CSX withdrawing effectively from interchange agreements

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CSX withdrawing effectively from interchange agreements
Posted by BaltACD on Monday, June 11, 2018 1:16 PM

https://www.wsj.com/articles/americas-boxcar-pool-has-a-leak-in-csx-1528632000

Yep - cut car hire costs and let the customer suffer - that's the ticket!

         

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Posted by CMStPnP on Monday, June 11, 2018 6:19 PM

Time to bring back the per diem Boxcars of the early 1980's?     At least they added some color to manifest trains if not colorful railroad names painted on the sides.

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Posted by SD70Dude on Monday, June 11, 2018 6:51 PM

So much for "next load, any road"!

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Posted by jeffhergert on Monday, June 11, 2018 6:55 PM

If the business you don't want won't go away because of poor service, go to plan B.  Make it harder to get cars.

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Posted by oltmannd on Monday, June 11, 2018 7:33 PM

Just more evidence that merchandise traffic is boutique business. 

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Posted by PNWRMNM on Wednesday, June 13, 2018 7:53 PM

The WSJ article is not clear about what is actually happening. I looks like CSX is withdrawing a few hundred cars from a free running pool to assign them to specific origins, presumably on CSX and perhaps there limited to high CSX revenue destinations. That should protect CSX customers and be welcomed by them.

After the reporter got through with one shipper's complaint I am still confused.

A totally incompetent piece of reporting.

Mac

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Posted by BaltACD on Wednesday, June 13, 2018 8:28 PM

PNWRMNM
The WSJ article is not clear about what is actually happening. I looks like CSX is withdrawing a few hundred cars from a free running pool to assign them to specific origins, presumably on CSX and perhaps there limited to high CSX revenue destinations. That should protect CSX customers and be welcomed by them.

After the reporter got through with one shipper's complaint I am still confused.

A totally incompetent piece of reporting.

Mac

Internation Paper ships to numerous locations around the country - some on CSX and many not.  As I piece the article together - if a CSX car gets shipped from IP at Savannah to a destination that is not on CSX; CSX will charge them $2K for the 'mistake', inspite of the fact that CSX does participate in the line haul division of the freight charges.

I agree the article is poorly stated.

         

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Posted by rockymidlandrr on Wednesday, June 13, 2018 9:02 PM

They claim to capture the cars to use them to better serve their customers, but only one customer is getting better served- the scrapper.  There's a line of perfectly good boxcars being cut up right now where I work at, and just put 5 more in there today.  Also cutting up CSX rock hoppers too.  Guess everything not nailed down is for sale.

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Posted by greyhounds on Thursday, June 14, 2018 12:30 AM

rockymidlandrr
They claim to capture the cars to use them to better serve their customers, but only one customer is getting better served- the scrapper. There's a line of perfectly good boxcars being cut up right now where I work at, and just put 5 more in there today. Also cutting up CSX rock hoppers too. Guess everything not nailed down is for sale.

CSX is trying to manage its assets for the greatest profit.  That's exactly what they should be doing.  They don't owe anyone a boxcar.  If an IP shipment doesn't move the needle toward a CSX gain then CSX should either withdraw from the business or increase their charges.

What's a CSX gain?  That's hard to say because determining the cost of individual rail shipments is a can of worms.  

But, in over 180 years of railroading no one in the world has been able to make traditional carload service work.  What do I mean by "Work"?  I mean providing a service a customer will pay enough for to make the railroad financially viable. Now, there are niches.  Chemical shippers pay through the nose, and they do complain about that.  But, they generally lease or own the rail cars, and the railroads seem to be content with the money.  Boxcars, not so much.  

That's why traditional boxcar business is going the way of the dodo bird.  

You can use boxcars in intermodal type service and make a buck.  But using boxcars in traditional carload service is a looser.

 

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Posted by SD70Dude on Thursday, June 14, 2018 1:05 AM

Loose carload traffic seemed to do a pretty good job sustaining many railroads for many years early on.  Maybe that was only because it was like Churchill's proverbial democracy (the worst except for all the others) but it still happened.

Today the remaining carload traffic still works for its customers and returns a profit to the railroads, if it didn't it would not exist in today's de-regulation world.  And you are right about niches, a relevant example is that most (~80% IIRC) remaining boxcar traffic is forest products.

Boxcars still make sense to someone, TTX has continued to buy new ones and CN just ordered 350 for themselves.

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Posted by greyhounds on Thursday, June 14, 2018 2:15 AM

SD70Dude
Loose carload traffic seemed to do a pretty good job sustaining many railroads for many years early on. Maybe that was only because it was like Churchill's proverbial democracy (the worst except for all the others) but it still happened. Today the remaining carload traffic still works for its customers and returns a profit to the railroads, if it didn't it would not exist in today's de-regulation world. And you are right about niches, a relevant example is that most (~80% IIRC) remaining boxcar traffic is forest products. Boxcars still make sense to someone, TTX has continued to buy new ones and CN just ordered 350 for themselves.

Loose car railroading worked when the only alternative was a team and wagon.  But that's changed.

Again, in 180 years of railroading no one in the world has figured out how to make it an efficient, reliable system of transportation.  But it was better than a team and wagon.

There are niches, but 350 cars is what?  Maybe 12 loads per day.  

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by SD70Dude on Thursday, June 14, 2018 2:50 AM

Carload's niche (and it is still a pretty big one) is non-perishable commodities that move in large enough quantities over long enough distances to make trucking or intermodal moves impractical, but also do not move in large enough shipments to justify unit train operation.

The remaining carload shippers do indeed gripe and complain, but it seems that even terrible rail service is a better (cheaper) alternative than trucking for this niche.  If the alternatives were better I am sure that the shippers would be using them instead.  

I am not trying to make excuses for or justify the poor reliablility of rail service, rather I think steps should be taken to improve reliablility and customer service, as opposed to blunt cost-cutting and extra charges in pursuit of some financial target.

And yes, 350 boxcars will be lost in the sea of our rail system, but I wanted to provide a contrast to the scrapping RockyMidland mentioned.  And they will not be alone, in addition to the new TTX cars CP boxcars have recently become a common sight in CN trains, they were almost never seen on our rails until about a year ago.  No idea if CN is leasing them or if CP released them into the general boxcar pool, but it is still more boxcars on our trains (CP's loss, CN's gain?).

I am not saying that this is a big revolution or sea change, but carload traffic (even boxcars) is not nearly as dead as everyone seems to think, and still supports (by itself) several key branch line routes out my way.  

Numerous shortlines remain entirely supported by carload traffic too.

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Posted by Shadow the Cats owner on Thursday, June 14, 2018 7:54 AM

Greyhounds there are some loads from International Paper that we in the OTR industry can not even freaking HAUL they are to large and heavy for our trailers.  IP has rules as to how old a trailer can be to even go into the plant why their larger rolls of paper tend to break trailers in half if those rules are not followed with the current plate sided construction methods.  Yes your reading that right they will literally break the trailer in half with one roll of paper.  You can not ship paper via a flatbed if it gets wet it is useless for the final customer so it has to go in a van or a boxcar.  The largest rolls that they ship are in the 20 ton range in railroad cars.  My late FIL used to haul rolls in the 10 ton range out of a plant in Florance Alabama all the time to other plants were they were cut into finished sheets.  They would load 2 rolls into the trailer one at the nose block it in then the other at the 40 foot mark inside the trailer according to what he told me before he died.  The master roll those rolls where cut from weighs 35 tons each.  So learn the commidty before you say you can ship all paper goods out in trailers or IM containers.  

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Posted by greyhounds on Thursday, June 14, 2018 6:09 PM

Shadow the Cats owner
Greyhounds there are some loads from International Paper that we in the OTR industry can not even freaking HAUL they are to large and heavy for our trailers. IP has rules as to how old a trailer can be to even go into the plant why their larger rolls of paper tend to break trailers in half if those rules are not followed with the current plate sided construction methods. Yes your reading that right they will literally break the trailer in half with one roll of paper. You can not ship paper via a flatbed if it gets wet it is useless for the final customer so it has to go in a van or a boxcar. The largest rolls that they ship are in the 20 ton range in railroad cars. My late FIL used to haul rolls in the 10 ton range out of a plant in Florance Alabama all the time to other plants were they were cut into finished sheets. They would load 2 rolls into the trailer one at the nose block it in then the other at the 40 foot mark inside the trailer according to what he told me before he died. The master roll those rolls where cut from weighs 35 tons each. So learn the commidty before you say you can ship all paper goods out in trailers or IM containers.

So you learn to understand what you read.

I have repeatedly written that there are niches for carload freight.  It's obvious that a role of paper too heavy for a truck is one of those niches.  

I try to avoid using terms such as "All", "Always", "Never", etc. because there are exceptions.  Overwhelmingly, boxcar carload freight just doesn't meet today's market demand.  But, as I clearly said, there are niches for such service.  

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by cx500 on Thursday, June 14, 2018 10:06 PM

greyhounds
Loose car railroading worked when the only alternative was a team and wagon. But that's changed. Again, in 180 years of railroading no one in the world has figured out how to make it an efficient, reliable system of transportation. But it was better than a team and wagon.

I rarely see any reason to question your comments, but I feel there may be room for debate here.  For a good many of those 180 years various management tools that came with increasingly powerful computer systems were not available.  Only recently has the plague of interchanging a shipment between railroads multiple times been reduced to perhaps one as the mergers took place.  Then there was the regulatory insanity that I believe prevented charging more if the customer wanted more personalized service, such as delivery to his own siding rather than a team track.  That all created a mindset that favored reducing costs rather than encouraging business.

I have long held that the philosophy of holding three units and 70 cars of freight for 12 hours because a minimum of 80 cars is required to run the train was counter productive.  That longer freight is more efficient, agreed, but the use of resources is not.  And of course the resulting missed connections made the overall system hopelessly inefficient and the customers fled to the highways.  That eliminated the potential economies of scale that are needed to maintain loose carload railroading as more than a niche product.

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Posted by greyhounds on Friday, June 15, 2018 4:54 PM

cx500
I have long held that the philosophy of holding three units and 70 cars of freight for 12 hours because a minimum of 80 cars is required to run the train was counter productive. That longer freight is more efficient, agreed, but the use of resources is not.

I fully agree.  "Hold for tonnage" is a wasteful, inefficient way to operate a railroad.  A system schedule is actually the railroad's profit plan.  It's a plan for the use of assets and crews, the plan for your service offerings, and it's the first step in quality control.  The employees can't produce service to a standard if they don't know what the standard is.

But that's not the problem with traditional carload reliability.  The reliability problem comes from the number of "Events" a carload shipment must go through to travel from the shipper to the receiver.  i.e., The car must be picked up by a local or industry job, switched in to the right block, picked up by the right train, moved to another yard, switched in to another block, placed in the right train....(it goes on)

Each of these events has a probability of failure.  And one such failure throws the shipment off schedule.  Multiple failures really mess things up.  Since there is no perfection, this makes the transit times erratic.  Good management can make improvements by reducing the probabilities of failure, but they cannot achieve perfection by making those probabilities zero.

A real advantage of truckload is that it has fewer "Events", opportunities for service failure.   This makes it more reliable than carload.  Intermodal also bypasses many of the events and can be truck competitive. 

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by CMQ_9017 on Friday, June 15, 2018 9:44 PM

greyhounds

 

rockymidlandrr
They claim to capture the cars to use them to better serve their customers, but only one customer is getting better served- the scrapper. There's a line of perfectly good boxcars being cut up right now where I work at, and just put 5 more in there today. Also cutting up CSX rock hoppers too. Guess everything not nailed down is for sale.

 

CSX is trying to manage its assets for the greatest profit.  That's exactly what they should be doing.  They don't owe anyone a boxcar.  If an IP shipment doesn't move the needle toward a CSX gain then CSX should either withdraw from the business or increase their charges.

What's a CSX gain?  That's hard to say because determining the cost of individual rail shipments is a can of worms.  

But, in over 180 years of railroading no one in the world has been able to make traditional carload service work.  What do I mean by "Work"?  I mean providing a service a customer will pay enough for to make the railroad financially viable. Now, there are niches.  Chemical shippers pay through the nose, and they do complain about that.  But, they generally lease or own the rail cars, and the railroads seem to be content with the money.  Boxcars, not so much.  

That's why traditional boxcar business is going the way of the dodo bird.  

You can use boxcars in intermodal type service and make a buck.  But using boxcars in traditional carload service is a looser.

 

 

 

If in 180 years no one has figured out how to make traditional carloads work than railroads would not exist. I have in previous and current roles handle several carloads on a weekly basis, majority boxcar,  and I can very much assure you that net contribution to cash flow is positive. 

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Posted by Shadow the Cats owner on Friday, June 15, 2018 10:11 PM

I can tell you this much for what my boss paid in shipping and switch charges for 2017 was enough to pay for the locals that ran them to us.  

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Posted by tree68 on Saturday, June 16, 2018 12:04 PM

greyhounds
CSX is trying to manage its assets for the greatest profit. 

Short term, or long term?

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Posted by zugmann on Saturday, June 16, 2018 12:26 PM

greyhounds
They don't owe anyone a boxcar

Not even cusotmers they have contracts with?

I just think of the often used quote:

"A hell of a way to run a railroad."

The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by VOLKER LANDWEHR on Saturday, June 16, 2018 1:03 PM

CMQ_9017
They don't owe anyone a boxcar.

I have a question: What is with the so ofted cited common carrier obligation?
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Posted by CMQ_9017 on Saturday, June 16, 2018 4:43 PM

Basically a RR has to service someone who seeks it, so the RR has to publish rates if the track isn't out of service for some reason. A RR can price themselves out of business but if a shipper wants to challenge a rate as being unreasonable it can be reviewed. Since RRs are such an important economic instrument to business sustainiability & growth, they can't control the power of who they do and do not serve. Like most things, there are ways around this... (embargos, STB filings, ect) but by and large the RR has to be willing to play ball. 

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Posted by VOLKER LANDWEHR on Sunday, June 17, 2018 4:38 AM

If I understand you correctly, the railroads owe a shipper a boxcar as long as the shipper is willing to pay the rate.
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Posted by SD70Dude on Sunday, June 17, 2018 12:32 PM

zugmann
greyhounds
They don't owe anyone a boxcar

Not even cusotmers they have contracts with?

I just think of the often used quote:

"A hell of a way to run a railroad."

"Sure would be easy to run this railroad if it weren't for all those darn customers!"

Greetings from Alberta

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Posted by BaltACD on Sunday, June 17, 2018 12:50 PM

SD70Dude
 
zugmann
greyhounds
They don't owe anyone a boxcar

Not even cusotmers they have contracts with?

I just think of the often used quote:

"A hell of a way to run a railroad." 

"Sure would be easy to run this railroad if it weren't for all those darn customers!"

Bummer!

         

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Posted by Murphy Siding on Sunday, June 17, 2018 1:15 PM

SD70Dude
"Sure would be easy to run this railroad if it weren't for all those darn customers!"



Like the sign in my dentist's office says about teeth- "Ignore them and they'll go away".Mischief

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Posted by greyhounds on Sunday, June 17, 2018 11:28 PM

I seem to have kicked over a hornet nest here.  Oh well, if you don't ever get people upset you're not doing anything.

I'll try to answer some things.

If CSX has a contract to supply boxcars, is it obligated to do so?  Yes.  Never welch on a deal.  But no one in their right mind signs a perpetual contract.  I'm confident that if CSX was moving the freight on a contract they complied with the contract.  Otherwise, they'll end up in court.  If the contract expired, or there was no contract, CSX is free to chart their own path.

Does CSX have a "Common Carrier" obligation to supply boxcars for any service?  No they don't.  Boxcar movements were deregulated, along with intermodal, on March 23, 1981.  That deregulation fully includes the right to withdraw provision of railroad owned boxcar service.  Railroads are, generally, allowed to operate as a business and no longer required to offer money loosing services.  That has worked out for the good.

Is CSX "Ignoring" its customers?  I don't think so.  They needed a kick in the pants, and they sure got one.  Were mistakes made?  Oh sure.  Progress is made by trial and error.  If you don't try things and make some mistakes doing so you're not going to progress.

Does some boxcar business today produce a positive cash flow?  For sure.  That's why it's still there.  If it produced a negative cash flow alarm bells would go off and the situation corrected one way or the other.  Cash flow does not equal profit, but once you've already got the asset (boxcar) you're going to flog it for all the cash you can get.  You've already made the investment so there's nothing to do but make the best of it, even if it was a mistake.

Did loose car, boxcar service ever work in 180 years?  It did when there were very poor alternatives such as a team and wagon.  Does it work now?  Only for niche services.  It cannot be made in to a reliable competitive service that meets today's logistics needs for the vast majority of freight.  

 

 

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by CMQ_9017 on Monday, June 18, 2018 4:17 PM

EBIDTA, the measure of cash flow before required costs (aka costs you have no choice in making), is the standard measure of corporate health these days. And the common carrier obligation, as far as I understand it (I don't make the rules, I play by them) is that basically a RR is required to give service if it is with a reasonable request (emphasis on what one considers to be reasonable). So that means there are complexities and it must be judged on a case-by-case basis. Similar to business law, you must have a meeting of the minds to establish the framework of a contract. Deregulation did not remove common carrier obligation, just gave more freedom to publish rates. 

More on the CC obligations: https://www.nap.edu/read/22093/chapter/13

Most contracts outline the terms of doing business, how are payments processed, what are the average transits, whats the equipment pool, how is it handled... ect ect. Also what is important is what kind of move it is, where are transfers of liability/risk, ect. Shippers depending on their level of control they wish to exercise can either let the primary RR (the one they are located on) to establish the routing or they may seek/ask for particular routings. Pricing mix and strategy can come into play, if you wish to bulk up volume as a RR you can attempt to pull in some at or near-cost business that subsidizes other more lucrative business, thus on a train basis you are a net-net positive (so lets say some railcar traffic ends up just covering costs of operating while other different types on the same train might pull in a bigger penny, but be smaller in volume).

But now we're falling down a rabbit hole and I don't want to reveal too much about pricing strategy of RRs... also its a headache like most things.

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Posted by charlie hebdo on Monday, June 18, 2018 5:34 PM

CMQ_9017

EBIDTA, the measure of cash flow before required costs (aka costs you have no choice in making), is the standard measure of corporate health these days. And the common carrier obligation, as far as I understand it (I don't make the rules, I play by them) is that basically a RR is required to give service if it is with a reasonable request (emphasis on what one considers to be reasonable). So that means there are complexities and it must be judged on a case-by-case basis. Similar to business law, you must have a meeting of the minds to establish the framework of a contract. Deregulation did not remove common carrier obligation, just gave more freedom to publish rates. 

More on the CC obligations: https://www.nap.edu/read/22093/chapter/13

Most contracts outline the terms of doing business, how are payments processed, what are the average transits, whats the equipment pool, how is it handled... ect ect. Also what is important is what kind of move it is, where are transfers of liability/risk, ect. Shippers depending on their level of control they wish to exercise can either let the primary RR (the one they are located on) to establish the routing or they may seek/ask for particular routings. Pricing mix and strategy can come into play, if you wish to bulk up volume as a RR you can attempt to pull in some at or near-cost business that subsidizes other more lucrative business, thus on a train basis you are a net-net positive (so lets say some railcar traffic ends up just covering costs of operating while other different types on the same train might pull in a bigger penny, but be smaller in volume).

But now we're falling down a rabbit hole and I don't want to reveal too much about pricing strategy of RRs... also its a headache like most things.

 

A very informative post!   You are obviously an expert on these concerns, so what about this statement in the post before yours?  
"Does CSX have a "Common Carrier" obligation to supply boxcars for any service?  No they don't.  Boxcar movements were deregulated, along with intermodal, on March 23, 1981.  That deregulation fully includes the right to withdraw provision of railroad owned boxcar service.  Railroads are, generally, allowed to operate as a business and no longer required to offer money loosing services."  
True, partially, or non-applicable?  Are railroads still "common carriers" under the current laws?

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Posted by CMQ_9017 on Monday, June 18, 2018 7:52 PM

I learn new things everyday... so hardly an expert I'd say just always trying to improve and find a better way to do business. 

RRs are still common carriers, absolutely. There are STB rulings you can look up where RRs file to get out of the CC obligations. The move by CSX to put their cars into certain lanes is to maximize the utility of the asset for CSX, something they paid for and they really have a right to do. Now think about that for a minute, the Class Is know that they all must work together to ensure fluidity in the entire network... can you imagine if every since railcar had a return empty to the host RR. Yes, some cars are put into service in particular lanes for a variety of reasons (designed for purpose, under lease/contract for service, can't be cross-functionally moved) but a good chunk of cars can move load-to-load without issue and should. TTX also a big part of that (RR owned) and ensures fluidity, each RR is expect to carry their own weight. From a business perspective I get what CSX is doing, but from an industry perspective they aren't making many friends. I have opinions either way on this topic, I can see parts of both sides. I tend to weigh against CSX and their percision railroading but I do think some of the concepts if properly applied can work out pretty well. We are also in the era where you have take or pay agreements build into many clauses, where shippers can't simply sit around and hold onto equipment forever. I also have seen examples where some RRs are slow on turning over equipment, or keep it captive. While certainly they pay car hire for it, it can serve their benefit as they don't have to buy rail cars when they just hold a few hostage... so it like most things it gets complicated. You can't judge one instance against another, most cases are completely unique. 

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