aricat wrote:Railfans should realize what the competition is up to. I read an article today about using both container ships and barges to transport containers domestically. This industry wants to take on both the trucking and rail industries. It points out that a barge can carry 456 containers and container ships even more.They think the I-95 corridor between Boston and Miami would be ideal for them. What does FEC CSX and NS think about this. Shipping interests want Congress to have the DOT to establish a coastal shipping program and pass the Blue Water highway act of 2007 which would enable shipping interests compete with both truckers and the Railroads. The shipping interests claim that barges and container ships are three times more fuel efficient than either trucks or trains I hope that the rail industry is NOT asleep!!!
There have been efforts for years to obtain subsidies to expand the market penetration of short-sea shipping. The rail industry is not asleep. There isn't a lot of belief that the subsidy requests will succeed any time soon.
RWM
aricat wrote:Railfans should realize what the competition is up to. I read an article today about using both container ships and barges to transport containers domestically. This industry wants to take on both the trucking and rail industries. It points out that a barge can carry 456 containers and container ships even more.They think the I-95 corridor between Boston and Miami would be ideal for them.
Hearing about that is ironic in that the container was developed as a way of reducing costs for domestic shipping - so the idea may come full circle (but I'm not holding my breath...).
MichaelSol wrote: Dakguy201 wrote: I started thinking about the captive shipper/receiver issue and the auto industry. A number of new auto plants have been built in recent years, mostly in the southern states. Are these plants located so that access by more than one railroad is possible, either through physical connection or track rights? Toyota, for instance, makes it an absolute requirement that if it builds a plant, there will be access by two rail companies. Then they put the requirement on local government to do it or lose it. Local and state governments then step up to the plate, just like trained ponies, and build new rail lines to meet Toyota's requirements so that it will build the plant.In this fashion, Toyota avoids the captive shipper problem suffered by legacy plants owned by GM, Ford and Chrysler. At the same time, government assistance is used directly to compete with old-line American industries. The fact is that railroad pricing policy is directly responsible for this state of affairs. The policy creates rustbelts all by itself, and creates a vacuum for government funding which gets filled by whoever has the wherewithal and inclination to build a rail line for a new plant. On the other hand, some lucky railroad gets a new line built at government expense, so that it can compete for traffic with some other rail line, keeping rates competitive for Toyota, while it jacks up rates for GM and Ford somewhere to make its quarterly profit goals.This is the natural result of unregulated captive pricing, it is cross-subsidization at its worst, it has implications throughout the economy, and it results in a distortion of a rational investment decision-making process.Ultimately, does it help the railroads? Not one bit. The Ford plant closes down and the railroad loses the business, ultimately, to competitive locations. In return for the quick return from a captive shipper, the railroad exposes itself to the ultimate result that industries will relocate and that the railroad, by charging too much, will eventually find itself in a catfight somewhere else charging too little to try and keep the business.Of course, the railroad is a fixed plant. Most industries aren't. Somebody somewhere thinks that captive pricing at the unbearable margin is smart business, and that it does not represent the cross-subsidization that allows cutthroat rates on competitive traffic. They will kill the golden goose for the short term, and wonder why the R/VC ratio continues to go down, not up.
Dakguy201 wrote: I started thinking about the captive shipper/receiver issue and the auto industry. A number of new auto plants have been built in recent years, mostly in the southern states. Are these plants located so that access by more than one railroad is possible, either through physical connection or track rights?
I started thinking about the captive shipper/receiver issue and the auto industry. A number of new auto plants have been built in recent years, mostly in the southern states. Are these plants located so that access by more than one railroad is possible, either through physical connection or track rights?
Toyota, for instance, makes it an absolute requirement that if it builds a plant, there will be access by two rail companies. Then they put the requirement on local government to do it or lose it. Local and state governments then step up to the plate, just like trained ponies, and build new rail lines to meet Toyota's requirements so that it will build the plant.
In this fashion, Toyota avoids the captive shipper problem suffered by legacy plants owned by GM, Ford and Chrysler. At the same time, government assistance is used directly to compete with old-line American industries. The fact is that railroad pricing policy is directly responsible for this state of affairs. The policy creates rustbelts all by itself, and creates a vacuum for government funding which gets filled by whoever has the wherewithal and inclination to build a rail line for a new plant. On the other hand, some lucky railroad gets a new line built at government expense, so that it can compete for traffic with some other rail line, keeping rates competitive for Toyota, while it jacks up rates for GM and Ford somewhere to make its quarterly profit goals.
This is the natural result of unregulated captive pricing, it is cross-subsidization at its worst, it has implications throughout the economy, and it results in a distortion of a rational investment decision-making process.
Ultimately, does it help the railroads? Not one bit. The Ford plant closes down and the railroad loses the business, ultimately, to competitive locations. In return for the quick return from a captive shipper, the railroad exposes itself to the ultimate result that industries will relocate and that the railroad, by charging too much, will eventually find itself in a catfight somewhere else charging too little to try and keep the business.
Of course, the railroad is a fixed plant. Most industries aren't. Somebody somewhere thinks that captive pricing at the unbearable margin is smart business, and that it does not represent the cross-subsidization that allows cutthroat rates on competitive traffic. They will kill the golden goose for the short term, and wonder why the R/VC ratio continues to go down, not up.
Do you really believe that railroad people are so dumb that they would put a solely served facility out of business by pricing the facility's traffic so high that it can't compete with facilities on other railroads? Here's a REALLY important point. Where an shipper served by a single railroad is in competition with shippers served by other railroads, the first railroad is in competition with those other roads. This is often called "geographic competition" (or "product comeptiton" where the solely served shipper's product is in comeptition with substitute products), and is something that is very real and very well understood by railroad marketing people.
For example, there are many electric utility plants which are only served by a single railroad. But those plants are in competition with other plants served by other railroads to sell power on the grid. That puts all of the railroads serving the competing plants in competition with each other. Simply put, if a railroad demands rates from a solely served plant that reduces the plant's ability to sell power on the grid, the plant will use less coal relative to its competiors, and the serving railroad will lose business to railroads serving the competing plants. You can safely bet that this is something that's very carefully considered by rail marketing people when they set prices to their solely served plants.
This kind of competition is also a reason that the rheotoric about "captive shippers" is so much hogwash. The only ways a railroad which solely serves a particular shipper can be a "monopolist" in any meaningful sense of the term are if (i) the shipper is a monopolist in its own market; or (ii) the serving railroad also SOLELY serves so many of the shipper's competitors that the railroad has a monopoly share of the transportation market in the shipper's industry. There may be some examples of this out there somewhere, but they are extremely rare.
Of course, all else being equal, most shippers would prefer to be served by multiple railroads (as in your Toyota example). It gives the shipper some more negotiating leverage and gives the shipper some protection against a service failure on a single railroad (assuming, lof course, that the alternate railroad has the capacity to step in, which is not always the case). But the notion that a railroad that solely serves a particular shipper is some kind of a monopolist that can set rates up in the stratosphere is nothing more than political rhetoric.
Falcon48 wrote:This kind of competition is also a reason that the rheotoric about "captive shippers" is so much hogwash. The only ways a railroad which solely serves a particular shipper can be a "monopolist" in any meaningful sense of the term are if (i) the shipper is a monopolist in its own market; or (ii) the serving railroad also SOLELY serves so many of the shipper's competitors that the railroad has a monopoly share of the transportation market in the shipper's industry. There may be some examples of this out there somewhere, but they are extremely rare.
Well, whether a rate set at 350% - 400% of the R/VC is in "the stratosphere" or not depends on whether you are forced to pay it or not. I gather you don't because you're not in business and this is theoretical to you. However, those examples are not mere "rhetoric" but well documented.
How exercising monopoly control over a captive shipper's rates is "meaningful" only if the shipper is a monopolist or if the railroad has a monopoly share in the shipper's entire industry is one of the most interesting and innovative economic arguments I have every seen.
I would suggest the use of the word "rare" is indeed appropriate.
A couple of years ago, this was examined in some detail for the Wheat industry. At the time, wheat at Portland was bringing about $4.20, at Texas ports, about $3.90. This tends to represent the differential between prices that reflects a relative stability between markets. Much beyond that, and wheat starts to move to the higher market, bringing the price per bushel back down. Indeed, at another point that year, Portland was paying $4.08 per bushel while bringing $4.24 at Brownsville. But, the price tends to modulate, historically, in something of that range between export ports.
As with any commodity, the low cost producer tends to be the price setter, and it is no different in the grain industry, subject to the differentials in distance, primarily, to the market. In this instance, I am referring to the export market.
In the study, which examined all wheat rates from elevators on the BN to the major export terminals served by BN, linear regression analysis showed a greater than 92% correlation between the rate and the distance to a rail or waterway competitor across the BN system. That is, the farther such distance, the higher the rate. Generally, rates in Montana and North Dakota reflected a captive shipper status, with R/VC rates at between 220% and 260% at that time. This compared with rates elsewhere ranging between 120% and 180%. Captive shipper rates for wheat have been documented by the STB to range, in some years, up to as high as 380%.
In the case of the average farmer in Montana, whose elevator was located at an average distance of 840 miles (statistically), his single car rate to Portland was $3,200. At a price of $4.20, with an 80% cost of production and 5% overhead, he netted $2205 per carload, but spent $3,200 on shipping costs, for a net deficit of $995.00 per carload. At the shuttle rate, he only lost $511 per 100 ton carload.
For the average farmer shipping in Texas to a Gulf Port, he received only $3.90 per bushel, but had slightly lower costs of production. If he shipped the average distance of 840 miles, he received a single car rate of $2,400 -- the single car rate being $316 lower than the shuttle rate in Montana. Notwithstanding the lower price received for his product, he earned $330 in net profit per carload.
The differential between the Montana farmer and the Texas farmer, notwithstanding the lower price received for his wheat, was $1,325 per 100 ton carload, due to railroad pricing policy regarding captive shippers. In those instances in which Gulf Port prices were higher than Portland, the differential simply became greater.
In 2002, under similar circumstances, BN "decided" there wasn't enough grain going to Portland, and instituted "inverse" pricing for Minnesota elevators to Portland. It was cheaper, under the inverse rates, to ship from Minnesota to Portland than it was to ship on the identical rail line from North Dakota and Montana to Portland.
The price dropped, but worse, a quality of wheat arrived in Portland that was unexpected by the Asian buyers. Wheat is much like coal, various processes involved in production and baking are fine tuned to a given source. Buyers began complaining, and in the following year, the Portland price was lower because Asian buyers were for the first time skeptical of the quality of wheat they were purchasing in the Portland market. So, the captive shippers pretty much lost money to a flooded market, they lost both the advantages of their closer proximity to the market, and the advantages of the higher quality of their product. Unhappy shippers, unhappy buyers, disrupted markets, all because of "careful" railroad rate people. Thanks, I guess. All "thanks" to a captive shipper pricing policy actively, aggressively, engaged in by BN at that time.
The shippers enjoying competitive rail rates continued to make money.
This example suggests that the quoted comment above reflects something theoretical that is new to me and apparently to most commentators on the subject. I suppose the use of the term "hogwash" is simply designed to pick a fight, but the term lends no credibility to the interesting proposition, and it certainly doesn't reflect a thoroughly documented reality.
Falcon48 wrote: Of course, all else being equal, most shippers would prefer to be served by multiple railroads (as in your Toyota example). It gives the shipper some more negotiating leverage and gives the shipper some protection against a service failure on a single railroad (assuming, lof course, that the alternate railroad has the capacity to step in, which is not always the case). But the notion that a railroad that solely serves a particular shipper is some kind of a monopolist that can set rates up in the stratosphere is nothing more than political rhetoric.
Well, wheat rates may be a bit esoteric, and given the documented 350% R/VC ratios, perhaps a little too stratospheric, notwithstanding they are real.
Let's climb down out of the stratosphere, and look, as the gentleman suggests, at a circumstance where "all else is equal."
We can take a shipping cost that represents a 150% R/VC for a given auto plant, and the shipping cost for another auto plant, same distance, all else being equal, of 180%. Not even "potentially" captive, but, not sufficiently competitive to get the better rate.
Nothing stratospheric about the 180% rate.
Here's what it means between a hypothetical Toyota plant that gets the 150% rate, say $600 per car, and a hypothetical GM plant served by one railroad that pays $720 per car. Each plant produces 400,000 units at a sticker price of $14,000, with 90% variable costs and 5% fixed costs. Each plant requires $20,000,000 per year in replacement capital expenditures for equipment, tools and dies.
The transportation cost differences used here are well within the statistical range of such differences demonstrated in study after study. There is in fact no contrary data that the poster might rely on to suggest otherwise.
Simply because of what appears at first glance to be a small difference in the cost of transportation to market, Toyota earns $40 million profit from the plant, $20 million after paying for required capital expenditures. The GM plant loses $8 million, and if it wants to keep current on its capital equipment, will lose a total of $28 million on the plant.
Toyota can spend 50% of its remaining net on new capital expenditures, and still enjoy $10 million in pre-tax earnings.
If it is to remain competitive, and match the new capital expenditures, the GM plant will have to lose a total of $38 million on that plant.
If each Company has a market share of 15.6 million units, and GM as the established maker is stuck with legacy plants paying the slightly higher cost of transportation at each one, and everything else is equal, GM will lose a total of $1.5 Billion, while Toyota will earn $390 million, pre-tax, after having paid for all of its capital expenditures out of earnings.
More conventionally put, without CapEx, Toyota earns $1.6 Billion in profits, while GM loses $312 Million, all because of small but statistically recognized differences in rail transportation rates between monopoly and duopoly circumstances.
The other poster does not need to rely on "hogwash" to see the profound difference that a relatively small difference in transportation rates makes to a large scale manufacturer such as an auto assembly plant.
Toyota understands that difference.
Will GM ultimately shut down the plants that do not have competitive transportation costs? One way or another, yes. It is absolutely inevitable. Going broke may be the "way" thanks to railroad pricing policy.
Toyota will show its appreciation by continuing to require at least two railroads for service at each manufacturing location.
Trucking is Agile, rail is not.
I can get some words from my boss, be moving within 10 minutes and gone.
Railroads are over muscled and need crewing, generating orders, finding a engine etc.....
Railroads and Shipping haul best massive loads large distances.
There is one constant with trucking. The reciever has no trouble waiting a year for a widget to arrive from China across the wide pacific ocean but once on USA soil, they want it yesterday.
Dakguy201 wrote:I started thinking about the captive shipper/receiver issue and the auto industry. A number of new auto plants have been built in recent years, mostly in the southern states. Are these plants located so that access by more than one railroad is possible, either through physical connection or track rights? Alternately, does the manufacturer reach some kind of a long term understanding with a single railroad before finalizing a location? When I started thinking about this I was thinking about the auto industry, but the same questions would apply to any industry that is capable of generating a large number of freight movements.
I started thinking about the captive shipper/receiver issue and the auto industry. A number of new auto plants have been built in recent years, mostly in the southern states. Are these plants located so that access by more than one railroad is possible, either through physical connection or track rights? Alternately, does the manufacturer reach some kind of a long term understanding with a single railroad before finalizing a location?
When I started thinking about this I was thinking about the auto industry, but the same questions would apply to any industry that is capable of generating a large number of freight movements.
My Dad used to work in the Automotive division at the UP. I know that Chrysler had an exclusive contract with the UP and Ford had an exclusive contract with BNSF. I forget about GM. I would assume that the automakers are satisfied with whatever rates they get in an exclusive contract if they choose to sign it.
DrummingTrainfan wrote: I would assume that the automakers are satisfied with whatever rates they get in an exclusive contract if they choose to sign it.
And if they didn't choose to sign it, because it put them at a disadvantage, their alternative was .... what?
MichaelSol wrote: DrummingTrainfan wrote: I would assume that the automakers are satisfied with whatever rates they get in an exclusive contract if they choose to sign it. And if they didn't choose to sign it, because it put them at a disadvantage, their alternative was .... what?
Ever heard of trucks? Remember that trucks hauled the lion's share of automobile traffic until railroads won back the traffic with innovative equipment and competitive rates. Also keep in mind that, when you're talking about a high value commodity such as automobiles, the transportation expense is a very small part of the final price, so a transport company would have to set a really high price to put its automobile shippers at a "competitive disadvantage". But this is all academic. If a railroad finds the traffic attractive, it is not going to demand rates that would put its shippers at a competitive disadvantage compared to shippers on other railroads.
The reality is that railroads don't have very much market power. Just take a look at what's happened with railroad rates since the Staggers Act. If railroads had as much market power as rereg proponents claim, rail rates would have gone through the stratosphere after rate regulation was relaxed in the 1980 Staggers Act. What actually happened? The rates went down. The vast majority of railroad rates today are far below the 1980's rate levels when adjusted for inflation. In fact, many rail rates today are below the absolute dollar value of the pre-Staggers rates (in other words, without any adjustment for inflation). How many rail shippers can say the same about their prices? Certainly not automobile manufacturers.
MichaelSol wrote: Falcon48 wrote: Of course, all else being equal, most shippers would prefer to be served by multiple railroads (as in your Toyota example). It gives the shipper some more negotiating leverage and gives the shipper some protection against a service failure on a single railroad (assuming, lof course, that the alternate railroad has the capacity to step in, which is not always the case). But the notion that a railroad that solely serves a particular shipper is some kind of a monopolist that can set rates up in the stratosphere is nothing more than political rhetoric.Well, wheat rates may be a bit esoteric, and given the documented 350% R/VC ratios, perhaps a little too stratospheric, notwithstanding they are real. Shippers don't pay "revenue-variable cost ratios". They pay rates. Compare existing rate levels Let's climb down out of the stratosphere, and look, as the gentleman suggests, at a circumstance where "all else is equal."We can take a shipping cost that represents a 150% R/VC for a given auto plant, and the shipping cost for another auto plant, same distance, all else being equal, of 180%. Not even "potentially" captive, but, not sufficiently competitive to get the better rate.Nothing stratospheric about the 180% rate. Here's what it means between a hypothetical Toyota plant that gets the 150% rate, say $600 per car, and a hypothetical GM plant served by one railroad that pays $720 per car. Each plant produces 400,000 units at a sticker price of $14,000, with 90% variable costs and 5% fixed costs. Each plant requires $20,000,000 per year in replacement capital expenditures for equipment, tools and dies. The transportation cost differences used here are well within the statistical range of such differences demonstrated in study after study. There is in fact no contrary data that the poster might rely on to suggest otherwise.Simply because of what appears at first glance to be a small difference in the cost of transportation to market, Toyota earns $40 million profit from the plant, $20 million after paying for required capital expenditures. The GM plant loses $8 million, and if it wants to keep current on its capital equipment, will lose a total of $28 million on the plant.Toyota can spend 50% of its remaining net on new capital expenditures, and still enjoy $10 million in pre-tax earnings.If it is to remain competitive, and match the new capital expenditures, the GM plant will have to lose a total of $38 million on that plant.If each Company has a market share of 15.6 million units, and GM as the established maker is stuck with legacy plants paying the slightly higher cost of transportation at each one, and everything else is equal, GM will lose a total of $1.5 Billion, while Toyota will earn $390 million, pre-tax, after having paid for all of its capital expenditures out of earnings. More conventionally put, without CapEx, Toyota earns $1.6 Billion in profits, while GM loses $312 Million, all because of small but statistically recognized differences in rail transportation rates between monopoly and duopoly circumstances.The other poster does not need to rely on "hogwash" to see the profound difference that a relatively small difference in transportation rates makes to a large scale manufacturer such as an auto assembly plant.Toyota understands that difference.Will GM ultimately shut down the plants that do not have competitive transportation costs? One way or another, yes. It is absolutely inevitable. Going broke may be the "way" thanks to railroad pricing policy.Toyota will show its appreciation by continuing to require at least two railroads for service at each manufacturing location.
Shippers don't pay "revenue-variable cost ratios". They pay rates. Compare existing rate levels
With respect to the Toyota example, what I was responding to was the notion that railroads are establishing rates to solely served automotive shippers that are pricing them out of their markets compared to automotive shippers with multiple rail access. That is simply hogwash - no railroad would do such a thing unless it wanted to exit the market. And it would be really hard to do in any case, since transport costs are a relatively small part of the costs of a finished automobile. A shipper like Toyota believes, rightly or wrongly, that it can get some rate savings by having facilities served by multiple railroads and, if it can some savings by making this a condition of its siting decisions, why shouldn't it try? But it certainly isn't an issue of keeping their plants competitive. Finally, the reasons why older auto plants in the rust belt have been less competitive than newer auto plants established by foreign auto makers has nothing to do with rail prices, and everthing to do with the legacy cost structures of the older auto plants, including things like aging infrastructure, union contracts and pension obligations.
Falcon48 wrote: Shippers don't pay "revenue-variable cost ratios". They pay rates. When you are talking about grain rates, most railroads establish group rates that give all their shippers in a given area the same rate (whether solely served or served by multiple railroads). They typically don't establish higher rates for their solely served shippers vs multiple served shippers in a given area because such a rate strategy would simply cause grain to flow to shippers on other rail lines.
Shippers don't pay "revenue-variable cost ratios". They pay rates. When you are talking about grain rates, most railroads establish group rates that give all their shippers in a given area the same rate (whether solely served or served by multiple railroads). They typically don't establish higher rates for their solely served shippers vs multiple served shippers in a given area because such a rate strategy would simply cause grain to flow to shippers on other rail lines.
Well, this isn't useful -- then the shippers wouldn't be captive, would they? I am gathering you are equating single line service with captivity. That isn't it. Another rail line "in a given area" usually means the shipper isn't captive.
Captive shippers are statutorily determined by the R/VC ratios used. That is the point of using those ratios in the discussion, because of the high statistical correlation between the R/VC ratio and captivity.
With respect to the Toyota example, what I was responding to was the notion that railroads are establishing rates to solely served automotive shippers that are pricing them out of their markets compared to automotive shippers with multiple rail access. That is simply hogwash - no railroad would do such a thing unless it wanted to exit the market. And it would be really hard to do in any case, since transport costs are a relatively small part of the costs of a finished automobile. A shipper like Toyota believes, rightly or wrongly, that it can get some rate savings by having facilities served by multiple railroads and, if it can some savings by making this a condition of its siting decisions, why shouldn't it try? But it certainly isn't an issue of keeping their plants competitive.
The big "negative" for Toyota's site procurement policy is that it is hugely self-restricting because of the two-railroad requirement. That kind of restriction imposes its own costs on the process. I think this is a non-sequitur -- if it wasn't an "issue", they wouldn't do it.
But they do.
The point of the example, which uses a statistically known cost spread between one railroad and two railroad service, is to show that the small spread -- less than 1% of the cost of manufacture -- results in a $2 Billion profit spread between Toyota which has the two railroad service, and GM with one railroad service, or, in the case of the individual plant, the difference between profit and loss.
It may be hogwash to you that railroads "would" do such a thing, but they do. Differential pricing is the corner-stone of deregulation. That doesn't mean that there are no competitive impacts to captive shippers as a result. And yes, they will go broke or move. How you can admit that it gives Toyota "more negotiating leverage" and then deny that it has any significance is interesting as to how people view things, but the viewpoint simply not true. The example offered is designed to show that using your initial criteria of "everything else being equal", a very small advantage in transportation cost has significant consequences.
And it does.
Falcon48 wrote: MichaelSol wrote: DrummingTrainfan wrote: I would assume that the automakers are satisfied with whatever rates they get in an exclusive contract if they choose to sign it. And if they didn't choose to sign it, because it put them at a disadvantage, their alternative was .... what?Ever heard of trucks?
Ever heard of trucks?
As you acknowledge, railroad rates are cheaper. So, the GM plant gains what advantage by going to trucks?
None.
It will hemorrhage even more. That's an alternative? That will certaintly teach the railroad a lesson! You've used the word "hogwash" pretty freely ...
The point is, the apparently small competitive advantage -- nothing "stratospheric" about it -- gained by the two rail service plant is corrosive to the single rail service plant, captive shipper. It can't be fixed except by relocation or going out business.
And, yes, people lose their jobs, families lose their homes, communities lose their job base and die, and the railroad loses a shipper ....
All for thirty pieces of silver.
MichaelSol wrote: Falcon48 wrote: MichaelSol wrote: DrummingTrainfan wrote: I would assume that the automakers are satisfied with whatever rates they get in an exclusive contract if they choose to sign it. And if they didn't choose to sign it, because it put them at a disadvantage, their alternative was .... what?Ever heard of trucks? As you acknowledge, railroad rates are cheaper. So, the GM plant gains what advantage by going to trucks? None. It will hemorrhage even more. That's an alternative? That will certaintly teach the railroad a lesson! You've used the word "hogwash" pretty freely ...The point is, the apparently small competitive advantage -- nothing "stratospheric" about it -- gained by the two rail service plant is corrosive to the single rail service plant, captive shipper. It can't be fixed except by relocation or going out business.And, yes, people lose their jobs, families lose their homes, communities lose their job base and die, and the railroad loses a shipper ....All for thirty pieces of silver.
Only in the wacky world of rereg economics would the fact that rail rates are cheaper than truck rates be considered to be part of a "problem" that requires govenrment intervention to correct.
Of course GM finds shipping by rail cheaper than shipping by truck. That's why it ships by rail rather than by truck (even though rail shipment usually requires transloading of finished vehicles at least once and sometimes more). The question I was answering is the question raised in an earlier posting as to what options GM has if it doesn't like the rail rates it is being offered. The answer is that an automaker like GM has at least two options, It either (i) uses its very substantial leverage to get a lower rail rate (remember that GM ships to and from multiple locations across the U.S. and it can threaten a railroad with loss of traffic in traffic lanes other than the one at issue) or (ii) it uses an alternative. Trucking is a perfectly practical alternative. Lots of finished vehicles are moved from assembly plants to market that way. It's simply a question of cost over longer distances. If the auto maker dissatisfied with a rail rate can ship cheaper by trucks (and, again, it doesn't have to be dollar for dollar cheaper, because direct trucking will probably eliminate the need for transloading), then it will use trucks. If the rail is still the cheaper alternative (even if the auto maker doesn't like the rail rate), then it will ship by rail. Either way, there's no "problem" warranting government intervention.
I may not like the price Walmart charges for widgets, even though its prices are lower than the Sears across the street, but I'll still buy my widgets at Walmart rather than Sears because the Walmart price is cheaper. The fact that I find it in my interest to continue buying my widgets at Walmart doesn't mean that the government should regulate Walmart's prices.
Falcon48 wrote:I may not like the price Walmart charges for widgets, even though its prices are lower than the Sears across the street, but I'll still buy my widgets at Walmart rather than Sears because the Walmart price is cheaper. The fact that I find it in my interest to continue buying my widgets at Walmart doesn't mean that the government should regulate Walmart's prices
Whew. In a genuine "market," Sears is regulating WalMart's prices or probably more accurately, WalMart is regulating Sears by taking advantage of a supply chain that relies on cross-subsidized transportation as part of its price advantage.
And it does, even in your example.
That's what's missing for the captive shipper GM plant, and why the demonstration of a moderate price difference, that GM has no genuine "market" to appeal to, shows the ultimate difference between foreign plants locating in the US with a price advantage courtesy of captive pricing, while domestic companies go broke, plants close, loyal workers lose their jobs, families are destroyed, and towns devastated .
This is courtesy of a U.S. railroad captive pricing policy that, in fact, imposes costs on captive U.S. industry far higher than the example used, while cross-subsidizing foreign-owned plants as well as off-shore production.
Falcon48 wrote:Only in the wacky world of rereg economics would the fact that rail rates are cheaper than truck rates be considered to be part of a "problem" that requires govenrment intervention to correct.
Nothing wacky about it. The "free market" can function only if there is a "market". It doesn't matter in substance whether it is a Kommissar or a Manager of Pricing setting the captive rate -- the result is the same: distorted impacts on producers and consumers, distorted investment decision making, disincentives to investment, and the creation of geographical investment ghettoes.
The Sherman Anti-trust Act is nearly a Century old. Few question its fundamental wisdom. Most of the recent proposed legislation is aimed at simply applying Sherman Anti-trust Act principles to railroads in the same way that it applies to virtually all other business except regulated utilties.
And why would railroads object, not to re-regulation, but to simply operating under the law that governs all other competitive business in the United States?
And this is, indeed, where you phrase the argument backwards. The railroad industry currently enjoys regulatory protection from anti-trust actions. Most of the recent proposals are designed to de-regulate the industry even further, by removing that regulatory protection.
Surely you do not object to full deregulation, do you?
Put another way, Falcon48, it's an argument that the railways are too craven and stupid to know or do what's in their best interest so the government needs to do it for them.
For 75 years the public demanded that small and off-the-beaten-track shippers ought to be able to ship for the same price as large shippers in large places. To create that world, the public prohibited railways from reducing rates because that would disadvantage the small guys. Eventually the existing investment in railways was used up, and since there wasn't any profit in reinvestment, investors shunned railways and the industry started to go out of business. In effect the public was transferring wealth from consumers to a class of small business owners and decided it was the better off for it, probably because in that day many consumers were also small business owners, namely farmers, grocers, and the like. This was a lifestyle values decision to alter the rules of the marketplace, and we voted for it.
Then, after the industry had one foot in the grave and the public had to choose between itself making the reinvestment in plant, equipment, and employees, or altering the rules of the market so that railways could attract investors again, it threw the small shippers under the train, probably because the public was no longer mostly small business owners or living in rural areas and the interests of those classes no longer mattered to most of the public. This was also a lifestyle values decision to alter the rules of the marketplace, and we also voted for it.
Today, there's a continuing argument advanced in this forum that we can have our cake and eat it too, that there is a technical solution under which railways can serve small and rural customers and at the same cost for which it serves large and urban customers. That argument stands on its head the laws of physics and thermodynamics, among other things. I have collected for years and read every book I can find on railway rates, economics, traffic, regulation, and their relationship with the republic, and they also squash this argument under their collective weight, but who knows, maybe Mencken was right, history is bunk, those books all look in the rearview mirror, and next time it will all work out better.
There's no technical solution, but we can always resurrect the 19th century value that we need to have more farmers, more small businessmen, and more economic activity in rural areas, and fewer corporate employees, government employes, and less economic activity in urban areas. If that's what we want, then we can re-regulate railway, truck, inland waterway, pipeline, coastwise, and airline transportation, and start transferring wealth from people purchasing flat-panel TVs at Wal-Mart to farmers in North Dakota. I'm not the one to say that's right or wrong; we're a democracy and we can shape our world however we like. If it makes us feel happer to do it and we think America will be a better place, then let's do it. But let's be clear that decision to regulate railway rates, or not regulate them, is at its core driven by lifestyle values. There's no way to regulate railways for the benefit of small shippers or rural shippers and not generate a very expensive bill that everyone else is going to have to pay.
kevarc wrote:Falcon, while your example may work for autos, it sure does not work for coal fired utilities. Can you imagine the cost of shipping from the PRB to Central Louisiana? Utilities , when captive, pay a 33% premium per ton. I used to work for a utility and I saw the paperwork and was there when they talked to KCS that is on the otherside of the river from the plant. KCS would have gladly undercut the rate, but we had to do the buildout to their tracks, which would have included a bridge over a navigatable river. Even with this, we would have earned the money back in 5 years. (The other partners inthe plant would not go for it.) The reason for KCS not building the track was that after 5 years, the other RR, UP, would come back with a competitive rate and they could not recover the cost of the track. I wish I was at home, I have copies of studies that show that, including one done by the RR's themselves.
I have the studies too, though for different power plants, because I wrote some of them. You would be astonished, I think, at how few shippers today -- even ones building multibillion dollar facilities with half-century lifespans -- worry for more than one or two minutes about selecting a site with dual access for their plants, and I know this because I work with a lot of these shippers, and my friends work with the rest. They have bigger worries such as access to labor, permitting considerations (particularly environmental), tax considerations, water availability, political support, cost of land and development, and convenience to markets. Exactly one shipper out of roughly 100 building a new plant in the last year told me they wanted dual-line access, and that's only because one of my cohorts told them it was important. In the end they chose single-line anyway because the land cost was much cheaper and the site was much easier.
What do you suppose would happen if every utility magically woke up tomorrow morning and had dual service? Would the rates of utilities that previously had single-line service rates go down by 33%? No way. What would happen is the rates of the plants that previously had dual-access service would go up a lot and the rates of the plants that had single-line service would stay the same or go up too. The railways can't compete themselves out of business! The fact that rates are lower for dual-access plants doesn't mean they have cheaper cost of service -- in fact they have higher cost of service because the amount of traffic is spread over more fixed plant, overhead, and management. Their rates are lower because individuals at railways are competing on the margins. It's a benefit to the lucky dual-line plant but it's not a benefit in which all can share.
Add a third railway to the mix and rates would go up even more because one of the three would likely have a significantly inferior route and/or fixed plant to pay for and the other two would use his price as an umbrella under which to advance their own, or outcompete the third one which would starve and collapse. Add a fourth and we're looking like Trunk Line Territory in 1970, far too much infrastructure for the traffic to bear and everything crumbles.
Railways price in order to what the market will bear. The market won't bear very much as we can see by the profit margin of railways, which is not mouth-watering. (And for those people who think that railways could run significantly more efficiently and lower their costs significantly, I will cheerfully admit I am wrong after they personally make it happen.) Prices are set in order to optimize profits. Driving a shipper out of business, particularly a big one, is rarely a means of optimizing profits. And the argument that utilities are captive only goes so far, they can switch to natural gas or wheel the power from a utility with access to water-born or the cheap dual-line coal.
Railway Man wrote: Today, there's a continuing argument advanced in this forum that we can have our cake and eat it too, that there is a technical solution under which railways can serve small and rural customers and at the same cost for which it serves large and urban customers.
Today, there's a continuing argument advanced in this forum that we can have our cake and eat it too, that there is a technical solution under which railways can serve small and rural customers and at the same cost for which it serves large and urban customers.
That considerably misrepresents the "small and rural" GM plant vs the "large and urban" Toyota plants. I don't see anyone arguing for a return to the individualized service levels of the 19th Century and I do think the poster has misrepresented the points made on this thread in order to try and make his point.
Here's a "large and urban" Toyota plant in Georgetown, Kentucky:
Railway Man wrote: What do you suppose would happen if every utility magically woke up tomorrow morning and had dual service? Would the rates of utilities that previously had single-line service rates go down by 33%? No way. What would happen is the rates of the plants that previously had dual-access service would go up a lot and the rates of the plants that had single-line service would stay the same or go up too.
What do you suppose would happen if every utility magically woke up tomorrow morning and had dual service? Would the rates of utilities that previously had single-line service rates go down by 33%? No way. What would happen is the rates of the plants that previously had dual-access service would go up a lot and the rates of the plants that had single-line service would stay the same or go up too.
Hopefully this disabuses people on this forum who have previously argued that railroads are not cross-subsidizing whole classes of shippers. As the poster states, railroads clearly are using captive shippers to cross-subsidize shippers with competitive access.
Railway Man wrote: Exactly one shipper out of roughly 100 building a new plant in the last year told me they wanted dual-line access, and that's only because one of my cohorts told them it was important. In the end they chose single-line anyway because the land cost was much cheaper and the site was much easier.
Exactly one shipper out of roughly 100 building a new plant in the last year told me they wanted dual-line access, and that's only because one of my cohorts told them it was important. In the end they chose single-line anyway because the land cost was much cheaper and the site was much easier.
Railway Man wrote: Today, there's a continuing argument advanced in this forum that we can have our cake and eat it too, that there is a technical solution under which railways can serve small and rural customers and at the same cost for which it serves large and urban customers. That argument stands on its head the laws of physics and thermodynamics, among other things.
Apparently, shippers moving to rural areas for the compelling reasons advanced by the poster do not understand that they are standing the "laws of physics and thermodynamics" on their respective heads, either that, or they have discovered that the technical solution lies in the apparent fact that the cost of acquisition is cheaper than the rail rate penalty incurred. Nothing wrong with that, but, when a shipper has the leverage of Toyota, they demand the dual service notwithstanding the laws of physics and thermodynamics because they know, for a fact, that it gives them a competitive advantage.
Railway Man wrote: Put another way, Falcon48, it's an argument that the railways are too craven and stupid to know or do what's in their best interest so the government needs to do it for them.
The railroads are more than glad to receive government protection from anti-trust enforcement. There's nothing craven and stupid about seeking government protection and regulation.
Railway Man wrote: Railways price in order to what the market will bear. The market won't bear very much as we can see by the profit margin of railways, which is not mouth-watering.
Railways price in order to what the market will bear. The market won't bear very much as we can see by the profit margin of railways, which is not mouth-watering.
This is misleading, along the lines of railroads being the most "capital intensive" industry. I don't understand why these persistent factual misrepresentations are necessary on Trains forums. If the argument is as good as is claimed, it ought to be supportable by the truth, rather than distortions in an attempt to make the point. As the late Senator said, "you can have your own opinions, but you can't have your own facts".
Operating Margins
CN 37.4%
NS 27.03%
BN 22.51%
CSX 21.4%
UP 20.84%
Exxon 17.27%
GE 15.13%
IBM 14.49%
UPS 13.99%
Toyota 9.48%
FedEx 8.93%
BP 8.82%
HP 8.42%
GM 3.16%
MichaelSol wrote: Railway Man wrote: What do you suppose would happen if every utility magically woke up tomorrow morning and had dual service? Would the rates of utilities that previously had single-line service rates go down by 33%? No way. What would happen is the rates of the plants that previously had dual-access service would go up a lot and the rates of the plants that had single-line service would stay the same or go up too. Hopefully this disabuses people on this forum who have previously argued that railroads are not cross-subsidizing whole classes of shippers. As the poster states, railroads clearly are using captive shippers to cross-subsidize shippers with competitive access.
I stated no such thing, but you inferred it. Regardless, it doesn't disabuse me.
First, let me make clear that I am not agreeing there's a 33% average difference in rates between single-line and dual-line power plants. I used it only in response to the person who claimed it for one specific example.
Cross-subsidy asserts that a supplier cuts the price to one class of customer in order to gain market share from another supplier, and pays for the loss by raising the prices to another class of customers. In this case, the price raise to the single-line customers has not been enough to incentive most of the single-line power-plants to seek dual-line access, fuel-source substitution, or a different electricity delivery mechanism. And, if the dual-line plants went off-line tomorrow, I do not see that the prices to the single-line plants would fall, if anything they would go up because there was less traffic to shoulder the burden of operating and maintaining the railway's fixed plant and overhead. Since Test #1 of a cross-subsidy (class of consumer would be better off seeking an alternative) is not met, and Test #2 (class of consumer is paying prices in excess of its stand-alone costs) is not met, a cross-subsidy does not occur.
What market share is there to gain anyway? I would argue that if a railway really is charging significantly less to a dual-line plant than a single-line plant in an effort to gain market share from the other railway, since the other railway can't be driven out of business it's a losing proposition and their investors should discourage such behavior.
I went to the grocery store today and bought 10 12-packs of soda for the kids at a "buy 3, get 2 free price," while the little old lady behind me bought just one and paid full list price. Tomorrow when I'm flying on a $450 full-fare Delta ticket I'll probably be sitting next to another little old lady who paid $99 because she bought hers a month ago. I don't see those as cross-subsidies either, just volume discount and marginal pricing, respectively.
There is an old argument that all rail customers should pay on a formula basis that considers mileage, grades in route, shared costs of track use, volume, etc. Even assuming we could perform the Herculean task of writing such a formula that scrupulously captures all costs and proportions them exactly -- an army of ICC economists, clerks, consultants, and lawyers failed after many years -- the formula would discriminate against innovation, persistence, and insight.
MichaelSol wrote: Falcon48 wrote:I may not like the price Walmart charges for widgets, even though its prices are lower than the Sears across the street, but I'll still buy my widgets at Walmart rather than Sears because the Walmart price is cheaper. The fact that I find it in my interest to continue buying my widgets at Walmart doesn't mean that the government should regulate Walmart's prices Whew. In a genuine "market," Sears is regulating WalMart's prices or probably more accurately, WalMart is regulating Sears by taking advantage of a supply chain that relies on cross-subsidized transportation as part of its price advantage. And it does, even in your example. That's what's missing for the captive shipper GM plant, and why the demonstration of a moderate price difference, that GM has no genuine "market" to appeal to, shows the ultimate difference between foreign plants locating in the US with a price advantage courtesy of captive pricing, while domestic companies go broke, plants close, loyal workers lose their jobs, families are destroyed, and towns devastated . This is courtesy of a U.S. railroad captive pricing policy that, in fact, imposes costs on captive U.S. industry far higher than the example used, while cross-subsidizing foreign-owned plants as well as off-shore production.
The first problem with your assumption that "captive pricing" for automobile plants served by a single railroad in the Rust Belt is driving these plants out of business is that it is just that, an assumption. You can't make your assumption without making another one -- that the railroads serving these plants are economically irrational. They would have to be economically irrational if they have been establishing prices that are driving these plants out of business, thereby losing all of the profits that the plants are generating. These firms certainly have problems, but they result from their own internal cost structures and the inroads foreign manufacturers have made in U.S. markets due to consummer preferences, not rail rate levels or differentials. I haven't seen any U.S. auto maker claiming that its problems are all due to rail pricing.
Your prior postings have speculated that a "solely served" plants in the Rust Belt have a rate disadvantage to Sun Belt plants in the south because the Rust Belt rates supposedly produce higher revenue -variable cost ratios that the Sun Belt rates. Now, as a starter, I haven't seen any real figures showing this is so, and I question whether it is given the significant market leverage the big U.S. auto companies have.
But let's assume, for purposes of discussion, that the revenue-variable cost ratios for the Sun Belt traffic are really lower that the ratios for the "Rust Belt" traffic. Contrary to your example, this doesn't mean that the Sun Belt plant has any rate advantage. Revenue-variable cost ratios don't tell you anything about relative rate levels of two movements, particularly movements in widely separated parts of the country. You, of course, know what a "revenue-variable cost ratio" is, but for the benefit of others who may be reading this string and haven't fallen asleep yet, a "revenue/variable costs ratio" (R/VC ratio) is a measure of the railroad's markup above the railroad's "variable costs" for a move (that is, the costs that "vary" with volume of traffic, as distinguished from a railroad's "fixed" costs). The ratio is driven not only by the "revenue" side of the equation, but by the "cost" side. That means "high" rate can produce a "low" R/VC ratio. A "low" rate can produce a "high" R/VC ratio. Identical rates can produce different R/VC's for different movements.
The exception to this is where a railroad's costs for two movements are identical. In that case, a "higher" R/VC for one move vs another mathematically translates directly into a "higher" rate. But that works only where the costs are identical, which appears to be what you've been assuming in your example. While we are dealing with hypotheticals rather than real numbers, I think it is safe to say that the "variable costs" one railroad is incurring to serve a Sun Belt plant are going to be very different than the variable costs a different railroad is incurring to serve a Rust Belt plant. And you can't assume that the variable costs for the Sun Belt plant will be lower either. They could be higher, as the traffic may be moving greater distances to reach final markets. In this case, even though the R/VC's may be lower for the Sun Belt plant, the actual rail rate per vehicle could easily be higher than rate per vehicle being paid by the Rust Belt plant.
There's another important but unspoken assumption in your example. You've assumed that both the Rust Belt and the Sun Belt plant are purchasing the same amount of transportation services per vehicle. Again, we are dealing with hypotheticals, but that's a highly unlikely assumption. The Sun Belt plant may actually be buying MORE transportation for finished autos than the Rust Belt plant because (as noted above) the Sun Belt plant may be shipping longer distances to many of its major markets. Further, it's not only the finished cars. A company like Toyota probably has a higher import content than equivalent U.S. models. In other words, it is paying to transport many vehicle components across the ocean by ship and then across the U.S. by truck or rail. The U.S. Rust Belt plant will likely obtain a greater portion of its components from closer sources.
In other words, the transportation cost component of the cars produced by the Sun Belt plant could very easily be HIGHER than the transportation cost component of cars produced by the Rust Belt plant. If that's so, why would anyone build an auto plant in the Sun Belt? Simple - because transportation costs are only a small part of the plant's total cost structure, and the other cost and marketing advantages of building in the Sun Belt dwarf the tranportation cost component. We've seen a somewhat similar process happen before, when major U.S. manufacturers closed west coast assembly plants some time ago. That certainly increased their transportation costs to reach west coast markets, probably dramatically, but the other savings more than offset the transportation costs. All plant siting and closing decisions are a tradeoff between many cost and marketing considerations, some positive and some negative, and no single factor - be it rail rates or anything else - is going to control the decision.
Finally, you didn't like my Wal Mart example, but I don't follow your explanation of what's supposedly wrong with it. The issue is whether GM has a truck alternative to direct rail
MichaelSol wrote: Railway Man wrote: Railways price in order to what the market will bear. The market won't bear very much as we can see by the profit margin of railways, which is not mouth-watering. This is misleading, along the lines of railroads being the most "capital intensive" industry. I don't understand why these persistent factual misrepresentations are necessary on Trains forums. If the argument is as good as is claimed, it ought to be supportable by the truth, rather than distortions in an attempt to make the point. As the late Senator said, "you can have your own opinions, but you can't have your own facts".Operating MarginsCN 37.4%NS 27.03%BN 22.51%CSX 21.4%UP 20.84%Exxon 17.27%GE 15.13%IBM 14.49%Toyota 9.48%BP 8.82%HP 8.42%GM 3.16%
So you are suggesting that railways could charge a lot, lot less? Maybe, say, comparing CN to HP, about 1/4 as much?
Railway Man wrote: MichaelSol wrote: Railway Man wrote: Railways price in order to what the market will bear. The market won't bear very much as we can see by the profit margin of railways, which is not mouth-watering. This is misleading, along the lines of railroads being the most "capital intensive" industry. I don't understand why these persistent factual misrepresentations are necessary on Trains forums. If the argument is as good as is claimed, it ought to be supportable by the truth, rather than distortions in an attempt to make the point. As the late Senator said, "you can have your own opinions, but you can't have your own facts".Operating MarginsCN 37.4%NS 27.03%BN 22.51%CSX 21.4%UP 20.84%Exxon 17.27%GE 15.13%IBM 14.49%Toyota 9.48%BP 8.82%HP 8.42%GM 3.16% So you are suggesting that railways could charge a lot, lot less? Maybe, say, comparing CN to HP, about 1/4 as much?RWM
I am suggesting that there is a tendency in the industry to misrepresent the financial condition of railroads, and that the misrepresentations create conventional wisdoms about the rail industry that are utterly false. A false premise cannot help but lead to a false conclusion or analysis and so why these misrepresentations are made at all is a mystery to me. Perhaps my premise that I consider that everyone actively wants to seek a correct analysis is a false premise as well.
It is true that railroad rates in the area between 180% and 300% have fallen over the past several years, and that more and more rail traffic travels at rates below 180% R/VC. This is suggestive of competitive forces at work. If the cross-subsidization premise is false, rates in general would fall. If the cross-subsidization premise is true, however, then a class of rates would have to increase in order for railroads to maintain or increase their profitability.
As reported by the General Accountability Office, the percentage of rail traffic moving at rates below 180% has indeed increased. However, the percentage of traffic moving at rates above 300% R/VC has also increased during that time.
This is suggestive that captive shippers are indeed bearing the burden of supporting the rail industry's current profitability. Unless the captive shippers do not compete at all -- that is, they offer a unique product or service -- that rate differential cannot do anything but make them less competitive than others in their industry.
By way of example from the GM/Toyota plant example above, the two service plant gets a rate at $650 if the rate is 150% R/VC, where a captive shipper under otherwise identical circumstances at 300% pays $1,300. As a percentage of the manufacturing cost of the car in that example, Toyota would be paying 4.9% of the cost of manufacture in transportation, whereas GM would be paying 9.8% of the cost of manufacture in transportation, which is to say that the GM product would have to be priced higher than the identical (hypothetical) Toyota product.
The hypothetical does not address the probability that the GM plant is also paying higher prices for the materials received by rail for the manufacturing process, as a result of captivity.
MichaelSol wrote: Falcon48 wrote:Only in the wacky world of rereg economics would the fact that rail rates are cheaper than truck rates be considered to be part of a "problem" that requires govenrment intervention to correct.Nothing wacky about it. The "free market" can function only if there is a "market". It doesn't matter in substance whether it is a Kommissar or a Manager of Pricing setting the captive rate -- the result is the same: distorted impacts on producers and consumers, distorted investment decision making, disincentives to investment, and the creation of geographical investment ghettoes.The Sherman Anti-trust Act is nearly a Century old. Few question its fundamental wisdom. Most of the recent proposed legislation is aimed at simply applying Sherman Anti-trust Act principles to railroads in the same way that it applies to virtually all other business except regulated utilties. And why would railroads object, not to re-regulation, but to simply operating under the law that governs all other competitive business in the United States?And this is, indeed, where you phrase the argument backwards. The railroad industry currently enjoys regulatory protection from anti-trust actions. Most of the recent proposals are designed to de-regulate the industry even further, by removing that regulatory protection.Surely you do not object to full deregulation, do you?
I think that, if the government offered the railroads "full deregulation" in return for "full application" of the antitrust laws, the railroads would take the deal in a heartbeat. The problem with the proposals on the table is that they keep the whole regulatory system intact (and, under the rerg proposals, would vastly expand it) while imposing an antitrust scheme on top of it.
You say that "Most of the recent proposed legislation is aimed at simply applying Sherman Anti-trust Act principles to railroads in the same way that it applies to virtually all other business except regulated utilties." Maybe you can get away with a statement like this with people who don't follow Congressional proposals, but not with me. There is, in fact, a legislative proposal directed at railroad antitrust "immunities", but "most of the recent proposed legislation" is aimed at making regulatory changes in the regulatory laws applicable to railroads, by creating new regulatory standards, regulatory entitlements and regulatory remedies applicable only to railroads. One can argue about whether proposals like this are warranted or not, but they are certainly not "aimed at simply applying Sherman Anti-trust Act principles to railroads the same way that it applies to virtually all other business." The are aimed at creating a vast and pervasive new regulatory scheme applicable only to railroads.
Finally, from the standpoint of rail customers, the existing "immunities" the railroads have from antitrust laws aren't that significant from the standpoint of rail customers. There was a time (before the Staggers Act) when railroads were permitted to "collectively" make rates, which was done through regional "rate bureaus", but those organizations vanished long ago. Ironically, the primary beneficiaries of "railroad" immunities today aren't railroads but utilities and communications companies, which have used some of these principles to their advantage in their own industries. Interestingly, the legislation under discussion (which is supported by utility interests) would apply only to railroads and not the utility and communications companies. That's what is known as a "double standard".
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