Around 1986, Oakway and LMX both had programs in place with BN. On units they leased to BN, BN had to pay only for the electricity the locomotive produced. It put the responsibility of keeping the units up and running on the leasing companies. What happened to this program? Everytime I run accross a comtemporary account of the program, it's portrayed as the greatest thing since sliced bread.
Thanks to Chris / CopCarSS for my avatar.
Power by the hour or the UP/SP version of Power by the Mile. was a WONDERFUL thing in theory. in practice our PBYM locomotives were maintained by our own mechanics and parts were changed on (and paid for) the milage reccomended by EMD not necessarily by the UP's standards. It was a good idea but very expensive for both parties involved.
Power by the hour was also viewed by the various shopcraft unions as a union-busting tactic by having the power-by-the-hour fleet maintained by other than BN's own shops.
CSSHEGEWISCH Power by the hour was also viewed by the various shopcraft unions as a union-busting tactic by having the power-by-the-hour fleet maintained by other than BN's own shops.
Power by the Hour was one of several manifestations of a business philosophy popular in railroading in the early 1980s, right after deregulation. The premise was this:
"Railroading doesn't make money because it has old ways of doing things, and an old culture that is resistant to change."
The solution was this:
"It's hard to change cultures, so rather than doing that, let's just overturn the system and cast off big pieces of the business to other people who aren't beholden to the old way of doing things, either through their culture or through their existing business arrangements (e.g., union contracts).
Now, consider the sales problem that occurs when you try to reach your solution. You are trying to interest outsiders in purchasing a piece of an industry that for many years has been barely profitable or unprofitable, and pay you not just for the Going Concern Value but the Net Liquidated Value. That person, in order to get a bank to loan them the money to buy the piece of the railroad business your are selling, has to be assured of a very high profit margin in order to pay off the mortgage as well as reinvest in the capital necessary to maintain the Going Concern Value. So the piece you are selling has to come with a very high, built-in, take-or-pay revenue stream and profit margin, in order to find any real buyers with real money.
The bet, made by those who were selling off pieces, is that the "new culture" of the spun-off businesses would be more efficient, and that efficiency in turn would increase the value of the core business that was retained. The whole idea really had as its keystone this notion that there was a better way of running a railroad and that these better ideas would never be implementable or even discoverable at the "old railroad" because of its cultural problems.
The result was, as others pointed out above, pretty unsatisfactory. The spin-outs sucked up a lot of free cash flow, they didn't generate the expected radical restructuring of railroading (because it was mostly imaginary), and everyone got hurt feelings. Railroading figured out how to rebuild its culture from the inside, instead.
RWM
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