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%
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%
Toyota 9.48%
BP 8.82%
HP 8.42%
GM 3.16%
Please don't complain about people making factual misstatements. Recall that it was you who recently made the completely false claim in an earlier posting today that most of the recent proposed legislation was aimed at appliying the Sherman anti-trust act to railroads the same as other industries. The old saying about people who live in glass houses comes to mind.
With respect to the numbers shown above, the rail numbers appear to be the mirror images of the named railroads' operating ratios, although I can't be sure of that. If so, the numbers do not represent railroad "profit margins" as they do not include all of the costs incurred by a railroad in generating its revenues. I don't know listing whether the numbers shown for the non-railroad companies are developed in a manner comparable to the rail numbers, but I wouldn't assume that they are.
Falcon48 wrote:Please don't complain about people making factual misstatements. Recall that it was you who recently made the completely false claim in an earlier posting today that most of the recent proposed legislation was aimed at appliying the Sherman anti-trust act to railroads the same as other industries. The old saying about people who live in glass houses comes to mind.
Well, since "proposed legislation" can include just about any nitwit idea to satisfy any given constituent somewhere just to make them happy, if I said "serious legislative proposals" that would accurately describe the discussions within the major shipper organizations about the preferred alternative if -- if -- the Staggers Act cannot be enforced efficiently within the context of its current meaning and intent.
Feel better?
Falcon48 wrote: With respect to the numbers shown above, the rail numbers appear to be the mirror images of the named railroads' operating ratios, although I can't be sure of that. If so, the numbers do not represent railroad "profit margins" as they do not include all of the costs incurred by a railroad in generating its revenues. I don't know listing whether the numbers shown for the non-railroad companies are developed in a manner comparable to the rail numbers, but I wouldn't assume that they are.
The numbers are developed from company reporting on standardized 10K reports required by the SEC in all cases cited.
MichaelSol wrote: Falcon48 wrote:Please don't complain about people making factual misstatements. Recall that it was you who recently made the completely false claim in an earlier posting today that most of the recent proposed legislation was aimed at appliying the Sherman anti-trust act to railroads the same as other industries. The old saying about people who live in glass houses comes to mind.Well, since "proposed legislation" can include just about any nitwit idea to satisfy any given constituent somewhere just to make them happy, if I said "serious legislative proposals" that would accurately describe the discussions within the major shipper organizations about the preferred alternative if -- if -- the Staggers Act cannot be enforced efficiently within the context of its current meaning and intent.Feel better?
So, the Oberstar rereg bill isn't a "serious legislative proposal", but simply a "nitwit idea" to make a constituant happy? I don't think Chairiman Oberstar would agree. And "major shipper organizations" will only support this bill "if the Staggers Act cannot be enforced efficiently within the context of its current meaning and intent"? Who are you trying to kid?Anyone who's remotely familiar with the current rail legislative proposals knows very well that the rereg proponents main interest is in getting regulatory changes to the regulatory laws that apply to railroads, not in just getting antitrust laws applied to railroads the same as other industries. And you know it too. Don't complain about other people if you can't get your own facts straight.
Michael, I agree, I should have said "net profit margin" or "return on assets" or "return on equity." Chalk one up for you.
Try these numbers on. I know which ones I find mouth-watering and it ain't railways:
BNSF
Gross profit margin 36.2%
Net profit margin 11.9%
ROA 6.3%
ROE 17.4%
XOM (Exxon-Mobile)
Gross profit margin 22.8%
Net profit margin 10.4%
ROA 17.0%
ROE 33.3%
GE
Gross profit margin 43.2%
Net profit margin 13.2%
ROA 3.1%
ROE 19.8%
GOOG (Google)
Gross profit margin 60.1%
Net profit margin 26.9%
ROA 20.6%
ROE 22.7%
MSFT (Microsoft)
Gross profit margin 78.4%
Net profit margin 27.5%
ROA 22.7%
ROE 43.6%
Source is my on-line brokerage account as of tonight.
Now -- if I'd just bought Google before its PE ratio went into the 50s.
RWM
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"Oh, life is a glorious cycle of song, A medley of extemporanea; And love is a thing that can never go wrong; And I am Marie of Romania." -- Dorothy Parker, 1937
kevarc wrote:In the study we had done for our plant there was a $6 difference in price. LAst time I checked, 6/18 is 33%
I wasn't doubting you in the slightest.
Was the $12/ton price estimated from other peoples' rates or an actual through-rate quote from the carrier, all-in?
MichaelSol wrote: 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 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.
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.
1. I said "forum," you reduced that to "thread."
2. You're the one who picked out one shipper, Toyota-San Antonio. Toyota did make a big deal that it wanted two-line access, though I have no idea if I should take that at face value or as a negotiating position, and whether the motivation was because it wanted competition for its business, single-line access to more points, greater ability to pressure its competitors indirectly, or really didn't care and was merely using it to extract deeper concessions from individuals, government bodies, and organizations competing to land the plant. Any one of those would be valid reason if I were in their shoes. For all I know Toyota actually wanted to build the plant in a different state and was hoping to use the two-railroad aspect of the San Antonio site as a strawman to drive price and taxes down and government concessions up on the other site.
I have no idea if the 100 or so shippers I worked with in the last year, only one of which was seeking dual-line access, and three of which will generate considerably more railroad revenue than the San Antonio plant, are representative of all shippers, so I did not claim that. But it's certainly a bigger number than one shipper.
Falcon48 wrote: So, the Oberstar rereg bill isn't a "serious legislative proposal", but simply a "nitwit idea" to make a constituant happy? I don't think Chairiman Oberstar would agree. And "major shipper organizations" will only support this bill "if the Staggers Act cannot be enforced efficiently within the context of its current meaning and intent"? Who are you trying to kid?..... Don't complain about other people if you can't get your own facts straight.
So, the Oberstar rereg bill isn't a "serious legislative proposal", but simply a "nitwit idea" to make a constituant happy? I don't think Chairiman Oberstar would agree. And "major shipper organizations" will only support this bill "if the Staggers Act cannot be enforced efficiently within the context of its current meaning and intent"? Who are you trying to kid?..... Don't complain about other people if you can't get your own facts straight.
My "opinion" about various and sundry "proposals" that may or may not be out there, may or may not be serious, or may or may not have a snowballs chance in heck of being passed doesn't have much at all to do with demonstrable "facts" about shipper rates or rates of return for railroad companies or, for that matter, railroad capital investment.
My expressed opinion is that the antitrust exemption for the rail industry is a regulatory feature that the railroads enjoy, and that rate litigation under the Staggers Act would have considerably different economic outcomes if they could be prosecuted in conjuction with anti-trust penalties, applying anti-trust principles that govern most other businesses in the United States. Sophisticated captive shippers understand that, which is why most of the serious legislative proposals do, in fact, impose Sherman Anti-trust standards on rail industry practices, albeit in different fashions. I stand by my statement.
And if you don't like the "double standards" that you refer to above, then by all means, let the rail industry comply with the same business laws that other industries must obey.
Railway Man wrote:1. I said "forum," you reduced that to "thread."
I don't see anyone on this "forum" either that suggests a return to the individualized service levels offered by the rail industry in the 19th Century, but then again I don't read most of the threads, so if I missed it, point me to it.
Railway Man wrote: kevarc wrote:In the study we had done for our plant there was a $6 difference in price. LAst time I checked, 6/18 is 33%I wasn't doubting you in the slightest. Was the $12/ton price estimated from other peoples' rates or an actual through-rate quote from the carrier, all-in? RWM
18 was the quote by the current carrier, the 12 was a preliminary bid, fi we built the buildout.
The two bills representing "serious" proposals that I am acquainted with both speak to anti-trust protection, one directly, and one by removing existing regulatory barriers to providing competitive alternatives on the specific basis that such barriers represent specific violations of the Sherman Anti-trust Act and should be enjoined.
The first, the Railroad Antitrust Enforcement Act of 2007, S.772/H.R.1650, is, as I stated, a straightforward removal of the exemption of the rail industry from the provisions of the Sherman Anti-trust Act.
The second, the Railroad Competition and Service Improvement Act of 2007, S.953/H.R.2125, would require the STB to dismantle certain paper barriers to competitive alternatives.
Currently, a railroad offering direct service may refuse to quote a rate for traffic connecting to a competing railroad. This often results in captivity even for traffic ultimately carried on otherwise highly competitive corridors. Essentially, a company is permitted to dictate to the customer whom the customer can solicit to carry the customer's traffic. In nearly any other business context, this would be considered an act in "restraint of trade" and illegal. However, the STB "Bottleneck" decision of December, 1996 makes it legal. The Department of Justice has offered a formal opinion that the STB decision represents a violation of public policy and in effect authorizes a specific violation of Section 2 of the Sherman Anti-trust Act.
For similar reasons, the bill would abolish the industry "tie-in" agreements restricting connecting shortlines from moving freight to or from any railroad other than railroad company leasing the underlying premises to the shortline. Again, the Department of Justice has offered its opinion that such lease provisions violate public policy because they act in "restraint of trade" and represent a specific violation of Section 1 of the Sherman Anti-trust Act.
These are the current legislative proposals that I am aware of, and both approach the captive shipper problem by resort to anti-trust measures -- one by specifically repealing the anti-trust exemption and the other, a less drastic approach, by specifically applying anti-trust measures to certain specific practices -- which represents a "deregulation" in the specific context that it is the current regulatory structure that specifically protects and even encourages such anti-competitive practices.
Please describe the other pending legislation that you say you are aware of that approaches these shipper problems differently, and offer solutions, re-regulatory or otherwise, that are not based on general or specific application of Sherman Anti-trust Act principles.
I am unaware of any pending railroad deregulation legislation that does not, in fact, have a Sherman Anti-trust component, but as I stated, there are "nitwit" bills all over the place about everything under the sun and I don't waste my time reading them if I can help it. But, if you will point out the bills you are referring to, I would be curious to see what they say.
The Railroad Antitrust Enforcement Act of 2007 achieves Sherman Act application by a variety of insertions and deletions into the current Staggers Act, but is summed up by the following language in the proposed legislation: "(1) IN GENERAL- Nothing in this section exempts a transaction described in subsection (a) from the application of the Sherman Act (15 U.S.C. 1 et seq.), the Clayton Act (15 U.S.C. 12, 14 et seq.), the Federal Trade Commission Act (15 U.S.C. 41 et seq.), section 73 or 74 of the Wilson Tariff Act (15 U.S.C. 8-9), or the Act of June 19, 1936 (15 U.S.C. 13, 13a, 13b, 21a)."
Similarly, the Railroad Competition and Service Improvement Act of 2007, S.953/H.R.2125 contains the following specific language:
SEC. 103. ELIMINATION OF BARRIERS TO COMPETITION BETWEEN CLASS I, CLASS II, AND CLASS III RAIL CARRIERS.
Other than legislation giving the railroads a generous tax break that will increase the tax burden on the rest of us, bills dealing with railroad safety, retirement funds, and some minor housekeeping matters regarding solid waste disposal, I can see no other proposed bills that affect railroad regulation.
The only two that I can find both specifically refer to further deregulating railroads by imposing the statutory anti-trust principles that are controlling on most other free market business enterprises in the United States.
Falcon48, you made the contention that my comment regarding this legislation and the application of anti-trust principles was "completely false".
Given the strength of your statement, I could only, at the time, conclude you had read something that I had not. I see, however, after a review of all pending railroad legislation that had anything whatsoever to do with changing regulatory policy that all such legislation, it turns out was not, as you announced, "completely false" regarding anti-trust language, but exactly the opposite: they did exactly what I said they did: further deregulate the industry by removing regulatory protections and imposing the free market principles embodied by the anti-trust statutes.
This brings up my pet peeve on Trains forums; yet another poster who just makes stuff up -- absolutely fabricates a charge whole cloth, using inflammatory language, stating something that is exactly the opposite of the demonstrable truth for whatever personal purposes they have for misleading readers, and that forum policy continues to tolerate these people.
MichaelSol wrote: This brings up my pet peeve on Trains forums; yet another poster who just makes stuff up -- absolutely fabricates a charge whole cloth, using inflammatory language, stating something that is exactly the opposite of the demonstrable truth for whatever personal purposes they have for misleading readers, and that forum policy continues to tolerate these people.
However, the upside of such people is that when you reply to them (as above), you educate the rest of us regarding issues about which some of us (at least myself) are totally uninformed.
We (I) thank you for the most interesting posts!
zardoz wrote: MichaelSol wrote: This brings up my pet peeve on Trains forums; yet another poster who just makes stuff up -- absolutely fabricates a charge whole cloth, using inflammatory language, stating something that is exactly the opposite of the demonstrable truth for whatever personal purposes they have for misleading readers, and that forum policy continues to tolerate these people.However, the upside of such people is that when you reply to them (as above), you educate the rest of us regarding issues about which some of us (at least myself) are totally uninformed.We (I) thank you for the most interesting posts!
And I appreciate your comments. There are many informed, reasonable people here, but the quality of every forum depends, ultimately, on the quality of the participants. But that requires some effort on somebody's part. Kind of like the local bar -- ultimately the quality of the clientele depends on the owner. The "free market place of ideas" unfortunately means that good ideas have nothing to gain from the ideologues who have nothing honest to say, but feel a need to distort the argument to win ... something. And people leave.
Regarding Toyota, and the implication stated on this thread that somehow this was related to a specific instance in San Antonio, merely a bargaining chip in a single instance:
INDIANA TOYOTA PLANT TOUR, May 21-22, 2003, Evansville, Indiana
"The need for two railroad providers is a uniform need for all Toyota plants."
Note, from the following, how Toyota does business. Note also how that is different from the attitudes expressed by certain parts of the rail industry in the United States:
1. Pay attention to difference in cultures.
2. Emphasis on "Kaizen" - "Continuous improvement" and "Kanban" - "Just in time" method of parts procurement.
3. If you want to do business with Toyota, you are going to have to learn how to do business the Toyota way.
...
5. Local business will have opportunities with Toyota, but will have to work hard to compete.
A Japanese corporation, coming to America, having to remind Americans that competition is good. How about that? And people in the rail industry arguing that competition is bad for railroads because of fixed plant costs. Who couldn't make that argument in a competitive environment?
The ideas expressed on these threads often are bizarrely contradictory, and this thread is no exception: a defiant "by golly, railroads should be allowed to charge what the market will bear", runs headlong into the opposite declaration, often by the same individuals, that railroads would never do such a thing since it would drive many of their own customers out of business.
"As businesses dependent on the railroad industry, we are vitally interested in the financial health of America's railroads. We simply cannot operate successfully in this country without a financially viable railroad industry and a secure railroad infrastructure. Indeed, I believe that the ability of American manufacturers and producers to compete in today's global market is highly dependent on the rail freight industry. Today, unfortunately, the rail freight industry impedes -- rather than enables -- our nation's global competitiveness. American manufacturers and producers find it more and more difficult to remain competitive against manufacturers and producers outside the United States." June 20, 2006. Testimony Before Subcommittee on Surface Transportation and Merchant Marine of the Senate Committee on Commerce, Science, and Transportation, Hearing on Economics, Service, and Capacity in the Freight Railroad Industry June 20, 2006 Submitted By: John L. Mcintosh President Chlor-alkali Products, Olin Corporation, on Behalf of American Chemistry Council."In the case of UPM-Kymmene, the world's largest producer of publication (magazine and catalog) papers, we can ship raw materials from Georgia to our company's home country of Finland (4,900 miles) more cheaply ton for ton than we can transport these same materials from Georgia to our operations in northern Minnesota (1,100 miles).Why? Our Minnesota facility is served by only one railroad." ...
Note the following comments, in particular that they do not come from wild-eyed legislators and cynical opportunists, but are reported by mainstream industry publications."... our companies face global competition and the unreasonable rail costs we pay as captive rail customers weigh onerously on our bottom lines. (The impact of rail captivity is such a business liability that it is increasingly becoming a deciding factor in whether companies build or expand in certain locations.) "Rail Status Quo Unacceptable", Traffic World, March 31, 2003, p. 28.The "Cost of Captivity" published by Rail Price Advisor, First Quarter 2003, Volume 12, Number 1, published by Escalation Consultants, Inc., is an eye-opener, particularly since the divergence between captive and non-captive pricing has widened, rather than narrowed, since 2003.
CSX NSC BNSF UP
Transportation Equipment, Captive Rate $110.27 $103.73 $210.34 $157.41
Transportation Equipment, Non-Captive Rate $53.36 $47.61 $88.87 $69.91
Cost of Captivity $56.91 $56.12 $121.47 $87.50
The cost difference. interestingly, is greater than the 150% R/VC to 300% R/VC used in our hypothetical GM/Toyota plant example above, and, on the BN the Captive Rate would represent a 355% R/VC if the Non-captive Rate is indeed equivalent to the 150% used in the hypothetical.
It's not just the shippers ... it's the pervasive attitude that railroads are becoming known for." The black widow spider is notorious for killing its mate. Sadly, there is a bl
MichaelSol wrote:"In the case of UPM-Kymmene, the world's largest producer of publication (magazine and catalog) papers, we can ship raw materials from Georgia to our company's home country of Finland (4,900 miles) more cheaply ton for ton than we can transport these same materials from Georgia to our operations in northern Minnesota (1,100 miles).Why? Our Minnesota facility is served by only one railroad." ...
Thanks to Chris / CopCarSS for my avatar.
MichaelSol wrote:[As we have discussed, Ford and GM can't afford to rebuild all their captive facilities because they are retrenching, not expanding. Yet, railroad pricing policies punish the established domestic companies while providing yet another competitive advantage to foreign companies expanding to the United States.
I think that both Honda's new plant in Greensburg IN, and Kia's new plant in GA are served by just one railroad. Seems with your logic that they are just setting themselves up to fail. Seems to me that both are smarter than that.
An "expensive model collector"
n012944 wrote: MichaelSol wrote:[As we have discussed, Ford and GM can't afford to rebuild all their captive facilities because they are retrenching, not expanding. Yet, railroad pricing policies punish the established domestic companies while providing yet another competitive advantage to foreign companies expanding to the United States. I think that both Honda's new plant in Greensburg IN, and Kia's new plant in GA are served by just one railroad. Seems with your logic that they are just setting themselves up to fail. Seems to me that both are smarter than that.
And smarter than Toyota's logic too!
No wonder Honda beats Toyota on profitability ... uh, well, no, it doesn't.
But I am sure it has nothing to do with smarts ... and I will bet you agree.
Murphy Siding wrote: MichaelSol wrote:"In the case of UPM-Kymmene, the world's largest producer of publication (magazine and catalog) papers, we can ship raw materials from Georgia to our company's home country of Finland (4,900 miles) more cheaply ton for ton than we can transport these same materials from Georgia to our operations in northern Minnesota (1,100 miles).Why? Our Minnesota facility is served by only one railroad." ... Well, I have to doubt, that the reason the shipping is cheaper from Georgia to Finland, is because there are 2 competing railroads going to Finland.
Priceless!
MichaelSol wrote: Murphy Siding wrote: MichaelSol wrote:"In the case of UPM-Kymmene, the world's largest producer of publication (magazine and catalog) papers, we can ship raw materials from Georgia to our company's home country of Finland (4,900 miles) more cheaply ton for ton than we can transport these same materials from Georgia to our operations in northern Minnesota (1,100 miles).Why? Our Minnesota facility is served by only one railroad." ... Well, I have to doubt, that the reason the shipping is cheaper from Georgia to Finland, is because there are 2 competing railroads going to Finland.Priceless!
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
jeaton wrote: MichaelSol wrote: Murphy Siding wrote: MichaelSol wrote:"In the case of UPM-Kymmene, the world's largest producer of publication (magazine and catalog) papers, we can ship raw materials from Georgia to our company's home country of Finland (4,900 miles) more cheaply ton for ton than we can transport these same materials from Georgia to our operations in northern Minnesota (1,100 miles).Why? Our Minnesota facility is served by only one railroad." ... Well, I have to doubt, that the reason the shipping is cheaper from Georgia to Finland, is because there are 2 competing railroads going to Finland.Priceless!What is really priceless is the part where an anecdotal observation is used to support a claim of unfairness. While shopping today I noticed that the price of two apples was much less than one orange. What a great injustice to orange consumers.
And this is what is priceless about it. There can be innumerable statistics and studies, ultimately overwhelming to anyone who takes the trouble, but the same bunch will always ignore those, and pick out something -- indeed, the single anecdotal observation -- pointing to the Penn Central, the moon, the stars, or their profound botanical knowledge obtained through their recent, apparently transformational, visit to the local grocery store, from which the new knowledge of fruit prices that they triumphantly obtained seems to actually prove or disprove something about railroads, possibly and perhaps to them alone.
Notwithstanding the troubling implication that imports and exports are transported ultimately more cheaply than domestic production.
The Paper Company gentleman's anecdote was plainly a sarcasm -- known to some, a devious and clever few apparently, as a literary rather than an analytical device -- directed at a system which proclaims its natural efficiency and superiority, unwilling to deliver domestically on price at 1,000 miles what a combination internationally of railroads, water, and probably trucks, delivers at 5,000 miles, notwithstanding time cost, multiple transloads, icebergs, storms, languages, multiple equipment types, and the inevitable Muse.
The Paper Company gentleman's effort fails only because of the withering knowledge offered, that a sarcasm about fruit costs at the local grocery store trumps a sarcasm about transportation rates combining transport modes and multiple handlings across Georgia, the Atlantic Ocean, the English Channel, the North Sea, the Denmark Straits, and the Gulf of Finland, brightly and smugly offered by way of revelation that the cost of an apple is different than that of an orange. Evaluating the relative meaning of the distinction between respective sarcasms is a problem for English majors everywhere.
From that, readers are invited to gain wisdom about rail rates.
That must have been some grocery store visit!
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