Why Own your own cars?

[Anonymous]

I was looking through the owner reporting marks list. I noticed that a lot of manufacter's own there own rail cars. Is there an advantage to this? Can anyone own a railcar?
Lets say my company makes Hot sauce and Chilli peppers here in Illinios. Ninty percent of my product (about 20 cars a day) are shipped by rail to Texas. (For every true Cowboy hat wearing Texan knows that the Hottest and best Chilli Peppers are grown right here, In Illinios.) Would it be benificial for me to own my own railcars? Are there any advatages to lease? Would I have to buy track somewhere in order to buy these cars?
TIM A

[Anonymous]

Can't answer you about the cars, but I'll take the bait. If anyone believes the line about chili peppers and Illinois, then (apologies to George Strait), I've got some "Ocean Front Property" in Arizona.

[Anonymous]

OK, You caught me, Iowa grows a Hotter chilli pepper. But Illinios is a close secound.
TIM A

[Anonymous]

I'm sure there are people out there far more qualified than me to explain this but since they haven't answered I'll tell you what I know. In general freight service you'll pay x amount to use a car and then pay for the railroad to take the car from your location in Illinois to Texas. Now, if you use these cars enough that you would be using your own almost all the time then it might work out cheaper to invest in your own cars for this dedicated service. However, if you don't use the cars enough to get your full investment out of them in your utilization then it might be cheaper to lease cars since you only use them part of the time. As to owning a railcar as far as I know anyone can own them but the problem is in finding business for the cars you own. I don't believe there is much of a shortage of railcars right now seeing as I've seen brand new cars put directly into storage around here in Ohio.
CV2652

[edblysard]

Hi Tim,
Lets take your example a little further, and then you decide.
20 cars a day from Illinios to Texas.
Time from your plant to say, my yard in Houston.
Figure your close to a BNSF yard in Illinios, so 1 day to pull your 20 cars, and get them to the yard, and on a outbound to Texas. So tomorrow, what do you put your hot sauce in.? ( Illinios hot sauce?) So you need another 20, now you own 40 cars, but it takes 24 hours for your first 20 cars to get here, the second 20 just got pulled from your plant, so you need another 20 for tomorrow, while you wait for the first 20 to be unloaded here. So now you need 60, but wait, it take us 24 hours to move the cars from our yard to the grocrey store track, and get them unloaded. So you now need another 20 cars..so forth and so on. You would need at least 140 cars to keep 20 a day to be filled at your plant, maby more, while the rest would be in transit, on the way to Texas or on the way back to Illinios. Then add in some back up cars, to put into service when one of your cars is damaged, wheels slid flat, hand rail knocked off by a slow switchman...say, another 20, so now you own 160 cars, each costing $100,000.00, so thats $1,600,000.00. Now add in the AAR repair billings you have to pay for other railroads repairing your cars, well, you can see how the cost goes up real quickly. Now lets say demand for your Illinios hot sauce drops off, (Texans dont eat foreign hot sauce) and you only need ten cars a day, to ship your hot sauce to Tacoma, where they dont know the difference between a jalapino and a banana pepper. So now 1/2 of your cars have to be stored, somewhere, and you have to lease the track and pay a carrier to take your cars there, switch them out, and if you need them again, you have to pay to have them pulled...
The only real advantage to owning your own cars are if you
A: own cars that have several uses, or
B: your cars are in captured service hauling a commidity like grain, even though grain prices fluctuate, or coal or coke, where the demand may drop off, but always comes back, and cars are in service 24/7.
C: your cars are always in service, (see above) or are a type of cars that, if you are not using them for a period of time, you can lease them to some one else, like a tank car for corn sweetner or peanut oil, or a plastic hopper.
The reason most huge companies like Phillips, Dow or Shell lease, instead of owning cars, is the volume required. The capitol expense would be enormous, as opposed to leasing cars for a fixed rate, for a set time. And at some point in time, the cars would have to be replaced due to age, or wrecks.
Because ACF, Trinity and the GATX Corp, Union Tank Car and CEFX own cars, well, ACF, Trinity and Union build them, then lease them out, GATX buys them from the above, and leases them, and CEFX is a capitol trust company, they buy and sell the leases. How do they make money, if owning cars is so expensive? Our old friend, volume.
Because of sheer volume of cars they lease out, the number of cars in service far outweighs the number of cars stored or otherwise out of service. Most of their leases are long term, 10 or 20 years, and they get paid the lease fee, even if the car isnt being used. The person leasing the car pays for storage, when the car isnt in use, sorta like leasing a automobile, you pay the monthly lease, even if you dont drive it every day.
Somewhere along the way, I expect gdc to jump in here, and provide more accurate numbers and figures, at least I hope he does, I am kinda courious myself as to the cost.
(Illinious hot sauce, on a Iowa tortillia?, get a rope)
Stay Frosty
Ed

[Anonymous]

Tim,

In a word, control, and to a lesser extent assured supply. If you own (or lease) them you control them they come back to you when empty.

This is more important in some situations than others. If you are shipping in boxcars you will probably not want to own them because the railroads have plenty and at 20 cars per day you will be an important customer and the originating line will flow 20 cars per day to you and probably have a day's supply very close to you.

If you are shipping in tank cars, you will own or lease cars because the railroads do not supply tank cars. This goes all the way back to the Pennsylvania oil fields of the 1850's and 60's when the PRR did not want to supply tank cars. J. D. Rockerfeller did, and that is the foundation of his fortune.

The PRR made a wise decision because tank cars come in an incredible variety and tend to be built for one or a few commodities. As a practical matter, they are not as versitile as box cars and you can not easily change from one commodity to another. If you are shipping hot sauce you would not be too keen on the PTRA using your car to haul styrene to Chicago.

Hopper cars are an intermediate case. Grain cars are pretty much all alike and you do not see a lot of private grain cars and most of them are leased to BN & UP to simplify fleet management. Plastics and chemical cars are like tank cars, one commodity and often private. Plastics cars are often used as temporary storage bins. Railroads discourage this with their own cars by charging demurrage at a rate of 2-4 times actual capital cost of the car.

Last case is TTX. This started out kind of like tank cars. Piggyback was a new deal and railroads, again PRR, were skeptical about making a long term investment in a business that may or may not go away. The major railroads got together and created a captive leasing company that became TTX. Railroads funded TTX and guaranteed the debt, but paid for cars as they were used. This kept the cars, and the associated debt off railroad's ballance sheet. TTX contines because they can manage a national pool of cars better than the individual railroads. What that means is that with TTX the fleet is smaller, and more flexible as to depolyment, than it would be if each railroad undertook to provide cars to protect its own loadings. RBOX and GONX are same idea as applied to box cars and gondolas, by TTX. This has evidently not been as advantageous as with flats because TTX has not bought boxes or gons for several years.

No, you do not need to own track to own cars, but if business turns down and you have to store they the railroad will charge you storage charges. Track is not free!

Mac McCulloch

[jsanchez]

TTX recently placed an order for boxcars to use mostly in the paper trade, boxcars are kind of specialized now also.

[Anonymous]

Gentlemen,
Can railroad companies tell you were to lease from? If a railroad such as the Port has had some bad experience with a lease companies rail cars, can they refuse to haul them?

[edblysard]

Hi Tim,
No, a railroad cant tell you who to lease from, nor would we refuse to move someones cars, unless those cars were a hazzard, as in a safty issue, or there were clearence problems. Ever see the square box, with a letter, C D, E or F, in the middle of the box, or a note near the box that says this car exceeds plate E? The box and letter refer to the cars overall dimensions, and tell crews that this car is X number of feet tall and wide, so forth.
The plate the stencil refers to is a builders plate, or elevation, with certain limits as to height, width and length. Plate C falls within these dimensions, plate D fits here, and so on. The only way we would refuse to move a car is if we know it will have a clearence problem, say with a bridge, or a underpass or highway abuttment.
Cars we recieve damaged are bad ordered, placed in the rip track, and thoses beyond our shop forces ability to repair are sent back to their home shop for repair. As for a certain group of cars, or cars from a certain manufactuer having a consistant defect, no, not really. The car makers build prototypes, and test them on railroads before they build more, so most of the bugs are worked out before a production run starts. Also, remember that every time a car enters a yard or terminal, its looked over by that railroads car department or mechanical department for defects, broken steps, grab irons, flat wheel, sharp wheel flanges, more things than I could list. If any are found, the cars is cut out, placed in the rip tracks, and repaired. The railroad who sent it to us is billed for the repair, so you can see its in the forwarding railroads interest to catch any bad orders before they get in a train. Its cheaper for them to find and fix it than to have us fix it and bill them, and they, in turn do the same process on all the cars they receive, and bill whoever sent them the bo car. This way, most cars have minor repairs done almost as soon as the damage is discovered.
The only consistently "bad" cars we get here are coke cars and grain cars. The coke cars are on their last legs, in captured shuttle service to and from a east Texas power plant to the coke plant on the ship channel, they are beat up, patched together, rusty and filthy, but still meet the AAR interchange rules. The grain cars dont sit still long enought, last night we had six grain trains through here out to caqrgil, two were loaded directly into ships, straight from the cars to the boat. Bad order grain cars are hustled in and out of the rips asap, sometimes the car department blue flags the whole train, and fixes whatever is wrong while the car is still in the train, like welding on a new sill step, or replacing a grab iron, maby brake shoes, simple stuff like that. So, no, there isnt a class or type of car we refuse to move, only indivdule cars with damage or a safty defect.
Stay Frosty,
Ed

[Anonymous]

Am I correct in saying, you could own a railroad company. Not own any track. Not own an engine. Not have any maintance personal. Own just one car and you can be a railroad company?
Are there a lot of railroad companies like this? The X at the end of the reporting marks then mean "Owned by other than a rail company". Is this correct?

[Anonymous]

Also, is there a national standard that rail cars must meet? Is there a goverment agency that inspects rail car companies to insuare that the standard is met? Do railcars have to be torn down and inspected yearly? (Bearings, Axeles, Wheels and Frames?) Are there private firms that do this for a railroad? Or do rail companies have major shops who's job it is to do nothing but inspections?
TIM A

[edblysard]

Hi Tim,
The X at the end of the reporting mark means the car is leased, as in UTLX, Union Tankcar Leasing, a fleet of tank cars union tankcar built just to lease, hence they end in X. If you look at the list of reporting marks in the trains ABCs of railroading, allmost all of the marks ending in X are not assigned to a railroad, but to the fleet of cars, leased by a company. Fina dosnt own the cars, but leases them, so FINX is the reportin mark assigned to the fleet of hoppers leased by Fina. Note the cars owned by Union Pacific, or BNSF have no X at the end, only UP#### or BNSF####,which denotes the cars are owned by that railroad, not leased. But, to answer your first question, yes, you could be a railroad without owning any cars, or locomotives. The PTRA owns no revenue cars, only a few mow, and untill we purchased the MK1500Ds, we didnt own a locomotive, we leased them. We dont own our track, its the property of the Port of Houston, Navagation District. Our yards, and the right of way also belong to the navagation district.
So if your planning to buy a railcar, and apply for a reporting mark, go for it. You could have TimX on the side, and own your own rail car leasing company, although I belive TIMX is already taken.
Stay Frosty,
Ed

[edblysard]

Yes, the FRA has a set of guidlines a car must meet, there is a five year inspection of air brakes, and a whole lot of other inspections made at certain timed schedules. Note the black square with dates in it, painted on the side of all ralroad cars, and often the type of inspection, and when and where it was done is also painted on the car, tankers especially. They even have a schedule to inspect the tank for pressure, the relief valve if so equiped, when the bearings were lubed, if it haas those type of bearings. Our mechanical dept has a manuel about two inches thick, the AAR interchange rules which, among other things, tell the carmen what will pass, or fail a FRA inspection, what to look for, and how long between certain inspection a car can go. Some railroads maintain a shop to do their own heavy repairs on their own cars, but most are returned to their home shop, (builder) for that. Light repairs, brakes, couplers and drawbars, hand rails, steps and some body work can be done in a rip track, (Repair In Place)which most yards have, and most major yards have a shop which can do almost any repair. Some companies, like CEFX, outshop their repairs, and there are private companies which do just that, repair cars. Trinity railcar service, here in Houston, repairs and rebuilds tankcars for a lot of companies and railroads. Its sometimes cheaper than having to take the car back to the builder for heavy repairs. There is no agency which inspects cars, but the FRA and the AAR have to ok a new car design. Each railroad has a craft called carmen, or car inspectors, and just like switchmen and engineers, they have to be trained, and follow the FRA guidlines in their jobs. They inspect all the cars coming onto their railroad, and bad order any with defects. These cars can not be allowed back into service untill the defect has been repaired. They have a set of rules, as stringent as the operation departments, that they must follow, or face FRA fines. And of course, you dont want to send a bad order car on to another railroad, they will inspect the car, most likely find the defect, then repair it and bill you.
Todays railcars may look like crap, but mechcanicaly, they are very sound. You dont hear about wheels cracking and causing a derailment very often, and most class 1 roads have electronic defect detectors at certain points along their track, to spot and report hot bearings or brakes, and dragging equipment.
Clear it up any?
Stay Frosty,
Ed

[Anonymous]

Just a little clarification here. The X at the end of a reporting mark doesn't indicate whether a car is leased or not, it does indicate that the car is owned or leased to someone other than a "common carrier". CSX has to use reporting marks of CSXT to differentiate themselves from GATX, ACFX, and others who operate car fleets but do not hold common carrier status. I hope this helps, stay safe Ed, and keep the questions coming TIM A--perhaps I should send you a Texas chili pepper--it'll melt the snow off your sidewalk!!!

[Anonymous]

Ed,

Small error in last reply. The "X" means car is owned by someone other than a railroad. That someone may be a leasing company, like GATX, or an owning user like Dupont DUPX. Of course a DUPX marked car may actually belong to General American and on long term lease to DuPont.

You have the patience of Job answering these questions.

Take Care
Mac

[edblysard]

Thanks Mac, but next time I see a hopper with TIMX on the side, well, you get it...
Who knows, we might all end up working on Tims Railroad!
Stay Frosty
Ed

[Mookie]

Ok - in this same vein of thought - my favorite place to watch is east of the main BNSF yard - where we catch in-coming west bound and out-going eastbound. The BNSF repair shops are farther east of our location on the east side of town. We have heard a lot of "flat" wheels and a lot of squealing from mostly coal train cars. Would this be something that should have been caught as the train came thru the main yard, or is it possible it will be caught as the train is leaving town and closer to the "shops" on the east end of town. In other words can anyone hazard a guess or actually know where the sensors would be located for the Lincoln yards/Havelock shops in Lincoln NE?

[edblysard]

Hi Jenny,
Ok, the squeal it most likley the flanges of the wheels, rubbing up against the inside of the rail. Real high pitched, almost painful to the ears?
As for the flat wheels, there is no detecter for that, only humans. A yard crew, or a conducter on another train should report the flat spots if they are severe enough to "hammer" the rail or cause the car to jump. There is a allowance on flat spots, over 2 inches is a condemmable wheel.
This is one of the reasons most railroad require their conducters, when stopped to meet another train, to give the other train a roll by, keeping his or her eyes open for such things.
The reason you see this on a lot of coal cars or coal trains is because the cars are used on a non stop basis. They are on the go 24/7.
Most flat spots are caused from yard crews dragging the cars with a hand brake or air brake set to hard, locking the wheel in postition.
You can hear a sliding wheel long before you see it, oddly enough, it sounds just like sizzling bacon, a hissing sound. Some railroads sorta ingnore flats spots on unit or bulk trains, as the turn around time is critical, but here at the PTRA, our carmen do a visual inspection, and will condemn any they find.
Stay Frosty,
but not too frosty,
Ed, in sunny Texas

[Mookie]

thanx Ed! You have explained what I wanted to know. I do know a flat wheel when I hear one, but like you said - it is always on a coal train and probably isn't so bad it would be fixed right away. And the squeal is horrible - but then I have sensitive ears, too! Really hurts!

We're 40's and sunny til weekend. Then snow!

Jen