Empty Rolling Stock Finance

[VGN Jess]

How does a RR recover the expense of returning rolling stock that is empty (think crude tank cars); is the return expense built into the initial loaded rolling stock? If so, what if the rolling stock is not returned to the same customer; they've just paid for another customer to use the car? Or perhaps the RR does NOT recover the expense?? I've often wondered.

[CSSHEGEWISCH]

A lot depends on how the rate is structured.  I would assume that long-term contracts, such as for moving x number of tons of coal from the mine to the power plant, have the cost of returning the empties factored into the contract.  There are other variations for specialized equipment such as auto racks.  The shipper will get a better rate on the initial haul if he can provide a loaded back haul.  Otherwise, repositioning empties is an expense borne by the railroad.

[VGN Jess]

Thanks. RE: "Otherwise, repositioning empties is an expense borne by the railroad" Wow; for less than car load mdse. that's a lot of expenses with no revenue covering it.

 

[greyhounds]

VGN Jess

hanks. RE: "Otherwise, repositioning empties is an expense borne by the railroad" Wow; for less than car load mdse. that's a lot of expenses with no revenue covering it.

Well, it's no greater for LCL than it is for anything else.

It is why, when I worked in intermodal marketing, we focused on finding revenue loads to "Balance" the equipment.  We tried to get a revenue load in each direction.  We could usually do it.  But it took work and innovation.

[VGN Jess]

Thanks. So, maybe deadhead expenses are not as prevalent as I thought. I've seen many videos of returning empties (100+ cars-mainly unit trains) and always thought about the expenses being run up and wondered how those expenses were covered.

[BaltACD]

The efficiency of the total Unit Train package applies two basic rules to both shippers and consignees - train must be LOADED within 24 hours - train must be EMPTIED within 24 hours.  Unit trains do not undergo car for car switching during their transit.  Where private owner cars are used, railroads do not own the cars or pay for the cars maintenance - those expenses fall to the car owner.  Since Staggers the 'rates' for Unit Train movement have become Contracts between the parties involved in the movement - Shipper - Railroad - Consignee; those contracts also apply to empty movements.