OK, before I kick back with a hot dog and a beer to watch the 4th of July White Sox baseball game, I'll say this.
I am convinced that the concepts of PSR are sound and will be a net benefit to the economic well being of the people of North America. But it's change. And change upsets some folks. There are going to be some mistakes in implementation, there always are. But we learn and progress by trial and error. So there are going to be some mistakes.
New technology always involves a learning curve. People don't immediately grasp how to use it to its best advantage. But they'll get there, by trial and error. So let's look at some of what railroad technology has changed.
1) AC traction. A big improvement that allows locomotives to do more work with more efficiency.
2) Distributed Power. Longer trains are possible and more efficient. They don't have to be slow moving "Land Barges". 300 containers can move along at 70 MPH with distributed power.
3) Information Technology. IT makes scheduling, planning and analysis much more "doable".
Learning to integrate these three, along with many other advancements, is going to take a while. But it's being done. And it's change, which does upset people.
From my marketing point of view a big plus for PSR is that the railroads are again doing pick ups and set outs. At one time they were in to what I've seen called "Boutique Trains". I was working on a project to move westbound meat when the railroad marketing managers desired a unit train. No, that won't work. Make a pick up with an existing train. "Oh, we can't do that". I heard that a couple times from different railroads.
Well, the marginal costs, and they're what really counts, of adding additional revenue loads to an existing train are far lower than trying to run special "Boutique Trains" for every market. Sometimes there may be a need for a 20 car special train. But if the business can be handled on an existing schedule, do it.
greyhoundsI am convinced that the concepts of PSR are sound and will be a net benefit to the economic well being of the people of North America. But it's change. And change upsets some folks. There are going to be some mistakes in implementation, there always are. But we learn and progress by trial and error. So there are going to be some mistakes.
I tend to agree - the fundamental concepts are sound, and in many cases, are concepts that have been around for years, even if they were not well executed.
The problem with PSR today is that the process has been tainted by the "activist investors," eager to wring a buck out of the railroads for their own gain.
This is why you're seeing slow implementation of PSR concepts by those who haven't been subjected to the hedge fund impetus.
And the trial and error factor is why you're seeing railroads that have already implemented PSR backing out of the parts the aren't working for them.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
I spent 40 years as a rail shipper in minerals and ores; fertilizer and chemicals. I experienced the good and the bad of PSR implantation on CN, CP and CSX and the first steps in that direction by NS and UP.
In my opinion; CN’s was our least painful implementation which I attribute to the close cooperation of CN’s marketing and sales folks along with their network operations people. Rather than simply having changes shoved down our throat; CN’s folks engaged with us to develop a service plan that actually resulted in a measurable improvement in our service despite a reduced frequency of local service.
The most painful implemendation award goes to CSX for the absolute cluster EHH visited on that railroad’s customers, employees and communities served. Our service levels in 2019 are no better than in pre-PSR 2016 despite the pain and additional costs we have experienced.
In my opinion; if a railroad takes the lower cost structure obtained from PSR and uses that to grow their business in the manner CN has under JJ Ruest; then the concept can be a good one. If PSR is implemented solely to improve shareholder value by stripping assets, shedding employees and picking the pockets of your customer base - then it shifts to being a flawed process that threatens the long term viability of the railroad implementing it.
tree68The problem with PSR today is that the process has been tainted by the "activist investors," eager to wring a buck out of the railroads for their own gain.
Well, I defended PSR without getting flamed. I was surprised by that.
So now I'll defend "Activist Investors". I'll ask if you prefer "Passive Investors?" The goal is to get the greatest output while using the fewest inputs. (Fuel, labor, capital, etc.) Doing that will maximized the benefits the railroad provides to the overall population.
Management just doesn't always do that. They get comfortable, settle in, go on "Retreats" to places like Jackson Hole, WY, etc. Don't make waves, leave well enough alone. They should always be constructively disatisfied. Looking for better, more efficient ways to get things done. But that's hard work and it involves personal risk. If someone's initiative just doesn't work out he/she runs the risk of getting fired. Better to just go along with the routine.
And that, over time, will kill the company. It will get displaced by more agressive firms.
Activist investors act when they see an underperforming company just rolling along with a settled routine. They come in a light a fire under management. Changes start getting made. Some of these changes are mistakes, but as long as adjustments are made things will get better over time.
Activist investors are rarely just trying to loot a company. They see an opportunity to make it a better company. This increases its value and this increase in value is what puts money in their pockets.
All in all, activist investors are good for the economy and the people.
Now; if we are going to start singing the praises of activist investors - I will part ways with you. Typically these folks are in it for the short term to rake as much cash as possible then skitter back under the rocks to wait for another victim to drift by.
I‘ll repeat something I said in my earlier post; if the railroad uses the lower cost structure achieved with PSR to invest in the railroad and grow the business; PSR can be a good thing.
Too often though; the railroad uses the extra cash flow along with taking on additional debt to buy back shares and drive the stock price up so their activist investors can cash out.
I certainly do not see that as a positive for the other stakeholders with a longer term interest in the company - the customers, employees and the communities served.
greyhoundsAll in all, activist investors are good for the economy and the people.
Maybe economy, but people? I don't know. Trains don't operate in a vacuum. They operate among the public. Should they be allowed to blcok US-main street with 20,000 foot trains because they don't fit anywhere? Sure hope to hell your ambulance isn't stuck on the other side....
Personally, I think there needs to be a balance between profits and regulation. Too much of either isn't good, but lack of either can be just as harmful.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.
greyhoundsActivist investors are rarely just trying to loot a company. They see an opportunity to make it a better company. This increases its value and this increase in value is what puts money in their pockets. All in all, activist investors are good for the economy and the people.
Activist Investors all tend to work in the short term - as such they tend to loot the treasury and lost interest in a company and then move on to the next 'mark'. The 'activist investor' when they have control of a company, tend not to permit 'long term' capital investment projects to happen as that would decrease the amount of money available to the 'activist investor'. They may not want to 'loot' a company but they do want to insure that they get the most first.
Never too old to have a happy childhood!
greyhounds I'll ask if you prefer "Passive Investors?"
Actually, yes. Those are the folks who want to use their investment twenty or more years down the road for their retirement. They want to see the company grow and improve in the long term. That means putting part of the profits into that growth and improvement, not harvesting the profits out like some sort of crop.
Juniata Man Now; if we are going to start singing the praises of activist investors - I will part ways with you. Typically these folks are in it for the short term to rake as much cash as possible then skitter back under the rocks to wait for another victim to drift by. I‘ll repeat something I said in my earlier post; if the railroad uses the lower cost structure achieved with PSR to invest in the railroad and grow the business; PSR can be a good thing. Too often though; the railroad uses the extra cash flow along with taking on additional debt to buy back shares and drive the stock price up so their activist investors can cash out. I certainly do not see that as a positive for the other stakeholders with a longer term interest in the company - the customers, employees and the communities served.
+1.
There are many employees who are embracing PSR - Pickup, Setout, Recrew. Until they get a better feel, it seems like all the working trains hit some of the yards at the same time. Often, this causes trains to sit and wait their turn for access. Ultimately, some hog law before reaching the next crew change point causing a dog catch crew to be called.
Although they still have a ways to go, I do think they are getting better. At first every manifest, and some stacker (so much for being 70mph) and hopper trains, were working almost every yard. This really choked things up. While more trains are working more places, they seem to have planned out work events a little better. Not every train works every yard. Things still get plugged up, but maybe not as bad as at first.
Jeff
The way to run PSR is to serve ALL of your customes, large and small. Do not abandon customers because they do not generate a lot of money for the railroad and are on a line that has only a few customers. You can run fewer, but longer trains and plan shipments so that not all trains server all yards enroute..
caldreamerThe way to run PSR is to serve ALL of your customes, large and small. Do not abandon customers because they do not generate a lot of money for the railroad and are on a line that has only a few customers. You can run fewer, but longer trains and plan shipments so that not all trains server all yards enroute..
If you are serving ALL customers large and SMALL you are not running PSR because you still have loose car railroading. Loose car railroading requires car for car switching to service the SMALL customer. If you have small customers you cannot have PSR.
BaltACDIf you are serving ALL customers large and SMALL you are not running PSR because you still have loose car railroading. Loose car railroading requires car for car switching to service the SMALL customer. If you have small customers you cannot have PSR.
What I really like about this thread is that I'm learning. My mom taught school for 43 years and I guess she taught me to learn to learn. Nobody has changed my mind, but I get to better understand people who differ with me. I kind of like that.
I'm going to speak up on this one. Sorry Balt, but you're wrong.
Serving ALL customers, great and small, does not require loose car railroading. While there is a niche for loose car business, it's generally a very inefficient system. Somebody will have to pay for this inefficiency. There just ain't no free lunch. The government can't try to force the investors to pay, because then they won't invest. If the customers would pay there would be no problem, but they won't. Who's left?
Put the small shippers in containers and do the pick up and delivery by highway. There will be a need for more intermodal terminals, and trains. But it's usually far less costly to do small shipper PU&D by truck with the line haul by rail. And lower cost logistics are good for all of us.
greyhoundsPut the small shippers in containers and do the pick up and delivery by highway.
How many containers would it take to replace 10 full sized tankers of cooking oil? Delivered twice a week? Or two flat cars of steel shapes, too big for the highway?
Some are speaking of 'activist investors' as though they were one and the same with 'vulture' capitalists. They are not, in my opinion.
According to the Investopedia, an activist investor is an individual or group that purchases large numbers of a public company's shares and/or tries to obtain seats on the company's board to effect a significant change within the company. On the other hand, a vulture capitalist is a type of venture capitalist who looks for opportunities to make money by buying poor or distressed firms. “Distressed” refers to companies or property in trouble, mismanaged, dying and heading toward bankruptcy. The “vulture” fund believes they see some “meat on the bone” and may get involved when all others have passed. They will either try to turn the asset around or liquidate it before it goes into the inevitable bankruptcy process.
greyhounds BaltACD If you are serving ALL customers large and SMALL you are not running PSR because you still have loose car railroading. Loose car railroading requires car for car switching to service the SMALL customer. If you have small customers you cannot have PSR. What I really like about this thread is that I'm learning. My mom taught school for 43 years and I guess she taught me to learn to learn. Nobody has changed my mind, but I get to better understand people who differ with me. I kind of like that. I'm going to speak up on this one. Sorry Balt, but you're wrong. Serving ALL customers, great and small, does not require loose car railroading. While there is a niche for loose car business, it's generally a very inefficient system. Somebody will have to pay for this inefficiency. There just ain't no free lunch. The government can't try to force the investors to pay, because then they won't invest. If the customers would pay there would be no problem, but they won't. Who's left? Put the small shippers in containers and do the pick up and delivery by highway. There will be a need for more intermodal terminals, and trains. But it's usually far less costly to do small shipper PU&D by truck with the line haul by rail. And lower cost logistics are good for all of us.
BaltACD If you are serving ALL customers large and SMALL you are not running PSR because you still have loose car railroading. Loose car railroading requires car for car switching to service the SMALL customer. If you have small customers you cannot have PSR.
Not all small customers can be SERVED by truck sized shipments. Of course once you stop serving them they will get truck shipments from other carriers since you pissed them off in the first place.
The small railroad served customers of the 21 Century are railroad customers for a reason. The reason being that for most of the last two decades the carriers have tried to substitute 'intermodal' service for their needs and it has alread been found wanting for a variety of reasons that are germain to the individual customers.
PSR does not want car load customers - train load yes, car load no. Ever since Staggers the Class 1's have been actively discouraging car load customers. They are almost gone now, a few more years and they will be gone.
tree68How many containers would it take to replace 10 full sized tankers of cooking oil? Delivered twice a week? Or two flat cars of steel shapes, too big for the highway?
Well, I did say that there was a niche for loose car railroading. When you're in to large volume bulk liquids or oversize loads, you're in the niche. Who, The Blazes, gets 1,000 tank cars of cooking oil in a year?
But that isn't most freight. After all, most freight now moves by truck. Loose carload just isn't, and can't be, competitive.
A good example is the Quaker cereal factory in Cedar Rapids, IA. They claim it's the largest cereal factory in the world. It pumps out 100 trucks of cereal per working day. And not one ounce of that cereal moves out by rail.
Be concerned about things like that. Not the niche movements.
greyhounds Who, The Blazes, gets 1,000 tank cars of cooking oil in a year?
It might be less - I believe they repackage it.
The actual industry is served by a short line that provides "last mile" service for a number of small customers, including steel that is often a "high/wide" load. CSX picks up/drops the aggregated group of cars, but it's still loose car.
The short line also still serves a feed mill that gets one car at a time, about once a week. Must still be economical for the mill to get carload lots vs trucks.
Actually, PSR isn't about train load customers. It's about running as few trains as possible. They want to run a balanced system, the same number of trains east/west or north/south every day. Unit trains can be unpredictable and throw off the network. It might require holding onto extra equipment and manpower in anticipation of when the trains will run.
They actually want to convert some unit trains to the manifest network. One example of this goal was using an imaginary customer that loads 10 cars a day, but waits 10 days until they accumulate 100 cars and then the train is run. Now they would rather pick up those 10 cars every day and move it in the regular manifest network. It's funny how over the years they wanted unit trains by offering multi-car discount rates and just making it hard to obtain cars for those that didn't or couldn't use the railroad's targeted unit train size. Now it seems they want to undo that.
What they still don't want, of course, is the small volume/once or twice a week customer. I think about some of the opprotunities they've turned down involving 10 to 30 car block business that could've been handled in the manifest network over the last few years. I wonder now if they would jump at it.
Ultimately, the class ones (for now) may have the goal of having nothing but intermodal trains. PSR isn't about getting to that goal, rather how to handle the remaining car load business until it can be converted or eliminated. If they ever reach that goal, about the only customers they'll be serving are those located near a major metropolitan area where most of their IM terminals are. I think rail customers outside of whatever is a reasonable drey range will end up sending their shipments entirely by highway.
charlie hebdo Some are speaking of 'activist investors' as though they were one and the same with 'vulture' capitalists. They are not, in my opinion. According to the Investopedia, an activist investor is an individual or group that purchases large numbers of a public company's shares and/or tries to obtain seats on the company's board to effect a significant change within the company. On the other hand, a vulture capitalist is a type of venture capitalist who looks for opportunities to make money by buying poor or distressed firms. “Distressed” refers to companies or property in trouble, mismanaged, dying and heading toward bankruptcy. The “vulture” fund believes they see some “meat on the bone” and may get involved when all others have passed. They will either try to turn the asset around or liquidate it before it goes into the inevitable bankruptcy process.
Far worse than the activist investor who holds management to account are the droves of passive investors who don't vote.. don't get involved .. and just let'er ride. These passive investors often don't have a clue about what they own even (i.e. CSX is a cereal) , and they allow poor managements to thrive and prosper until its too late.
These days the biggest culprits and enablers of mediocrity are not the activist investors but rather the index funds that have proliferated over the last couple of decades. Index funds are by their very nature passive.. they track the market or a portion of it, and they aren't managed or directed to any meaningful extent. They're akin to having an owner of a business who doesn't care.. doesn't even come in to the office.. And if the business goes south.. oh well.. he's got other businesses anyway.
This is not to say that all activist investors are good.. many are too focussed on the short term without any regard for how things turn out 10 or 20 years down the road. Ideally a business should have owners (investors) who have 10 to 30 year time horizons.. but those are generally family own businesses and not publicly traded companies where shareholders really have no skin in the game.. i.e. can sell out at any time.
jeffhergertUltimately, the class ones (for now) may have the goal of having nothing but intermodal trains. PSR isn't about getting to that goal, rather how to handle the remaining car load business until it can be converted or eliminated. If they ever reach that goal, about the only customers they'll be serving are those located near a major metropolitan area where most of their IM terminals are. I think rail customers outside of whatever is a reasonable drey range will end up sending their shipments entirely by highway.
Or the railroads could bring more customers within economic drayage range by adding more intermodal terminals.
Let's go back to my favorite place, Iowa. Iowa does generate a whole lot of truck freight. It's kind of the breakfast originator for America. Pork, cereal, eggs. And there's export. Very little of this, if any, moves by rail. Even though it's moving long distances to coastal population centers.
And, just how busy is the UP main line between Chicago and Council Bluffs these days? They could consider putting low cost intermodal terminals in Sioux City (Beef, pork and eggs), Marshalltown (Pork), and Cedar Rapids (Cereal, with pork from Waterloo). That would bring these production facilities within economical drayage distance. They've already got an IM facility in Council Bluffs.
So what's the hold up? Well, railroad cost analysis is a can of worms. In a time gone by I went a few rounds with a guy calling himself "466lex" over on Fred Frailey's blog. He was a former financial guy with, I guess, the BN. He insisted on applying average costs to any analysis. This will give you the wrong answer every time. It seems to be a legacy from the ICC which insisted on doing it that way.
What counts are the marginal costs, not the average costs. Marginal costs are what will be directly incurred by adding the service, nothing more. If the railroad can get more added revenue than the added marginal costs, it will be money ahead by doing so.
I don't see the UP as being at this point, yet. They seem to be still using average costs. Again, if a company uses average costs in analysis they'll get the wrong answer every time.
So, so much to think about here, and I'm short on time.
Ken, I've gone a couple rounds with both you and 466lex over on Frailey's section of this site, so you probably already have a good idea of what we agree and disagree on. Also, Paul Bouzide would probably be a good source for info on UP's internal practices, though I believe he left their employment a couple years ago.
It truly is a shame that this so-called PSR is not very precise or scheduled. If it were then customers like Juniata Man would not be complaining in droves. Short-term hiccups while restructuring could be understood, but with CN, CP and CSX the pains went on for years. Not to mention all the other cuts that happened during EHH's tenure, leaving railroads with worn-out physical plants with rampant deferred maintenance and an inability to properly handle any future increases in business. When CN's oilfield and intermodal traffic surged in Western Canada a couple years ago it caused gridlock out here, which continues today (though not nearly as bad as the winter of 2017-18). That's the true legacy of PSR.
A railroad that implemented EHH's version of PSR wouldn't be able to keep all that new business hauling pork, beef, cereal and eggs, even if they had bothered to go out and get it in the first place.
So far it seems like UP's 'PSR-lite' is not causing nearly as many problems as the full EHH dose. Let's hope it stays that way.
Greetings from Alberta
-an Articulate Malcontent
UP could open small IM terminals. All the places you name, plus many more, had them at one time. (Yes, a far cry from the modern IM terminal.) But they won't. Unless there is a sea change, they aren't interested in what they consider a short haul. I can tell you the volume of IM that originates in Council Bluffs (The ramp is on the IAIS over in the old RI East Yard. They haul it to/from the UP yard.) to Chicago. Zip, none. nada. The only time you see IM coming out of CB is if a conductor misread his train list and setout the wrong cars.
Don't get me wrong. I'd love to see them grow the business. But PSR isn't about running more efficiently to free up assets to grow the business. It could be, but as practiced it's about cutting costs and saving money.
greyhoundsOr the railroads could bring more customers within economic drayage range by adding more intermodal terminals.
Yeah, don't hold your breath for that with PSR. Intermodal will be/ is being slashed just like everything else.
PSR has had some very stinging complaints from various freight customers including Amtrak.
A proposal that congress should consider is some sort of regulation on train lengths.
What if congres and or the STB / FRA proposed the following.
Limit the length of trains on any segment so they would fit into the sidings on a route. As well distances between sidings capable to handle these monsters would have say no more than 40 miles between capable sidings with that distance being reduced every year until lengths between capable sidings would be 10 miles.
This would allow the RRs to determine on each route how many of these super sidings and their length that they would want on any route to handle both freight and those routes with Amtrak as well. Mountain routes such as the northern transcon would probably have shorter super sidings.
An example of not having at present having train lengths that will fit into present sidings is on NS between Meridian, Birmingham, and Atlanta that do not allow opposite direction freights to be dispatched on several long segments between sidings at the same time. As well Amtrak wannot run around an extra length train on this route. These Super sidings defined as capable of opposide direction trains of "X" length to pass. That would also allow Amtrak trains to run around freights for example on the Crescent route it is not possible on many segments.
Routes that are already 2 main tracks not double track current of direction would be naturally be exempt such as the BNSF transcon which only has a few short single track locations left. 2 MTs would allow for most trains to pass around any broken down freights.
Hopefully this would mainly benefit freight customers with side benefit to Amtrak.
blue streak 1Hopefully this would mainly benefit freight customers with side benefit to Amtrak.
Very disingenuous, Streak. You are a well known passenger train guy advocating for another hidden subsidy for the rolling wreck known as ATK.
While the above overdetailed regulation would probably not come out of Congress, it does demonstrate that PSR, however it is defined, has given new life to the specter of re-regulation.
Would the railroad customers prefer re-regulation?
Euclid Would the railroad customers prefer re-regulation?
I doubt many shippers would want to refer to it as “re-regulation“ but; I suspect many would like to see stronger oversight of the railroads that implement PSR.
EuclidWould the railroad customers prefer re-regulation?
Customers - like everyone else - are looking for 'free shipping'.
BaltACD Euclid Would the railroad customers prefer re-regulation? Customers - like everyone else - are looking for 'free shipping'.
LOL! Maybe not free but; what an old colleague of mine years ago referred to as “widows and orphans“ pricing.
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