My husband has several cousins with actuary math degrees. One of which works for an insurance company that does insurance for non hazmat OTR trucking companies. He called him up and asked what the average increase was for their own polices. He was told between 10 and 15 percent due to higher accident costs. 10 percent if the fleet was self insured for 100k. 15 percent if not.
MrLynn In his March '19 Trains column, Fred Frailey tells us that "In 2016, Class I railroads grossed $70 billion in revenue versus $739 for truckers. And the gap is widening." But how much of that trucker revenue is for short-haul versus intercity, which is where I assume most of the RR revenue is from? How does intercity rail compare with intercity truck shipping? What happens if you subtract bulk rail cargo, like coal, grain, potash, etc., which trucks can't compete with. What are the comparative stats for intercity merchandise shipping? I'm curious, because the trucks have a lot of subsidized infrastructure that railroads don't. So how do profits compare? I looked around on line, but can't find good stats. Anyone know where? Common sense tells me that for medium-to-long-distance intercity transport, two guys in a lead diesel running the equivalent of 200-400 truckloads has got to be a lot cheaper than one guy per truck. So apples-to-apples, I'll bet the railroads are doing better than Fred says. True? /Mr Lynn
In his March '19 Trains column, Fred Frailey tells us that "In 2016, Class I railroads grossed $70 billion in revenue versus $739 for truckers. And the gap is widening."
But how much of that trucker revenue is for short-haul versus intercity, which is where I assume most of the RR revenue is from? How does intercity rail compare with intercity truck shipping? What happens if you subtract bulk rail cargo, like coal, grain, potash, etc., which trucks can't compete with. What are the comparative stats for intercity merchandise shipping?
I'm curious, because the trucks have a lot of subsidized infrastructure that railroads don't. So how do profits compare? I looked around on line, but can't find good stats. Anyone know where?
Common sense tells me that for medium-to-long-distance intercity transport, two guys in a lead diesel running the equivalent of 200-400 truckloads has got to be a lot cheaper than one guy per truck. So apples-to-apples, I'll bet the railroads are doing better than Fred says. True?
/Mr Lynn
This has been a very interesting discussion, and I've learned a lot about the trucking industry. But no one has answered the questions I posed in the lead post a couple of weeks ago. So I'm taking the liberty of quoting it.
Any thoughts?
MrLynnCommon sense tells me that for medium-to-long-distance intercity transport, two guys in a lead diesel running the equivalent of 200-400 truckloads has got to be a lot cheaper than one guy per truck. So apples-to-apples, I'll bet the railroads are doing better than Fred says. True?
No, Fred is bascially correct.
What you say about two rail crewmembers with hundreds of loads being cheaper than one driver per truck is also basically correct. But it doesn't tell the whole story. It only includes the line haul portion, and there's more to the story than the line haul.
For simplicity we can break down rail freight transportation in to five cost centers.
1) collection - getting the loads to the rail terminal
2) aggregation - holding the loads to make up a train of economical size (to include loading them on the train)
3) line haul - the movement of the train from origin terminal to destination terminal
4) sorting - getting the loads off the train and organized by final destination
5) delivery - getting the loads from the rail terminal to the receiver
The railroads have a significant advantage in only #3 - which you focus on. It's the other four cost centers that favor trucks. They basically don't exist for truckload freight. A driver just hooks to the load and takes it from shipper to reciver. In other words, it's the terminal costs of rail freight that are the problem.
Depending on available volume and terminal costs, rail becomes more economical at some distance. That would be the distance at which the line haul savings of rail movement overcome the terminal cost disadvantage of rail movement. There is no magic number of miles for this. It depends on the situation.
Since most freight doesn't move long distances, trucks dominate.
I'd like to see the railroads go after the available long haul truck moves first, but to succeed in the shorter haul markets they're going to have to work on all five cost centers. More low cost intermodal termnals to reduce drayage expenses are needed. Trains need to do pick ups and set outs at such terminals. Something the operating departments really don't like.
And, the unions need to come around and admit that shorter trains serving such terminals can safely and efficiently be operated by a one person crew.
I don't see a real break though on this, but incremental progress can well be made.
In the PSR world of today's railroads - loose car, short distance railroading is much too cost intensive to fit the PSR mold, any way you want to shape it. That being said a short distance shuttle operation of 30-40-50 cars each way falls into the domain the PSR wants to attract and can make profitable.
Never too old to have a happy childhood!
This has been a great discussion. I really appreciate the input from Shadows the Cats Owner: I think that hearing the trucker side of things is at least as important as the railroad side of things: truckers know what shippers want far better than railroads, and when they forget that, there is always another trucker ready to step in and take over immediately. I deal mostly with the shippers, very little with truckers, but the facilities I’m involved in mostly (a WAG would be 97.5%) use trucking vs. rail. Because they are looking at true supply chain costs of each mode. And much of the time, trucking is cheaper to their supply chain operations, even though trucking rates are higher than rail rates. Read what greyhounds just wrote: he talks about the whole picture. And the reliability/certainty that Shadows the Cats Owner talks about translates into lower supply chain costs as well.
On the other hand, I appreciate that truckers pay a lot of taxes. But regardless of how much, they still don’t cover what it’s “road impact” costs are. I don’t want to say damage, because that implies that trucking is a negative. It isn’t. The nation could survive without railroads, albeit with higher transportation costs. It could NOT survive without trucks. But the reality is that, were truckers to pay taxes or fees commensurate with the wear and tear they do to roads, as well as the first-in design costs (that is, paying for heavier road sections, stronger bridges, etc), their rates would have to increase. The amount that studies suggest varies, so I’m not going to try to pinpoint that number. But it would make railroading more cost-effective, relative to RATES. However, the likelihood of getting trucking to pay the true costs is unlikely, not because trucking companies/truckers are the problem, but because businesses – the shippers – don’t want those costs to rise. The TRUE costs of freight transportation will always end up with the consumers. The question is: will they enjoy lower prices for goods and services but pay the hidden (in their minds) costs of more taxes, both at the gas pump and in other taxes? Or will they pay more for purchasing goods and services directly, a transparent cost? Most Americans are too concerned with who the latest winner of American Idol is than analyzing what the wide-screen television they are watching it on REALLY cost them (meaning that they paid a cheaper cost for the TV, but a higher cost at the pump and on taxes). And businesses know that, whether they are industrial users, retailers/wholesalers, whoever. They know the public won’t make a stink: they don’t want to think that hard.
I have argued on Fred’s blog quite a bit, and on other pages, that the solution is not to have the government take over and own the tracks/infrastructure, but rather to give railroad companies 100% tax credits on infrastructure investment. That would cover maintenance, but more importantly it would cover purchasing of land for updating alignments from 19th Century winding anachronisms into 21st Century iron highways, including the track, signaling, etc; adding/extending sidings and multiple main tracks; purchasing land for new intermodal terminals (becoming prohibitive without such a credit in urban and even suburban places such as the LA Basin’s Inland Empire; Seattle-Tacoma; Denver; MSP; and the majority of Eastern metropolises) and building those terminals; and building rail – rail grade separations. Just as important as the actual money cost is that it would minimize the risk cost that railroads have to pay in the financial markets that truckers do not pay running on publicly-built roads. For the most part, today’s railroad C-suite folks are loathe to take the chance given the risk. Just look at UP’s Rochelle ramp: a classic case of “build it and they did not come”. UP has since curtailed or slowed down quite a few infrastructure projects. And being in Wall Street analysts crosshairs, who can blame them? One other item that has surfaced on Fred’s blog is to free railroads from property taxes on their infrastructure. That makes sense – to me, anyway.
At the end of the day, however, it comes down to: is the culture of today’s railroads moving towards meeting shipper needs, or away from it? The world of shipping is changing: as I noted, shipping costs are now evaluated as a part of supply chain costs. And the simplicity and reliability of trucking has a huge advantage over railroads. The complaints about trucking these days are mostly related to capacity from a booming economy. Service has suffered in some instances, but everyone understands why and that it is not the CULTURE of trucking that is the problem; it is a business surge supply and demand issue. The complaints about railroading are legion, and they suggest an industry hell-bent on doing things their way and thinking they are fine. It is a land-barge bulk mentality, and they are trying to fit everyone into that category. That is a cultural issue. And even Matt Rose, while arguing against PSR, leads a railroad that is moving in that direction in long, under-powered trains, mistreatment of crews, cutting back on operating crews and MOW and equipment maintenance. And the industry, rather than break into a large-railroad wholesaler / small railroad retailer model, continues to screw anyone that doesn’t fit its paradigm of how to ship. So perhaps the discussions on trucker taxes vs. railroad tax credits is irrelevant. It sure looks like an industry with a dark future to me.
Bruce D Gillings As of the end of Feb our business is up close to 10% and if we had more capacity we could be doing more like 20% but the trouble is finding 2 things for us qualified drivers or trainees that can make it through our training program. We are trying to lease more Owner Operators as fast as we can but they have to meet our requirements. Our drivers are running more miles if they can while staying in the HOS regulations. At the end of the day, however, it comes down to: is the culture of today’s railroads moving towards meeting shipper needs, or away from it? The world of shipping is changing: as I noted, shipping costs are now evaluated as a part of supply chain costs. And the simplicity and reliability of trucking has a huge advantage over railroads. The complaints about trucking these days are mostly related to capacity from a booming economy. Service has suffered in some instances, but everyone understands why and that it is not the CULTURE of trucking that is the problem; it is a business surge supply and demand issue. The complaints about railroading are legion, and they suggest an industry hell-bent on doing things their way and thinking they are fine. It is a land-barge bulk mentality, and they are trying to fit everyone into that category. That is a cultural issue. And even Matt Rose, while arguing against PSR, leads a railroad that is moving in that direction in long, under-powered trains, mistreatment of crews, cutting back on operating crews and MOW and equipment maintenance. And the industry, rather than break into a large-railroad wholesaler / small railroad retailer model, continues to screw anyone that doesn’t fit its paradigm of how to ship. So perhaps the discussions on trucker taxes vs. railroad tax credits is irrelevant. It sure looks like an industry with a dark future to me.
As of the end of Feb our business is up close to 10% and if we had more capacity we could be doing more like 20% but the trouble is finding 2 things for us qualified drivers or trainees that can make it through our training program. We are trying to lease more Owner Operators as fast as we can but they have to meet our requirements. Our drivers are running more miles if they can while staying in the HOS regulations.
To provide for the future, both the Chair (Democrat) and Ranking Member (GOP) of the House Highway and Infrastructure Committe are in agreement that it is time to shift funding to a VMT (Vehicle Mileage Tax or Vehicle Miles Traveled Tax), as do most of the members of that committee. This method is used experimentally in Oregon.
Bruce - good post. Cheap trucking serves consumers, although we pay for it in a variety of ways. One of the things I would like to read in the magazine is a very hard hitting ongoing anti-RR series. And I say that as pro Amtrak and pro freight trains. Unit trains are problimatic to the economy of my state - they contribute some, but after subtracting the negatives not so much as many think.
ROBIN LUETHEUnit trains are problimatic to the economy of my state - they contribute some, but after subtracting the negatives not so much as many think.
Would you please elaborate on this claim? I think it could use some explanation.
ROBIN LUETHE Unit trains are problimatic to the economy of my state - they contribute some, but after subtracting the negatives not so much as many think.
What state do you represent with your assertion? What are the negatives from your view point?
I also would like clarification as to how they hurt your state. Though I keep wondering what the effect of taking all that coal out of Wyoming does to the "wide open spaces"
Electroliner 1935I also would like clarification as to how they hurt your state. Though I keep wondering what the effect of taking all that coal out of Wyoming does to the "wide open spaces"
CSX & NS have been taking coal out of West Virginia for the better part of 150 years in train load quantities - and the state is still there mountains, country roads and all!
Last Spring I got distracted by other things, and failed to respond to two very significant and thoughtful posts in this thread, from Greyhounds (I’m capitalizing his handle, for clarity) and Bruce D Gillings. Both of them were responding to me, so I apologize. I spend too much time these days on political blogs, and not enough on trains.
Anyway, I was thinking this morning about an encounter I had with a trucker back in August, and that reminded me that I had left this discussion hanging. My wife and I had been returning to home in Framingham, MA, with our little Casita travel trailer, from our daughter’s home in Powhatan, VA. We stopped for lunch in a rest area on I81 in PA, parking incongruously alongside the big 18-wheelers because of the trailer.
One of the trucks beside us was a handsome red Kenworth with a sleeper cab and a couple of big long lumps covered with tarps on a flatbed trailer. I was puzzling over the cargo when the driver, a friendly middle-aged fellow appeared. He said he was carrying coils of sheet metal, aluminum, from a mill in Mississippi to a company in northern New York that makes storm doors.
I volunteered that I had often seen special railroad cars carrying sheet-metal coils, and wondered why they would be shipping such a long distance by truck, rather than by rail. As I recall, he said that they do ship by rail, but when time is important, trucks are faster. That fits in well with what Greyhounds said above:
For simplicity we can break down rail freight transportation in to five cost centers. 1) collection - getting the loads to the rail terminal 2) aggregation - holding the loads to make up a train of economical size (to include loading them on the train) 3) line haul - the movement of the train from origin terminal to destination terminal 4) sorting - getting the loads off the train and organized by final destination 5) delivery - getting the loads from the rail terminal to the receiver The railroads have a significant advantage in only #3 . . . It's the other four cost centers that favor trucks. They basically don't exist for truckload freight. A driver just hooks to the load and takes it from shipper to receiver. In other words, it's the terminal costs of rail freight that are the problem.
The railroads have a significant advantage in only #3 . . . It's the other four cost centers that favor trucks. They basically don't exist for truckload freight. A driver just hooks to the load and takes it from shipper to receiver. In other words, it's the terminal costs of rail freight that are the problem.
Greyhounds goes on to draw the more-or-less obvious conclusion:
Clearly one of those factors is time, and apparently in this example dock-to-dock transport time has overridden even the expected ‘line haul’ savings, in this case over a distance of 1,000 to 1,500 miles. What does that tell us about trucks versus trains? That trucks are more flexible, because they bypass Greyhounds’ steps 1, 2, 4, and 5.
Of course other factors can come into play. A lot of truckloads would drive up over-the-road costs to the point where the highway option might be too expensive, and the shipper might send one or two loads by truck, and the rest by train, assuming the bulk would not be as time-sensitive.
Now Interstate 81 in Pennsylvania is not bad, but in Virginia it’s wall-to-wall trucks, or it used to be. We get off at Harrisburg and head southeast, so I haven’t been down there recently. Have Norfolk-Southern’s improvements over the past decade cut into the north-south truck traffic on I81? The increasing roadway congestion caused by trucks—not to mention the roadway deterioration—has got to be a factor that may not affect individual shipping decisions, but might well begin to influence national policy on shipping, which has (at least in railfans’ minds) favored roads over rails by paying for one and not the other. I have long wondered whether it would make sense for the Federal government to support the rail infrastructure as heavily as it does the highways and air travel.
Bruce D Gillings however suggests a different approach:
the solution is not to have the government take over and own the tracks/infrastructure, but rather to give railroad companies 100% tax credits on infrastructure investment. That would cover maintenance, but more importantly it would cover purchasing of land for updating alignments from 19th Century winding anachronisms into 21st Century iron highways, including the track, signaling, etc; adding/extending sidings and multiple main tracks; purchasing land for new intermodal terminals (becoming prohibitive without such a credit in urban and even suburban places such as the LA Basin’s Inland Empire; Seattle-Tacoma; Denver; MSP; and the majority of Eastern metropolises) and building those terminals; and building rail–rail grade separations. Just as important as the actual money cost is that it would minimize the risk cost that railroads have to pay in the financial markets that truckers do not pay running on publicly-built roads.
Not a bad idea. Not sure how we’d convince a recalcitrant Congress, but as Mr Gillings suggests, it may be a question of changing cultures. He says,
At the end of the day, however, it comes down to: is the culture of today’s railroads moving towards meeting shipper needs, or away from it? The world of shipping is changing: as I noted, shipping costs are now evaluated as a part of supply chain costs. And the simplicity and reliability of trucking has a huge advantage over railroads. . .
But the railroads are stuck in “a land-barge mentality.” What’s needed is a “a large-railroad wholesaler/small railroad retailer model, [that doesn’t continue] to screw anyone that doesn’t fit its paradigm of how to ship.”
Small (regional, short-line) railroads can function as feeders and distributors for large railroads. Realistically, they aren’t going to be as flexible as trucks. But the trucks can’t really handle the volume of interstate commerce. Maybe it’s the trucks that have to be the feeders and distributors for the large railroads. That’s the intermodal model, isn’t it? Just get the goods to the intermodal yards, and essentially eliminate the ‘aggregation’ and ‘sorting’ that create railroad molasses.
Seems to me if the big railroads can write off their infrastructure development and maintenance, they’ll be able to out-compete with trucks for long distance shipping, and dropping off containers to waiting trucks will take care of the delays. Everybody wins, except maybe the short lines. But there are still the commodities that can’t be shipped in containers: there’ll still be a place for the short lines.
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