?

[Randy Stahl]

QUOTE: Originally posted by espeefoamer

I am in charge of motive power for the Rio Grande.I have heavy coal trains ,and other slow heavy trains,for which I need AC locomotives.I want SD70MACs in this service. I also need SD70Ms for other through freights. I need SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service.
I am sticking with EMD because I need good reliable power,and can't have trains breaking down on the Front Range or over Soldier Summit.

O.K. I can deliver the SD-70 macs for 2.8 million dollars each. SD-70 macs for 2.1 million dollars each . I have SD40-2 rebuilt for $ 350.000.00 each , GP38-2 rebuilt for $300.000.00 each and GP-40-2 for $300.000.00 each.
I also have some GE locomotives C-30-7 for $45.000.00 each and some B-40-8 for $35.000.00 each.
How much money do you have to spend, remember it's not unlimited ! For the sake of this discussion lets give you a 10 million dollar startup budget. Remember that includes shops and labor. You will have a 500 k monthly budget.
Randy
Randy

[bobwilcox]

I am the Coal product manager.

The units have got to deliver the lowest cost per net ton mile possible. Do not tell me how the new software is not working quite right when costs are keeping my coal shippers out of new markets.

[ericsp]

QUOTE: Originally posted by Randy Stahl

QUOTE: Originally posted by espeefoamer

I am in charge of motive power for the Rio Grande.I have heavy coal trains ,and other slow heavy trains,for which I need AC locomotives.I want SD70MACs in this service. I also need SD70Ms for other through freights. I need SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service.
I am sticking with EMD because I need good reliable power,and can't have trains breaking down on the Front Range or over Soldier Summit.

O.K. I can deliver the SD-70 macs for 2.8 million dollars each. SD-70 macs for 2.1 million dollars each . I have SD40-2 rebuilt for $ 350.000.00 each , GP38-2 rebuilt for $300.000.00 each and GP-40-2 for $300.000.00 each.
I also have some GE locomotives C-30-7 for $45.000.00 each and some B-40-8 for $35.000.00 each.
How much money do you have to spend, remember it's not unlimited ! For the sake of this discussion lets give you a 10 million dollar startup budget. Remember that includes shops and labor. You will have a 500 k monthly budget.
Randy
Randy

Are DRGW and SP affliated in this exercise (I would guess no)? Does SP have an opening? Are the $2.1million locomotives SD70Ms? I definately would not buy 8-40Bs for DRGW, well maybe a couple, we could always use them on the ski train (I like the idea of an 8-40B in DRGW paint). If IC trains can run relatively fast, I might buy for IC, if they are reliable. I guess how much needs to be spent on shops and labor will depend on what locomotives are bought. Is there some type of forum that will give a ballpark figure on the costs for buildings, equipment, and labor? How do the reliabilities of the above rebuilt locomotives compare, generally? Or, do we know who rebuilt them and what the company's reputation is? There sure is much information to consider?

[Anonymous]

" If IC trains can run relatively fast, I might buy for IC, if they are reliable. I guess how much needs to be spent on shops and labor will depend on what locomotives are bought. "

ericsp,
in order to get the ic leg of this discussion in play, would you be willing to assume the role of the ic management?

[csxengineer98]

wow..if i knew anything about managment of a railroad..this might be a nice game to play... but since i dont know anything about why a railroad picks one kind of locomotive over another... i guess im just going to have to sit back and watch this one unfold..... should push for a software company to write a game like this... might be intersting to see how well some of us here would be able to mannage a railroad...
csx engineer

[Randy Stahl]

QUOTE: Originally posted by bobwilcox

I am the Coal product manager.

The units have got to deliver the lowest cost per net ton mile possible. Do not tell me how the new software is not working quite right when costs are keeping my coal shippers out of new markets.

Good arguement! Just like the real railroads this is your presentation to to board. with a 10 million dollar capital program though it is unlikly you will get the quantity io locomotives you need for this train. All of the dept heads are coming to the board asking for approval for cash, your capital budget for the DRGW is 10 million. There's more on this railroad than coal. You need to think about a short term solution for the time being.
Randy

[Randy Stahl]

QUOTE: Originally posted by csxengineer98

wow..if i knew anything about managment of a railroad..this might be a nice game to play... but since i dont know anything about why a railroad picks one kind of locomotive over another... i guess im just going to have to sit back and watch this one unfold..... should push for a software company to write a game like this... might be intersting to see how well some of us here would be able to mannage a railroad...
csx engineer

Your managers require feedback from the operating people to find the equipment that suits the railroad.
Randy

[Randy Stahl]

QUOTE: Originally posted by ericsp

QUOTE: Originally posted by Randy Stahl

QUOTE: Originally posted by espeefoamer

I am in charge of motive power for the Rio Grande.I have heavy coal trains ,and other slow heavy trains,for which I need AC locomotives.I want SD70MACs in this service. I also need SD70Ms for other through freights. I need SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service.
I am sticking with EMD because I need good reliable power,and can't have trains breaking down on the Front Range or over Soldier Summit.

O.K. I can deliver the SD-70 macs for 2.8 million dollars each. SD-70 macs for 2.1 million dollars each . I have SD40-2 rebuilt for $ 350.000.00 each , GP38-2 rebuilt for $300.000.00 each and GP-40-2 for $300.000.00 each.
I also have some GE locomotives C-30-7 for $45.000.00 each and some B-40-8 for $35.000.00 each.
How much money do you have to spend, remember it's not unlimited ! For the sake of this discussion lets give you a 10 million dollar startup budget. Remember that includes shops and labor. You will have a 500 k monthly budget.
Randy
Randy

Are DRGW and SP affliated in this exercise (I would guess no)? Does SP have an opening? Are the $2.1million locomotives SD70Ms? I definately would not buy 8-40Bs for DRGW, well maybe a couple, we could always use them on the ski train (I like the idea of an 8-40B in DRGW paint). If IC trains can run relatively fast, I might buy for IC, if they are reliable. I guess how much needs to be spent on shops and labor will depend on what locomotives are bought. Is there some type of forum that will give a ballpark figure on the costs for buildings, equipment, and labor? How do the reliabilities of the above rebuilt locomotives compare, generally? Or, do we know who rebuilt them and what the company's reputation is? There sure is much information to consider?

As far as labor we can use the formula of .8 man per locomotive. This number can be adjusted depending on the fleet. We need a fictional number of the amount of locomotives we actually require for this railroad. Maybe someone familier with the roster of the IC and the DRGW can shoot us a number. Remember our corporation just took control of these two propertys.
Randy

[Anonymous]

randy,
to put novices in the ballpark could you suggest a couple of general principles which should be considered or highlighted at this point in the process? something which might focus the "lesson" being played out at this stage.

[Randy Stahl]

The biggest principle is finding the most cost effective way to fill the requirements of your company. If buying older locomotives and rebuilding is the best short term and cost effective way to then the choice is clear. If your railroad has good earning potential and solid revenues your capital improvement money annually may be enough to buy some new locomotives. A railroad like the UP buying 1000 sd70m 's is very rare. this purchase was heavily capitalized and I think only recently UP paid the interest on the financing. I would prefer buying locomotives in smaller lots. GE locomotives like the Dash 9 are cheaper in small orders than the EMD engines. In my opinion the Dash 9 is the best value unless you have a large 250 million dollar plus capital plan. Remember other departments have capital expense plans too, not all the cash goes to the mechanical dept. Traditionally the biggest capital expense is the engineering dept.
It's all about value!
Randy

[Anonymous]

1) as a stockholder i am going to observe that the denver and rio grande has a 2.2% ruling grade and that rather than split the company's order between the sd70mac and sd70m the ac's better torque and consequent savings on a heavy train, mountain route will be a value to be examined. just to stir thing up a bit with management i might suggest looking at the dash 9 ac4400 which mr. stahl suggests as the best buy.
2) as to a decision to take rebuilt engines, would it not be more cost effective to down grade units from the existing fleet to what was described as "SD40-2s for secondary trains,andGP 38-2s and GP40-2s for switching and local service" and concentrate buying in the high end. interest rates are still low price of stock is high and capacity is being stretched.
if as earlier threads are correct in assuming the second hand market is weak due to strong first hand market then our own old equipment, although well known to our own service department, may mistakenly be sold off at poor value in order to acquire another road"s used units. it is better keep our own existing and well maintained emd power for downgraded work load and cull less easily maintained units.

[csxengineer98]

QUOTE: Originally posted by Randy Stahl

QUOTE: Originally posted by csxengineer98

wow..if i knew anything about managment of a railroad..this might be a nice game to play... but since i dont know anything about why a railroad picks one kind of locomotive over another... i guess im just going to have to sit back and watch this one unfold..... should push for a software company to write a game like this... might be intersting to see how well some of us here would be able to mannage a railroad...
csx engineer

Your managers require feedback from the operating people to find the equipment that suits the railroad.
Randy

you mean in real life or just in this little "what if" senerio you got going on..becouse i have never nor anyone i work with as ever been asked what we think of anything...it just shows up on the proproty..and we are told to get fimilar with it..becouse we are going to use it....
csx engineer

[ericsp]

QUOTE: Originally posted by cbt141

" If IC trains can run relatively fast, I might buy for IC, if they are reliable. I guess how much needs to be spent on shops and labor will depend on what locomotives are bought. "

ericsp,
in order to get the ic leg of this discussion in play, would you be willing to assume the role of the ic management?

I know even less about IC than about DRGW.

Randy, here is the DRGW roster in August 1990. The road, Yard, and passenger classifications are by DRGW, not me.
Road
GP9 . . . . . . 13
GP30 . . . . . 24
GP35 . . . . . 22
GP40 . . . . . 64
GP40-2 . . . 36
GP60 . . . . . 3
SD9 . . . . . . 10
SD40T-2 . . 71
SD45 . . . . . 26
SD50 . . . . . 17

Yard
SD7 . . . . . . 5
SW1000 . . 10
SW1200 . . 10

Passenger
F9A . . . . . . . 1
F9B . . . . . . . 2

[adrianspeeder]

This looks like a good one, too bad i know squat about runnin a railroad. Now we switch this to mowers or fleet trucks and im in.

Adrianspeeder

[Randy Stahl]

Which DRGW power do we want to look at getting rid of and why? What do we want to replace them with?
Randy

[Anonymous]

regarding the dash 9 being the best value as of today, these guys seem to have made their decision to buy emd as of these 1990 numbers. will they be inclined to switch to ge? i guess the clue is "...the UP buying 1000 sd70m 's ".
any way knowing nothing about the individual condition of these units or about their industry reputation, on behalf of the stockholders i would initially suggest culling the oldest units....say 6 of the gp9's and 12 of the gp30's. your earlier comment on rebuilt prices will lead me to hope i can get $150,000 per unit for a $900,000 total which i'll put to use for first year's maintainence. this leaves $10,000,000 to spend.... before leverage. as to leverage i'll put down $10,000,000 as 20% on a $50,000,000 order for 18 sd70mac's which seem to have done well in the ns coal fleet (bobwilcox needs).
this gives me more net power on the same number of units. the financing costs of around 6% and continuing maintainence will need to be carried on the units profitability in up coming years.
randy, you're the salesman in this exercize and the expert on the subject. where are we as far as the real world? what principles should the thread now deal with?

[Randy Stahl]

Your points on the DRGW fleet are in line with current reality , and your planned purchse of the EMD product makes perfect sense. The newer locomotives will be better on fuel, more reliable, and you can replace older units almost on a 2 for 1 basis. If you do switch to a GE product don't forget that you will need the training and tooling thay goes along with this purchase and that cost should be added on to the purchase price. The KCS did just that a few years ago, they went from an all EMD railroad and bought several GEs. The real point of this exercise is to make you think ! You have a good grasp on the economics of railroad locomotive purchasing. Yes you can sell your excess locomotives and reduce capital expense.
Randy

[Anonymous]

randy,
thank you. this was fun.
ericsp's input on the old roster gave the exercise a good focus point.
again, thank you.

[ericsp]

I would get rid of all of the GP30s and GP35s. I might send a few GP35s per year somewhere to be rebuilt to GP38-3s, if local traffic warrented it . Also, the SD40T-2s, GP40s, and GP40-2s will probably need to be rebuilt soon, maybe even the SD50s. The GP40s were built in 1966-1971, the SD40T-2 were built in 1974, 1975, 1977, 1978, & 1980. Most of the GP40-2s were built in 1972-1974, with 2 in 1983. Even the SD50s were built in 1984. If we will keep the SD45s, we probably should look at rebuilding them to 3000HP and/or adding wheel slip control to them. Given the fact that they will probably be pulling heavy trains at low speeds most of the time, the current configuration will probably waste fuel.

The actual dispostion of the locomotives should gives us a clue about their condition. SP had got rid of most, or all, of the GP30s and GP35s before UP bought them out. I think most of the GP40s are off the UP roster, I am guessing they were rebuilt. Some of the SD40T-2s are in UP's regular fleet, some in the surge fleet, and some have been sold. I know some of the sold locomotives are now on shortlines, I do not know if any have been scrapped. I think SP started retiring the SD45s.

Given the fact that in this exercise DRGW is not part of a large railroad, and does not have a good route, we will probably lose a considerable part of the regular freight traffic that DRGW had in 1990. Of course something else to consider is that SP owned DRGW by this time, so DRGW locomotives were probably common on SP rails and SP locomotives common on DRGW rails. However most of the locomotives were bought before Rio Grande Industries bought SP, therefore, I would guess that this is about the amount of locomotives DRGW needed before RGI bought SP.

This brings up a question. Will SP still be an independant company in this exercise? If they are, SP will probably send some freight our way, if not, it will probably all go UP. Either way, with traffic shifting to the Sunset Route, I am guessing we can count on less traffic than DRGW had in 1990. What do you think Mark and Randy?