Sigh, how railroads have lost their importance

[gabe]

I logged onto Yahoo about five minutes ago and noticed that Microsoft just posted a 32.6 BILLION dollar dividend. After saying holly shnikies, taking turns with my fellow officemates bending over and kicking one another in the backside for investing in companies other than Microsoft, and picking my chin off the floor, I began to think about this fact in relation to railroads.

I remember Mark noting that it would only take about 85 billion to buy all the rail lines in America. Microsoft, which isn't even America's most lucrative company, just paid out a dividend over one third of their worth. That makes it seem as though Microsoft could buy all the railroads in this country as an afterthought.

Suddenly, I just don't feel as though my passion for trains is that important to the public anymore.[sigh]

Gabe

[Anonymous]

They don't make Christmas movies about Windows, there are remarkably few folk songs about the Crash of Ol' Operating Systems, and nobody ever lay awake at night listening to the far-off *ping* of incoming e-mail and dreaming of far away places. Also, folk legends of heroic Sys Ops are non-existent. We are embedded way deeper in the culture.

[jeaton]

Gabe, Don't worry, it is just public perception. Well, yah, money, too. But, aside from the fact that Microsoft shareholders would would find their assets in the tank and the economic ripples might be about tsumai (Sp?) size, if Microsoft liquidated, life with computers, as we know it, would probably continue on.

Suppose the UP announced a GOB sale. Next...

Jay

[jeaton]

lfish. LMAO.

jAY

[CSSHEGEWISCH]

Much of Microsoft's dividend comes from the fact that it tends to operate a lot like a bank and reinvests much of its net income into securities, not necessarily its core business.

[Puckdropper]

lfish:

You don't know us geeks very well, do you? I'll have to see if I can pull up a few computer related songs. (Ok, they're all parodies thus far, but it's just a small sample.)

To the tune of Gillian's Island (http://www.humorcentral.net/audio/gilligan.wav)
"Just sit right back and you'll hear a tail about my virtual trip.
It started on my I.B.M. with a single little click..."

To the tune of Oh Come All Ye Faithful:
"Oh COM on 0 3 F 8..."

(Don't take this personally, just want to make sure you understand the stuff's out there, just out of the common person's knowledge.)

[Anonymous]

I had little doubt that the stuff is out there. In the name of all that's holy, please keep it there.

[Anonymous]

QUOTE: Originally posted by lfish


They don't make Christmas movies about Windows, there are remarkably few folk songs about the Crash of Ol' Operating Systems, and nobody ever lay awake at night listening to the far-off *ping* of incoming e-mail and dreaming of far away places. Also, folk legends of heroic Sys Ops are non-existent. We are embedded way deeper in the culture.

Yeah, we are laughing now, but who knows, this just may be a glimpse of the future.[:D]

[Anonymous]

Look at the mythic status Bergie already has.

[Anonymous]

Gabe,
Maybe it's your perception of things, just because you're a railfan.

I think all of us wish we'd bought Microsoft way back when.

Almost everyone has a computer, and there are relatively few of us, in the large scope of things, who railfan. I doubt anyone goes out to watch a computer run by, or takes pictures of one, or has meetings with their buddies to talk about them.

Trains still haul LOTS of stuff to LOTS of places. They're big and loud a smell good. AND a lot of people still make a pretty good living working for the railroad.

Keep your passion for trains and enjoy it for yourself. Don't care about what the rest of them think.

But I do have an off-topic comaparison... I love drag racing and sprint car racing, but all I get on TV is NASCAR. I'll bet if you checked, NASCAR turns a pretty hefty profit too. But it doesn't mean I love sprint cars or dragsters any less, and it doesn't matter to me what anyone else thinks about them , or trains either.

Just my .02

m

[MP173]

Microsoft's dividend situation is sort of a once in awhile type thing.

They have accumulated so much cash, no make that SO MUCH CASH, that they have nothing to do with it. So, they are giving it back to the owners of the company.

Why? Lets see:
1. Cannot find anyone worth while to purchase in tech industry.
2. Do not want to fight Justice Dept over any purchases in the tech industry.
3. T bills and commercial paper are returning about 3% now, which tends to drag down the ROE.
4. Railroads are not a core business and should not be invested in even tho Mr. Gates does seem to like trains (or so I have read). Plus the ROE for railroads is pretty low.
5. The tax rate on dividends is fairly low at this time, so it makes sense to do so.
6. By being a dividend paying company, it puts Microsoft into play as a "value" stock, thus making it a stock which "value" funds can purchase. So, it is more liquid.

Microsoft is a textbook company for stocks that should be owned. Enormous brand recognition and huge ROE. Same for Coca Cola, McDonalds, and a few others. Note those companies have relatively few assets, the opposite of rails, which are asset intensive, have no brand loyalty and basically have a product that is a commodity (except for value added situations).


ed

[motor]

QUOTE: Originally posted by lfish


They don't make Christmas movies about Windows, there are remarkably few folk songs about the Crash of Ol' Operating Systems, and nobody ever lay awake at night listening to the far-off *ping* of incoming e-mail and dreaming of far away places. Also, folk legends of heroic Sys Ops are non-existent. We are embedded way deeper in the culture.

LOL

[gabe]

Not to worry, this isn't going to stop me from being a rail fan--I don't think that is even possible.

It is more that I liked the fact that my hobby was an integral part of the national economy and that rail knowledge translated to insights into the economy as a whole. Now, it seems as though any insights I might have are yesterday's news.

Gabe

[Junctionfan]

I can think of several ways for the railroad to fix that.

1/ Advertising, lots of proganda and other marketing gimics

One of the main reasons why things are sucessful is that it is the public is constantly bombarded by advertising and slogans making people think that they need their product. The railroad is no exception really. NS and UP obviously have some idea of this as I have seen their t.v commercials before but not enough. They need to market themselves not just to the customer but to the general public to explain to them the importants of the industry. Essentially what this is designed to do is keep the voter informed and get them to do much of the pressuring on the politicians particularly when it comes to an election. A smart idea. Many industries do this including the automotive industry and its lobby groups.

[Overmod]

I somehow doubt that the UP and NS commercials are accomplishing very much that furthers the attractiveness of railroads to the general public. And the commercials certainly do very little, I suspect, to attract shippers who would otherwise patronize another mode.

Yes, commercials could definitely rekindle some sense of romance in railroading -- think what the Armed Forces commercial makers could do with a railroad commercial! -- but I'm not sure any existing railroad knows enough, or has the right kind of 'desire', to do that...

Part of the problem is that when railroads note that they are run like businesses, both the romance and the public perception tends to decline... quite the opposite of what happens with Microsoft et al. Remember the context of that "public be damned" remark that W.H. Vanderbilt made? It would be somewhat difficult for the E. Hunter Harrison vision of railroading to come across as a dramatic role model for our youth's careers, eh?

[gabe]

QUOTE: Originally posted by Junctionfan

I can think of several ways for the railroad to fix that.

1/ Advertising, lots of proganda and other marketing gimics

One of the main reasons why things are sucessful is that it is the public is constantly bombarded by advertising and slogans making people think that they need their product. The railroad is no exception really. NS and UP obviously have some idea of this as I have seen their t.v commercials before but not enough. They need to market themselves not just to the customer but to the general public to explain to them the importants of the industry. Essentially what this is designed to do is keep the voter informed and get them to do much of the pressuring on the politicians particularly when it comes to an election. A smart idea. Many industries do this including the automotive industry and its lobby groups.

Sorry Junctionfan, but I don't think so.

Even assuming for a moment that mass-market type advertising convinced me that railroads were “all that and a cup of tea,” it is not exactly going to make me run out and start shipping by rail. Why? Because I, the general public, and other such groups that are susceptable to mass advertising have absolutely nothing to ship by rail.

Mass advertising that works so well in selling beer doesn't strike me as being at all successful in selling freight. This is not to say that advertising plays no roles, it is just not the same kind of role and it is not like selling beer.

Rail transportation is much closer to a utility like a phone company. For instance, AT&T, MCI, and Sprint can advertise all they want. They all provide basically the same service and type of service. Accordingly, no matter how much they make me familiar with their market name, I am still going to switch to AT&T for a lower rate and their $100 check they give me to change to them, and then switch back to MCI for an even lower rate and their $40 check they give me to change to them a month later, and then to Sprint when the offer me a lower rate and a $70 check a month later, and then back to AT&T when they offer me a $150 check and a lower rate a month later.

(I am not joking, there was about an 8-month period of time where I actually made a noticeable amount money on using long distance phone connections; as a poor student, talk about a gift. How any of these companies are still in business is beyond me).

I think rail rates and rail service works pretty much the same way. Name recognition vel non, shippers are going to allow railroads (and other forms of transportation that can also move something from point A to point B) to undercut one another for what is essentially similar service. It is only when railroads are able to offer service that another cannot that they will have true pricing power--which to many would be a bad thing.

Gabe

[cbq9911a]

There's very little that's newsworthy about railroads nowadays. The railroads just do their job without fuss. That said, there were three news stories (and a Chicago Tribune editorial) on railroads this week here in Chicago.

To give you an idea of how much railroads are taken for granted, a Metra train that's 10 minutes late makes the radio traffic report.

[tree68]

QUOTE: Originally posted by gabe
Rail transportation is much closer to a utility like a phone company. For instance, AT&T, MCI, and Sprint can advertise all they want. They all provide basically the same service and type of service. Accordingly, no matter how much they make me familiar with their market name, I am still going to switch to AT&T for a lower rate and their $100 check they give me to change to them, and then switch back to MCI for an even lower rate and their $40 check they give me to change to them a month later, and then to Sprint when the offer me a lower rate and a $70 check a month later, and then back to AT&T when they offer me a $150 check and a lower rate a month later.

A major consideration in this example is that AT&T, Verizon, MCI, and Sprint are advertising their consumer services. When was last time you saw an ad for AT&T long line service (that which actually connects your long distance, your Internet, your bank to its headquarters, etc)? Where I work, we deal with these folks on a regular basis, as they provide the circuits we use to connect our voice and data to the rest of the world. Fact is, they don't advertise it to the public. Perhaps in a trade publication, but not to John Q. The railroads are little different. They have no product to offer the general public. Potential shippers, yes, and you may well see advertising specifically targeted to those customers.

[Anonymous]

I bought some microsoft for my kids.

LC

[Junctionfan]

As far as you saying that advertising isn't the key, consider this.

If UP et all didn't advertise to sell the importance of the railroad, wouldn't the general public be more incline to say to heck with rail and try to convert all lines into bike paths or something else that they thought was more important?

It is all in public opinion and how the industry is percieved. If the railroads continue to advertise, it might make others want to do business with the railroads because than the business can take advantage of the popular choice and say they ship by whomever. Kind of like telling folk that "our computers come with Windows 2000 (wow Windows big deal) but it is a big deal because the advertising and marketing strategy long ago sold the general public that it was a good idea so of course now it is the trend. Another example, "All of our products are 100% American", some industries of said this and although they may not cater to the average Joe, their P.R has been altered and now they are respected as a "true blue American" company.

It is all on image. This is a material world and you can do anything including the railroads, unless you sell yourself to everybody not just those who will use your product or service. Anybody can ship by rail if not direct spur than by intermodal including Allied Van Lines. If you trust the rail more with your furniture than just a truck, chances are you will hire someone like Allied Van Lines. If you are a person who likes a good investment and you want to know of a company that is good, how do you do it. I may not have any use for a railroad but if I see that it is an important industry, I might be inclined to invest in it for a return of money. If people don't know what the company is and are not shown that it is important period, nobody will be interested in it and will not appreciate its importants. If advertising wasn't the key to establishing importance, would CN have www.cn.ca on their locomotives or UP have We Will Deliver on their locomotives and freight cars for example. Almost every railroad has a logo to advertise. Now yes, the advertising is largely for the customer or potential customer to see or is it? Enroute, who is going to see the advertising on the railway equipment more than anybody? The general public.

Obviously this is working. My mother who doesn't think much of trains, knows about CN, CP et al. She doesn't have any reason to use this but she would not want to see the rail industry fall. She like myself, would like to see more things on the rails and less on the roads. Now how do you suppose she decided this? Any psychologist here with any theories? Advertising. The president didn't attack Iraq without first selling the importants to the people right? You can't use war and God knows it's not something anybody can use but it is necessary at times and so the people had to be educated in knowing why it was so important to risk death over.

This is just my opinion but really, can you disagree with my observations?

[dwil89]

Well, the Railroads will never regain the stature they had with the public up until the mid-20th Century..especially Passenger Service....Before the Interstate Highway System was started back in the 1930's, and before the revolution in air travel, the Railroad was the way to travel, and to move freight. Just watch any old Railroad Promotional Film from the 1940's.....Now, with Interstate Highways getting clogged with Trucks, the trend in some ways may begin to reverse itself, as Intermodal traffic is seeing large growth on Railroads but it will never be like it was in the'Good Old Days' when roads like the Pennsy were at the top of their game.....Dave Williams http://groups.yahoo.com/group/nsaltoonajohnstown

[Modelcar]

...Dave....Turnpikes and Parkways, but not interstates in the 30's.....They were started in the mid 50's.

[dwil89]

QUOTE: Originally posted by Modelcar

...Dave....Turnpikes and Parkways, but not interstates in the 30's.....They were started in the mid 50's.

Well, I used the wrong terminology there, I should have said. "before the vast improvements in the Nation's highway system began in the 1930's, followed by the beginning of the Interstate Highway System in the 1950's"........... At any rate...FDR's 'New Deal' started alot of the Highway Improvements that would eventually create a viable alternative to railroad passenger and freight business..... Dave Williams

[cpbloom]

QUOTE: Originally posted by gabe

Suddenly, I just don't feel as though my passion for trains is that important to the public anymore.[sigh]

Gabe

I don't think non-railfans have ever understood our passion for trains and railroads.

[Anonymous]

QUOTE: Originally posted by Junctionfan

As far as you saying that advertising isn't the key, consider this.

If UP et all didn't advertise to sell the importance of the railroad, wouldn't the general public be more incline to say to heck with rail and try to convert all lines into bike paths or something else that they thought was more important?

IMO the advertising they do is largely aimed at existing and potential investors and shippers with general public name recognition being secondary. The NS & UP commercials are most common on CNBC and other business news shows. Ad agencies and networks sell packages of channels and times based on demographics, so some of the ads also show up on regular news & some entertainment programs of the affiliated networks. Most of the cost is in producing the commercial, so once you have it and pay to run it in the target market, running it in other secondary markets is fairly inexpensive.

But I really doubt you'll see UP or NS ads on major event braodcasts like the Superbowl or World Series. Amtrak did a really smart move IMO in having an ad for the Acela behind the plate in Fenway at the ALCS. That targets both New York and Boston consumers plus gets some national recognition.

For freight though, most consumers don't know or don't care. They give it to USPS, UPS, or FedEx(ground or air) and it's the people at those companies that determine what goes by rail. Consumers are more concerned with lost or damaged goods, tracking, convenience, etc. It's a little like buying a dishwasher. It may be made in USA, but few consumers are going to research if the steel is domestic or imported.

[bobwilcox]

Advertising does not make sense for the railroads. Public relations does make sense.

Advertising does not make sense because the typical Class I will have about 80% of its stock held by 250-300 investors. About 80% of its revenue will come from 800-1,000 customers. Their are better ways to get your message across than mass advertising. My customers each paid the UP something in the mid eight figures a year for service. It makes more sense to deliver the message in person than run an add on TV in Houston.

The recent UP's media campaign was aimed mostly at employees with heavy ad buys in places like Omaha, St. Louis, Houston, Little Rock and North Platte. This fits it with their mission statement:

"Union Pacific is committed to be a company where:
our customers want to do business,
our employees are proud to work,
and shareholder value is created."

Notice that nothing is said about the general public or The Faithful. However, as railroads start to think about going after cheap government money they need to start looking at the public as a potental investor. This is where good public relations could pay off in billions for capital investment.

[Modelcar]

....I understand from a railfan point of view the railroad doesn't have the aurora in the community it once did..."Down at the railroad depot".....point of attraction, gathering, town center point of comings and goings....I personally headed off to war by first stepping on a train in Johnstown, Pa. as did many others....Changing to a troop train in Chicago I guess it was union station for the trip to Seattle....
No one would like to have that center of transportation being again at such locations as I would. But we don't have it anymore....Our times are different now. But....from what figures I seem to read and be aware of, the class one's haul more tonnage now than ever before. So maybe we can take a bit of comfort that, that being true, maybe it holds a hope that more railshipments will come with our changing transportation needs...Unclogging highways, intermodule shipping expanding, cleaner processes of using coal to produce electricy and more....We can hope.

[Modelcar]

....And Dave, understand...about improvements in highways back then, even local county roads being paved getting folks out of the mud, etc...

[CSXrules4eva]

QUOTE: Originally posted by dwil89

Well, the Railroads will never regain the stature they had with the public up until the mid-20th Century..especially Passenger Service....Before the Interstate Highway System was started back in the 1930's, and before the revolution in air travel, the Railroad was the way to travel, and to move freight. Just watch any old Railroad Promotional Film from the 1940's.....Now, with Interstate Highways getting clogged with Trucks, the trend in some ways may begin to reverse itself, as Intermodal traffic is seeing large growth on Railroads but it will never be like it was in the'Good Old Days' when roads like the Pennsy were at the top of their game.....Dave Williams http://groups.yahoo.com/group/nsaltoonajohnstown

YES those were the good old days when rail transportation dominated all other modes of transportation. Unfortunitly, I wasn't living or should I say born then. :( I hate interstates, and turnpikes. I live about 15mins from many surounding interstates and one PA trunpike, oh they get on my nervous. The only thing I like about the PA turnpike is that at the Willow Grove exit, it follows NS mailine traffic, ex PRR tracks.

Oh as for Microsoft, they better not touch any railroad out there. I don't care if it's a shortline, or a class one. However, there are exceptions. Microsoft may only collaborate w/ a railroad to develop or upgrade a train simulation game. LOL.

[rob_l]

QUOTE: Originally posted by M.W. Hemphill

I can't think of a single piece of second main track or double track that they have reduced to single main track in the last 40 years, except for some unimportant bits and pieces here and there. Not on the UP proper. C&NW long before their merger reduced some double-track to single, out in Iowa, but UP put it all back, and better, too. SP pulled some double-track off the Overland Route (Donner, Rose Creek, Lakeside-Ogden), but on a railroad that runs 12-20 trains per day it's a difficult case to say UP needs it now.

If we consider other roads besides the UP, there certainly are a few glaring examples of double cut back to single in busy and growing corridors:

On the BN in the late 80s: north of the Twin Cities (Becker - Big Lake vicinity), and then Spokane - Pasco (one of the paired track lines taken out).

On the CN more recently: some double track in the Canadian Rockies was taken out.

I have a real hard time believing these were wise decisions (in the long run).

I recently heard from UP management about one or two examples of retrenchment that they now regret, but they escape me right now. In general, I think you are correct, UP has been much more resistant than most to reducing track capacity.

And I agree about the SP case. They needed that track on the Sunset Route a lot more than they needed it on the Overland Route. That was really a case of a poor RR redeploying assets where they were more urgently needed, rather than outright elimination of track capacity.

Best regards,

Rob L.