QUOTE: Originally posted by rrandb Nice try Micheal. What I said was many companies charge different prices for the same sevices (products). I offered the airlines as an example. Exact same service with dramatically different prices. Happens everyday. Fred can charge more for his JD mower if he's not next door to HD. He can make the same amount or more per mower as HD but he will never sell as many. The majority of rail shippers are captive to the line they built next to. More so in the west than the developed areas of the coast's or mississippi valley. Being served by more than one rail shipper is the exception not the rule. You yourself stated that grain shippers pay the same or less per carload (when adjusted for inflation) today than they did 30 years ago. There complaint is they are paying more than there competitors are who are shipping from a more cost effective location transportation wise.
QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by jeaton 2. The new laws will have the desired effect of lowering rates charged to formerly captive shippers. As a result there will be reductions in railroad revenue and cash flow, which will mean a reduction in the rate of capacity expansion. Of course, with this remark, you give up the game. You are conceding that railroads are using revenue from captive shippers to finance capacity expansion for non-captive shippers -- i.e. non-captive shipper revenue that does not generate a sufficient rate of return on its own to finance the additional capacity necessary to carry more of it. I happen to agree entirely that is exactly the game, and your diagnosis can be nothing but true, for so long as railroads divert their resources from productive traffice to traffic that does not generate a sufficient rate of return to finance the solutions to the congestion problems created by ... low rates and low rates of return. The old railroad conundrum -- noncompensatory rates -- in a new dress.
QUOTE: Originally posted by jeaton 2. The new laws will have the desired effect of lowering rates charged to formerly captive shippers. As a result there will be reductions in railroad revenue and cash flow, which will mean a reduction in the rate of capacity expansion.
QUOTE: Originally posted by MichaelSol Well, now we know why railroads couldn't earn their cost of capital over the past 80 years. Ken Strawbridge says that "the railroads are not in business to haul freight and run trains. They are in business to increase the wealth of their shareholders." Of course, it's all so easy and clear. If they had just listened to Strawbridge. All railroads had to do was repeat three times, "we are not in the business to haul freight and run trains" and everything would have been just fine, and will be just fine now.
QUOTE: Originally posted by greyhounds But to say, as Sol has done, that the railroads are adding capacity that will dimini***heir income is basically silly.
QUOTE: Originally posted by greyhounds Which is exactly why capcity declined and they're now playing catch up after years of government opression and government forced diversion of profitable freight to highway.
QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds But to say, as Sol has done, that the railroads are adding capacity that will dimini***heir income is basically silly. While it is akin to pounding on a poor dead horse to suggest that Strawbridge makes things up to generate controversy, I said nothing about diminishing income. What I did say was that the income was insufficient to justify the investment.
QUOTE: Originally posted by MichaelSol Of course, with this remark, you give up the game. You are conceding that railroads are using revenue from captive shippers to finance capacity expansion for non-captive shippers -- i.e. non-captive shipper revenue that does not generate a sufficient rate of return on its own to finance the additional capacity necessary to carry more of it. I happen to agree entirely that is exactly the game, and your diagnosis can be nothing but true, for so long as railroads divert their resources from productive traffic to traffic that does not generate a sufficient rate of return to finance the solutions to the congestion problems created by ... low rates and low rates of return. The old railroad conundrum -- noncompensatory rates -- in a new dress.
QUOTE: Originally posted by greyhounds QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds But to say, as Sol has done, that the railroads are adding capacity that will dimini***heir income is basically silly. While it is akin to pounding on a poor dead horse to suggest that Strawbridge makes things up to generate controversy, I said nothing about diminishing income. What I did say was that the income was insufficient to justify the investment. Right here: QUOTE: Originally posted by MichaelSol Of course, with this remark, you give up the game. You are conceding that railroads are using revenue from captive shippers to finance capacity expansion for non-captive shippers -- i.e. non-captive shipper revenue that does not generate a sufficient rate of return on its own to finance the additional capacity necessary to carry more of it. I happen to agree entirely that is exactly the game, and your diagnosis can be nothing but true, for so long as railroads divert their resources from productive traffic to traffic that does not generate a sufficient rate of return to finance the solutions to the congestion problems created by ... low rates and low rates of return. The old railroad conundrum -- noncompensatory rates -- in a new dress. Ken Strawbridge
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
QUOTE: Originally posted by rrandb Location apparently matters to those who feel others are getting a better rate because of where they are shipping to and from.
QUOTE: Since most rail shippers are " captive " the railroads should be making profits in line with the oil companies.
QUOTE: Originally posted by jeaton I suppose if you compare revenue per load "captive" vs. "noncaptive" or even profit per load, the profit per load on the captive shipments might be higher. There is, however, the matter of volume. Maybe 7000 loads a day on the Transcon?
QUOTE: Originally posted by rrandb Since most rail shippers are " captive " the railroads should be making profits in line with the oil companies.
QUOTE: Originally posted by greyhounds No. No business manager in his/her right mind would cross subsidize business and '"divert their resources from productive traffice to traffic that does not generate a sufficient rate of return" Why on earth would any sane person do that? Your statements make no sense.
QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds No. No business manager in his/her right mind would cross subsidize business and '"divert their resources from productive traffice to traffic that does not generate a sufficient rate of return" Why on earth would any sane person do that? Your statements make no sense. Pharmeceutical companies do it all the time with enormous R&D expenses, hoping that one in ten might pay off. IBM did it with PCs for years. Venture capitalists do it for a living. Boeing does it with every plane it develops, looking at overall losses for years on the product, until finally they hit (hopefully) the break even point. In the real world it is fairly common for a variety of reasons, some of them simply being mistakes and business makes a lot of them.
QUOTE: Originally posted by jeaton QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds No. No business manager in his/her right mind would cross subsidize business and '"divert their resources from productive traffice to traffic that does not generate a sufficient rate of return" Why on earth would any sane person do that? Your statements make no sense. Pharmeceutical companies do it all the time with enormous R&D expenses, hoping that one in ten might pay off. IBM did it with PCs for years. Venture capitalists do it for a living. Boeing does it with every plane it develops, looking at overall losses for years on the product, until finally they hit (hopefully) the break even point. In the real world it is fairly common for a variety of reasons, some of them simply being mistakes and business makes a lot of them. But you are saying it is wrong if railroads invest cash generated from one segment of business into a segment that may be earning a lower rate of return?
QUOTE: Originally posted by MichaelSol "Boeing does it with every plane it develops, looking at overall losses for years on the product, until finally they hit (hopefully) the break even point."
QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds Which is exactly why capcity declined and they're now playing catch up after years of government opression and government forced diversion of profitable freight to highway. Deregulation occured 26 years ago, and railroads just "now" decided to play catch-up? Wow. And which current events are you still blaming on the Civil War?
An "expensive model collector"
QUOTE: Originally posted by MichaelSol Strawbridge: "No business manager in his/her right mind would cross subsidize business and "divert their resources from productive traffic to traffic that does not generate a sufficient rate of return"". Strawbridge: "...which is just exactly what you said the railroads are doing." Strawbridge is finally at the point of completely contradicting himself, offering only in his own defense, "boy, this is stupid." Couldn't agree more.
QUOTE: Originally posted by cogload Pharmaceutical companies are selling to a "captive market" protected by patent law. And they have rather large tax breaks (in various parts of the world) to do so. Not a good example.
QUOTE: Originally posted by greyhounds QUOTE: Originally posted by MichaelSol Strawbridge: "No business manager in his/her right mind would cross subsidize business and "divert their resources from productive traffic to traffic that does not generate a sufficient rate of return"". Strawbridge: "...which is just exactly what you said the railroads are doing." Strawbridge is finally at the point of completely contradicting himself, offering only in his own defense, "boy, this is stupid." Couldn't agree more. And just how was that "contradicting myself"? Ken Strawbridge
QUOTE: Originally posted by n012944 QUOTE: Originally posted by MichaelSol QUOTE: Originally posted by greyhounds Which is exactly why capcity declined and they're now playing catch up after years of government opression and government forced diversion of profitable freight to highway. Deregulation occured 26 years ago, and railroads just "now" decided to play catch-up? Wow. And which current events are you still blaming on the Civil War? The capacity issues has more to do with the explosion of imported goods in the last 20 years than dereg.
Thanks to Chris / CopCarSS for my avatar.
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