The world according to McClellan

Posted by Fred Frailey
on Friday, October 5, 2012

I enjoy Jim McClellan’s speeches. Hell, I enjoy Jim McClellan’s company. First of all, he has a finely developed sense of humor, which he likes to turn on himself. More important, Jim has this talent for distilling huge numbers of facts and ideas into simple truisms. Finally, like Zelig, he had this talent for appearing at so many critical junctures of railroad history the past half century. He was present at the development of what became Santa Fe’s Super C, the fastest freight train ever. He was present at the creation of Amtrak and later of Conrail. He was the brains behind Norfolk Southern brilliant (and savage) attack on the purchase of Conrail by CSX, an attack that succeeded in getting NS more than half of Conrail.

Jim has been retired from NS for about a decade, where he ended up as VP of corporate strategy, but that mind of his keeps churning. And it was on full display at this week’s annual meeting of the Lexington Group, in Peoria, Ill. Rather than give you a traditional report on his talk, I’ll just offer you his sound bites. Ladies and gentlemen, the world according to Jim McClellan:

“A simpler network runs most efficiently.”

“You make money by running big trains and keeping them in motion.”

“When railroaders talk merger, they don’t pull out their financial statements. They pull out their maps.”

“Railroads used not to think of themselves as profit making enterprises. They thought in terms of public service. Santa Fe and Seaboard Coast Line stuck with passenger trains way beyond the time they knew they shouldn’t be in that business, because they thought it their duty.”

“The goal of regulation [in the Interstate Commerce Commission era] was fairness, not efficiency. It was a convoluted, complex, and inefficient system. There were too many routes, too many railroads, too many junctions. In the end, the system was unsustainable.”

“Penn Central: Two drowning men clinging to each other.”

“Two railroads are all you need for competition. This idea once seemed radical.”

“The most important event in railroading in the Midwest during the 1970s was the liquidation of the Rock Island Lines. It sent shock waves through labor. Ten thousand jobs went poof.”

“. . . and Canadian Pacific acquired the Delaware & Hudson. God knows why they bothered.”

“Unit trains concentrated traffic on a few main lines, as did intermodal traffic.”

“Marketing guys now have to deal with what it really costs to run a railroad.”

“The decline in coal traffic is good for railroads. It will force them to find new markets. Railroads don’t like to do that, because they don’t have enough intelligent sales people.”

“There are a million ways to make railroads more efficient. But none of them are easy. It will require lots of singles, rather than home runs.”

“Transload and intermodal give customers a whole lot of alternatives to poor carload service.”

“Transcontinental mergers? I think not. The threat of reregulation is serious. And the economics of such mergers are not compelling. We’re down to about ten junction points between major railroads and they run well. The railroad network today is pretty efficient, rather than Balkanized.”

“Railroads thrive on density and velocity.”

That’s it, folks. Wish you could have been there. But for those who were not, you now have the best of McClellan. — Fred W. Frailey

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