bobwilcox wrote: In addition, in the early 80s the railroads lost their ability to fix rates much as OPEC sets the price of oil. In the early 1980s the Fed started making Rate Bureaus so burdensome to administer they went away. The Rate Bureaus operated much like OPEC but for railroads. If you were dealing with commodities that moved by rail, barge and/or truck the Bureaus had gotten to be pretty silly by 1960. The truckers and barge lines weren’t invited to the party. It would be like trying to run OPEC without letting Iran and Nigeria participate.However, on commodities where railroads had a large market share the Bureaus were able to keep rates high. As an example, plastic resins moved almost exclusively by rail out of the Texas Louisiana Gulf Coast. It was perfectly legal for the railroads serving Texas and Louisiana to set down and agree on rates. The conventional wisdom was that the ICC would protect the shippers. Also, since rates had to be public, everyone knew if say the Santa Fe cut rates from Houston the MP and SP would react immediately with cuts of their own to protect market share. That was obviously a zero sum game. When contract rates came along this changed because business could be tied up for one or two years in return for a price reduction. In the case of plastics, starting this ball rolling down the hill didn’t sense for the SP or MP since they had the business. That was not the case for the Santa Fe or the Katy. It was an expensive process to relearn the pricing lessons of the 1890s but huge price drops while car storage capacity was disappearing brought home the message. It only took about 25 years to let the dust settle.
In addition, in the early 80s the railroads lost their ability to fix rates much as OPEC sets the price of oil.
In the early 1980s the Fed started making Rate Bureaus so burdensome to administer they went away. The Rate Bureaus operated much like OPEC but for railroads. If you were dealing with commodities that moved by rail, barge and/or truck the Bureaus had gotten to be pretty silly by 1960. The truckers and barge lines weren’t invited to the party. It would be like trying to run OPEC without letting Iran and Nigeria participate.
However, on commodities where railroads had a large market share the Bureaus were able to keep rates high. As an example, plastic resins moved almost exclusively by rail out of the Texas Louisiana Gulf Coast. It was perfectly legal for the railroads serving Texas and Louisiana to set down and agree on rates. The conventional wisdom was that the ICC would protect the shippers. Also, since rates had to be public, everyone knew if say the Santa Fe cut rates from Houston the MP and SP would react immediately with cuts of their own to protect market share. That was obviously a zero sum game.
When contract rates came along this changed because business could be tied up for one or two years in return for a price reduction. In the case of plastics, starting this ball rolling down the hill didn’t sense for the SP or MP since they had the business. That was not the case for the Santa Fe or the Katy. It was an expensive process to relearn the pricing lessons of the 1890s but huge price drops while car storage capacity was disappearing brought home the message. It only took about 25 years to let the dust settle.
Am I understanding this correctly, that before Staggers, railroad could set a rate collectively in a region, as long as they put the rates out in the open for all to see? Liek gas stations do with gas prices? (weird analogy, I know). After Staggers, they were allowed to make confidential, rates over a time period? Could they not set rates over a 1 or 2 year contract before?
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding wrote: Why would all the railroads be so in favor for it otherwise?
Well, who said they weren't in favor it?
Murphy Siding wrote:But yet, they were able to do it after Staggers?
They could do it before Staggers. The PCE was the biggest abandonment of mainline in American history -- had nothing to do with Staggers. This isn't really a question about the Staggers Act, it has to do with specific powers granted by Congress to the USRA to manage the rationalization of Conrail, specific powers of Federal Courts to impose "cram-down" provisions on mortgage holders, and the rights of mortgage holders to accept substitute collateral. A lot of things that just don't have anything to do with the Staggers Act.
MichaelSol wrote: Abandonments weren't a big relief to the bottom line. Nobody was spending anything on those lines. In a very great many cases that I have looked at, the lines were generating positive cash flows, as the very last ounce of profitability was wrung out of them prior to either abandonment, or rebuilding if something warranted that. So, as an odd artifact of that circumstance, most railroads suffered slightly in loss of revenue as the result of abandonments overall. So, what a few months difference in consideration of the petitions meant, I could not guess.
Abandonments weren't a big relief to the bottom line. Nobody was spending anything on those lines. In a very great many cases that I have looked at, the lines were generating positive cash flows, as the very last ounce of profitability was wrung out of them prior to either abandonment, or rebuilding if something warranted that. So, as an odd artifact of that circumstance, most railroads suffered slightly in loss of revenue as the result of abandonments overall. So, what a few months difference in consideration of the petitions meant, I could not guess.
MichaelSol wrote: Murphy Siding wrote: MichaelSol wrote: nanaimo73 wrote: Michael, you seem to be giving all the credit for line abandonments to 4R, and none to Staggers. I believe both acts should be credited, but Staggers more so. Line abandonments did not seem to pick up speed until 1980, other than the 3000 miles Conrail did not pick up in 1976. It was Staggers that forced the ICC to make all decisions on abandonments within 9 months.Well, we are talking 27 years since Staggers. I'm not sure that nine months, 12 months, or 15 months on abandonment decisions measures the success of Staggers as measured by 27 years. The 4R Act is what made abandonments feasible, because of the change in the standard of proof required to permit abandonment -- and that was huge compared to any time differential on petitions. In my limited experience on abandonments petitioned for in 1977 and 1978, the petitions were approved in less than 6 months. What I've read, is that before Staggers, the abandonments were mostly branchlines. Railroads were not being allowed to abandon any mainlines. See oltmannd's thread above, about Conrail lines. If that had been the caseeither CNW or Milwaukee Road would have pulled up a line going to western S.D. It seems the CNW Cowboy line through Nebraska would have gone much sooner as well.Railroads could not abandon mainlines because mainlines were subject to General Mortgages with "Mainstem Covenant" clauses. This is a whole different conversation.
Murphy Siding wrote: MichaelSol wrote: nanaimo73 wrote: Michael, you seem to be giving all the credit for line abandonments to 4R, and none to Staggers. I believe both acts should be credited, but Staggers more so. Line abandonments did not seem to pick up speed until 1980, other than the 3000 miles Conrail did not pick up in 1976. It was Staggers that forced the ICC to make all decisions on abandonments within 9 months.Well, we are talking 27 years since Staggers. I'm not sure that nine months, 12 months, or 15 months on abandonment decisions measures the success of Staggers as measured by 27 years. The 4R Act is what made abandonments feasible, because of the change in the standard of proof required to permit abandonment -- and that was huge compared to any time differential on petitions. In my limited experience on abandonments petitioned for in 1977 and 1978, the petitions were approved in less than 6 months. What I've read, is that before Staggers, the abandonments were mostly branchlines. Railroads were not being allowed to abandon any mainlines. See oltmannd's thread above, about Conrail lines. If that had been the caseeither CNW or Milwaukee Road would have pulled up a line going to western S.D. It seems the CNW Cowboy line through Nebraska would have gone much sooner as well.
MichaelSol wrote: nanaimo73 wrote: Michael, you seem to be giving all the credit for line abandonments to 4R, and none to Staggers. I believe both acts should be credited, but Staggers more so. Line abandonments did not seem to pick up speed until 1980, other than the 3000 miles Conrail did not pick up in 1976. It was Staggers that forced the ICC to make all decisions on abandonments within 9 months.Well, we are talking 27 years since Staggers. I'm not sure that nine months, 12 months, or 15 months on abandonment decisions measures the success of Staggers as measured by 27 years. The 4R Act is what made abandonments feasible, because of the change in the standard of proof required to permit abandonment -- and that was huge compared to any time differential on petitions. In my limited experience on abandonments petitioned for in 1977 and 1978, the petitions were approved in less than 6 months.
nanaimo73 wrote: Michael, you seem to be giving all the credit for line abandonments to 4R, and none to Staggers. I believe both acts should be credited, but Staggers more so. Line abandonments did not seem to pick up speed until 1980, other than the 3000 miles Conrail did not pick up in 1976. It was Staggers that forced the ICC to make all decisions on abandonments within 9 months.
Michael, you seem to be giving all the credit for line abandonments to 4R, and none to Staggers. I believe both acts should be credited, but Staggers more so. Line abandonments did not seem to pick up speed until 1980, other than the 3000 miles Conrail did not pick up in 1976. It was Staggers that forced the ICC to make all decisions on abandonments within 9 months.
Well, we are talking 27 years since Staggers. I'm not sure that nine months, 12 months, or 15 months on abandonment decisions measures the success of Staggers as measured by 27 years. The 4R Act is what made abandonments feasible, because of the change in the standard of proof required to permit abandonment -- and that was huge compared to any time differential on petitions. In my limited experience on abandonments petitioned for in 1977 and 1978, the petitions were approved in less than 6 months.
Railroads could not abandon mainlines because mainlines were subject to General Mortgages with "Mainstem Covenant" clauses. This is a whole different conversation.
oltmannd wrote: Conrail went from just barely breaking even in 1979 to solidly profitable by the mid-80s, in large measure because of Staggers.
Most U.S. companies did the same thing during exactly the same time period. They couldn't thank Staggers, since they weren't part of that legislation. It was the economic upturn.
Railroads in general lagged behind the rest of the economy in their recovery in the early to mid 1980s, to an extent greater than they had historically. If I was looking at cause and effect, I suppose one could argue they lagged behind because of Staggers. I happen to think it was more complicated than that, but my point is that showing a lagging industry as a proof of success of something is just a non-sequitur to me. If it had done as well, or better, then the premise becomes at least superficially plausible.
By 1985, I would have expected railroads to be doing well, or at least considerably better, without any changes at all, simply because of their historical link to general economic conditions. Conrail was no doubt a special case, a very special case, but the fact that it was even just barely breaking even in 1979, not a good year in general, and compared to Penn Central, perhaps is a testament more to the 4R Act, which was in large part specifically directed at rationalizing that particular system.
It would be an interesting test, to see how the crew changes affected the profitability of that company over that time frame.
MichaelSol wrote: joemcspadden wrote:One other thought--it would be interesting to compare and contrast the effects that deregulation in general have had on the railroad industry vs.the airline industry. It seems to me the results have been quite different.I compare the 1970s for the rail industry, with strong and stable rate support -- rates reached their all-time highs --under regulation, and imagine what that same decade would have meant, under the same circumstances, under rate deregulation -- no rate bottom, everyone desperately fighting for traffic, locked in combat with the deregulated truckers, expenses skyrocketing, the economy stumbling badly. I think that would have been the railroad version of the apocalypse. I suppose if someone wants to write a controversial thesis: "How Regulation Saved the Rail Industry".
joemcspadden wrote:One other thought--it would be interesting to compare and contrast the effects that deregulation in general have had on the railroad industry vs.the airline industry. It seems to me the results have been quite different.
I compare the 1970s for the rail industry, with strong and stable rate support -- rates reached their all-time highs --under regulation, and imagine what that same decade would have meant, under the same circumstances, under rate deregulation -- no rate bottom, everyone desperately fighting for traffic, locked in combat with the deregulated truckers, expenses skyrocketing, the economy stumbling badly. I think that would have been the railroad version of the apocalypse. I suppose if someone wants to write a controversial thesis: "How Regulation Saved the Rail Industry".
Well, from my myopic perch at Conrail, Staggers did "change everything". It gave the RR two very effective "power tools" where "hand tools" had previously existed. One, was the ability to shed excess lines and branches quickly. Conrail simply had too much track for it's traffic base. Second, it allowed rapid "demarketing" of traffic and lanes that weren't earning their keep. Conrail went from just barely breaking even in 1979 to solidly profitable by the mid-80s, in large measure because of Staggers.
Conrail's CEO, Jordan, was one of the chief pusher for the Staggers Act. It was probably the best thing he did while CEO.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
I cannot accept the comparison between railroads and airline.
Airlines overbook consistently and people flock by the dozen.
Railroads like to gather up 120 cars at a elevator; drive it 200 miles to the seaport. But hates to gather up 120 individual loads spread across a city or half a state to make a train.
Manpower... aircraft get pampered and supervised on so many levels. Train crews have been reduced in number from 6 or so down to remote switchers and possible one man trains because of money.
Finally, Ton per mile of freight or speeds have not improved much. I think it is because they are runnng full trains on a few big mainlines instead of lots of branch lines spaced about a day's horse ride apart.
Anyway, that is my recollection. If you wish, I can give you a link offline to my private copy of Milwaukee Road's light line abandonment study of 1977. Two lines that I am familiar with were identified in that study for abandonment in March ... and were abandoned by September. In that study, 3,600-odd miles of lines were identified for potential abandonment, with a detailed accounting for each line of "normalized maintenance" and "actual maintenance" as well as carloads, commodity types, and revenue, and you can see a corporate policy of simply keeping costs under income until a final abandonment could occur -- which ironically resulted ultimately in a loss of positive cash flow upon actual abandonment, but it avoided future investment needs. As I say however, that's my recollection, and I haven't read the study for some time.
Regarding the post Staggers rate cuts, can it be said that the railroads were able to give them because of the abandonments ? Isn't it likely that the cuts would have been considerably smaller if Staggers had not allowed faster abandonments ?
Murphy Siding wrote: MichaelSol wrote: I think that the economy and crew agreement changes had far more to do with it on both sides of the equation -- costs and revenue; and throw in the 4R Act on abandonments, contracts and greater tariff freedom, and railroads would be just about where they are today; I suppose an argument could be made that they might even be better off. It would make an interesting doctorate thesis for somebody.Correct me, if I'm wrong,but it appears that you are saying that the Staggers act, in essence, did not help the railroads? If so, that really is the first time I've ever seen anybody say that.
MichaelSol wrote: I think that the economy and crew agreement changes had far more to do with it on both sides of the equation -- costs and revenue; and throw in the 4R Act on abandonments, contracts and greater tariff freedom, and railroads would be just about where they are today; I suppose an argument could be made that they might even be better off. It would make an interesting doctorate thesis for somebody.
I think that the economy and crew agreement changes had far more to do with it on both sides of the equation -- costs and revenue; and throw in the 4R Act on abandonments, contracts and greater tariff freedom, and railroads would be just about where they are today; I suppose an argument could be made that they might even be better off. It would make an interesting doctorate thesis for somebody.
I think the Staggers Act gets the credit for a lot of things that happened, that were happening, or would have happened, anyway.
As has been pointed out, railroads are usually the first to suffer in a recession, and the last to come out one. The other side of that coin is that railroads usually do quite well when the economic times are good.
Since 1980, the economy has had extraordinary moments exceeding anything seen between 1960 and 1980. But, if it had not been for the abandonment rules changing under the 4R Act, and the crew law changes, the rate competition introduced by Staggers would have been a complete disaster because under similar deregulation, it unleashed the truckers, but it also set the railroads against each other in a ruthless fashion that had not existed under regulation.
And yet, the assumed result -- that it represented a great boom in rail tonnage -- is absolutely false. The rate of ton-mile growth after Staggers was marginally slower than before Staggers. Yet, when various advocates show positive growth curves for tonnage -- claiming that "this is what Staggers has done!" -- they are showing a curve that for the most part represents the growth rate that existed since the Korean War -- so how would Staggers have anything to do with it?
Indeed, during the 1990s, had the economy been like the 1970s, the rail industry would have been in very serious trouble, perhaps more so than during the 1970s, and we might have been looking at the consequence of deregulation in much the same fashion as we have looked at it in different industries and utility circumstances, as in, uh, not such a good idea. But, fortuitously, the economy has been roaring along -- something it just wasn't doing prior to deregulation, and I think that economic performance bears the lions share (!) of the resulting success -- that and captive shippers, of course.
The "good things" that happened -- abandonment, crew reductions and the thriving economy -- were not the results of Staggers. The "bad things" that happened -- plummeting revenues -- were a direct result of Staggers. The growth rate didn't change much -- either before or after Staggers; if anything it slowed slightly even as the economy roared.
People want to draw conclusions from Staggers itself for ideological reasons -- and I tend to agree in general with deregulation -- but that doesn't require attributing all success to Staggers, and in fact it may be entirely misleading to do so. But, as the second poster points out, many of the actual positive changes came about prior to Staggers as part of a long-tem process for which Staggers gets the penultimate credit, for some reason, and I do think those reasons are grounded in ideology, and not well grounded in the facts.
An interesting exercise would be to build an econometric model of the rail industry, circa 1960, add in the subsequent years of normal, expected productivity increases, change the crews requirements, add in abandonments, and see what the industry would look like as a theoretical model by 2000 without deregulation of the rates, given a linkage to the GDP and the RCAF.
Railway Man wrote: Oh, so the bars of the zoo cages needed a good rattle this afternoon?
Oh, so the bars of the zoo cages needed a good rattle this afternoon?
It would not be too difficult to get a Authority for one truck after I buy it with a trailer to haul something, after two trucks or more Im a fleet. Eh, there are easier ways to make a dollar.
I didnt think at the time the Staggers was passed that the people thought that there will be two big railroads out of the mess left over from many smaller railroads in the USA.
The common carrier chunk of the trucking industry was getting deregualted at the same time. This had a big impact on the railroads. The supply of truckload carriers went way up as enterpenaurs were unleashed by the Fed to hit the new Interstates looking for loads moving by rail.
The Carter ICC started giving almost anyone for could get cargo insurance wide open, all commodity, 48 state Operating Authorities. This was followed soon by deregulation. An Operating Authority was permission from the Federal government to provide comon carrier truck service on non agricultural commodities. Unprocessed farm products like lettuce or corn were not subject to ICC regulation. Prior to the Carter administration these operating authorities were only granted after navigating through a guantlet of oppostion from truck lines currently in the business. I remember in college two friends who wanted to start a general merchandise LTL truck line. Dr. Joe told them they would never get the authority from the ICC even if they identified a market. There only recourse was to buy grandfather authorities from someone who was willing to sell.
When full trucking deregulation came for the first time a trucker could move lettuce from California to Chicago and go up to Johnsons Wax in Wisconsin for a return load to an Espee served warehouse in the Bay Area. They set aside their JWAX box cars and The Milwaukee, SP and we lost a lot of loads!
Thanks to the Carter ICC my friends could go into the truck business. They gave their customers great service, prospered and sold out to a larger truck line after a decade in the business. They think deregulation of the railroads and truckers was really good idea.
Murphy Siding wrote: I know that the Staggers Act greatly changed American railroading, allowing it to become what it is today.
I know that the Staggers Act greatly changed American railroading, allowing it to become what it is today.
Recall that Staggers caused a free fall in rates; that was completely unexpected by the industry, and would have completely bankrupted the entire industry had it not been for the abandonments freedom allowed under 4R, and the crew staffing changes that were not Staggers related. The industry managed to push productivity improvements ahead of declining revenues, but those were mostly the result of non-Staggers influences.
And that isn't often mentioned. While industry revenues generally increased during the 1970s, they decreased under Staggers during the 1980s.
Sometmes you will hear that the fall in rates brought traffic back to the railroads, that railroads could get rid of unprofitable short-haul traffic and that this was responsible for improvements in the financial condition of the industry. The rate of ton-mile improvement for Class I railroads, however, was lower, 1980-2000, than for the period 1960-1980, notwithstanding a much more rapidly growing economy, and a much greater reliance on imports.
Looking to Staggers for a simple answer may not offer the correct answer, or at least, the complete answer. This one may be more complicated than meets the eye.
Railway Man wrote: A widely accepted watershed date within the railroad industry is the Transportation Act of 1958 and if one accepts that date as the beginning of the end of regulation, then the Staggers Act was the end of the end. Regulation of course did not go away -- almost every public activity in the U.S. is regulated to some extent --
A widely accepted watershed date within the railroad industry is the Transportation Act of 1958 and if one accepts that date as the beginning of the end of regulation, then the Staggers Act was the end of the end. Regulation of course did not go away -- almost every public activity in the U.S. is regulated to some extent --
And this is a much more accurate description and way of looking at it than is generally presented, i.e. "the Staggers Act changed everything".
Best way to think of Staggers is that it is the culmination of a long series of revisions in the special relationship between railways and the U.S. public and its elected representatives. A widely accepted watershed date within the railway industry is the Transportation Act of 1958 and if one accepts that date as the beginning of the end of regulation, then the Staggers Act was the end of the end. Regulation of course did not go away -- almost every public activity in the U.S. is regulated to some extent -- but for practical purposes the freedom of action of railways to merge, build, abandon, price, serve, and contract was made more or less "unspecial" compared to other lines of business in the U.S. There are still some peculiar differences in the relationship of railways and the government vs. other lines of business and their relationship with the government, which various advocates inside the industry and without find wrong-headed or injurious to some classes, but the point is that the special relationship disappeared.
I assume I'll be taken to task for an improper definition of "special", either to say it never was special or still is, and that doesn't bother me. I don't speak for anyone other than myself, I participate here because I like some of you people, and my day job in the railroad industry rewards me satisfactorily in Yankee train-ridin' dollars for my opinions, even if they're scoffed at here. For my efforts here I am probably only earning frequent-fryer miles in the 4th circle of Hell. Can you tell I've been reading Crandell? I'm offering pre-emptive disclaimers now!
You asked about the how's and why's. The how is that the government rewrote the law, it's that simple. The why's is that the government made the finding that under the existing law the railroad industry was not generating enough income to maintain services and that a definite harm to the public good and convenience was resulting, spurred by the cost to the government of exhuming from the grave the rail services that made up Conrail. The government's expectation was that if it did not rewrite the law that the plague afflicting the Northeast would spread -- several of the grangers were already looking near-dead or WERE dead. Two alternatives -- base-case is heavy government expenditure and quasi-government operation; alternative case was deregulate and enable the industry to abandon, consolidate, and price in accordance with demands for its services; the government chose the alternative case.
RWM
Staggers Act, passed deregulating the railroads about 1980.
One example would be railroad can make a contract and haul for a shipper at one price for a length of time. Subject to Laws in place to protect other shippers. Particularly if there are alternative ways to move this freight. These contracts generally are secret and not for the public to know all about specifics.
Ive just about exhausted my knowledge and thinking about researching it further. For some reason I keep thinking that the ICC was dead at that point with it's now obselete tarriff and rates. Eventually ICC was really dead. But it never got buried deep enough to be truly dead.
If anything Ive posted here is wrong, fix me and tell me the correct version.
I know that the Staggers Act greatly changed American railroading, allowing it to become what it is today. What I don't quite grasp is the how's and why's of it. Can someone explain please, in layman's terms, what it did to/for railroads in America?
Thanks
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