Location, location, location

[henry6]

MP173

"... why did certain mergers in the 90's, primarily UP/CNW, UP/SP and Conrail/NS/CSX have so much difficulty when compared to BN/ATSF and CN/IC/WC?

ed

 

These were investment mergers based on money rather than  thought out, planned operational mergers.  On paper it looked good.  On a map it looked good.  But the merger was decided by investment bankers for the sake of increasing the rates of return and gaining monopolisitic market share by finding ways to save money through layoffs and other cost cutting measures.  These were not the guys out on the road running the operations.  Following that, there was a smashing together of corporate cultures and and operating philsophies rather than acclimating and blending.  The arguement can be made, too, that these were not mergers as much as takeovers similar to Penn Central and Erie Lackawanna.  On the other hand, for instance, the formation of CSX as we know it was easier and smoother because the roads involved had already been "family" members or otherwise in the fold for longer periods of time before loosing thier own identities.

[Railway Man]

henry6

MP173

"... why did certain mergers in the 90's, primarily UP/CNW, UP/SP and Conrail/NS/CSX have so much difficulty when compared to BN/ATSF and CN/IC/WC?

ed

 

These were investment mergers based on money rather than  thought out, planned operational mergers.  On paper it looked good.  On a map it looked good.  But the merger was decided by investment bankers for the sake of increasing the rates of return and gaining monopolisitic market share by finding ways to save money through layoffs and other cost cutting measures.  These were not the guys out on the road running the operations.  Following that, there was a smashing together of corporate cultures and and operating philsophies rather than acclimating and blending.  The arguement can be made, too, that these were not mergers as much as takeovers similar to Penn Central and Erie Lackawanna.  On the other hand, for instance, the formation of CSX as we know it was easier and smoother because the roads involved had already been "family" members or otherwise in the fold for longer periods of time before loosing thier own identities.

 

The reason you advance for these mergers occurring comes as a surprise to me and all the people I know and still work with that were involved in creating and implementing them. 

RWM

[henry6]

But, RWM, at what level are you working?  Are you an investment banker or work on the financial end of deciding on the merger or are you the one who was handed the assignment to make it work?

[Railway Man]

MP173

You are correct Paul.  Sometimes you are too distracted by what you need to do that you cannot do what should do.

Not to hijack the thread...but why did certain mergers in the 90's, primarily UP/CNW, UP/SP and Conrail/NS/CSX have so much difficulty when compared to BN/ATSF and CN/IC/WC?

ed

 

What makes you think those "trouble-free mergers" were actually trouble-free!

Two things caused the trouble.  1st, in some cases the scale of the mergers never reached a threshold where the requirements of the integration surpassed the fragility of the all the subsystems to tolerate sudden rearrangement.  PRR-NYC was not one of these cases, it was a disaster! and not just red team/green team stuff either.   2nd, in some cases, the mergers were not integrations at all, but just two end-to-end systems that began borrowing things from each other, e.g., BN-ATSF and CN-IC, and there was no need to quickly integrate, and in many ways are not yet integrated to this day.  BNSF for example, really runs two dispatching offices under one roof, one Santa Fe and one BN. 

UP-SP had no choice but to undergo shock-treatment integration because SP was collapsing.

RWM

[Railway Man]

henry6

But, RWM, at what level are you working?  Are you an investment banker or work on the financial end of deciding on the merger or are you the one who was handed the assignment to make it work?

 

If I were an investment banker I would have my minions handle this forum while I lolled on a tropical beach with maidens.

Investment bankers don't run railroads.  Railroaders run railroads.  Railroads have been singularly intransigent to the hand-over of control and decision-making to Wall Street, unlike some companies and industries.  Do you really think Warren Buffett would be buying billions of dollars of rail stock if it was subject to the whimsy of investment bankers? 

There's a reason why railroads didn't have anguish over Sarbanes-Oxley, and are not requiring TARP funds, or any of those other embarassments.

RWM

[henry6]

As you make my point, RWM.   CSX finally got hold of the situtation when they were able to fend off off shore investment groups.  Too often mergers are formed in the frame of bleeding out investments without much thought to actual operations.  Investment bankers and CPA's sit there an crunch number while you crunch your you know whats trying to make it work.

[oltmannd]

Paul_D_North_Jr

MP173

[snip] Not to hijack the thread...but why did certain mergers in the 90's, primarily UP/CNW, UP/SP and Conrail/NS/CSX have so much difficulty when compared to BN/ATSF and CN/IC/WC?

ed

garyla's reply (above) sums up a lot of the conventional wisdom on this, and I don't have a huge amount to offer in addition, though I will submit the following for consideration:

Configuration:  BN & ATSF was essentially an end-to-end merger, as was CN & IC, and then CN & WC.  UP & C&NW was also, but UP & SP had a lot of overlap and divestiture and grants of rights, mainly to the then-also-new BNSF and also to KCS.  ConRail to NS & CSX was much different - a "split the baby" kind of thing.  For all of the time that the latter had to plan, it should have gone off much better.

Financial Condition: The railroad being acquired was pretty good shape physically & financially in the case of ATSF, IC, WC, and ConRail, but not so much with C&NW, and not at all for SP.

Corporate Culture: Supposedly UP really threw its weight around in the SP merger with the take-over of the SP's facilities and people, and did not consider anything that the SP people had to say or tell them.  I can't think of a worse business to do that in than railroading - it's way too easy then to just keep your head down, say nothing more than the required minimum, do exactly what you are told, and no more or no less - and stand back and watch the resulting non-operation self-destruct (melt-down) all over the territory.  At least in military combat situations, the primal need for physical survival will usually overcome the natural human impulse to just let some arrogant jerk - at whatever level - get what's coming to him.  Out on the railroad, aside from rules violations, there's no such self-preservation imperative to offset that urge for psychological revenge.

Network Operational Planning:  Others who are more knowledgable will have better and more accurate comments on this, but here goes.  I believe that both BN & CN were using fairly high-level computer-driven planning and studies, often through outside consultants - Multi-Modal and ALK (?) come to mind - before or during those mergers.  In contrast, I don't believe that UP, SP, NS, CR, or CSX had gotten into any of that very deeply at the time.  Since then, NS has; I'm not sure about the others.  This is a case where "failing to plan is planning to fail"; if you don't at least look at the situation, how can you possible know how it's going to turn out ?  Also, I recall that some of these mergers were rushed and implemented far more quickly than others, most likely without adequate thought and consideration given to all of the far-ranging effects elsewhere on the systems.  Largely as a result of this, for any such mega-mergers the Surface Transportation Board adopted rules and now requires - among many other things - very extensive and detailed network operations planning, submissions, documentation, and analysis, of "before - during - after" scenarios and how to mitigate any adverse impacts or effects that may develop.  Again, there are others here more qualified than me who can expand on this if they wish.

- Paul North.

I'm a little late to this party!

NS did use Multi-Modal to help do the traffic flows for the merger.  The big problem was that NS and CSX had absolutely no idea how the CR traffic off the shared areas would split and consequently, planned for the wrong traffic.  Both their guesses were off quite a bit.  For example, Conrail had two trains a day in and out of Pavonia (Camden, NJ).  Both the CSX and NS plans had two trains a day out of Pavonia on split date.  Then, pile on that the wrong data tape got loaded at midnight on the split date and that although the patch between the Conrail car reporting and NS systems worked OK, there were timing issues that caused cars to ping-pong back and forth on the railroad.  The death spiral began and took ages to dig out of.  Then, the railroad still had too much train service for the traffic base - so a second itteration of the traffic flow modelling was done and TOP was born.

There was also some cultural friction between NS and the ex-CR territory.  Although NS had hired several top level operating guys, they chose to put two NS guys over the new Northern Region.  These guys were not very flexible when it came to doing things the "NS way".  Needless to say, there was some backlash from the CR guys at a time when NS needed their cooperation the most.  (Both these guys now work at CSX!)

[Murphy Siding]

henry6

These were investment mergers based on money rather than  thought out, planned operational mergers. 

  ?  Of course they were mergers based on money.  What other reason would there be?

[tree68]

Murphy Siding

  Of course they were mergers based on money.  What other reason would there be?

The measure is when they want to see the money. 

The "bad" merger results in a relatively quick profit for the investors who can then move on to another target.  It wasn't a merger, but methinks that was pretty much the perception with the CSX/TCI affair.

The "good" merger builds a solid foundation that will continue to provide profits in the long term.

[henry6]

Yes, tree pretty well says it.  A merger is of course for the money.  But, mergers in virtually all businesses over the past 25 or 30 years have been for a quick return on investment without putting the investors out.  The acquired became collateral for boosting stock values or value of the company as a whole so that stock or resale value was enhanced and therefore the investors could borrow against their newly acquired collateral to pruchase more collateral..  That's why there is an immediate cutting of costs rather than bolstering of a company's postion or ability to manufacature more or better products.  By defnition there never really was an investment in these cases, just a bunch of mergers and acquisitions.  Railroads, financial institutions (banks, insurnace companies, etc.), broadcastiang and print media, computers, and general manufacturing businesses have all been victims of these so called investing situations..

[erikem]

Murphy Siding

erikem

 PDN, Murphy:

As I mentioned earlier, Stan Johnson had brought up Anaconda Copper as one of the reasons that construction of the PCE was approved (in addition to the reasons given by Vance). Johnson undoubtedly put a lot more effort researching the PCE than Vance did (this is not intended as a criticism of Vance), so I'm not surprised that Johnson would have details not in Vance's book.
 

  Yes,  that might explain the reasoning to run the line as far as Butte.  That was the (reletively) easy part to build. But, it wouldn't, on it's own, seem like justification for the line extending to the coast

 

Note the emphasis on "one" in "one of the reasons". I'm guessing that the PSE/PCE was built as a result of all three scenario's that RWM postulated. 

[Murphy Siding]

     I have to disagree with you.  In railroads, for example, can you really say that mergers in virtually all over the past 25 or 30 years have been for a quick return on investment without putting the investors out?  It seems to me, that all were driven by economics of the situation.

[henry6]

An investor climate created by investors.

[Murphy Siding]

henry6

An investor climate created by investors.

Beyond your gut instinct, and you're underlying tone that we're all headed somewhere in a handbasket, I can't see much that supports your line of thinking.  Perhaps you could explain it a little better.

     In the last 30 years or so, the major railroad mergers I can think of are: MWK>SOO,   SOU/NW.NS,   GTW>CN,  WP>UP,  MP>UP,  MKT>UP,  CNW>UP, SP>UP,   IC>CN,  WC>CN,  DMIR>CN, DME/ICE>CP, and EJE>CN.  All of these seem to be mergers of either economic neccesity, or economic oportunity.  They were all made by railroad people, for railroad purposes, whether it was to broaden their marketshare, expand their territory, oroptimize their operations cost.  Where do you see any of those as being investor generated for short-term investor gain?

    There was of course: CR>NS / CSX,  and CRIP>dirt, that may fit the description you put forth. 

   A side note:You might consider starting a new thread on mergers, as it's an interesting subject that would attract many responces on it's own.

[tree68]

Murphy Siding

     I have to disagree with you.  In railroads, for example, can you really say that mergers in virtually all over the past 25 or 30 years have been for a quick return on investment without putting the investors out?  It seems to me, that all were driven by economics of the situation.

There's no question that most of the mergers mentioned were done to save the railroad - which is protecting long-term investment. 

My perception of the get-rich-quick merger is that it's a fairly recent phenomenon.   Not that it hasn't occurred in the past, or that their haven't been shyster out to get milk all they can out of such transactions since the beginning, but I do think the get-in-gut-it-get-out thing is a product of the past decade or two.

I may be wrong.   Food for discussion.

[Paul_D_North_Jr]

You need to understand what a "leveraged buy-out" is in order to appreciate the differences between those types of "raids" that henry6 is alluding to, and most railroad mergers which are different.  Space and time preclude me from a good explanation, but here's a really simple one:

Most railroad mergers mainly involve just the shareholders of the respective railroads as principals.  There are always investment banks involved, which line up ("underwrite") the issuance of the new stock and any interim or new debt financing.  Important note:  In these transactions, the debt is accessory to the primary transaction - usually only to consolidate/ clean-up or simplify the balance sheet or legal aspects of which one is senior, that kind of thing - the debt is not the "driver" of the transaction.  Those investment banks* always get their fee, and may participate in some of the stock or debt for their own account one way or another, but that too is minor. 

* - "Despite their name, investment banks regard anything over 48 hours as 'long-term'. "  - Robert Townsend, former President and CEO of Avis Rent-a-Car from back in the 1960's (of the "We try harder !" advertising slogan fame), in his business book from around then entitled Up the Organization ! (which is a nice double-entendre for those of us who are left-over flower children and hippies from or remember the same era).

In a leveraged buy-out or "LBO", the acquiring entity borrows all or almost all of the money it needs to purchase the company(ies) being acquired.  The acquirer then does as henry6 indicates - cuts costs and whatever else it feels it needs to do to bump up the stock price, sells the stock, reaps its profit, and then goes on its merry way (no doubt to "rinse & repeat" = do it all over again with/ to someone else).  The goal and purpose is for the acquirer makes its money from the increase in the stock price, without having to come up with or invest much of its own money, as long as the interest costs on the borrowed money and other fees associated with the transaction don't eat up all the profit.  Note that in this scenario, a merger may or may not be involved. 

More importantly, in the LBO note the presence of a huge amount of new debt - the debt-to-equity ratio will typically be in the 80 to 90 to even the 100 % range, depending on how bold/ aggressive the acquirer is and how credit-worthy the underlying company(ies) is (are), their short-term business prospects, etc.  In contrast, most recent railroad mergers did not involve any huge new debt loads, and most railroads keep their debt-to-equity ratio in the 50 % range. 

It should be obvious, but just in case it isn't: "debt-to-equity ratio" is very similar to - really, the railroad equivalent of - the "loan-to-value ratio" (LTV") that most of us are familiar with from our home mortgages.  Right now everyone is preety much comfortable with an 80 % LTV ratio for mortgages, if the buyer has great credit and the property appraises OK, etc.  In contrast, the sub-prime mortgages and other aggressive financing often involved LTVs of 90 to 100, often with "junior" or "secondary financing" add-on or rider mortgages for that last 20 %, such as home equity loans or lines of credit, etc.**  See the similarity with the LBOs in the high debt ratio ?  Now compare with the debt-to-equity ratio of the usual stolid railroad: 50 %.  How many of us would feel really great if we owed only 50 % of the value of our home on a mortgage to the bank ?  [Disclosure: Yeah, I'm there, but it took a lot of years.]

** - In the fall of 1980, one of my professors, Prof. Walter J. Taggart, Esq. (who was the law clerk for Judge John P. Fullam when the infamous Penn Central bankruptcy landed in the Judge's courtroom on a Sunday night, and went on to become quite an expert in both banruptcy and railroads) observed of what was then known as "creative financing" - assumed and wrap-around mortgages and the like - that "Creative financing leads to . . . what ?  Creative foreclosures !!!"  OK, gallows humor, I suppose.  But he knew, having seen it first-hand at both the railroad and professional levels with Penn Central and that late 1970's Pres. Jimmy Carter era recession, too.

To conclude:  When Norfolk Southern bought its share of ConRail in 1997 or so, it issued one of the largest debt financings in the corporate world up to that time - something like $10 billion.  But no one then responsibly thought that it was an LBO, or that NS was "raiding" ConRail.  Some of the short-line and regional transactions - spin-offs, acquisitions, and mergers, etc. - in the last like 20 years, though, have had that flavor - my memory and knowledge of the facts is too tenuous for me to names names and point fingers here - I don't want to "tar and feather" someone or some organization unfairly.  Maybe someone else can think of some good examples.

Anyway that's this morning's reading in "Corporate Take-Over Finance 101 for Dummies and Non-Majors".  Additions, corrections, differences, constructive criticisms, expansions, lonks, etc. will be welcomed for the general education and edification of us all.

- Paul North.

EDIT: P.S. - Another couple of important differences are that:

1)  The LBO will typically acquire most or all of the shares of the target company(ies), both to obtain voting and Board of Directors control, and to make as much money as possible.  In contrast, the railroad merger shares will still be held by pretty much the same diverse and dispersed group of shareholders as before, though no doubt there will be some minor shifting of positions, esp. among those who don't favor the transaction;

2)  The LBO will usually hold most of the shares for only a short time - say, a year or two, just long enough for "pillaging" and the share price increase to hopefully take place - then sell ("flip") them to the public at large, and move on to their next conquest.  In contrast, the majority of the railroad merger's shares will continue to be held as a long-term investment by the same owners as before (as above), for an average or overall much longer time - like 5 to 10 years, or longer (just to provide some example time frames).

"If it looks like a duck, walks like a duck, and quacks like a duck . . . " - that's how you tell the difference.

- PDN.

 

[henry6]

OK.  So I don't know who I am or where I am.  Am I right for the wrong reasons, wrong for the right reasons, right and wrong within in reason, or wrong and right for no reason?

 In my defense, I go back to the the 70's when fresh MBA's were brought into supervisory positions on properties like the EL and told to cut expenses. Manpower and thus services were cut to the point where the product at least wasn't the same.  For instance, you might have had to drive a truck and trailer up to 50 miles to a railhead instead of across town under the guise of "centralizationizing".  Or you'd get a switch every other day instead of one or two time a day because the train only ran one way one day and reverse the next; and if your plant didn't operate Sat., you had to wait until Mon. despite the train running Sat. which it soon no longer did because there was no business for it.  And so it went in railroading until trains were running the length of the railroad because there was no reason to stop in between.  Scarcastic, yes.  But...

The next business to get the same treatement were banks which merged and merged and elimentated branches and services until they became distant, unknown entities.  At one time a tenant of mine bounce a check...went to the bank and said "Hey Chip...so and so and so on",  to which he replied, "Its OK, we gotcha covered"!  Today, I get drilled for my name, account numbers, pin numbers, how long I've been a client of the bank, and asked how to pronouce my name and if I really do live at the address in thier computer, and then they give me a $50 charge. 

Another business I am quite familiar with is broadcasting/media.  New, big owner comes to town, merges a half dozen stations into one building then proceeds to get rid of long time employees cutting staff in half leaving half the staff to do twice the work.  Income dwindles so that all six stations are billing what two used to.  So more staff is cut, equipment gets worn out and not replaced.  And the owner goes out and buys more stations in other markets.  The listener gets a bad product to listen to and the advertiser gets a poorly produced product for a reduced size audience at a higher price.  The big owner takes the money out of town for products and services cutting local busineses out of the pruchaseing loop and thus losing them as clients.  So owner goes to sattalite feed of programs and gets rid of more employees.  If a manger complains of having to work from 5AM to midnight 6 days a week plus 10 hours on Sunday, he might be allowed to hire a high school kid to replace the 30 year veteran. Product suffers more, listener get less, audience shrinks, advertiser (if still around) gets worse commercial and smaller audience again.

So, there is my jade, my cynicism, in three short paragaphs.

[Paul_D_North_Jr]

henry6 - In a friendly way, I'd say you're partially right, and partially wrong.  I'm personally familiar with all 3 of the situations in your 3 paragraphs (although the last 2 mainly as a consumer, not as an "insider").  The intellectual mistake you're making is the fallacy of over-generalizing - understandably carrying valid observations from one - or two - or many - set(s) of circumstances over to other conditions, where they do apply in some instances, and don't in others.

Your E-L example was quite true, then - 30 or 35 years ago.  E-L or CR was in a struggle for survival, and that skews what might otherwise be rational decisions.  Large organizations make macro-level decisions that don't always make sense or work out on the micro-level, down in the weeds where most of us are, and that's not new either: "Remember, the charge of the Light Brigade was ordered by an officer who wasn't there looking at the ground." - Robert Townsend in Up the Organization ! above (again).

But in the railroad world, that was then, and this is now.  Also, the same general set of actions - cutting costs and outsourcing - might have several different causes and purposes in different organizations and times, not always consistently. That's where the short lines have stepped in to fill the voids left by the large railroads, much the same as the new local and community banks fill the voids left by the big ones when they do the things that you describe.  (Someone once said that law firms grow and split apart and then merge again like amoebas - I use the "Lava Lamp" analogy instead, which I suspect that you can relate to if you remeber the E-L from the 1970's.  Well, banks are of like kind.)  The same Robert Townsend also said (in the same book) that big organizations have no idea of what they're doing to themselves, and that we didn't have to fear the Russians (this was back in the "Cold War" days, remember): "We've perfected 'do-it-yourself' methods of self-destruction." 

You know the prayer that ends with "God grant me . . . the wisdom to know the difference." ?  May I respectfully suggest that you critically analyze each of these situations or changes, and figure out what matters, what is alike, and what is different, in each.  Then you will be in a better position to evaluate and judge what is happening.  It's certainly not all good, not even in the railroad world - but it's not all bad, either.

- Paul North.

[henry6]

Actually there is another level of observation that I have.  That is that railroads were one of the first, and probably most familiar, businesses to enter into this merger/investment maze back in the 60's/70/s era.  So, yes, today, it is much different as they learned thier lessons of being inadequate to both themselves and their customers and are working their way out of it with plant investment and with the creation of real shortline/regional companies that work.  The others I mention are still evolving out of it. The problem being that banks/investment/money businesses got slammed by thier inattention to the future; some call it greed.  Broadcasting is still fumbling with their lot, knowing that locally is the best way for an individual property to survive but drowning in too much debt (and still besparkled by the glamour of it all) to find a life raft that will pull them up.  Assuming they want to get out of the water.   There is still a big shake down cruise coming as the likes of Clear Channel and Citadel are counting their chips by the penny rather by the thousand dollar bills they used to.  Governtment and other businesses are in the process of fixing the money business but broadcasters, and others, will have to find ways to work out of their situations.  And I really think they will; the price will be steep for them, but the public, and the advertiser, the suppliers, etc.,  will eventually be better off. I don't believe in true cycles but rather cycles that move forward.  Like putting a light on the spot on a wheel and tracing its arcs and circles as it moves across the field of vision.

 

[Paul_D_North_Jr]

There are a few more differences here:

1)  Again, time frame - the commercial and railroad world now is far different from 30 to 35 years ago.  The railroad mergers of the still-ICC-regulated 1960s and 1970s were of course about more money, but mainly for the primary purpose of consolidation for survival.  Greed as in getting a lot of money out of the railroad - or the parent "Industries" company as many did - definitely happened in some cases, but not on the magnitude of today's non-railroad deals.  Today, they are more for long-term business purposes, not short-term cash-outs.  That said, I don't happen to favor any more large RR mergers, either.  I think the resulting operation will be another step up the too-large-to-manage ladder, and the same operational results can be achieved by agreements and intelligent coordination without the headaches, regulatory burdens, and public backlash against a large-scale merger.

2)  I've thought long and hard about a nice way to say this, and here's what I came up with: The subjects of the 2 non-rail businesses that henry6 mentions above are all intangibles - banks/ finance and broadcasting.  They don't make or ship anything that you can touch or lift.  As such, they are legal and commercial fictions (or figments of imagination) that those business models have decided to treat as their reality.  That's fine for them, but maybe not everyone else goes along with it.  Eventually someone decided to point out that "The Emperor has no clothes !".  We're now seeing the results of the stripping away of that fiction.  You can probably draw the appropriate contrasts with the railroad business model.

I recommend that you read Tom Clancy's fictional Jack Ryan book Debt of Honor (published circa 1994).  One of the main plot elements involves an attack on the U.S. - actually, the whole Western world's - financial system by a rogue Japanese industrialist.  Near the middle of the book, Clancy has several excellent expositions and excursions by various characters, as well as himself as a kind of Greek chorus, on the nature of our financial system - that it's all psychological, and that's mainly about our confidence in ourselves, our system, and our futures.  I don't want to trivialize what you're concerned about or saying, but it's nothing new.  Fortunately, it's not universal, either.  Don't let the shenanigans of and to a couple of mainly "smoke-and-mirrors" businesses lead you to false conclusions about the rest.

- Paul North.

[Paul_D_North_Jr]

To get this thread back on topic, here are some references to old article in Trains by Robert A. LeMassena that I just dug up using the "Index to Magazines" feature that's linked at the bottom of the page.  I've got to talk to the folks about Kalmbach about finding a legitimate way to post these or otherwise make them available to us - they are way too good to just let moulder away in the magazines archives.  Meanwhile, all you really need to do is read the titles and subtitles - that'll give you a pretty good idea of what they're about.  henry6, the first two are for you !

Church of the Holy Faith (Railroad)
Trains, November 1977 page 74
turning railroads into conglomerates hasn't accomplished anything
( "LEMASSENA, ROBERT A.", OPINION, TRN )

Steam out of Scranton
Trains, September 1965 page 28
Lackawanna's steam locomotives
( DL&W, "LEMASSENA, ROBERT A.", STEAM, SYSTEM, ENGINE, LOCOMOTIVE, TRN )

Note: Despite the subtitle, I recall this was about more than just the locomotives - it was about the wiole railroad.  I also ecall that a sidebar 1-page article was entitled something like "Sights and Sounds along the DL&W".  More to the point, I think he had some commentary about the beneficial economic effect of the Lackawanna's big line relocations that we discussed earlier here.
 

Shorter plus steeper equals faster plus cheaper
Trains, August 1970 page 44
accent is now on speed, not tonnage
( "LEMASSENA, ROBERT A.", LINE, LOCATION, TRN )

Selected railroad reading: Numbers
Trains, July 1982 page 44
accuracy beyond the decimal point
( COMMENTARY, "LEMASSENA, ROBERT A.", TRN )

And many, many, others.

- Paul North.

[Murphy Siding]

     In the building period of railroads in North America, who was it, that did the *location* work for a rail line?  I've seen lots written about the railroad surveyors, scouting out passes, and staking the best route.  But who actually decided that building the rail line from point A to point B was a good financial investment for the company?  It would seem the BOD would be the folks approving it, but provided the plan being considered?

[Railway Man]

A locating engineer.  Someone with extensive knowledge of economics, geography, railway engineering, railway operation, railway maintenance, agricultural and mining economics, and transportation economics. Yes, they existed.  It's what we do today, too, though our arena of play has no buffalo a-roaming through it anymore.

Not a "go-forth and deliver us an answer proposition."  A team effort taking a lot of time to study, investigate, research, reconnoiter, plan, conceptually engineer, and estimate.

Step 1:  Develop a thorough understanding of the potential and the geography.  Lots of people short-cut this stage and rationalize it by saying, "Who knows?"  In other words, they generate questions to fit an answer they already decided they were in love with.

Step 2:  Run a preliminary survey to generate a cost estimate.  A fertile field for incompetents who either are merrily oblivious to the problems or kill the project through lack of creativity and CYA mentality.

Step 3:  Review the cost estimate, P&L, and market to determine if there's a business case, and to determine the route, timing, quality of construction to obtain the best business case.  For example, the ideal route from a construction cost perspective might be up the middle of a valley, the ideal route from a land-acquisition cost perspective might be on the sterile ridgetop rather than the fertile valley lands, and the ideal route from a traffic perspective might be right on the edge of the valley.  All of those thousands of variables have to be sorted out and ranked to make an effective decision, and this is where people usually get bored, lazy, impatient, or default to preconceptions and make bad decisions.

Step 4:  If there's a business case, then the board authorizes expenditure on construction. At this point the board is often so far down the path that they rarely say no to a project they have already decided they like, or rarely say yes to a project they have already decided they dislike.  It's not a good idea to expect actual due diligence to occur at this stage of the game.

Your question has the premise that locating work ended a century ago.  Not so!  Today we are locating new passenger railroads both on top of existing corridors and in all-new high-speed corridors, and trying to figure out how we will increase the freight capacity of the nation's railroads by 50% in the next 30 years.  In some ways it is more difficult today because there are so many more actors in the play, the corridors are extremely constrained, and the costs are fantastic.  It's a slightly different flavor but the game is the same.   On the other hand we don't have to sleep in tents, trudge through the mud and snow for thousands of miles, and eat whatever we shoot.  On the other hand they didn't have e-mail and Blackberrys and cell phones demanding instant answers 24/7.

RWM

[Railway Man]

Paul_D_North_Jr

Shorter plus steeper equals faster plus cheaper
Trains, August 1970 page 44
accent is now on speed, not tonnage
( "LEMASSENA, ROBERT A.", LINE, LOCATION, TRN )

 

I need to reread that one.  I think there's a lot of people who thought it was wrong.

RWM

[Paul_D_North_Jr]

It was only 2 pages long, if I remember right.  Depends on how you feel about using GTM/TH (Gross Ton-Miles Per Train Hour") as the primary metric to measure and govern the operation.  See also:

Is gross ton miles per train hour valid?
Trains, April 1970 page 37
is the ratio a valid indicator of efficiency?
( ANALYSIS, "LEMASSENA, ROBERT A.", OPERATION, TRN ) 

More correctly, it depends on the operating plan, which should depend on the analyzed and selected market segments, and their associated projected revenues & profit margins, etc.

I think he based it on the D&RGW's "fast & frequent" operating plan, because a couple years later he wrote an article touting that:

How to run a railroad in 1972
Trains, July 1972 page 20
Why Rio Grande threw out the bible
( D&RGW, "LEMASSENA, ROBERT A.", OPERATION, TRN )

I understand that the 1980's French TGV was designed/ located and built using this philosophy, using grades of up to 3% to minimize the route mileage.  With the power coming from the catenary and utilizing/ taking advantage of the short-time overload ratings of the motors to run up those grades at close to full speed, the electrification negated the usual downside of doing that, while still having the shorter downhill leg to benefit from

- Paul North.

[Railway Man]

Paul_D_North_Jr

More correctly, it depends on the operating plan, which should depend on the analyzed and selected market segments, and their associated projected revenues & profit margins, etc.

I think he based it on the D&RGW's "fast & frequent" operating plan, because a couple years later he wrote an article touting that:

How to run a railroad in 1972
Trains, July 1972 page 20
Why Rio Grande threw out the bible
( D&RGW, "LEMASSENA, ROBERT A.", OPERATION, TRN )

An article that succeeded in creating a "truth" that never was true.  Railfans love a good myth, and once they've latched onto one, you can't pry it even from their cold, dead fingers.  D&RGW was a drag-freight railroad dependent upon regulation to keep it in the overhead traffic game.  What railfans thought was a high horsepower-per-ton ratio was actually just enough power to trudge up the inclines, and what they thought were short trains were trains that just barely fit into the sidings. 

If the D&RGW really had been a faster railroad, it would have enjoyed the perishable traffic, of which it could capture only a tiny smidgen.  There was no need for speed for local traffic between Denver and Salt Lake City, as there was very little.  But railfans looked at D&RGW trains and UP trains and drew the wrong conclusions because they were fishing for facts to fit their preconceived notions:  UP trains were long, heavy, and had very low horsepower because its railroad was double-track and flat.  D&RGW trains were short, light, and had very high horsepower because its railroad was single-track with short sidings and steeply graded.  But when it came to over-the-road schedules -- which is all the regulated-railroad shipper cared about -- the D&RGW was not competitive with UP.*  And once deregulation occurred, the D&RGW was not cost-competitive either. 

Everybody loves an underdog.

*D&RGW was competitive on lumber traffic, however, because it was slower.  A lumber broker desiring to get a car loading on SP or WP in Oregon or Northern California to a hot market would divert to UP at Ogden or Salt Lake City.  If the market was not hot, he would divert to D&RGW and hope for a market turnaround while his car trudged over mountain and dale.

RWM

[Murphy Siding]

Railway Man

Your question has the premise that locating work ended a century ago.  Not so!  Today we are locating new passenger railroads both on top of existing corridors and in all-new high-speed corridors, and trying to figure out how we will increase the freight capacity of the nation's railroads by 50% in the next 30 years.  In some ways it is more difficult today because there are so many more actors in the play, the corridors are extremely constrained, and the costs are fantastic.  It's a slightly different flavor but the game is the same.   On the other hand we don't have to sleep in tents, trudge through the mud and snow for thousands of miles, and eat whatever we shoot.  On the other hand they didn't have e-mail and Blackberrys and cell phones demanding instant answers 24/7.

RWM ()  Um, yeah,  I guess it did kind of come out that way.  To my credit, I didn't use the phrase 'good old days'.

    By  locating new passenger railroads both on top of existing corridors, are you meaning new tracks where none existed before, or tweeking the current system to provide more slots for more trains?

    Will our system increase the freight capacity by adding new lines, or by incrementally improving the existing lines-for example Abo Canyon type things?

    

[Railway Man]

Murphy Siding

    By  locating new passenger railroads both on top of existing corridors, are you meaning new tracks where none existed before, or tweeking the current system to provide more slots for more trains?

    Will our system increase the freight capacity by adding new lines, or by incrementally improving the existing lines-for example Abo Canyon type things?

Generally to put any significant quantity of passenger trains onto a freight railroad, unless it's a line with a lot more plant than trains, it will take a lot of new track.  Most of the major passenger-train additions being proposed are corridor trains, and most of those proposals will require an additional main track over some or all of the route.

There is almost no capability to tweak the existing infrastructure to create more slots.  In some cases new crossovers, acceleration/deceleration tracks, and the like can create more capacity by improving flexibility, and by getting trains on and off the main track faster.  Of course all that costs a lot of money.  I think you're thinking of inexpensive things to do.  There aren't any.

It is almost impossible to permit new rights-of-way -- just ask our friends in the transmission line business, who have been soundly thrashed in their efforts to build new lines.  They've encountered a perfect storm of opposition from property-rights/no-new-taxes/don't-you-dare-harm-my-property-values activists and environmental/social justice/green activists, which virtually guarantees 100% opposition from both political parties in any given district.  Absent a fundamental shift in U.S. politics, culture, and values, I can't see any major new-line construction in my lifetime.

A very substantial capacity increase has been created through operational changes, namely longer and heavier trains.  This came about through the rapid adoption of DPU, but more importantly because the volume increase has made it economical to make trains bigger.  We expect trains will continue to grow larger.  Right now 135-car coal trains are standard with 150's in the offing.  In ten years, maybe 200-car trains.  Double-stacks are into the 10,000-foot size now, and that can get bigger, too.

RWM 

[henry6]

Railway Man

Generally to put any significant quantity of passenger trains onto a freight railroad, unless it's a line with a lot more plant than trains, it will take a lot of new track.  Most of the major passenger-train additions being proposed are corridor trains, and most of those proposals will require an additional main track over some or all of the route.

RWM 

An interesting thought was passed on to me last night by a long time friend and even longer rail observer.   With today's downturn in freight business, would not the current operators look to passenger rail in general, Amtrak in particular, to fill in the ledgers by occupying otherwise empty tracks?

[Railway Man]

henry6

An interesting thought was passed on to me last night by a long time friend and even longer rail observer.   With today's downturn in freight business, would not the current operators look to passenger rail in general, Amtrak in particular, to fill in the ledgers by occupying otherwise empty tracks?

I won't speak for or of any railroad's future strategy, nor make predictions.  However, what is publicly said is this:

Not unless Amtrak starts paying more than 30 cents on the dollar for the value of the slot and Amtrak is willing to bid fairly for the value of the slot when the freight traffic returns and Amtrak agrees to play nice in Washington on reregulation, on-time performance lawsuits, PTC, liability, etc., and Amtrak agrees that the slot doesn't become a permanent extension of its system.

Amtrak is not the same thing as a corridor operator, however.  That's a different game.  But I doubt railways are not going to sell short the value of their franchise again.  Railways are betting the value of the franchise will continue to increase rapidly and sustain high values for the next 100-plus years.  This is not 1971 when most railways were predicting the value of the franchise would continue to fall toward zero.

RWM