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[quote]QUOTE: Originally posted by MichaelSol [quote]QUOTE: Originally posted by jeaton Huh??? Your implication that the conversion to diesel was the cause of the decline of railroad return from 4% to 2% is a little farfetched. If you could find a "number cruncher" that would compare the actual financial results of a railroad, say the Illinois Central, with the result that probably would have occured had the same railroad stayed with steam power and show the latter to be superior, I'd buy the argument. [/quote] Better than that: a study that looked at three U.S. railroads in detail, including the ATSF, with a thorough financial review of their operating and maintenance costs, interviews with mechanical officers, and a detailed econometric analysis of 15 years of purchases and operations. Brown, H.F., "Economic Results of Diesel Electric Motive Power on the Railways of the United States of America," Proceedings of the Institution of Mechanical Engineers, 175:5 (1961). I don't recall now if this is in the paper, or Brown told me, but his Santa Fe experience was interesting. He was comparing the operating and maintenance costs from Santa Fe's own books, and said to the Chief Mechanical Officer, "you told me that the diesel-electrics are so much cheaper to operate, but your books show the exact opposite, that these locomotives are more expensive to maintain and operate than your comparable steam." The Mechanical Officer began to recite GM advertising claims, and Brown had to remind him "I'm sorry, but I'm a Professional Engineer, I don't care what the advertising says, your numbers show that either the advertising is wrong, or your numbers are wrong. If your numbers are wrong, you sit down here and show me how and where." The findings of Brown's study are consistent, not inconsistent, with the drop in earnings from 4% to 2%, during the specific time frame of a conversion to a motive power type that was supposed to be an economic benefit to railroads, and yet there is no evidence that it was, that is, to the contrary, the effort damaged American railroads financially in the decade of the 1950s, resulting in restricted track maintenance during the 1960s, resulting in the national rail crisis of the 1970s. An interesting exercise is to graph the net railway operating income as a % of assets, against the interest cost charges for locomotive acquisition during the period 1940-1980. The correlation resulting from a linear regression analysis is "suggestive". If not that, what does explain the drop in profitability from 4% to 2%, and why would the alternative explanation be less far-fetched than the massive recapitalization of the national locomotive fleet relying almost totally on financing which was not the case in the industry previously? Best regards, Michael Sol [/quote] Regarding "alternate" explanations for the profitability drop from 4% to 2%, isn't the popular explanation the advent of the Interstate Highway System and a subsequent drop in small lot and time sensitive deliveries for the railroads? It is interesting that you have found a documentable reason based on over-financing of dieselization, while the whole "competition from truckers" argument has less of a grounding in documentation. That's one reason I suspected the whole highway competition theories were more of a chicken and egg comparison, e.g. which came first, railroad debt loads from wholesale dieselization, or actual market loss to trucking competition? Is it possible that the railroad debt problems that arose from dieselization (and subsequent maintenance deferments) were the cause of railroads giving up on some commodity moves?
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