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E Hunter Harrison and CN...

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  • Member since
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  • From: Guelph, Ontario
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Posted by Ulrich on Monday, July 20, 2009 7:23 AM

No...don't necessarily disagree...good point in fact.

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Posted by Ulrich on Monday, July 20, 2009 7:43 AM

greyhounds

Ulrich

Yes..the regulatory framework was different back then..I believe the trucking divisions were unionized as well and for alot of reasons became uncompetitive with others in the market as  deregulation took hold. Also..so much else has changed since then.. TOFC was more important back then.. there was no double stack.. free trade was in its infancy and traffic was still primarily east-west and not north south as it is today.

CN is probably also realizing that as a transportation company (as opposed to just a railroad) they are leaving alot of business on the table. Most loads...75% of all loads...move 500 miles or less from origin to destination. That's business that CN as a railroad can't touch...but that CN as a multimodal carrier can handle via a logistics/trucking division. All in all  a smart move and in my opinion long overdue.

Well, I'm going to disagree with Ulrich again.  But first,

It wasn't that long ago that the UP bought a rather large LTL trucker, Overnight.  It was like they spent a lot of money for something, then they didn't know what to do with it.  When they bought it I thought they were really on their way, but they did literally nothing with this wonderful asset.  Eventually, they sold it off for about half of what they paid for it.  Overnight is now part of UPS.

Rail ownership of trucking operations was greatly restricted  under regulation.  For no good reason except that the regulators didn't know what they were doing.  When partial deregulation occured the rail owned truck lines, such as Santa Fe Trail, were smaller regional carriers with no real future.  They folded rapidly, as did many other regional truck lines.  It was amazing to watch the carnage.  Regional truck lines such as Gordons, System 99 and A.P.A. (one of the best in the business) died like flies when their regulatory protection was removed and they entered a competitive enviornment.    (Even some of the larger truckers couldn't adapt to a competitive environment.  Consolidated Freightways is gone, as are Carolina, P.I.E., Preston, etc.)

One of the great economic drivers of the late 20th Century boom was the logistics efficiencies produced by the dregulation of transportation.  A truck line had to be one of the most efficient or die, and a lot of them died.  It was good for the nation, good for the people, but very hard on regional motor carriers.

Back to my disagreement with Ulrich. 

Rail intermodal can compete with trucking at 500 miles.  I've done it.  At the ICG we didn't have long hauls for intermodal.  Chicago-New Orleans is 900 miles, but the volume on that lane was about 10 loads per day.  We had no choice but to get down and fight it out for Chicago-Memphis (500 mile) traffic, and we did.  We were even successful marketing (and profiting from) Memphis-New Orleans business, which is only a 400 mile line haul.  There is no magic number of miles where rail intermodal does or does not have the ability to compete with over the road trucking.

The difference between the ICG and a railroad like the UP or BNSF is that they have had little incentive to go after 500 mile freight.  Until the current economic unpleasantness developed they had much bigger fish to fry.  Niether one was going to waste terminal or track capacity on Chicago-Twin Cities freight when they needed that capacity to handle the containers flooding in through the west coast ports.

One current question is:  How long will this slump last?  If it ends relatively soon, the rail carriers will not change.  There will be no incentive for them to do so.  If it drags out, as I think it will, they'll eventually get hungry and look to develop business in the less than 500 mile range, such as Chicago-Twin Cities.  The UP has a lot of locomotives stored.  Putting them to work earning some cash hauling intermodal between Chicago and the Twin Cities might not seem like such a bad idea after all. 

That's enough for now.  CN's entry into the trucking business, under the guidance of E. Hunter Harrison,  can help make their intermodal service profitably competitive at much shorter distances.  It will be interesting to see if they do it.

BTW, I commute to and from work on I-94 north of Chicago.  I see a "whole lot" of CN containers pulled by CN tractors on that Interstate.  Either the folks out in western Canada drink a whole lot of Ocean Spray Cranberry Juice or those containers are moving on relatively short hauls to places like Memphis, Toronto, etc.  (Who knew Ocean Spray was produced in Kenosha, WI until Zardoz, IIRC, told us?) 

Good points...and you're right...short haul intermodal can work in some cases. I would think the limiting factor from a cost standpoint would be the cost of the trucking at each end. Here in Toronto the cost of picking up a container and bringing it to the rail could easily cost $250.00...and costs are probably of the same magnitude in other large cities. However, these drayage costs may be significantly less where large volumes are concerned and where shippers and receivers are located near rail facilities.

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Posted by MP173 on Monday, July 20, 2009 3:39 PM

RWM:

I see your point.  One should not measure the success or difficulties in implementing a merger based on a 1983 perspective vs 1995 vs 1998, etc.  That is what is difficult for one to understand without knowing the insides of an industry or an individual railroad.


Further, in  addition to the time differences and the resulting complexities, there are the individual railroads, connections, rationalizations (if any), personalities, etc to deal with. 

I cannot imagine the magnitude of details involved in a merger, even with considerable planning involved there is always the unforeseen factors that evolve.

A complex merger such as Conrail/NS+CSX seems almost impossible, when looked at 10 years gone.  Perhaps there was more to the UP/CNW merger than met the eye.

ed

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Posted by greyhounds on Monday, July 20, 2009 11:01 PM

MP173

Would those possibly be inbound loads of cranberries from the upper east coast?  Arent cranberries grown in Maine?

Maybe I am all wrong on this one.

I could be wrong too.  But they grow a lot of cranberries in Wisconsin.  Me thinks it's outbound juice.

http://www.wiscran.org/user_image/pdf_files/CranProduction08.pdf

MP173

I am not so sure on the short haul aspect of intermodal.  Perhaps the dynamics of the logistics industry, plus future cap/tax implications will take the trucks off of the highways and on the rails.

What is your opinion of the future of Triple Crown type service?  That could possibly make a go of it, but wont service be limited to typically one departure daily due to limitations of the equipment with standard railcars?

ed

The length of haul at which rail intermodal becomes truck competitive is dependant on the relationship of several cost factors.  It's also dependant on volume.  If there are only two truckloads a day on a given lane, rail is not a viable option.

But, if the volume is there, then:

Rail intermodal has cost elements not present in truckload over the road.  For simplicity we'll limit these to drayage and the terminal costs.  These are not presnet in truckoad OTR.  Offsetting these added costs are the tremendous savings present in rail line haul.  When the savings from rail line haul overcome the added costs of drayage and operating the terminal, rail intermoal is competitive.  Heck fire, it can even be dominant such as on the Chicago-LA lane.

There are a couple ways to do this.  First, simply have enough line haul miles to overcome the added costs.  This is what has been done.  Rail intermodal dominates on the Chicago-LA lane because the additional drayage and terminal handling costs are relatively insignificant on this 2,200 mile run.

The railroads have largely chosen this path of least resistance because there was no reason for them to do otherwise.  If they can fill up their network with long haul freight they're happy.  They used to be able to do that.  Maybe they will be able to do that again.  But I don't see a return to such a happy, carefree state anytime soon.

The other way to get truck competitive is to reduce the terminal and dray costs so that fewer line haul miles are needed to overcome them.  This takes work.  But it is possible.  If the railroads need the business, they'll eventually do the work.

One great way to reduce the killer drayage costs is to get trucking authority (and acquire people who know how to run a truck company.)  A dray from Moline, IL to Chicago on freight to Memphis will kill you, unless you can haul a load of freight from Chicago to Moline.  This would spread the dray cost over two loads.

A second way is to put low cost intermodal terminals in places like Moline.  This is where your reference to RoadRailer makes great sense.  The problem with RoadRailers, and similar concepts, is that they have been envisioned as seperate, stand alone, intermodal systems.  After some experiences trying to market RoadRailer services, it became very evident to me that the technology's niche was as an adjunct to the intermodal system.  Not as a stand alone intermodal system.

A RoadRailer terminal costs very little to build (dump some white rock on an unused side track), and is inexpensive to operate.  Putting them in places such as Moline will eliminate high dray costs.  But, they have to be used as a feeder/distributor system to an intermodal network with limited OD pairs 

It'll work.  It won't work everywhere.  But It'll work in enough places to make it worthwhile. 

 

  

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
  • Member since
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Posted by zardoz on Tuesday, July 21, 2009 7:41 AM

greyhounds

MP173

Would those possibly be inbound loads of cranberries from the upper east coast?  Arent cranberries grown in Maine?

Maybe I am all wrong on this one.

I could be wrong too.  But they grow a lot of cranberries in Wisconsin.  Me thinks it's outbound juice.

Just an addition to my previous post: yesterday I noticed two CN tractors coming out of Ocean Spray hauling 20' containers. I could not tell if they were empty or full, nor was I able to get reporting marks. 

FYI: Cranberries are also grown in Maine, Massachusetts, Michigan, Minnesota, New Jersey, Oregon, Washington; additionally, some are grown in the Canadian provinces of British Columbia, New Brunswick, Ontario, Nova Scotia, Newfoundland and Quebec.  However, Wisconsin production totals more than half of all U.S. production.

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Posted by henry6 on Tuesday, July 21, 2009 9:13 AM

FYI RE: CRANBERRIES.  Grown in Massachusetts, R.I., NJ, WI, and I think WA among places. 

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