Farmers complain about BNSF rates to STB

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.

I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

You might be insolvent, might not be able to pay your bills, but you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.

Boy we fought it hard. We ran what I considered to be the best intermodal operation in the country. We went head to head with truckers between Chicago and St. Louis. Our longest realistic haul was 900 miles - and there wasn't much of that.

But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

[bobwilcox]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.

I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

You might be insolvent, might not be able to pay your bills, bt you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.

Boy we fought it hard. We ran what I considered to be the best intermodal operation in the country. We went head to head with truckers between Chicago and St. Louis. Our longest realistic haul was 900 miles - and there wasn't much of that.

But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

The CFO at the C&NW (aka The Best of the Bankrupts) once told us you were not broke untill the banks wouldn't loan you any more money. That never happened to us and later came Employee Ownership, Coal and the UP.

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by MP173

Mileage may be the determining factor for a "rate", but the determining the final "cost" will almost always be based on demand and supply.

Well, these economic platitudes are starting to wear a little thin.

Demand is the greatest where? Supply is the most constricted where?

And the rates are the lowest on those corridors, not the highest.

QUOTE: Originally posted by MP173
...you just realize the necessity to adjust the throttle.

So this explains why rates are lowest where demand is the highest? Well, that is exactly what you are saying. And rates are highest where demand is the lowest because of supply and demand?

I have long been puzzled by these frequent simplistic references to "laws" of supply and demand, because they have made just about zero sense in this context.

The discussion has been about captive and non-captive shippers. The economic fact of life is that supply and demand has nothing to do with it; it is a matter of market share pricing, rather than cost pricing, which leads to plummeting margins for most traffic, especially where demand is the greatest and capacity supply the lowest which is exactly why the railroads are struggling with excessive demand and inadedquate supply -- because they keep lowering the price, not raising it. Except to certain parts of the system where, ironically, there is little congestion and seemingly, lots of supply of train and track capacity.

It does not take an MBA to see that the platitude and the reality are two different things.

Best regards, Michael Sol

Well, this one goes in my book, along with his contention that The Railroad (Milwaukee Road) went broke because it had too much business.

So, supply and demand has nothing to do with prices. You could get the Nobel Prize in Economics if you could actually show that.

[Anonymous]

QUOTE: Originally posted by samfp1943

QUOTE: Originally posted by futuremodal

Yep, just post something about railroad rate gouging, and the ilks will slither up from the cesspool of arrogant idiocy.

Sounds like it must be ilk hunting season in montana, do they use stamps or tags?
Is ilk hunting with howitzers permitted?

Well, you have my permission.[^]

[MP173]

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

It happens everytime Southwest Airlines opens a new market. It happens every time a drug goes generic.

As far as getting a rise out of you...dont think so. I simply responded to your prior statement. I really dont feel the need to attempt to get under anyone's skin. I would like an explanation, tho on the difference between regulated and unregulated business.

Bob Wilcox....glad you understood what I had to say about the logistics management aspect. After I wrote it and was driving around to customers, I realized that a logistics company would probably be better equipped to handle this rather than an ADM or Cargil. They have their hands full right now.

Wow, imagine UPS Logistics getting ahold of that Montana grain and leveraging it with the high paying intermodal stuff! At the standard 40% of freight savings, someone would be happy at UPS. Of course the folks in Montana would probably be wanting to tax UPS.

I wonder why this hasnt been done yet?

ed

[MichaelSol]

QUOTE: Originally posted by greyhounds
Well, this one goes in my book, along with his contention that The Railroad (Milwaukee Road) went broke because it had too much business.

So, supply and demand has nothing to do with prices. You could get the Nobel Prize in Economics if you could actually show that.

Well, these are just little "cute" sessions for you aren' they?

1) Management experts point out that as many businesses fail from being unable to handle business growth, as from lack of business. This occurs when actual growth exceeds self sustainable growth and the company is unable to finance the additional growth. Oddly enough, the standard business model where this occurs almost exactly describes the Milwaukee Road during a period when American Class I's uniformly had difficulty finding outside financing. If the actual growth equals or is less than the SSG, there is little risk of failure due to lack of outside financing. Pretty standard finance stuff.

2) Do you actually know Milwaukee's business, and the revenue and carloadings, 1970-1977? Or just shooting off your mouth as usual on something that you clearly don't know anything about? I have sitting here the Milwaukee Road Station Revenue and Carloading Reports for those years. Want to challenge what they contain? Or is this another hot air attack?

3) Congestion. Lengthened cycle times. Too much demand. Not enough capacity (supply). Prices continue to go down for 20 years. Doesn't matter how you define "competition" -- that's a different concept than "supply." I understand supply and demand just fine. It's the way you define it, contrary to how any economist would define it, that is just bizarre, Orwellian.

QUOTE: I think you may have made another "typo". Being bankrupt is a legal condition, not a financial condition. You're not bankrupt until a judge says you're bankrupt.

4) Bankruptcy. And the last time you appeared in a federal court in a bankruptcy matter? Your professional training and qualification to be defining bankruptcy for anybody? Never, right? Nothing, right? It's a legal term -- how many years of legal training and practice? How many creditors have you represented? How many debtors have you represented? Which railroad bankruptcy proceedings were you involved in? You are admitted to practice in the Northern District or Southern District of Illinois? Have you litigated to the Circuit Court level on bankruptcy matters?

Want to show me and this Forum the place in any of Federal Judge Thomas McMillen's orders where he actually declares the Milwaukee Road "bankrupt"?

I'll wait.

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by MP173

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

"Supply" and "competition", for good reasons, are not the same word.

QUOTE: I would like an explanation, tho on the difference between regulated and unregulated business.

Well, this is getting ridiculous. The definition you offer makes no allowance for regulated rates prior to Staggers, and argues that the process of rate making is exactly the same as post-Staggers.

A statistical analysis shows a considerable difference in the effect of mileage on the rate under regulation as compared to deregulation. Why that might have become a controversial observation to a couple of individuals is a mystery I care little about since the facts speak for themselves.

However, since you define the process of rate-making as independent of regulation, there is no point in continuing the conversation. I have no reason based on other exchanges to think you actually believe that, but since you are now offering the idea that rate deregulation had no effect on how rates are actually set, the topic need not include me any more, since I have nothing to offer on that unusual premise.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by MP173

Supply and demand is quite simple in the case of Montana.

There is a demand for transportation services (grain) and very little supply (rail service). Perhaps I put it into too simple of terms to understand, but when there is an abundance of competition (supply of services) the prices will find equilibrium by falling. Happens all the time.

"Supply" and "competition", for good reasons, are not the same word.

QUOTE: I would like an explanation, tho on the difference between regulated and unregulated business.

Well, this is getting ridiculous. The definition you offer makes no allowance for regulated rates prior to Staggers, and argues that the process of rate making is exactly the same as post-Staggers.

A statistical analysis shows a considerable difference in the effect of mileage on the rate under regulation as compared to deregulation. Why that might have become a controversial observation to a couple of individuals is a mystery I care little about since the facts speak for themselves.

However, since you define the process of rate-making as independent of regulation, there is no point in continuing the conversation. I have no reason based on other exchanges to think you actually believe that, but since you are now offering the idea that rate deregulation had no effect on how rates are actually set, the topic need not include me any more, since I have nothing to offer on that unusual premise.

Best regards, Michael Sol

Well the "statistical analysis" would likely show such a difference. There's no reason, other that stupid, ignorant, government regulaton, to base a freight rate on mileage. There are a lot of other factors to be considered.

Staggers made it easier to "comply with the market", which you have to do, rather than "comply with the regulations", which have no relavance to reality.

Under "Reg" I had Crown Zellerbach come in and request a rate for a filter paper move from Bougalousa, LA to Sheybougan, WI. Now this was going to be a truck-rail-truck move. Bougalousa to Jackson, MS via truck, Jackson to Chicago on the train, and delivery to Sheybougan via another truck. It took months. I had to find a trucker that would do the pickup and negotiate a division of revenue with him. Then I had to find another trucker who would do the Wisconsin run, and strike a deal with him. I finnally got it done. I had to stick the letter documenting the rate in an envelope and send it off the nuts in Washington, DC. They did nothing with it. They had no idea how much revenue we received from the move since they didn't generally bother themselves about "divisions" between carriers.

After "Dereg" I could do it in under a minute. CZ could call and ask. I'd quickly crunch some numbers and say yes or counter with a proposed rate. We could do the trucking ouselves and I didn't have to "Date" trucklines to find a willing partner.

It made things a whole lot better.

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
The Milwaukee was a basket case that went broke. Extending their pricing strategy to the rest of the world through assumption is quite a stretch.

ICC Chairman Daniel K. O'Neal testified to the US Senate in January, 1978 that there were four railroad "basket cases," the Rock Island, the Illinois Central Gulf, The Milwaukee Road and the North Western, but that the other railroads were not far behind.

When Milwaukee petitioned for bankruptcy, it had something like $10 million cash on hand and $38 million accoounts payable. When Stanley Hillman left ICG, it had 0 in the cash drawer and $100 million in accounts payable outstanding. Interestingly, as of December, 1977, the Milwaukee Road was not technically bankrupt, and ICG technically was.

Best regards, Michael Sol

Well, my paychecks were good. Neat trick with zero cash.
...
You might be insolvent, might not be able to pay your bills, but you can't be bankrupt until "The Man" says so. As I said, the ICG never missed a payroll and never went to bankruptcy court. So I guess "technically" we were a going concern.
...
But we never missed a payroll and, unlike the Milwaukee Road, we never tucked our tails between our legs and went to court for protection from our creditors.

Well, considering that this comment is from the same source as the following

QUOTE: QUOTE: Originally posted by greyhounds
And I'm telling you, .... by the amount of subsidies going to the farmers, and by the amount of blaming someone else ....

From what I've read here, the BNSF could haul that wheat for free and those farmers would still need to take confiscated money (a subsidy) from the rest of us.

Milwaukee Road total Federal Government transfers, 1977-1984:
$102,951,000.

Illinois Central Gulf total Federal Government transfers 1977-1987:
$198,145,000.

ICG received 192% more direct federal subsidy than Milwaukee Road. During those years, ICG lost $271,094,000, while Milwaukee Road lost $349,467,000. Despite losing more money than ICG, Milwaukee Road was more solvent and able to cover its losses out of its own resources to a much greater degree than ICG, while ICG was more insolvent and was forced to rely much more heavily on government subsidies and handouts to cover its losses than Milwaukee Road.

Indeed, your paychecks did continue, because you were benefitting from "confiscated money (a subsidy) from the rest of us."

Indeed, Greyhounds, you personally benefitted more than any Milwaukee Road employee from taking "confiscated" money, and more so than any Montana farmer.

Naturally, I see no irony in your allegations, only what I have often suspected.

Best regards,
Michael Sol

[arbfbe]

QUOTE: Originally posted by MP173

I have always maintained that if I were negotiating the Montana wheat rates (for the farmers), I would use a method of tying that freight into a much larger pool of traffic. Large agricultural concerns such as Cargil, ADM, etc possibly have, or should have much favorable rates, based on mileage.

Darn, I wish I had gotten my MBA!

ed

Well, negotiating here is the operant wording. In Montana, there is no negotiation of the rates with the farmers. BNSF sets the rate and the farmers can either take it or leave it. End of negotiations. Yes, Cargill, Conagra and Pillsbury have better rates than what the independent or co-operative elevator operators have.

[Anonymous]

QUOTE: Originally posted by MichaelSol

Milwaukee Road total Federal Government transfers, 1977-1984:
$102,951,000.

Illinois Central Gulf total Federal Government transfers 1977-1987:
$198,145,000.

ICG received 192% more direct federal subsidy than Milwaukee Road.

This sentence should say, "ICG received 92% more than Milwaukee Road," even though the ICG figure is 192% of the Milwaukee figure.

Accuracy gentlemen.

[MichaelSol]

Yup.

best regards, Michael Sol

[Anonymous]

QUOTE: Yup.

lol.

[Anonymous]

Remember, let the free market determine rates via head to head competition among railroad service providers, and the farmers/utilities/manufacturers/producers will have no reason to complain to the feds.

It's as simple as that.