Per Diem Boxcars

[KBCpresident]

I was reading somewhere about Per Diem Boxcars, and it brought up a few questions. First of all, what were they Why did they get sold to bigger railroads, and last, do shortlines still have their own boxcars?

[greyhounds]

KBCpresident

I was reading somewhere about Per Diem Boxcars, and it brought up a few questions. First of all, what were they Why did they get sold to bigger railroads, and last, do shortlines still have their own boxcars?

 

It's more often like the boxcars have their own shortlines.

I can answer part of this.  I will assume that "Per Diem Boxcars" means the cars that were acquired new in reponse to failed governement economic regulation of boxcar rates.  There was at least one brand new carbuilding plant (Cartersville, GA) constructed to build these waste of money cars.

Through the 1970's there was a chronic "Boxcar Shortage".  Class 1 railroads, such as the ICG, had thousands of boxcars stored unserviceable because it didn't pay to repair them and put them back in service.  At the same time shippers couldn't get all the boxcars they wanted.  This was the "shortage".

There is only one reason for a "shortage".  The price is too low.  Normally, absent government interferance, a "shortage" is dealt with by allowing the price to rise.  This rations the avaiable suppy by allocating it to the customers who need the cars most and incourages increased supply by making it more profitable to provide the cars.  (More stored boxcars would get repaired.)

But we couldn't have that.  Nope.

So one of the schemes the government came up with was to create an artificial incentive for railroads to buy new boxcars.  If a railroad increased its boxcar fleet it was allowed to charge other railroads (not the customer) more for their daily use.  (That's Per Diem).  As an example, if the Crab Orchard and Egyptian acquired a fleet of 500 boxcars (up from zero) , and got them loaded on the ICG, it could charge the ICG for their use at an "Incentive Per Piem" rate that more than paid the CO&G's cost of ownership.  So new boxcars got pumped into the system while old boxcars sat idle. 

Bound to fail.  The ICG couldn't pass on the extra cost because of regulation and was driven further into the ground.  When the economy went into a decline there were no loads for the CO&E cars and they went back to home rails earning nothing.  Tank City.

Today, boxcar rates are unregulated and we haven't had a national "Boxcar Shortage" in decades.  Amazing, isn't it.  Railway car supply is complicated by the fact that the asset lasts half a human lifetime and no one can forecast the need for the asset that far out.  So third parties enter the picture.  A shipper may need cars over a five year period.  He can lease for that time.  Then the leasing company will get the cars back and find another user.  The leasing company assumes the risk of long term ownership, but it can find many different and diverse uses for the equipment.

Leasing companies are sometimes affiliated with short line railraods.  The reporting marks on the car can be those of the short line if it makes economic sense for the car to be in the Per Diem system.  (It's hourly now, not daily).  Or the reporting marks can be changed to exempt the car from Per Diem and make it a "Private Car" if that's more advantageous.  The leasing companies use short lines to market their equipment.

Like I said, the boxcars have the shortlines.

  

 

[BaltACD]

The railroad remedy to the box car shortage was to have their wholly owned Trailer Train Corporation create the free running Rail Box concept...reporting marks RBOX & FBOX among others.

[Northtowne]

I remember when I was young watching freights on the Katy I was taken by the wide variety of railroads rolling stock on an average freight train. This was in the 1950's and I was in my early teens. I remember my dad (who worked for the Katy) said that there was a per day rent paid for foreign cars and that the rate was the same between all the roads. I can't remember the daily rate but it seemed ridiculously low to me at the time, seems like it was $5. Anyknow what the universal per diem was in those days?

 Northtowne

[Deggesty]

As I recall, the per diem in the early fifties was a dollar a day for all general purpose cars--which would be absolutely ridiculous now. I have not kept up with the increases since, but I know that it began rising not long after, perhaps in the late fifties.

[CShaveRR]

The book where I can remember seeing such a figure was my Railroading Merit Badge guidebook from Boy Scouts (just a little later than the times you describe).  But can I find it in my dungeon now?  Nooooo.

Anyway, $5 might even have been on the high side (I thought it was something a little under $3, like $2.78 or something).  It was around 1965 when the per diem rate was changed to reflect the value of the individual cars in question--I believe there were nine categories, of which a couple had per diem rates even lower than the constant rate charged before.  They had fairly thick handbooks published quarterly that would give the classifications for cars in the rates above category 3.  This ended in about 1974 or so, when the rate structure became even more complicated, probably factoring in the age and depreciated value of the cars.  I also believe that a mileage component is in there now.

Changing the rate from daily to hourly just divided things by 24, and also had the effect of eliminating the midnight rush to get the cars off-line (I think I had an old IHB employee timetable that stated that "saving per diem is everybody's business").

As for the IPD box cars, I seem to remember that ICG got an awful lot of them when the bubble finally burst, in about 1981 or so.  The old paint schemes from that era (1974 or so until 1981) still survive, if you know where to look, but some of them are getting pretty ratty-looking.

[BaltACD]

Northtowne

I remember when I was young watching freights on the Katy I was taken by the wide variety of railroads rolling stock on an average freight train. This was in the 1950's and I was in my early teens. I remember my dad (who worked for the Katy) said that there was a per day rent paid for foreign cars and that the rate was the same between all the roads. I can't remember the daily rate but it seemed ridiculously low to me at the time, seems like it was $5. Anyknow what the universal per diem was in those days?

 Northtowne

Per Diem is based upon the carriers investment into the car type and the age of the car.  New expensive cars have a higher per diem rate than do old inexpensive car types. 40 year old coal hoppers have a very low per diem rate and specially equipped new high cube box cars would have a much higher per diem rate.  

In the early 70's the per diem rules were changed for the rates to be calculated on an hourly basis.  The old 'daily' system caused a 'rush' for each carrier to get it's interchange trains off line prior to Midnight, and thus created not only the opportunity for lying about the interchange time at outlying (and unmaned) points, in the urban areas of high road to road interchange activity it tended to create gridlock as Midnight approached.

In the days before computers, the carriers would have Car Accounting departments that employed an army of clerks whose job it was to account for all the interchange records and the resulting car hire accounts with all the connecting carriers.  Today, car accounting and the keeping of the various account balances is an almost automatic function of the carriers Car and Train Management computer systems.

The railroads do not pay per diem on Private Owner cars, instead they pay a specified milage rate (which is also based on initial investment into the car type and the age of the cars) to the car owner.

[SFbrkmn]

In May, 1987 the now defunct ICC issued a service order for rrs to begin pooling boxcars nationwide. I was employed by Cargill Flour Milling at the time. The mill loaded export flour on Santa Fe (in SF cars) and UP (in UP cars). At the time the order came out, SF cars were being used. Almost overnight, cars from just about any rr from just about anywhere were showing up for a load. The same said when the loads changed over to UP. On one occassion, a load of lumber came into town on UP to be unloaded. That car was then sent to the SF transfer to be spotted at the mill for a flour load heading to TX.Instead of the car returning to the Pacific northwest empty, it was diverted for another load--thus reducing a shipment of an empty.