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RR's are full - then let truckers pull doubles!

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In Re: Slotracer's post today at 11:58:42 My earlier posts have been somewhat uncharacteristically positive about the industry and its managers. However, much of my career in the industry was spent contending with and fighting over poor economic decisions (in my view) such as Slotracer describes. For example, in a notably public statement in the late 1970's the new CFO (recruited from AT&T) of a big Class I declared that all traffic would be subjected to a rate-of-return test. If a given piece of traffic didn't have a revenue-to-cost ratio of at least 1.34, it was candidate for elimination if rates couldn't be raised to that level. Major tonnage was diverted to truck and barge as a result. This enormously exacerbated the negative effects of the 1980-1982 "double-dip" recession on the railroad. In my opinion then and now, an economically rational decision system would have kept the traffic to use up the sunk capital if rates could not be raised. But this demonstrates the eternal tension in a complex entity with so many shared expenses and shared physical assets. It is difficult to trace out all ramifications of any decision. But one truth is eternal: It's almost impossible to reduce costs and plant as rapidly as revenue when traffic is driven away. Maintaining viable "excess" railroad capacity is expensive, so it isn't done much, because very few managers trust economic forecasts. Rightfully. Mothballing can be done, such as BN did with Stampede Pass, but reactivating is a multi-million dollar, multi-month process. One doesn't do it for "Easter Sunday" volume. And then there is Intermodal, on which Slotracer doesn't want to be got going! No traffic has been more praised or pilloried. I have done both. Deservedly so, I believe. Short-haul, "loose trailer" TOFC has historically been low-margin, and unless even more radical operational and technological innovation than "Iron Highway" comes along, it will remain so (if kept at all). Truck service and rates are too competitive. Only where sunk capital and short-term excess capacity exist can such service be justified, as was briefly the case for BN's "Expediters" of the late 1980's. Transcon intermodal is another matter. Apparently the Class I's see the traffic as investment quality. (One must concede that "glamour" affects even big investments such as this. Re-equipping the rail passenger fleet post-WW II comes to mind.) But the combination of highly efficient double-stack trains and premium-priced trailer service in essentially unit-train operating patterns is impressive. But recent industry experience is instructive. The transcon UPS hotshot appears to have wrecked havoc on the UP's Sun Belt LIne. And that after apparently interesting pricing decisions awarded the traffic to UP. It takes fortitude to turn away from "glamour" traffic, but the right analytical and decision making tools and management atmosphere make for sound decisions. One may debate and critique past intermodal strategies, but the dice have been cast and there are precious few box cars showing. Finally, Slotracer appropriately laments ill-advised cost cutting, and who would argue? In an earlier posting I mentioned that Class II's have a portfolio of traffic segments. Accurately ranking the profit-contribution and return-on-assets of those segments provides an invaluable tool to guide cost-reduction decisions (as well as re-investment decisions). Keep line A up to snuff, maybe even a bit over-maintained. Line M, well keep it safe, but slow. Line Z should be starved, and shut down if it can't be safely operated. Same with rolling stock. And train consolidations. In short, "Precision Railroading." Overhead expenses may not be as easily ranked, but they can never be ignored. There is always "low fruit." .
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