BNSF shuttle grain trains, Does this mean that BNSF does not want to serve small elevators?

[bobwilcox]

QUOTE: Originally posted by futuremodal
This country's rail system is still a mess, albeit a much retrenched one. Look at how much has been lost in railroad employment, relative market share (especially in terms of $$ share), customer access to rail lines, railroad responsiveness to customer demands, etc. There's enough evidence that railroading was in far better shape pre-Staggers than post-Staggers if you use these benchmarks. Indeed, if it wasn't for PRB coal and free trade policies (which have given new life to COFC) you can almost make a case that Staggers has accellerated the decline of railroading in this country, perhaps by allowing monopolistic management to hang themselves with their own rope, a rope that exists soley due to lack of head to head competition. The point I am trying to make is that neither the pre-Staggers era of comprehensive regulation, nor the post-Staggers era of comprehensive retrenchment, is doing much to guarantee that railroading will finally achieve it's promise.

The only way to guarantee railroading's long term prosperity is to (1)make sure all rail customers have access to competitive rail rates and services (which will dramatically increase market share on the demand side), and (2) equalize the cost of constructing and maintaining the rail infrastructure with the cost allocation associated with constructing and maintaining highways, waterways, and airports, so that we may finally see if indeed railroads would assume a 70% natural market share.

My views on how to achieve this are well known on this forum: Separate the current Class I oligarchy into infrastructure companies and transporter companies, regulate the infrastructure companies as public utilities while providing public track construction via a share of the federal fuel tax (which would be paid by all transportation modes and then reallocated to better reflect intermodal realities) and maintenance support in the form of maintenance tax credits (plus a property tax exemption, recognizing open access rail lines as public right of way by proxy), and then let the rail transporters go at it in a relatively unregulated environment, similar to trucking transporters. Market forces that have been absent since the beginning of the railroad era would finally be unleashed. Some transporters would fail, while others would prosper, and outsiders would finally be able to test their own theories of rail service innovations.

The bottom line is this: If BNSF doesn't want to provide carload or small carset service offerings, then let someone else fill that void. Right now that void is being partially filled by truckers as best as the free market allows, but with predictable long term driver shortages resulting (due to the inherent inability of the trucking genre to handle large volume commodity movements on a consistent efficient basis), it is probably the consensus on this forum that some form of rail transport would be much better at filling that void, and it is a consensus that is well founded. But this can only occur if the proprietary closed acces system is opened up to competitors, or if we can somehow return to the days of multiple railroad company tracks laid into each customer's facility.

Even the most ardent anti-open access opponents would probably prefer this scenario to that of pre-Stagger's regulation.

You certainly have a vision but it takes a majority in each House to pass this into law. None of the 537 people involved want to do that.

[MP173]

Great discussion.

I am not well enough versed to comment on what the current railroad rules and regs are....but I sell for a living and I completely understand the issues of costs and markets. I live it daily.

To me it is real simple about grain. There is very little natural competition for moving grain long distances, other than by water. Trucking is not an option. Thus, market conditions for pricing will exist.

When a company has leverage, it should utilize that leverage. You think BNSF's pricing is bad, take a look at Microsoft. What about the current situation for Exxon Mobile? Compare to GM. Who has the leverage? And how long can that leverage last? Take it while you can.

Powder River Coal pricing has fallen in the past years. Why? Competition. Now with the possibility of another carrier entering the market, the pricing will fall even more. The buyers of this coal understand this. They also control as much of the process as they can buy owning their own fleet of cars.

One of my customers is ADM. They own or control over 13,000 railcars. Let me repeat that ...13,000 CARS! No doubt to control costs and to have more leverage with the railroads.

As Bob indicated, the profit margins on various accounts and commodities run the gamut. That is the realities of business today. You take certain business because you must in order to cover overhead and keep the company moving. Other accounts you find are extremely profitable. A strong marketing and sales department of any company, any industry is constantly finding the right mix of services, products, and pricing to maximize profitability.

Part of that involves developing new business which is profitable which will allow you to replace the unprofitable accounts. In other words, increase your leverage to reduce the other party's leverage.

Perhaps Open Access is the answer, in theory at least. In the practical world, I doubt if we will ever see it occur, except where the marketplace allows it to occur, as it has in the intermodal market segment.

ed

[greyhounds]

Comparing the revenue per unit on an intermodal shipment with the revenue per unit on a grain shipment is not valid.

1) Grain cars generally have at least a 100% empty return. They go out to the export elevator under revenue load, then return empty for no revenue. In contrast, intermodal equipment tends to move both directions under revenue load. The railroad must always produce a round trip. As many locomotives and cars must leave Portland, OR as arrive Portland, OR, otherwise they'd clog the place up. You've got to compare round trip revenue with round trip revenue.

2) The railroads run intermodal from terminal to terminal. There's little switching involved.

3) Intermodal equipment utilization is extreamly high. Cars go from revenue load to revenue load within hours. This doesn't happen with grain.

4) The railroads have "outsourced" virtually everything involved with intermodal except the actual train operation. Contractors operate the terminals, intermodal marketing companies do the selling, TTX provides the flatcars, and many times the customer provides the trailer/container. Some of this takes revenue away from the railroad, but it's not the overall revenue level that counts. It's what you keep.

[MP173]

Amen Greyhound, "It's what you keep."

It sure seems as if you brought up valid points regarding the high utilization rates of the intermodal moves and equipment costs.

Essentially, you must have two trains for one trainload.

Now, this will be more interesting.


ed

[MichaelSol]

QUOTE: Originally posted by greyhounds

Comparing the revenue per unit on an intermodal shipment with the revenue per unit on a grain shipment is not valid.

That's why "cycle time" is the important concept discussed above for grain, as it includes both delivery and return, compared to revenue earned, and that cycle time is extremely important to the quality of revenues earned.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by futuremodal
This country's rail system is still a mess, albeit a much retrenched one. Look at how much has been lost in railroad employment, relative market share (especially in terms of $$ share), customer access to rail lines, railroad responsiveness to customer demands, etc. There's enough evidence that railroading was in far better shape pre-Staggers than post-Staggers if you use these benchmarks. Indeed, if it wasn't for PRB coal and free trade policies (which have given new life to COFC) you can almost make a case that Staggers has accellerated the decline of railroading in this country, perhaps by allowing monopolistic management to hang themselves with their own rope, a rope that exists soley due to lack of head to head competition. The point I am trying to make is that neither the pre-Staggers era of comprehensive regulation, nor the post-Staggers era of comprehensive retrenchment, is doing much to guarantee that railroading will finally achieve it's promise.

The only way to guarantee railroading's long term prosperity is to (1)make sure all rail customers have access to competitive rail rates and services (which will dramatically increase market share on the demand side), and (2) equalize the cost of constructing and maintaining the rail infrastructure with the cost allocation associated with constructing and maintaining highways, waterways, and airports, so that we may finally see if indeed railroads would assume a 70% natural market share.

My views on how to achieve this are well known on this forum: Separate the current Class I oligarchy into infrastructure companies and transporter companies, regulate the infrastructure companies as public utilities while providing public track construction via a share of the federal fuel tax (which would be paid by all transportation modes and then reallocated to better reflect intermodal realities) and maintenance support in the form of maintenance tax credits (plus a property tax exemption, recognizing open access rail lines as public right of way by proxy), and then let the rail transporters go at it in a relatively unregulated environment, similar to trucking transporters. Market forces that have been absent since the beginning of the railroad era would finally be unleashed. Some transporters would fail, while others would prosper, and outsiders would finally be able to test their own theories of rail service innovations.

The bottom line is this: If BNSF doesn't want to provide carload or small carset service offerings, then let someone else fill that void. Right now that void is being partially filled by truckers as best as the free market allows, but with predictable long term driver shortages resulting (due to the inherent inability of the trucking genre to handle large volume commodity movements on a consistent efficient basis), it is probably the consensus on this forum that some form of rail transport would be much better at filling that void, and it is a consensus that is well founded. But this can only occur if the proprietary closed acces system is opened up to competitors, or if we can somehow return to the days of multiple railroad company tracks laid into each customer's facility.

Even the most ardent anti-open access opponents would probably prefer this scenario to that of pre-Stagger's regulation.

You certainly have a vision but it takes a majority in each House to pass this into law. None of the 537 people involved want to do that.

Actually, I would argue that none of those 537 people have the slightest clue about the economic fundamentals of transportation, let alone the negative effects the current closed access rail system has on the economy, such as it's inherent contribution to the U.S. trade deficit (e.g. there are no importers who are captive to any one railroad, while there are a significant number of U.S. exporters who are captive to one of the Class I's). Look at the latest debate over Amtrak funding. Even Republican representatives (who by philosophy should know better) were using the old standby argument of comparing Amtrak funding to highway funding, nevermind that one is a rail passenger service paid for out of the general fund and serving a limited number of constituents, while the other is public owned open access ROW utilized by motor vehicles and funded primarily from user fees. I am still waiting to hear even one politician who can differentiate between passenger services and infrastructure funding, perhaps by causualy mentioning that there is no Ambus, Amair, Amboat, Amblimp, etc. so why do we have an Amtrak? But, rather than re-argue that topic.......

The truth is, the idea of open access is new, perhaps too new to have entered into legislative debates. Part of the problem is that the entities that should be be introducing the topic into the lexicon of public debate (such as those organizations that represent captive rail shippers) seem to rather prefer to reha***he concept of reregulation, a lose-lose proposition for both sides. Meanwhile, the Class I propoganda arm (know collectively as the AAR) did a pretty good job of misrepresenting the open access debate when it was just budding during the late 1990's. If history is any lesson, it will take some kind of economic catastrophy involving railroad/shipper relations before the topic will be able to take it's rightful place in the halls of Congress. Meaning alot of people on both sides have to be hurt financially before Congress will act. So much for the idea of pre-emptive economic policy foresight.

[MichaelSol]

QUOTE: Originally posted by greyhounds

Comparing the revenue per unit on an intermodal shipment with the revenue per unit on a grain shipment is not valid.

I have no idea what this means.

It should be noted, "intermodal" is not a profit center on BNSF. No such thing.

Grain intermodal exists, and is reported in the Ag Group, as a "grain shipment," not in the Consumer Group. "Industrial" intermodal also exists, and is reported in the Industrial Group, not the Consumer Group. Indeed, grain, corn and soybeans, in containers, are uses for the Consumer Group containers on the return leg, as a credit to a "grain shipment." The Ag Group gets the credit, not the Consumer Group. There is no "Intermodal Group."

What is misleading is to say that "grain shipments" are entirely different than "intermodal shipments" because that is not true. Ag products ship intermodal on BNSF. The United States does not ship a lot of Consumer Group goods back insofar as Import/Export is concerned, but does ship Ag and Industrial. Ag and Industrial exports are what balance out Consumer imports, insofar as intermodal is concerned.

Greyhounds, would you agree or disagree?

Best regards, Michael Sol

[arbfbe]

futuremodal,

Now that the US Supreme court has loosened the rules against immenent domain, perhaps the states, counties or even a city or two can sieze the tracks in their neighborhood to allow public access and open access in order to increase their revenues.

[Murphy Siding]

arbfbe: huh? ? Maybe the local governments would be able to claim eminent domain on the existing tracks and sieze them, to sell them to a developer who would build tracks that would generate more tax dollars? I guess I'm following the logic on that line of thinking. Can you explain please? Thanks!

[bobwilcox]

QUOTE: Originally posted by futuremodal

The truth is, the idea of open access is new, perhaps too new to have entered into legislative debates. Part of the problem is that the entities that should be be introducing the topic into the lexicon of public debate (such as those organizations that represent captive rail shippers) seem to rather prefer to reha***he concept of reregulation, a lose-lose proposition for both sides. Meanwhile, the Class I propoganda arm (know collectively as the AAR) did a pretty good job of misrepresenting the open access debate when it was just budding during the late 1990's. If history is any lesson, it will take some kind of economic catastrophy involving railroad/shipper relations before the topic will be able to take it's rightful place in the halls of Congress. Meaning alot of people on both sides have to be hurt financially before Congress will act. So much for the idea of pre-emptive economic policy foresight.

I think your correct about Congress not wanting to get involved untill there is a crisis. There was a lot of blah, blah, blah about the banckrupt Penn Central untill GM, Ford and Chrysler went to a Senate hearing and gave their lay off forecast if PC stopped operations. It was about 10,000 people in the first week with the collapse of the auto industry within 90 days. Since laid off UAW members tend to vote in their spare time, we got CR legislation very shortly after that hearing.

The ideas put into Staggers were just think tank stuff untill CR management told Congress deregulation would allow CR to stand on there own and thereby reduce the Federal deficit. Since that was back in a day when someone actually cared about the deficit Staggers was passed within a few months.

The 35 year soap opera concerning Amtrak funding is just absurb. Recently the Amtrak board put out a very good plan to start a serious discussion but everyone in the White House and Congress did the same old dance. I am worried that Amtrak will lose its ability to attrack good leadership and we will go back to the "glide path to self sufficiency" bipartisine silliness of the 1990s.

If you do not know about Asa Whitney I suggest you look him up in David Bain's Empire Express , ISBN 0-670-80889-x. He was a tireless promoter of a transcontintal railroad from the Missouri River to the Pacific Coast. Everyone else thought it was a pipe dream. How would it be financed? In 1843 he proposed the novel idea to Congress that the government pay for a railroad with land grants. He spoke tirelessly about a Transcontiental RR. He was the force that caused the Army surveys in the 1850s. He was the one that pushed his ideas into the Republican Party's first platform. He withdrew into private life but he lived to see the golden spike at Promontory.

The Class I have not made their cost of capital for over 75 years. Therefore the country is way behind in its rail plant investment. Someday it will come to a head. Asa Whitney did not have the internet to sell his ideas but you do...

[Anonymous]

QUOTE: Originally posted by arbfbe

futuremodal,

Now that the US Supreme court has loosened the rules against immenent domain, perhaps the states, counties or even a city or two can sieze the tracks in their neighborhood to allow public access and open access in order to increase their revenues.

More than likely, the local governments would use this new right of eminent domain to take out a rail line and put in a strip mall. Commercial developments tend to generate more tax revenue than private transportation ROW's.

But, in reality, I don't think you can use eminent domain to take over property that originally came about via eminent domain. Whose right of eminent domain would the courts exonerate? Can one fight an edict of eminent domain with their own eminent domain edict? Back and forth, back and forth, and the winner is the one with the best paid lawyers.

The Supreme Court may have really opened up a Pandora's Box on this one!

[dblink02]

Here in Burlington, WI the CN's former WC has a relatively small co-op elevator that ships 25 carloads of corn, twice a month to Chicago where it is trurned into corn syrup for Pepsi-Co. They are force to pay a $600 per train, fuel surcharge. Ths CN's reason for this is that they have to send an extra locomotive down from Fon du Lac that would otherwise not be necessary. Plus, all of the cars owned by non-CN railroads or leased cars, that sit on the loading track, they are charged a fee for that as well. They are even considering extending the loading track to serve the loader faster, but CN is reluctant to pay for any of it even though it will mean faster loading, which will mean as many as 2-3 more trainloads per month. In Whitewater,WI, the same Co-op is served by the WSOR and they have no such problems. The WSOR picked-up almost the entire tab for the xtension to the loading track that was recently made there.
On a side note, the Co-op manager I talked too said they had similar trouble with the SOO when they owned the line, but had no trouble at all with the WC.

[MichaelSol]

QUOTE: Originally posted by MP173

1. Clarify your use of $924 for breakeven per carload.
2. Does that $924 BE apply to grain? If I read correctly it is a system BE.
3. If that is correct, then the consumer product segment, based on your assumption of 1.6 "units" per carload would then be profitable....on the system BE point, and not unprofitable as you indicated.

Well, intermodal is part chicken and part duck. Is it a unit, or two units? Is it one carload, or two?

BNSF I think has resolved the question in favor of treating intermodal in the same fashion as a carload. One unit equals a carload. This is no doubt a result of resolving the significant handling requirements for intermodal. Each container requires direct human intervention to load, and direct human intervention to unload. Each "carload" then requires four direct human actions to achieve railroad transportation, that is, getting the container on the vehicle that will transport it, and then getting it off at its destination, twice for two containers.

An accounting function is to rationalize human activities by translating them into economic terms so that they are comparable. Intermodal being labor intensive compared to, oh, say, grain haulage.

I would guess that in early discussions about whether to define the unit of economic activity as a "unit" or as a "carload," in regard to intermodal, railroad accountants observed that intermodal was treated more accurately, both from a cost and a revenue perspective, as discrete units, and that these were comparable with a conventional "carload."

The semantic problem is that two are loaded onto a "car". But, as we see, railroads don't treat that as a carload. The cost function is considerably different than for a conventional carload.

So, when we see "units/carloads" we see railroading's effort to apply accounting consistency to two different ways of hauling things by rail. That is, an intermodal "unit" is equivalent to railroading's other method of measure, the "carload."

That's been the problem with intermodal. Two units require four direct human interventions, loading and unloading, then four more direct human interventions on the empty haul back. ATSF began to turn the empty haulbacks around by "aggressive pricing" to induce Ag and Industrial users to use containers for exports. Everybody followed. Everybody knows what "aggressive pricing" means.

Milwaukee was a pioneer on intermodal and aggressively built its market share around intermodal to the PNW. Intermodal was a classic example of "disruptive technology," which follows a pattern of an innovation that is typically less profitable than what came before, but which permits 1) a larger overall market to develop (think: computer Hard Drives) and 2) a smaller, more agile company can develop into a market leader (think Toyota vs. GM).

If anyone is interested in doing an MBA case study, Milwaukee Road's exploitation of intermodal is a classic example of taking a disruptive technology and running with it. Milwaukee almost pulled it off. But, even at Milwaukee, there were dissenters to the strategy.

In 1966, T.G. Swartzlander presented a paper at the annual meeting of the American Association of Railroad Superintendents, "TOFC -- Pigs for Profit." Swartzlander was Pennsylvania RR's superintendent of "Truc-Train" operations. Pigs were, he offered, the "most dynamic subject in railroading."

R.R. Brown, Milwaukee Road's General Superintendent, was skeptical. "I don't know what we are getting into with this TOFC. ... I am old-fashioned enough a railroad man to believe that the bread-and-butter of the railroad business is the box car."

Swartzlander: "Oh, that really hurts, sir."

Best regards, Michael Sol

[daveklepper]

Let us NOT get Amtrak into this argument, and remember that no country in the world really runs intercity passenger trains at a profit. Yes, the British have operators making a profit on running certain intercity trains, but that is only because the infrastructure is subisidized under a serparate account.

[Anonymous]

QUOTE: Originally posted by daveklepper

Let us NOT get Amtrak into this argument, and remember that no country in the world really runs intercity passenger trains at a profit. Yes, the British have operators making a profit on running certain intercity trains, but that is only because the infrastructure is subisidized under a serparate account.

The idea that passenger trains cannot run at a profit is a quasi-myth, if only because we have few modern day equivalents of private passenger rail opertations in areas where there is a significant degree of cost equalization regarding the infrastructure. Passenger trains in the U.S. did make money until the speed advantage was lost to autos, buses, and airlines, and even now there are a few examples of tourist trains making money in the U.S., so it certainly isn't impossible to have profitable passenger rail operations where the logistics and target markets are in line with realities.

There is no reason that the right kind of passenger rail operations cannot pay their fully allocated costs and still come up in the black. But we're getting away from the topic thread..........

[Anonymous]

Last week a man (old enough and of a background to know) told me that the UP was offering farmers in his area an extra ten cents per bushel if they would haul this season's corn to the UP's own granaries (elevators, I suppose) and bypass their local elevators.

If this rumor is true, it must make local elevator ops. really angry but might please the farmers (an extra dime for a bushel of any grain is a lot). While I feel for the local elevator owners, let's not forget that a lot of these "local" facilities are owned by the likes of Cargill and Bunge; so that kind of competition vis-a-vis BNSF would not always be the David-and-Goliath battle we might at first envision.

[Anonymous]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by futuremodal

The truth is, the idea of open access is new, perhaps too new to have entered into legislative debates. Part of the problem is that the entities that should be be introducing the topic into the lexicon of public debate (such as those organizations that represent captive rail shippers) seem to rather prefer to reha***he concept of reregulation, a lose-lose proposition for both sides. Meanwhile, the Class I propoganda arm (know collectively as the AAR) did a pretty good job of misrepresenting the open access debate when it was just budding during the late 1990's. If history is any lesson, it will take some kind of economic catastrophy involving railroad/shipper relations before the topic will be able to take it's rightful place in the halls of Congress. Meaning alot of people on both sides have to be hurt financially before Congress will act. So much for the idea of pre-emptive economic policy foresight.

I think your correct about Congress not wanting to get involved untill there is a crisis. There was a lot of blah, blah, blah about the banckrupt Penn Central untill GM, Ford and Chrysler went to a Senate hearing and gave their lay off forecast if PC stopped operations. It was about 10,000 people in the first week with the collapse of the auto industry within 90 days. Since laid off UAW members tend to vote in their spare time, we got CR legislation very shortly after that hearing.

The ideas put into Staggers were just think tank stuff untill CR management told Congress deregulation would allow CR to stand on there own and thereby reduce the Federal deficit. Since that was back in a day when someone actually cared about the deficit Staggers was passed within a few months.

The 35 year soap opera concerning Amtrak funding is just absurb. Recently the Amtrak board put out a very good plan to start a serious discussion but everyone in the White House and Congress did the same old dance. I am worried that Amtrak will lose its ability to attrack good leadership and we will go back to the "glide path to self sufficiency" bipartisine silliness of the 1990s.

If you do not know about Asa Whitney I suggest you look him up in David Bain's Empire Express , ISBN 0-670-80889-x. He was a tireless promoter of a transcontintal railroad from the Missouri River to the Pacific Coast. Everyone else thought it was a pipe dream. How would it be financed? In 1843 he proposed the novel idea to Congress that the government pay for a railroad with land grants. He spoke tirelessly about a Transcontiental RR. He was the force that caused the Army surveys in the 1850s. He was the one that pushed his ideas into the Republican Party's first platform. He withdrew into private life but he lived to see the golden spike at Promontory.

The Class I have not made their cost of capital for over 75 years. Therefore the country is way behind in its rail plant investment. Someday it will come to a head. Asa Whitney did not have the internet to sell his ideas but you do...

It amazes me on how dependent the automotive industry is on the railroads.....But the automobile industry lobbys for more money to be spent on roads and not railroads...

[Anonymous]

I'd love to hear what the farmers, or those with rural connections, have to say about this important and stimulating topic.

[Anonymous]

QUOTE: Originally posted by smalling_60626

I'd love to hear what the farmers, or those with rural connections, have to say about this important and stimulating topic.

Farmers want access to competitive bidding for the movement of their agricultural output. That's nothing less than what every shipper in a free market country deserves.

[Murphy Siding]

They have it, unfortunately, it's called a truck.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

They have it, unfortunately, it's called a truck.

Hardly.

Calling a truck the competitive alternative to railcar service is like calling a Volkswagon bug the competitive alternative to the Greyhound bus. When dealing in bulk quantities, you need competitive access to more than one form of transporting bulk commodities. When rail shippers are captive to one railroad, they do not have access to a competitive alternative in the form of the truck. Rather, they are utilizing the nickel and dime alternative to the million dollar problem.

[Murphy Siding]

In our part of the country, a lot of farm commodities are shipped out on trucks because the trucks are more competitive than rail. In a perfect world, every shipper in a free market country would deserve competitve bidding on the movement of their agricultural products. Competition requires 2 or more parties bidding on the price. It makes little difference if the 2 bidders are railroads,or trucks,or barges,or Great Lake freighters.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

In our part of the country, a lot of farm commodities are shipped out on trucks because the trucks are more competitive than rail. In a perfect world, every shipper in a free market country would deserve competitve bidding on the movement of their agricultural products. Competition requires 2 or more parties bidding on the price. It makes little difference if the 2 bidders are railroads,or trucks,or barges,or Great Lake freighters.

I would venture a guess that those farm commodities are shipped out by truck because the truckers are more responsive to the desires of the shipper, not necessarily because they are more competitive. In the perfect world, trucks would only be used to haul the commodities from the farm to the nearest railhead. There was a time when railroads were more responsive to the desires of shippers, but then again there were more railroads to go around. Now, our economy takes a hit every time something is shipper out by truck long distance rather than rail because the greatly diminished closed access rail system has skewed the natural transportation market.

And rather than "two or more", de facto competition starts with three or more. It's called the theory of triopoly.

[CSSHEGEWISCH]

FM: In your ongoing rant in favor of seizing private property in the name of "open (?) access", you have implied that it is the duty of management to go after every last piece of business available. As has been pointed out in other threads, a firm may opt not to pursue certain business opportunities because they may not cover costs or may not be sufficiently profitable. Small grain elevators, small lumber yards that ship primarily by truck, etc. may be more bother than they're worth to a railroad.

The reason a railroad is in business is to make a buck for the shareholders. If turning down certain business improves the rate of return for the shareholders, then it is the duty of management to make that decision.

[Anonymous]

Gotta go with Hegewisch on this one. Because truckers are "more responsive to the desires of the shipper," that MAKES them more competitive. Or, if the railroads bow out and only truckers remain, then their only competition is fellow truckers.

[Anonymous]

"...not pursuing business"! What a concept. Only works when one has monopoly power.

Let's also clarify. Truckers are NOT more price competitive than railroads. I haven't seen too many situations outside shorthaul corridors where nominal truck rates were lower than nominal rail rates. When we say that truckers are more "responsive", it simply means they're actually doing what the railroads in theory should be doing. It's not a situation of the railroad not covering their costs or not making "sufficient" profit (Hey, CSSH....., define "sufficient" profit. Is it 10% above costs? 20%? 100%? The answer is: Exactly one penny above all cost allocations. BTW, it's only a "rant" to those who don't have the cognitive ability to derive logic and reason). Rather, it's what every single economists predicts would happen when a monopoly market is created. Monopolists are very inefficient in their business approach, and this begins to show in examples of them turning down perfectly profitable business opportunities.

BNSF turns down the opportunity to serve smaller elevators because they engender monopoly characteristics, not because such service is "not sufficiently profitable". It is sufficiently profitable to those who deal with real competition each day.

[jeaton]

Oh then, capacity is irrelevant? Rant it is.

[Murphy Siding]

BNSF turns down the opportunity to serve smaller elevators simply because they can more money easier somewhere else. It's called capitalism and it's what makes our economy go round.

[bobwilcox]

QUOTE: Originally posted by futuremodal
[ It is sufficiently profitable to those who deal with real competition each day.

Before you continue with another rant about the evil BNSF how about letting us know exactly what real business competition you personally have ever dealt with. I think the answer is you never have but I look forward to knowing more about your business experience.

[Anonymous]

OF COURSE businesses turn down business all the time if it is of insufficient utility. They simply respond to underlying macroeconomic factors in deciding their microeconomic reach (tragic example: in the late 1970s investing in Treasuries or money markets made more money than most ROI, so the economy froze shut). Or, to use the homely metaphor, many time businesses will stick to the core and keep the bird in the hand instead of going for the two in the bush...

I can't tell you how many times in my life I've talked to moving van companies or full-service garages or photo restorers or telephone operators and been told something along the likes of "I'd be happy to do it for you, but the price I'd have to charge would be prohibitive and unfair to you because (your household furnishings are below the normal minimum weight we charge/ we're not set up to do oil changes/ we specialize in weddings and group pictures, not the individual snap/ direcf dialing is now so commonplace that we operators aren't even supposed to put calls through except in an emergency situation) . . . So in your case I'd advise (Hiring a Ryder truck and part-time help/ going to Jiffy Lube/ trying a shop that advertises it works with small orders/ dialing it yourself, one plus area code plus number . . . ).

If anyone wants to say any particular railroad is shortsighted or doesn't know how to do minamax equations or is too conservative with its capital, then fine. But it's their decision! All I can say is from what I've seen railroads are much less monopolistic than in the 19th Century and much less limited than in the pre-Staggers ICC era of the 20th Century--what is noticeable here is that the tenor of the conversation is not that one particular farmer or rancher is left high and dry, but alternate technologies (and I include the Interstate Highway System among them) leave other modes more attractive. Besides, if the railroad mgmt is so idiotic, why on earth would any government out to preserve itself try to FORCE that railroad into an operation at which it obviously does NOT excel. I'm not a total libertarian, government doesn't always guess wrong about economic development, but the point is they do have to guess, they don't have profit motives, careers and restive shareholders to worry about.

I own a small amount of stock in the Norfolk Southern and they've been very good to me in answering my ignorant questions. And you know what? Better me than the federal government.