Industrial shipper abandonments in the 1970s

[BaltACD]

Shadow the Cats owner

It's amazing when you threaten to get the STB involved in with a service issue with a railroad that is under the PSR belief system.  Just the threat of my boss going to them from his lawyers got the NS to not only pull our empties but also the loads that had been waiting for weeks then also bring in cars we had been waiting on those that had not been diverted to the BNSF for us.  We also got a formal apology from the Dearborn Division trainmaster and 2 different customer service reps also called my boss and personally apologized to him.  The best part was NS agreed to service us as needed from now on and did it in writing.

Come to Jesus moments do work.

One just has to know who Jesus is to get Him involved.

[mudchicken]

But did the PSR proponet who could do no wrong realize he/she had sinned? The people doing all the apologies were just his/her foot soldiers.

[greyhounds]

Convicted One

This is an interesting thread to read, when weighed against the hard cases who insist: A. No railroad has EVER chased away a customer that was willing to pay a fair price B. No railroad has ever abandoned a line that had willing customers wanting to do business Both are arguments we've seen advanced here a time or two.

I think the phrase "No railroad has EVER..." is out of place.  It implies a standard of perfection which cannot be met.  Of course, such things have happened.  They don’t make sense, but they happen.  Kind of like our life events from time to time.

 

Look at it this way:  An operating official is under pressure to reduce expenses.  So, he/she will reduce expenses.  This official has no profit/loss responsibility, only expense responsibility.  If the railroad looses more than it gained it is of no consequence to the official who made the decision.  They did as told and will get an “At A Boy” or an “At A Girl”.  That their directed actions hurt the railroad company is not considered.  

 

A possible solution is to franchise local and branch line services.  The franchisee will have both revenue and expense responsibility and the people making decisions should be more prone to act accordingly.  (No, this won’t be perfect either.  But it should be an improvement.)

 

This is being done in some places.  Tree cited an example in New York State.  In Illinois, the CN has leased a line from Clinton to Heyworth to a short line operator.  This operator has full profit and loss responsibility for the line.  Presumably, that operator will act accordingly. 

 

For a Class 1 it’s difficult to do these things.  1) It is impossible to accurately determine the cost of each load for carload traffic.  There are formulas for doing so, but they’re made up out of whole cloth.  2) It is impossible to determine the profit/loss status of a branch line.  Sometimes, it’s just plain obvious.  But, while the costs of operating the branch can be reasonably isolated and determined there is no valid way to assign revenue to the branch. 

 

In the previously cited Heyworth, IL example unit trains of grain are moved.  If such a train moves to Gretna, LA for export just how much of the revenue is assigned to the Heyworth branch?  There’s no valid way to make such an assignment.  And remember, the operating officials don’t have revenue responsibility, only expense responsibility.

 

Using the franchise system will, at least, give profit and loss responsibility to those making the decisions.  Again, it won’t be perfect, but it should improve things.

 

 

[SD60MAC9500]

 

greyhounds

For a Class 1 it’s difficult to do these things.  1) It is impossible to accurately determine the cost of each load for carload traffic.  There are formulas for doing so, but they’re made up out of whole cloth.  2) It is impossible to determine the profit/loss status of a branch line.  Sometimes, it’s just plain obvious.  But, while the costs of operating the branch can be reasonably isolated and determined there is no valid way to assign revenue to the branch. 

 

In the previously cited Heyworth, IL example unit trains of grain are moved.  If such a train moves to Gretna, LA for export just how much of the revenue is assigned to the Heyworth branch?  There’s no valid way to make such an assignment.  And remember, the operating officials don’t have revenue responsibility, only expense responsibility.

 

 

I can see the difficulty in quantifying cost of operation prior to the digital age. Though today with all the algorithms available to itemize line cost and get an idea of expenses would not appear to be all that difficult. Said train operating from Heyworth, IL to Gretna, LA is going to produce revenue. Would it not be possible to break down the revenue generated by the total haul into a percentages? A portion of the revenue is going to operating expenses. So why not break down operating expense into a percentage based on length of haul? If the Heyworth Branches portion of the haul is lets say 15 miles (this is just an example I don't how long the Heyworth Branch is) out of a total haul of roughly 850 miles. That comes to approximately 1.8%. The Heyworth Branch would get 1.8% of the revenue portion that's allocated to operating expenses. Of course this would be highly variable as trains would not always have the same: consist, weight, length, etc., and have different terminating points. Though would such a formula be feasible? Or have the RR's tried this formula already? 

 

[Convicted One]

greyhounds

I think the phrase "No railroad has EVER..." is out of place.  It implies a standard of perfection which cannot be met.  Of course, such things have happened.  They don’t make sense, but they happen.  Kind of like our life events from time to time.

I agree with you. It's seldom a good idea to base arguments  on absolutes.

Even so, there have been instances here on this forum as well as others, where notoriously stubborn posters have claimed just that...or very similar.

Usually, if I recall properly, it's some variant of an industry insider  getting his pants in a knot as a result of railfans' speculation of particulars pertaining to his sacred turf.

When you bother to dig deep enough, you frequently  find the two sides are arguing about separate issues pertaining to the same line.  But, once the adrenaline flares up, the absolutes start flying.  Shifting the focus of the discussion from "understanding" to "schoolin"   

 

[blue streak 1]

greyhounds

  Using the franchise system will, at least, give profit and loss responsibility to those making the decisions.  Again, it won’t be perfect, but it should improve things.

 

 

Agree.  Maybe STB can get the class 1s attention if it proposes open access to any short line that wants to service a segment ? 

[greyhounds]

blue streak 1

  Agree.  Maybe STB can get the class 1s attention if it proposes open access to any short line that wants to service a segment ?  Ad

Nope.  I don't agree with the open access concept.  It goes against the inherent economics of railroading.  A railroad has to aggregate units of sale in to units of production.  The unit of production being a train.  Open access will split the available business and will make this necessary aggregation more difficult and more costly.   

One franchisee per branch or local area operation of service.  Anything else will drive up the costs of rail shipments.  That's not a good plan.

[greyhounds]

SD60MAC9500

I can see the difficulty in quantifying cost of operation prior to the digital age. Though today with all the algorithms available to itemize line cost and get an idea of expenses would not appear to be all that difficult. Said train operating from Heyworth, IL to Gretna, LA is going to produce revenue. Would it not be possible to break down the revenue generated by the total haul into a percentages? A portion of the revenue is going to operating expenses. So why not break down operating expense into a percentage based on length of haul? If the Heyworth Branches portion of the haul is lets say 15 miles (this is just an example I don't how long the Heyworth Branch is) out of a total haul of roughly 850 miles. That comes to approximately 1.8%. The Heyworth Branch would get 1.8% of the revenue portion that's allocated to operating expenses. Of course this would be highly variable as trains would not always have the same: consist, weight, length, etc., and have different terminating points. Though would such a formula be feasible? Or have the RR's tried this formula already?   

It is possible to come up with all kinds of formulas.  How well those formulas reflect reality is the question. 

 

Railroad cost accounting, per shipment, is a rather large can of worms.  Some costs are readily identifiable.  For example, if a regular movement has assigned cars and the cars take 21 days to cycle from load to load it’s easy to calculate the ownership cost of the required freight cars.  In this example if the car cost $30/day to own the car ownership cost for each load is 21 x $30, or $630. 

 

On the other hand, how much of the crew cost goes to each load?  The crew is there and running the same miles whether the carload is there or not.  You can only do some arbitrary allocation and that will give you a BS answer.

 

It’s long been relatively easy to isolate and quantify the costs of operating a branch.  Even before BIG DATA.  (Don’t confuse the determination of the cost of operating the branch with the cost moving each rail car.)  If you try to get it down to each car, you’re going back into an arbitrary allocation of costs.

 

The problem is the revenue allocation to the branch.  Branch lines (and local switching services) are inherently less efficient than main line operations.  Volume drives average rail costs down.  Branch lines generally have less volume than main lines.  So, their cost per unit handled is higher than main line operations.  If revenue is allocated solely on a mileage basis the branch will likely show as losing money. 

 

The branch (or local switching service) must be allocated extra revenue to cover its less efficient operation.  How much extra?   Good question.

 

Edit to add:  Back in the bad old days of ICC regulation I spent some time doing line abandonment analysis.  We had to show that the line lost money.  (Why the government thought we would get rid of a line that made money is lost in government illogic.)

 

They did come up with a revenue allocation number.  50% of the revenue went to offset the expenses of the branch.  For every line, no matter what, it was 50%.  Just an arbitray number picked out of the air.  The government just loves magic numbers.  

 

 

 

 

 

[Shadow the Cats owner]

My boss provides all the cars we lease them for our SIT yards ourselves so no car hire fees there.  He also provides the tracks had them built for the SIT yards himself so no track maintance cost for the railroads we use a local contractor to maintain all our SIT yards.  We paid for the switches needed to connect to the Class 1 tracks ourselves.  The only track for all our SIT yards we do not directly maintain is one at our BNSF side that they actually bought from us.  It is the lead into the SIT yard that cuts off the Eastbound main or South track on the old Chili subdivision of the old ATSF mainline thru my town.  They bought it for a runaround track when the local is switching us and for storing track maintance equipment or any bad order cars that need repairs off of trains that come thru.  It is long enough to hold a rail train in the summer so they love it.  

 

Like I said the BNSF has no problems with us they love the amount of business we do generate for them.  Heck we are actually starting to get carload orders for our custom blended resins and the BNSF has no problems picking them up and dropping off the empties.  Several of our customers are wanting 100 ton lots now and are on the BNSF in TX so they worked out a shipping schedule they liked and well we are making it happen.   It is still revenue for us as we sell them the resins but not the shipping costs.  

[Murphy Siding]

greyhounds

 

...A possible solution is to franchise local and branch line services.  The franchisee will have both revenue and expense responsibility and the people making decisions should be more prone to act accordingly.  (No, this won’t be perfect either.  But it should be an improvement.)...

 

 

I find this interesting. Can you give me the big-picture tour of how something like this would work?

[CSSHEGEWISCH]

Murphy Siding

 

greyhounds

 

...A possible solution is to franchise local and branch line services.  The franchisee will have both revenue and expense responsibility and the people making decisions should be more prone to act accordingly.  (No, this won’t be perfect either.  But it should be an improvement.)...

  

I find this interesting. Can you give me the big-picture tour of how something like this would work?

And just how would the franchise (?) arrangement be any different from the existing process of selling the branch to the new operator?

[jeffhergert]

CSSHEGEWISCH

 

 

Murphy Siding

 

greyhounds

 

...A possible solution is to franchise local and branch line services.  The franchisee will have both revenue and expense responsibility and the people making decisions should be more prone to act accordingly.  (No, this won’t be perfect either.  But it should be an improvement.)...

  

I find this interesting. Can you give me the big-picture tour of how something like this would work?

 

 

 

And just how would the franchise (?) arrangement be any different from the existing process of selling the branch to the new operator?

 

In some places they're not selling, but leasing out lines.  I'd guess by leasing they may be able to exert more control on interchange when the line would have options beside the owning class one.  

Jeff