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Government Sticking Too Much of Its Nose Into Transportation .. Again!

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Posted by tree68 on Thursday, July 8, 2021 11:44 AM

They need to put the shippers and the railroad stockholders in the same room and let them argue about it.  

As we've discussed here before, the shippers would prefer that their goods be moved free, while the stockholders want the maximum possible return on their investment.  The actual railroads are kind of stuck in the middle.

There's middle ground there somewhere, but I would expect a bloody battle to reach it.

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Posted by Ulrich on Thursday, July 8, 2021 12:59 PM

What are they talking about? If I had only ONE competitor I would continue to offer low freight prices.. because I'm fair and a nice person and my one competitor will keep me in check anyway. Yes siree.. Unfortunately Biden is about 50 years too late with this initiative.. the horse is out of the barn and long since gone.. or perhaps a better way to put it.. the train has left the station. 

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Posted by Juniata Man on Thursday, July 8, 2021 2:07 PM

The reciprocal or competitive switching proposed here in the US is similar in nature to the interswitching that has existed in Canada since the mid to late 1980's.

Interswitching along with competitive line rates have certainly not killed Canadian railroads so, there is no reason to believe a similar structure would kill US railroads. 

CW

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Posted by Ulrich on Thursday, July 8, 2021 2:27 PM

Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

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Posted by BaltACD on Thursday, July 8, 2021 2:40 PM

Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

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Posted by Juniata Man on Thursday, July 8, 2021 2:57 PM

Or about half what has resulted from psr...

CW

 

BaltACD

 

Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

 

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

 

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Posted by Ulrich on Thursday, July 8, 2021 3:03 PM

And I wonder how well reciprocal switching works in most of Canada. Let's say you're a shipper in Atlantic Canada's largest city, Halifax. You're not happy with CN's prices so you contact CP for pricing on your five carloads a week. CP's nearest interchange to Halifax is roughly 300 miles away.. not sure how high CP would jump to price that business, but my guess would be not high at all. 

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Posted by CMStPnP on Thursday, July 8, 2021 3:20 PM

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

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Posted by Ulrich on Thursday, July 8, 2021 3:26 PM

CMStPnP

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

 

 

I like that idea, but critics would point out it would cost billions upon billions in this day and age. Maybe if someone like Elon Musk came along it could happen.. someone with the ability to think huge and with the wherewithal to raise the required capitial. 

 

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Posted by Juniata Man on Thursday, July 8, 2021 4:09 PM

Interswitching applies only within a 35 kilometer radius of a physical interchange point so; it wouldn't apply to your Atlantic Canada situation. Rather, the shipper would approach CN and request a competitive line rate to the nearest CP interchange then negotiate with CP for their rate beyond.

I used interswitching extensively prior to retirement because each of our Canadian production sites fell within a zone 1 or 3 for interswitching. I never had an opportunity to try using competitive line rates but, from conversations with industry colleagues they were beneficial at times but, not always. 

CW

Ulrich

And I wonder how well reciprocal switching works in most of Canada. Let's say you're a shipper in Atlantic Canada's largest city, Halifax. You're not happy with CN's prices so you contact CP for pricing on your five carloads a week. CP's nearest interchange to Halifax is roughly 300 miles away.. not sure how high CP would jump to price that business, but my guess would be not high at all. 

 

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Posted by Juniata Man on Thursday, July 8, 2021 4:15 PM

Nimbyism would kill this real quick. Heck, the short line folks who were proposing leasing and reopening UP's Tennessee Pass line ran into a firestorm of opposition from communities along the line. And that railroad is still in place albeit out of service for something like 20-25 years.  

Just imagine the opposition if a railroad attempted to acquire land to build a completely new rail line.

CW

 

CMStPnP

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

 

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Posted by BaltACD on Thursday, July 8, 2021 4:27 PM

Juniata Man
Or about half what has resulted from psr...

CW 

BaltACD 
Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today..  

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

That will be on top of what PSR has dealt the shipping public, not in place of.

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Posted by jeffhergert on Thursday, July 8, 2021 4:30 PM

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

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Posted by Juniata Man on Thursday, July 8, 2021 4:31 PM

The psr induced higher cycle times were usually accompanied by higher rates. At least with reciprocal switching, the extra couple of days should be cheaper.

CW

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Posted by jeffhergert on Thursday, July 8, 2021 4:36 PM

Juniata Man

The psr induced higher cycle times were usually accompanied by higher rates. At least with reciprocal switching, the extra couple of days should be cheaper.

CW

 

Hey, the "enhanced" service that PSR brings customers doesn't come cheap. Laugh

Jeff 

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Posted by CMStPnP on Thursday, July 8, 2021 5:45 PM

Ulrich
I like that idea, but critics would point out it would cost billions upon billions in this day and age. Maybe if someone like Elon Musk came along it could happen.. someone with the ability to think huge and with the wherewithal to raise the required capitial.   

Oh think of the negotiations that would go on between an existing Class I and a shortline about to parallel it's line for a distance in a customer intense area.    I think money would be exchanged or some other sweatheart deal to make sure some lines were never built.   In some circumstances the startup would have a lot of cards in their hands.

Yeah it would cost Billions but maybe limit it to private money or use federal funding only if in the National Interest to reduce congestion.

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:23 PM

You mean the PRR, CNJ, WP et al aren't coming back? DARN! Sixty years on from the beginning of the modern merger movment (N&W and VGN in 1959), there's no way to unscramble the egg. Lots of parallel routes have been torn up (talk to your local Sierra Club about laying down tracks on the neighborhood rail-trail), truncated or otherwise downgraded and/or mutilated to allow traffic to be concentrated on the high density "lanes". And, if you spot something, try getting roadbeds back from the nimbys. 

But, it isn't just rails and ships - Biden has declared war on "bigness" in all business. Economies of scale? What's that? It's being done in the name of "the consumer", of course. I'm all for consumer choice, but that ought to be on the basis of somebody having a better way of serving their needs, not on government fiat. 

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Posted by Juniata Man on Thursday, July 8, 2021 6:29 PM

Jeff:

Insofar as interswitching in Canada; my experience with it was that CN, CP and even CSX near Montreal, tended to submit serious bids for business only when it made sense to them from both a financial and network perspective. Put another way, they didn't go after business simply to grab another carrier by the shorts.

With regard to inclusion of short line and regional carriers in any reciprocal switching proposal here in the US; I can tell you that when we developed the NITL competitive switching proposal, we specifically excluded these smaller railroads. One reason was the hope (naive, I will admit) that by excluding them they would either support or, at the very least, not oppose the proposal. Too; many short lines and most regional railroads connect with more than one Class 1. Since the smaller railroads are generally exponentially easier to work with than a Class 1; elimination of paper barriers that prevent these smaller railroads from actually interchanging with another Class 1 would address the option of using a competing Class 1 without causing financial harm to the smaller railroad.

Personally; my preference would still be to see the US adopt Canadian style interswitching and competitive line rates with the STB establishing the various zone switching charges much like the Transport Board does in Canada. I'm doubtful this is politically possible here in the US though.

CW

 


jeffhergert

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

 

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Posted by flourish96 on Thursday, July 8, 2021 6:29 PM

I'm sure the trucking industry will see no changes while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail just like the pre-Staggers ICC days. I thought this administration was rail friendly and environmentally friendly...

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:32 PM

CMStPnP
to make sure some lines were never built.

What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:37 PM

flourish96
I thought this administration was rail friendly and environmentally friendly...

SUCKER !!

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Posted by Ulrich on Thursday, July 8, 2021 7:04 PM

Reciprocal switching is really only an option for those shippers who already "almost" have two rail shipping options. In many parts of Canada only one carrier is available, and the only realistic option is to use that carrier or another mode like road or ship. But it does seem to work.. the truckers keep a lid on how high rates can go. The railroads can't really charge more than the truckers can charge, and the trucking rates are kept competitive because (unlike rail) there are lots of trucking companies.. hundreds of them specializing in any given lane, thereby keeping rates competitive. 

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Posted by Convicted One on Thursday, July 8, 2021 7:09 PM

flourish96
while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail

Isn't the linked article about the government forcing the railroads to lower their rates? Shouldn't that make  the RRs more price-competitive with trucks? 

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Posted by flourish96 on Thursday, July 8, 2021 7:24 PM

Convicted One

 

 
flourish96
while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail

 

Isn't the linked article about the government forcing the railroads to lower their rates? Shouldn't that make  the RRs more price-competitive with trucks? 

 

 

Ever since trucks became a viable alternative to rail in the 1920s/30s the ICC has shown to set rates higher than what trucking can offer; it wasn't until deregulation in the late 70s and 80s where rail rates started dropping after the ICC gave them their ability to negotiate with shippers directly instead of having to base their rates off of predetermined charts.

So we've been here before, can't say I trust the STB when they say they're going to lower rates; I'm in favor of letting markets figuring out what fair rates are on a case by case basis

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Posted by Convicted One on Thursday, July 8, 2021 8:57 PM

Just me, but I feel that the current admin sincerely wants to do whatever it can to curb inevitable inflation. 

So many businesses are taking advantage of the pandemic to gouge consumers, that I think the gov't is gonna squeeze hard to try and wrestle control.

That's what I think is fueling this story.

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Posted by Murphy Siding on Thursday, July 8, 2021 9:30 PM

BEAUSABRE

 

 
CMStPnP
to make sure some lines were never built.

 

What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

 

I think you just summarized the DM&E fiasco.

Thanks to Chris / CopCarSS for my avatar.

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Posted by PNWRMNM on Thursday, July 8, 2021 9:49 PM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

There is much more to fear from big government than from the railroads and steamship lines.

Mac

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Posted by DSchmitt on Thursday, July 8, 2021 10:05 PM

BEAUSABRE
Biden has declared war on "bigness" in all business.

The "business" that really needs scaling down is the govermnent.

I tried to sell my two cents worth, but no one would give me a plug nickel for it.

I don't have a leg to stand on.

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Posted by CMStPnP on Thursday, July 8, 2021 11:07 PM

BEAUSABRE
What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

WSOR gets anything it wants in Wisconsin.   Laying new track?   No problem the state says, "how much do you need?".    Though WSOR is very careful it has a long-term (10+ years or more) haulage contract on new track that also has other potential.    I am pretty certain we will see further expansion of WSOR via new rail in the next 10 years but not sure how much.

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Posted by Backshop on Friday, July 9, 2021 7:48 AM

PNWRMNM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

There is much more to fear from big government than from the railroads and steamship lines.

Mac

 

Nobody cares about his son other than the "what abouters".  He's not a government official, unlike some who have been accused or charged for working for other governments.

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Posted by Overmod on Friday, July 9, 2021 7:59 AM

Backshop
He's not a government official, unlike some who have been accused or charged for working for other governments.

But he is the child of a government official, definitely more than accused or charged of working for another government, perhaps with some influence more than 'implied' to get what he wanted.  Every excuse in a storm!

Of course I expect this all to start "coming to light" about a year from now, in time for the first Harris administration to start safely after Jan 24 2023... but not long after that date.

Now back to railroading of the actual sort!

I see nothing 'awful' here -- the issues of equity and fairness for all shippers being a major 'incentive' for past regulation, and reciprocal-switching rights even if artificially controlled being far less intrusive than the arrogant misregulation of the bloated post-1920 ICC.  I don't think the sky is falling and an evil 'leftist-socialist cabal' sees this as the camel's nose to the happy world of soak-the-railroads that was played in not-so-recent but still-vivid memory.

That said: something the Biden and Harris administrations are going to need, badly, in a couple of years will be strong corporations and enough rich of the 'wrong' sort to soak for all the programs they'd like to run, and PSR railroads and their 'principals' are an increasingly attractive target... and to be honest I'm coming not to see that as a bad thing.

The likely problem as I see it is the same as in the Eastman years: the people making the stranded-fair-shipping-rate policies are more likely to be lawyers than logistics people.  And to think that Procrustean solutions (like Tier 4 final as applied to locomotive engines) are the expedient way to achieve what they want.

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Posted by charlie hebdo on Friday, July 9, 2021 8:41 AM

Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

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Posted by Overmod on Friday, July 9, 2021 8:50 AM

charlie hebdo
Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

Whether we like it or not, this is an explicitly political topic, and it may be an indication of priorities to be applied to the freight railroad industry.  I do not think President Biden is nearly as pro-freight-railroading as he is pro-passenger, and (as I think I said) I am not averse to his using public policy to deal with some... more rather than less... of the distortions caused by abuse of the idea of "PSR".  That is the focus that I think we should concentrate on, or at least take up seriously, in this sort of thread going forward.

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Posted by SD60MAC9500 on Friday, July 9, 2021 9:07 AM
 

PNWRMNM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

 

Mac

 

 

 

 

charlie hebdo

Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

 

 

Let's have some civil discourse in this conversation..These two comments above me are why threads get locked... I'm asking you all to refrain from personal political attacks and name calling. How you feel about the political arena is obviously your choice, and we are not going to agree with certain actions by the government. We're discussing why the govt. need not get involved in rates as it does not have OPEX (operation expenses) to make the judgement on how rates should be set in the free market.. Please stay on the subject..

 
 
 
 
 
 
 
 
Rahhhhhhhhh!!!!
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Posted by charlie hebdo on Friday, July 9, 2021 9:20 AM

SD60MAC9500
 

 

 
PNWRMNM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

 

Mac

 

 

 

 

 

 

 

 
charlie hebdo

Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

 

 

 

 

Let's have some civil discourse in this conversation..This above me is why threads get locked... I'd like people to refrain from personal political attacks and name calling. How you feel about the political arena is obviously your choice, and we are not going to agree with certain actions by the government. We're discussing why the govt. need not get involved in rates as it does not have OPEX (operation expenses) to make the judgement on how rates should be set in the free market.. Stay on the subject..

 
 
 
 
 
 

Exactly my point,  illustrated in spades by the rightist above with his pejorative. 

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Posted by Overmod on Friday, July 9, 2021 9:29 AM

I see we cross-posted.  Amended accordingly.  As you have quoted the original for reference, I have no hesitation in removing the 'personal' from the post in question.

I look forward to further reading your opinions on the actual topic of civil railroad-related discourse.

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Posted by charlie hebdo on Friday, July 9, 2021 9:29 AM

Overmod

 

 
charlie hebdo
Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

 

As long as the progressives stick to facts they'll have little to fear from me, at least.  Certainly no one intellectually honest can accuse me of being a 'Trumper' for a New York millisecond, and I haven't been able to stomach most of the right wing for decades (most prominently after they flubbed the post-1994 Congressional possibilities, but in sme respects well before that, and from about 2014 on, increasingly so).

 

On the other hand, I know propaganda when I see it, from any side, and I am very familiar with the usual ridicule-the-straw-man's-politics tactic.  It is beneath someone of your intellectual standing and accomplishments to perpetrate it.

Whether we like it or not, this is an explicitly political topic, and it may be an indication of priorities to be applied to the freight railroad industry.  I do not think President Biden is nearly as pro-freight-railroading as he is pro-passenger, and (as I think I said) I am not averse to his using public policy to deal with some... more rather than less... of the distortions caused by abuse of the idea of "PSR".  That is the focus that I think we should concentrate on, or at least take up seriously, in this sort of thread going forward.

 

You are attacking me for my post?  Straw man?   Apparently you have no clue what you are talking about. Several posters on the right (I was not specifically referring to you, but you think "the song is about you,  don't you?") made blatantly political remarks. I commented that typically it seems they think that is just fine but if a progressive has the temerity to challenge these "revealed truths" an adequate hominem attack follows.  That is exactly what you have done.  

Regulation issues should not be political as it is really about economics.  Capitalism and mixed economies seem to work better,  more efficiently with competition and the avoidance of centralized control, whether from DC or Wall Street and s few board rooms.  Lacking that, regulation can at least partially substitute. 

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Posted by SD60MAC9500 on Friday, July 9, 2021 9:31 AM
 

charlie hebdo

 

 
SD60MAC9500
 

 

 
PNWRMNM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

 

Mac

 

 

 

 

 

 

 

 
charlie hebdo

Why is it that the right wingers/Trumpers on here think their highly political and often offensive posts are just fine but they go running to the moderator as soon as someone progressive responds? 

 

 

 

 

Let's have some civil discourse in this conversation..This above me is why threads get locked... I'd like people to refrain from personal political attacks and name calling. How you feel about the political arena is obviously your choice, and we are not going to agree with certain actions by the government. We're discussing why the govt. need not get involved in rates as it does not have OPEX (operation expenses) to make the judgement on how rates should be set in the free market.. Stay on the subject..

 
 
 
 
 
 

 

 

Exactly my point,  illustrated in spades by the rightist above with his pejorative. 

 

Charlie you're inlcuded in my last comment. I was speaking specifically to your and Mac's comment.. Stop it!

 
 
Rahhhhhhhhh!!!!
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Posted by charlie hebdo on Friday, July 9, 2021 9:41 AM

You make my point.  Double standard. I said nothing offensive but you lump me in the same pocket as MAC who used political insults. Very different.

I realize that progressives are a minority on here,  partly because of the double standard and many have chosen to depart and let the rightists prevail in at least this one pipsqueak arena as a majority. 

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Posted by Overmod on Friday, July 9, 2021 9:47 AM

charlie hebdo
Regulation issues should not be political as it is really about economics.

The issue, though, being in part, as Weber didn't discuss but Keynes did, the imposition of correct 'regulation' of pure capitalist and 'market-based' activity.   Where I think the discussion might point is that there is regulation that is Pareto-optimal, establishing more of a 'level playing field' for the competent, vs. regulation that is an exercise of punitive or restrictive power.  In this sense, reducing the 'natural monopolist's' tendency to charge what the traffic will bear "because they can" is not an interference with the idea that a 'market price' is based on fair marginal profit over factor costs.  (As someone noted in a different context, all the putative advantages of PSR ought to be bringing rates down, and increasing the potential market for additional business, in an undistorted free-market economy...)

Capitalism and mixed economies seem to work better,  more efficiently with competition and the avoidance of centralized control, whether from DC or Wall Street and s few board rooms.

But again, only when run without 'gaming the system', or exploiting transient advantage merely for short-term perceived gain, or for playing dog-in-the-manger to reduce structural competition or enhance effective barriers to entry.

Lacking that, regulation can at least partially substitute.

It certainly can... in many cases, should... and arguably in a great many contexts must.

But I would argue that it be objective, non-ideological, and to the greatest extent possible Pareto-optimal.

(And that it address 'getting things done' for the industry as a functioning part of the economy, not assuring the greatest nominal fiduciary-responsibility return to the 'shareholders' of stakeholders who "matter".

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Posted by Euclid on Friday, July 9, 2021 10:23 AM

 

Is there a need for an executive order to increase competition and combat aggressive pricing by co-called “monopoly railroads”?  What can a shipper accomplish by challenging inflated rates?  What is an inflated rate?  What is a monopoly railroad?

 

https://thehill.com/homenews/administration/562032-biden-to-issue-executive-order-on-consolidation-in-railroads-ocean

 

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Posted by Overmod on Friday, July 9, 2021 10:45 AM

What Hunter S. Thompson said about 'that sickening here-we-go feeling'... Smile

Euclid
Is there a need for an executive order to increase competition and combat aggressive pricing by co-called “monopoly railroads”?

He thinks there is.  Are you going to argue it with him?

It's an initial shot; I think it's the lowest-hanging fruit to be 'proactive' about if he intends to change some of the ways the freight-railroad industry does things.  (I expect it will not be the last, but that's not material to the present discussion...)

What can a shipper accomplish by challenging inflated rates?

They might, you know, have to pay less for what they get?  They might feel they've helped strike a blow to get excessive charges or perceived 'gouging' addressed?

What is an inflated rate?

There is a rate that constitutes fair profit.  That is the thing that fair competition helps a market economy converge on: the costs of providing the service plus a fair profit above all overhead cost and allowance for risk.

"Inflated" is a charge above that, solely due to uncompetitive factors.  Biden and many others consider single-access customers to often suffer this.

One of the concerns does represent the stranded cost of what may be expensive 'premise access' or the opportunity costs associating with allowing another railroad to execute reciprocal switching.  Just as with other considerations of infrastructure, those things may be in some cases objectively very large.  But that to me is something that can be objectively discussed as part of determination of a fair policy, or even included in an executive order as a factor.

What is a monopoly railroad?
In this context: a railroad that controls the only access to a particular shipper.  Note that 'monopoly' here doesn't refer to all shipping options, just to the ability to get railcars in and out if the premise.  In the context of Biden's order, it's pretty clear what was meant.

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Posted by Juniata Man on Friday, July 9, 2021 10:46 AM

I doubt the executive order does much beyond send a strong message to the STB and FMC. These two agencies are, after all, the ones actually responsible for keeping an eye on railroads and maritime interests.

CW

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Posted by Convicted One on Friday, July 9, 2021 10:50 AM

Euclid
Is there a need for an executive order to increase competition and combat aggressive pricing by co-called “monopoly railroads”?

Personally, I don't believe there is any question that the government err'ed   in allowing some of the anti-competitive mergers of the past. So, it's not unreasonable to expect their "participation" in moderating against abuse by some of the monsters that rose under their watch.

Not completely dissimilar to way the electric utilities that dominate their territories have been forced to enjoy their monoplolies "under supervision". 

When that high barrier to entry begins to work against the general good of the republic, guidance is often necessary (IMO) to keep the overly enthusiastic in check. 

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Posted by Convicted One on Friday, July 9, 2021 10:53 AM

Juniata Man
I doubt the executive order does much beyond send a strong message to the STB and FMC

I found the link provided by the O.P.  to be especially illuminating in that regard. 

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Posted by Backshop on Friday, July 9, 2021 11:04 AM

Overmod
 

Of course I expect this all to start "coming to light" about a year from now, in time for the first Harris administration to start safely after Jan 24 2023... but not long after that date.

The presidential term of office is only two years now?  How interesting...

I also find it laughable when someone says "let's get back to railroading" while they use that same post to make one more political comment.

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Posted by Overmod on Friday, July 9, 2021 11:06 AM

Convicted One
I found the link provided by the O.P.  to be especially illuminating in that regard. 

See what Wilner says... and then what Smathers had to say!

Where I'd start looking as of the official issuance of this executive order is the likely influence, going forward, on the KCS-CN approval...

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Posted by Convicted One on Friday, July 9, 2021 11:43 AM

I'm not a big proponent of government. But at the same time, I believe that very little happens for no reason. 

The railroads have no qualms about using a big stick, when one is available to them.  Who else is there to respond in like-kind  fashion?

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Posted by Convicted One on Friday, July 9, 2021 11:46 AM

Overmod
See what Wilner say

 

Bingo! That was my point.

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Posted by Convicted One on Friday, July 9, 2021 11:50 AM

Regarding that "big stick":...I'm forced to remember the "blocked crossings" debates, where several here enthusiastically pointed out that the RR's are subordinate only to federal jurisdiction, not state.

"Can you hear me now?"  Whistling

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Posted by Overmod on Friday, July 9, 2021 12:33 PM

Backshop
The presidential term of office is only two years now?  How interesting...

More interesting than you think.

A Vice-President taking office less than two years from the end of a term does not have that 'count' toward the two-term restriction.  So a presumptive Harris administration could run 10 years rather than be limited to eight.

What will be amusing is the timing to ease President Biden out just by that point -- not before, and probably not too much after.

Personally, I find it laughable that someone who to date has contributed nothing remotely railroad-related to this discussion thinks they have the standing to criticize... but that doesn't matter either.

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Posted by Backshop on Friday, July 9, 2021 12:54 PM

Overmod

 

 
Backshop
The presidential term of office is only two years now?  How interesting...

 

More interesting than you think.

 

A Vice-President taking office less than two years from the end of a term does not have that 'count' toward the two-term restriction.  So a presumptive Harris administration could run 10 years rather than he limited to eight.

What will be amusing is the timing to ease President Biden out just by that point -- not before, and probably not too much after.

Personally, I find it laughable that someone who to date has contributed nothing remotely railroad-related to this discussion thinks they have the standing to criticize... but that doesn't matter either.

 

I see that you're a disciple of QAnon.  How quaint!

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Posted by Overmod on Friday, July 9, 2021 1:11 PM

Backshop
I see that you're a disciple of QAnon. 

If you see that, you need better corrective lenses.

Frankly, I like Harris and wouldn't mind seeing her have more than two statutory terms.  I'm just upset at the presumptive machination -- hopefully it will not develop according to "plan".

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Posted by Ulrich on Friday, July 9, 2021 1:19 PM

Convicted One

I'm not a big proponent of government. But at the same time, I believe that very little happens for no reason. 

The railroads have no qualms about using a big stick, when one is available to them.  Who else is there to respond in like-kind  fashion?

 

Same can be said for government.. I would prefer a freer "invisible hand" that is guided by supply and demand market forces over the "father knows best" mechanism that is the hallmark of every command economy. We're not so far off... CN and KCS are patiently awaiting the decision of the STB on whether their merger proposal will go ahead or not. Its up to five people to decide that.. they can give the thumbs up or the thumbs down. That's alot of power vested in five people.. 

 

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Posted by rdamon on Friday, July 9, 2021 1:31 PM

First a $10B defense contract to Microsoft cancelled and now this.  Hmmm to the benefit of AZNU?

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Posted by Convicted One on Friday, July 9, 2021 1:49 PM

Ulrich
. I would prefer a freer "invisible hand" that is guided by supply and demand market forces over the "father knows best" mechanism

Would you consider the way CSX butchered the former B&O  Illinois Sub,.. or "hemmed in" the western end of the former PRR.... to be "supply and demand" driven? I wouldn't. Seems like they were more intent upon making sure the line would never  pose any potential to compete with them, ever.

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Posted by Ulrich on Friday, July 9, 2021 1:57 PM

Convicted One

 

 
Ulrich
. I would prefer a freer "invisible hand" that is guided by supply and demand market forces over the "father knows best" mechanism

 

Would you consider the way CSX butchered the former B&O  Illinois Sub,.. or "hemmed in" the western end of the former PRR.... to be "supply and demand" driven? I wouldn't. Seems like they were more intent upon making sure the line would never  pose any potential to compete with them, ever.

 

 

Absolutely. but I never said it works perfectly. People are at the heart of all decisions, whether they're command economy driven or driven by market forces. I'm free to make good and bad decisions, and I'm free to reap the rewards and penalties of both. Free market does not mean all decisions are good all of the time.. 

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Posted by Backshop on Friday, July 9, 2021 2:12 PM

Overmod
Backshop
I see that you're a disciple of QAnon. 

 

If you see that, you need better corrective lenses.

 

Frankly, I like Harris and wouldn't mind seeing her have more than two statutory terms.  I'm just upset at the presumptive machination -- hopefully it will not develop according to "plan".

 

OOOH!  "The Plan".  This is getting more comical all the time.

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Posted by BaltACD on Friday, July 9, 2021 2:12 PM

Ulrich
 
Convicted One 
Ulrich
. I would prefer a freer "invisible hand" that is guided by supply and demand market forces over the "father knows best" mechanism 

Would you consider the way CSX butchered the former B&O  Illinois Sub,.. or "hemmed in" the western end of the former PRR.... to be "supply and demand" driven? I wouldn't. Seems like they were more intent upon making sure the line would never  pose any potential to compete with them, ever. 

Absolutely. but I never said it works perfectly. People are at the heart of all decisions, whether they're command economy driven or driven by market forces. I'm free to make good and bad decisions, and I'm free to reap the rewards and penalties of both. Free market does not mean all decisions are good all of the time.. 

Considering the economic power of the players in today's 'free market' most of the 'decisions' that are getting made are intended to monopolize and single source whatever is the product or service and therefore put the users at the mercy of the providers.

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Posted by Ulrich on Friday, July 9, 2021 2:25 PM

BaltACD

 

 
Ulrich
 
Convicted One 
Ulrich
. I would prefer a freer "invisible hand" that is guided by supply and demand market forces over the "father knows best" mechanism 

Would you consider the way CSX butchered the former B&O  Illinois Sub,.. or "hemmed in" the western end of the former PRR.... to be "supply and demand" driven? I wouldn't. Seems like they were more intent upon making sure the line would never  pose any potential to compete with them, ever. 

Absolutely. but I never said it works perfectly. People are at the heart of all decisions, whether they're command economy driven or driven by market forces. I'm free to make good and bad decisions, and I'm free to reap the rewards and penalties of both. Free market does not mean all decisions are good all of the time.. 

 

Considering the economic power of the players in today's 'free market' most of the 'decisions' that are getting made are intended to monopolize and single source whatever is the product or service and therefore put the users at the mercy of the providers.

 

Maybe intended to.. but generally that's not how it works out unless you're product or service is unique. Most shippers have many competitors... and have many potential transportation vendors to pick from. Sure there are exceptions, like Boeing and Airbus, but for the most part we all have competitors who are aggessvely going after our accounts. 

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Posted by Euclid on Friday, July 9, 2021 2:44 PM

Whatever price and terms are brought about by reciprocal switching, the shipper will always complain that the deal is not fair.

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Posted by Ulrich on Friday, July 9, 2021 3:07 PM

Reciprocal switching doesn't work when its needed the most i.e. where a shipper really only has one rail provider and no other alternatives. The current administration is attempting to put the genie back into the bottle.. decades of poor regulations that prevented  railroads from joining the 20th century as late as the 1970s  almost killed them off entirely. And now we've come full circle..after decades of deregulation they're once again looking at reregulation.. I wonder how much longer it will be before the government once again approves rates and terms.  

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Posted by PNWRMNM on Friday, July 9, 2021 3:33 PM

charlie hebdo
Regulation issues should not be political as it is really about economics.

This statement is completely backwards. It is always political when agents of the state force you to give some of your property to someone else, which is what rate regulation does and is the entire point of this executive order.

Rate regulation is always political interference in the workings of the market place. 

Mac

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Posted by Juniata Man on Friday, July 9, 2021 3:49 PM

Ulrich:

I'll politely disagree with your very first comment that reciprocal switching doesn't work where it's needed most. 

The whole idea behind interswitching in Canada or competitive (reciprocal) switching here in the US is it gives a shipper served by one railroad economic access to a second railroad. In Canada, as I mentioned earlier in this thread, any shipper within 35 kilometers of an interchange can solicit bids from a competing railroad or railroads that interchange with their serving carrier  at that interchange. The competing carriers even include the applicable zone interswitching charge in their rate quote. In Canada, something like 75% of rail served shippers fall within one of the three interswitching zones and can avail themselves of this alternative.The 25% who can't use interswitching can go the competitive line rate route. This latter is definitely a more difficult process than interswitching but, in either case the shipper has options that today generally do not exist in the US. 

The NITL competitive switching proposal that, to my knowledge, is the only one the STB has in their hopper isn't perfect but, it is a start at giving some captive shippers options they do not currently have; options that competing manufacturers in Canada have had now for about 35 years.

CW

 

Ulrich

Reciprocal switching doesn't work when its needed the most i.e. where a shipper really only has one rail provider and no other alternatives. The current administration is attempting to put the genie back into the bottle.. decades of poor regulations that prevented  railroads from joining the 20th century as late as the 1970s  almost killed them off entirely. And now we've come full circle..after decades of deregulation they're once again looking at reregulation.. I wonder how much longer it will be before the government once again approves rates and terms.  

 

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Posted by Ulrich on Friday, July 9, 2021 4:03 PM

Juniata Man

Ulrich:

I'll politely disagree with your very first comment that reciprocal switching doesn't work where it's needed most. 

The whole idea behind interswitching in Canada or competitive (reciprocal) switching here in the US is it gives a shipper served by one railroad economic access to a second railroad. In Canada, as I mentioned earlier in this thread, any shipper within 35 kilometers of an interchange can solicit bids from a competing railroad or railroads that interchange with their serving carrier  at that interchange. The competing carriers even include the applicable zone interswitching charge in their rate quote. In Canada, something like 75% of rail served shippers fall within one of the three interswitching zones and can avail themselves of this alternative.The 25% who can't use interswitching can go the competitive line rate route. This latter is definitely a more difficult process than interswitching but, in either case the shipper has options that today generally do not exist in the US. 

The NITL competitive switching proposal that, to my knowledge, is the only one the STB has in their hopper isn't perfect but, it is a start at giving some captive shippers options they do not currently have; options that competing manufacturers in Canada have had now for about 35 years.

CW

 

 

 
Ulrich

Reciprocal switching doesn't work when its needed the most i.e. where a shipper really only has one rail provider and no other alternatives. The current administration is attempting to put the genie back into the bottle.. decades of poor regulations that prevented  railroads from joining the 20th century as late as the 1970s  almost killed them off entirely. And now we've come full circle..after decades of deregulation they're once again looking at reregulation.. I wonder how much longer it will be before the government once again approves rates and terms.  

 

 

 

 

 

That's interesting ..thanks for clarifying this for me. Perhaps not such a bad idea then..

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Posted by Gramp on Friday, July 9, 2021 6:09 PM

Along the same line, sometimes the business is poorly located, and tries to use government to make up for poor decisionmaking or basic economic change. 

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Posted by jeffhergert on Friday, July 9, 2021 10:19 PM

Juniata Man

Jeff:

Insofar as interswitching in Canada; my experience with it was that CN, CP and even CSX near Montreal, tended to submit serious bids for business only when it made sense to them from both a financial and network perspective. Put another way, they didn't go after business simply to grab another carrier by the shorts.

With regard to inclusion of short line and regional carriers in any reciprocal switching proposal here in the US; I can tell you that when we developed the NITL competitive switching proposal, we specifically excluded these smaller railroads. One reason was the hope (naive, I will admit) that by excluding them they would either support or, at the very least, not oppose the proposal. Too; many short lines and most regional railroads connect with more than one Class 1. Since the smaller railroads are generally exponentially easier to work with than a Class 1; elimination of paper barriers that prevent these smaller railroads from actually interchanging with another Class 1 would address the option of using a competing Class 1 without causing financial harm to the smaller railroad.

Personally; my preference would still be to see the US adopt Canadian style interswitching and competitive line rates with the STB establishing the various zone switching charges much like the Transport Board does in Canada. I'm doubtful this is politically possible here in the US though.

CW

 

 

 
jeffhergert

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

 

 

 

I stand by my opinion that forced reciprocal switching will result in "cherry picking" of the more lucrative customers while most of the others won't get much relief.  It's not necessarily that they are going to drive each other over the brink.  It's that many customers are going to find out that other carriers aren't going to go out of their way for their business.  Those customers are also members, maybe the majority of shipper's groups and aren't going to see much benefit for their efforts.

If rates do go down as railroads sharpen their pencils to grab or retain some contracts, it will put more pressure for them to further cut the work force or negotiate more give backs.  You know senior management and stock holders aren't going to take a cut.

Jeff

PS. Many if not most field level railroad employees believe the railroads need to be reregulated.  I don't, although I do think there should be some kind of penalty for not living up to their common carrier requirements, because I remember what the regulated environment was like.  Most of my coworkers don't.  Time as thinned the ranks of those who worked back then. 

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Posted by MidlandMike on Friday, July 9, 2021 10:29 PM

Ulrich
... CN and KCS are patiently awaiting the decision of the STB on whether their merger proposal will go ahead or not. Its up to five people to decide that.. they can give the thumbs up or the thumbs down. That's alot of power vested in five people.. 

Those five people of the STB don't just go on a whim.  They still must follow the law, back their decission with facts, and are subject to legal challange.

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Posted by Juniata Man on Saturday, July 10, 2021 7:19 AM

Jeff:

While having to compete generally creates winners and losers, my point with regard to three decades of interswitching in Canada is that simply hasn't occurred up there. CP may be something of a "weak sister" to CN but, I believe that has more to do with CN's network and their customer engagement rather than chasing CP business and driving rates down. Despite their differences, both CP and CN have thrived in a highly competitive environment and their shareholders have benefited as well.

I will concede your point that railroads in the US, when forced to compete, may become more aggressive at implementing cost reductions and efficiencies (God, I hate that word!) but, I suspect there is already a certain inevitability of that occurring even in the absence of competitive switching. Cost cutting is, after all, what most companies do focus on these days, whether railroads or industrial manufacturers.

Lastly, I remember the regulated environment too and would not want to return to that either. Over the past 10-15 years however, the playing field between railroads and shippers has taken a decided tilt in the railroads favor. Changes need to be implemented that return doing business with a railroad to more of a 50/50, "give and take" business relationship.

CW

 

jeffhergert

 

I stand by my opinion that forced reciprocal switching will result in "cherry picking" of the more lucrative customers while most of the others won't get much relief.  It's not necessarily that they are going to drive each other over the brink.  It's that many customers are going to find out that other carriers aren't going to go out of their way for their business.  Those customers are also members, maybe the majority of shipper's groups and aren't going to see much benefit for their efforts.

If rates do go down as railroads sharpen their pencils to grab or retain some contracts, it will put more pressure for them to further cut the work force or negotiate more give backs.  You know senior management and stock holders aren't going to take a cut.

Jeff

PS. Many if not most field level railroad employees believe the railroads need to be reregulated.  I don't, although I do think there should be some kind of penalty for not living up to their common carrier requirements, because I remember what the regulated environment was like.  Most of my coworkers don't.  Time as thinned the ranks of those who worked back then. 

 

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Posted by Convicted One on Saturday, July 10, 2021 8:14 AM

tree68
They need to put the shippers and the railroad stockholders in the same room and let them argue about it. As we've discussed here before, the shippers would prefer that their goods be moved free, while the stockholders want the maximum possible return on their investment. The actual railroads are kind of stuck in the middle.

Perhaps the entire ordeal is mis-cast? Rather than insisting this is an assault against creosoted ties and welded steel rails, perhaps it more accurately might be cast as a struggle between the stockholders of the railroads, and the stockholders of the shippers?

You have an industry that has spent decades rationalizing it's plant, often at the expense of jobs and local taxes,  that is now loudly obsessed with current ratio, at the expense of more jobs  and often snubbed customers......and NONE  of this has been going on in a vacuum. So, IMO, it should be no surprise at all that some denizens of Wall street might have noticed the commotion surrounding the railroads as of late and said "I'll have some of what they are having'...literally.

One so often hears about  the evils and ills of Wall street,  'welcome back my friends, to the show that never ends'...etc.

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Posted by greyhounds on Saturday, July 10, 2021 8:43 AM

Convicted One
One so often hears about  the evils and ills of Wall street,  'welcome back my friends, to the show that never ends'...etc.

Well, Wall Street is sure helping me have a comfortable retirement.  In fact, it's sure helping a whole lot of folks have a comfortable retirement.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by Juniata Man on Saturday, July 10, 2021 8:47 AM

I will admit to being a beneficiary in this regard too.

CW

PS to Convicted One; Brain Salad Surgery - a favorite ELP album!!!


greyhounds

 

 
Convicted One
One so often hears about  the evils and ills of Wall street,  'welcome back my friends, to the show that never ends'...etc.

 

Well, Wall Street is sure helping me have a comfortable retirement.  In fact, it's sure helping a whole lot of folks have a comfortable retirement.

 

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Posted by Convicted One on Saturday, July 10, 2021 10:24 AM

I wouldn't want either of you to suffer an unpleasant retirement, but I really wasn't focused on that aspect.  What I was trying to convey is that we so often hear complaints about the ill effects that Wall street machinations have upon the world around them......hedge funds....stockholder greed..etc etc etc

"Wolves gonna be wolves"..... they are just trying to use the government  in this instance as a tool.  I really don't believe there is a "little red ridinghood" in this story.

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Posted by BaltACD on Saturday, July 10, 2021 10:52 AM

Remember - 

Those that cry the loudest about being held hostage to the monopolistic actions of a single railroad that services them are most likely monopolies in the products they provide to their own customers.

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Posted by Convicted One on Saturday, July 10, 2021 11:13 AM

BaltACD
are most likely monopolies

Exacty! Monopolies with stockholders of their own, as well, hence there is no "little red riding hood" in this story.  The government's involvement here is that of a "tool".

We all know that ultimately it is the consumer who pays any increased expenses associated with the cost of the products they buy.  So this episode might best be viewed as a "push back" against the usual tide.

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Posted by Juniata Man on Saturday, July 10, 2021 11:22 AM

I'll argue with you on that point Balt.

Chemical companies are among the shippers generally considered captive and I can think of very few chemical products that aren't being produced by multiple companies in North America or in multiple countries around the world. I believe many steel and fertilizer manufacturers would also be captive and God knows there's a multitude of them in North America and around the world.

In fact, I suspect you'd be hard pressed to come up with many examples in the industrial and manufacturing sectors that enjoy anything close to a monopoly.


CW

 

BaltACD

Remember - 

Those that cry the loudest about being held hostage to the monopolistic actions of a single railroad that services them are most likely monopolies in the products they provide to their own customers.

 

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Posted by BaltACD on Saturday, July 10, 2021 12:24 PM

Juniata Man
I'll argue with you on that point Balt.

Chemical companies are among the shippers generally considered captive and I can think of very few chemical products that aren't being produced by multiple companies in North America or in multiple countries around the world. I believe many steel and fertilizer manufacturers would also be captive and God knows there's a multitude of them in North America and around the world.

In fact, I suspect you'd be hard pressed to come up with many examples in the industrial and manufacturing sectors that enjoy anything close to a monopoly.


CW 

BaltACD

Remember - 

Those that cry the loudest about being held hostage to the monopolistic actions of a single railroad that services them are most likely monopolies in the products they provide to their own customers.

Most chemical companies are selling Patented products - products that they have a monopoly on account of the Patent protections.

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Posted by Backshop on Saturday, July 10, 2021 12:32 PM

ronrunner

This depends on the old mafia Dem shakedown that they use...AAR gives mega bucks to Dem candidates and party and problems go away if they refuse they will be swimming with the fishes in a regulatory sea for the next 4 to 8 yearsConfused

 

While many corporations are identified with one party or the other, the successful ones donate to both sides.

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Posted by Euclid on Saturday, July 10, 2021 12:45 PM

So a company can choose whether or not to be on a site served by rail.  Where is it written that such a site must be served by two rail companies in order to be fair to shippers?  The Government attempting to force this fairness by mandating competition-inducing measures on the railroads seems oddly indirect. 

Why not just use the obvious and direct solution and have the Government simply mandate the price of transportation and be done with it?  Why would that be worse than mandating competing dual service to hold prices down?

Just let the shippers decide whether the Government is fairly mandating the price of shipping and then if they don't think so, they can vote for somebody else. 

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Posted by Ulrich on Saturday, July 10, 2021 12:51 PM

greyhounds

 

 
Convicted One
One so often hears about  the evils and ills of Wall street,  'welcome back my friends, to the show that never ends'...etc.

 

Well, Wall Street is sure helping me have a comfortable retirement.  In fact, it's sure helping a whole lot of folks have a comfortable retirement.

 

Absolutely true. Wall Street and Bay Street are really just mechanisms that allow the average person to particiapte in the success of others and in humanity's great endeavours in general. Every quarter I get dividend checks that I could live off of quite nicely.. by simply making my own hard earned capital available to others. sure there's a bit of risk, but in return I get to share in the success of several businesses, and to a small extent my input is welcomed. In my opinion Wall Street/Bay Street are among the world's greatest creations...they allow anyone who wants to, to  tap into and be part of the success of great ventures and great minds. 

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Posted by Juniata Man on Saturday, July 10, 2021 1:11 PM

That sure as heck wasn't my experience in my twenty years in the chemical industry. There wasn't a thing we produced that wasn't also being produced by at least half a dozen competitors just here in North America. 

I'd hazard a guess the majority of chemicals moving by rail fall into the commodity chemical category, stuff like sulfuric acid, caustic soda, hydrogen peroxide, molten sulfur, various surfactants and so on.

CW

 

 

BaltACD

 

 
Juniata Man
I'll argue with you on that point Balt.

Chemical companies are among the shippers generally considered captive and I can think of very few chemical products that aren't being produced by multiple companies in North America or in multiple countries around the world. I believe many steel and fertilizer manufacturers would also be captive and God knows there's a multitude of them in North America and around the world.

In fact, I suspect you'd be hard pressed to come up with many examples in the industrial and manufacturing sectors that enjoy anything close to a monopoly.


CW 

BaltACD

Remember - 

Those that cry the loudest about being held hostage to the monopolistic actions of a single railroad that services them are most likely monopolies in the products they provide to their own customers.

 

Most chemical companies are selling Patented products - products that they have a monopoly on account of the Patent protections.

 

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Posted by ronrunner on Saturday, July 10, 2021 1:45 PM

ronrunner

Railroads should do what their peers do ...hire a Lobbyist and astroturf citizens group and give political contributions to the right politicos and party and there regulatory problems will just go away overnight....otherwise they will  swimming over there heads with the fishes in  a regiulotoy sea for the next 8 years

 

I am sure that the SFSP merger would have gone thru if the owner of both railroads took my advice and paid off the right politicos..predatory regulations are a legal shakedown tactic

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Posted by SD60MAC9500 on Saturday, July 10, 2021 2:56 PM
 

Euclid

Why not just use the obvious and direct solution and have the Government simply mandate the price of transportation and be done with it?  Why would that be worse than mandating competing dual service to hold prices down?

 

?

... I seem to recall Staggers was to eliminate gov't regulation of rail rates.....

How would you accomplish this? Are you going to regulate all sectors of transport; ground, air, and sea as well?

 

 
 
 
 
Rahhhhhhhhh!!!!
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Posted by SD60MAC9500 on Saturday, July 10, 2021 3:07 PM
 

jeffhergert

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

 

I agree. Plus this isn't Canada where they have just two transcontinental C1's and a few shortlines. US is a much larger rail market with many more players and reciprocal switching would cause more damage to the system. Shortlines are the reciprocal switching. If customers want access to more than one C1. Partner with a shortline toss some dollars in the pot. Last time I checked access came at a cost not for free.

 
 
 
Rahhhhhhhhh!!!!
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Posted by BEAUSABRE on Saturday, July 10, 2021 3:09 PM

ronrunner
Railroads should do what their peers do ...hire a Lobbyist

Isn't that what the AAR is supposed to do?

 

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Posted by Euclid on Saturday, July 10, 2021 4:10 PM

SD60MAC9500
 
 
Euclid

Why not just use the obvious and direct solution and have the Government simply mandate the price of transportation and be done with it?  Why would that be worse than mandating competing dual service to hold prices down?

 

 

 

?

... I seem to recall Staggers was to eliminate gov't regulation of rail rates.....

How would you accomplish this? Are you going to regulate all sectors of transport; ground, air, and sea as well?

 

 
 
 
 
 

The mood for regulation changes back and forth over time with the mood of Government.  So while railroads were deregulated, they can just as easily be reregulated.  I think we are now in a strong mood preferring regulation, so yes they will want to regulate all sectors of transport, and indeed, all sectors of business.   There will always be the boosters of regulation in the name of fairness and the critics of regulation in the name of free market capitalism. 

In my previous post, I asked why the boosters of regulation would prefer mandating reciprocal switching to make shipping costs fair when they could just as easily accomplish that objective by mandating the rates to accomplish the goal directly rather than fiddle around trying to incentivize fairness by mandating reciprocal switching.

Both types of mandates are regulatory in that they both force business to do something they may not want to do.  In my opinion these boosters of fairness are unable to determine what constitutes a fair rate, so they cite a lack of competition as being the essence of unfairness.  And then they call for reciprocal switching as the means to add competition. 

So, to these champions of fairness, that very remedy of forcing reciprocal switching feels fairer than simply dictating rates.  In other works, forcing reciprocal switching has better optics.  It is a lot easier to feel for fairness than to measure it. 

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Posted by charlie hebdo on Saturday, July 10, 2021 4:29 PM

There is a big difference.  A feature of what makes a dress market work efficiently is competition.  Apparently this was either never learned or else forgotten by some. 

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Posted by Juniata Man on Saturday, July 10, 2021 4:59 PM

Euclid:

I can't speak for the millennial logisticians but, for us gray haired guys who dealt with railroads for 40 years, we have a pretty doggone good idea of what a fair rate looks like.

Many rail shippers use rail costing software that incorporates the revenue and costs the railroads must report to the STB as part of their waybill sampling. After you've worked in the field for awhile, you know what a common revenue to variable cost ratio is for the products you ship and these rate modeling tools help to establish what level of rate you should be asking for from the railroad. Getting that rate is the high hurdle, of course. With a little research, these modeling tools also provide a good idea of what railroads are charging other shippers of the same type product.

With regards to SD60MAC9500's post about Canada only having two Class 1's, not entirely the case. CSX and BNSF both have lines in Canada and I utilized interswitching to get from a CN served site to CSX. In fact certain regional railroads in Canada such as the late CMQ also were included in interswitching. I would also note that if you look at a rail map of the US, what you'll see is two carriers serving a very large chunk of territory in the west and two serving a large chunk in the east. Sure, CP, KCS and CN cover the central portion of the country and there you do have multiple carriers but, competitive switching doesn't cover hundreds of miles to reach an interchange. My recollection of the NITL proposal was the interchange had to be within 15-20 air miles of the captive shipper site. That certainly narrows the application.

As to the suggestion a captive shipper partner with a short line to gain access to another Class 1, if you're only rail connection is to a Class 1, how do you propose getting the short line involved? Further, when most short lines are carved out of a Class 1, the carrier selling or leasing the track to the short line includes a paper barrier preventing the short line from interchanging with any Class 1 other than the original owner.

I'll add one last thought; under competitive switching there is nothing that prevents the railroad serving the captive shipper from offering a more competitive rate and retaining the business. Whether the psr mindset at most Class 1's would allow them to do so remains to be seen.

CW

 

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Posted by Euclid on Saturday, July 10, 2021 5:12 PM

Nothing wrong with capitalism except that it has lost all its competition.  Time for Government to level the playing field by forcing the return of completion. 

That according to this news video on the news story linked to the OP of this thread:

Biden signs sweeping executive order 'attacking' free markets

https://www.youtube.com/watch?v=1jqur2ZCiFA

 

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Posted by Ulrich on Saturday, July 10, 2021 9:16 PM

Often optics and perception outweigh the facts. There are excellent arguments to be made both for and against the merger based strictly on facts. Facts are facts.. but politics, personal biases, and other factors always come into play, and often the straight facts don't figure in at all.

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Posted by BaltACD on Saturday, July 10, 2021 9:22 PM

MidlandMike
 
BaltACD 
MidlandMike 
Ulrich
... CN and KCS are patiently awaiting the decision of the STB on whether their merger proposal will go ahead or not. Its up to five people to decide that.. they can give the thumbs up or the thumbs down. That's alot of power vested in five people..  

Those five people of the STB don't just go on a whim.  They still must follow the law, back their decission with facts, and are subject to legal challange. 

Are you referring to GOP style 'facts' or Democrat style 'facts'.  Between those two parties the 'facts' are mutually exclusive. 

I am referring to actual facts that will stand up to legal challanges.

Ah! Legal Challenges - someone has a even worse record in court than the Baltimore Orioles have on the baseball field, yet the facts are still challenged.

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Posted by MidlandMike on Sunday, July 11, 2021 9:55 PM

Ulrich

Often optics and perception outweigh the facts. There are excellent arguments to be made both for and against the merger based strictly on facts. Facts are facts.. but politics, personal biases, and other factors always come into play, and often the straight facts don't figure in at all.

 

Boards are not legislative bodies that make political decisions, but are administrative bodies that hold hearings, and any facts they consider should stand like evidence, otherwise they can be picked apart in appeals.  If the "straight facts" didnt figure at all, then they are malfeasant.

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Posted by Ulrich on Monday, July 12, 2021 8:11 AM

Straight facts will figure into this decision, but  likely other factors will dominate and lead to a decision apart from what the facts show. Biden, like Trump, is protectionist.. will that influence the decision? Even if the facts unequivocally show that the CN KCS combo is wonderful and efficient for all concerned parties we live in a "buy American.. America first" world, and against that backdrop, how does the proposed merger look? Boards are not legislative bodies, but they are politically driven just the same, and decisions they make will reflect the prevailing sentiment of the day, even when the bare facts might point in a different direction. 

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Posted by charlie hebdo on Monday, July 12, 2021 8:34 AM

MidlandMike

 

 
Ulrich

Often optics and perception outweigh the facts. There are excellent arguments to be made both for and against the merger based strictly on facts. Facts are facts.. but politics, personal biases, and other factors always come into play, and often the straight facts don't figure in at all.

 

 

 

Boards are not legislative bodies that make political decisions, but are administrative bodies that hold hearings, and any facts they consider should stand like evidence, otherwise they can be picked apart in appeals.  If the "straight facts" didnt figure at all, then they are malfeasant.

 

Very true.  A major question becomes the benefit analysis of more consolidation vs competition. I also wonder what our Canadian members would be saying if BNSF bought CP and UP bought CN? 

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Posted by Ulrich on Monday, July 12, 2021 8:44 AM

charlie hebdo

 

 
MidlandMike

 

 
Ulrich

Often optics and perception outweigh the facts. There are excellent arguments to be made both for and against the merger based strictly on facts. Facts are facts.. but politics, personal biases, and other factors always come into play, and often the straight facts don't figure in at all.

 

 

 

Boards are not legislative bodies that make political decisions, but are administrative bodies that hold hearings, and any facts they consider should stand like evidence, otherwise they can be picked apart in appeals.  If the "straight facts" didnt figure at all, then they are malfeasant.

 

 

 

Very true.  A major question becomes the benefit analysis of more consolidation vs competition. I also wonder what our Canadian members would be saying if BNSF bought CP and UP bought CN? 

 

Bingo.. my point exactly.. Often the facts have very little to do with the decision. Any salesman will tell you the same.. facts don't sell.. emotions (especially fear of loss) do. 

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Posted by Steven Otte on Monday, July 12, 2021 9:25 AM

I know that it's impossible to divorce railroading from politics when discussing regulation, but let's at least try to keep this discussion on that topic, rather than veering into party politics and electoral speculation. Otherwise I'll have to do more than delete a handful of posts to keep this thread on topic.

--
Steven Otte, Model Railroader associate editor
sotte@kalmbach.com

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Posted by greyhounds on Monday, July 12, 2021 11:14 AM
Government economic regulation of the railroads was one of the Great Failures of the 20th Century.  I just hope we don’t repeat it.
"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by zugmann on Monday, July 12, 2021 11:18 AM

No worries - I believe PSR will be seen as one of the Great Failures of the 21st Century. 

   The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by greyhounds on Monday, July 12, 2021 11:50 AM

zugmann
No worries - I believe PSR will be seen as one of the Great Failures of the 21st Century. 

I’ll disagree.  I see PSR as a good concept that has had some poor implementations.  It will get fixed, or people will be fired.
 
It’s easier to fix problems in the private sector than in government.  And it’s much quicker too.
"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by tree68 on Monday, July 12, 2021 11:56 AM

greyhounds
I see PSR as a good concept that has had some poor implementations. 

I would opine that it was a great idea until the investors got hold of it...

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Posted by zugmann on Monday, July 12, 2021 11:56 AM

greyhounds
It’s easier to fix problems in the private sector than in government.  And it’s much quicker too.

Well, I'm waiting.  Not holding my breath, though. 

Although the "good idea - poor implementation" seems like a cop-out to me. 

   The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by Ulrich on Monday, July 12, 2021 11:58 AM

Was the problem PSR or too much focus on PSR? Likely the latter... The first  railroad to apply PSR has long since evolved toward a more balance model that gives more weight to customer service, sales, MOW etc.. If the focus is too much in one direction or the other the organization will suffer. I think that would be the takeaway.. don't focus too much on one metric (like the OR) to the exclusion of everything else. 

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Posted by ronrunner on Monday, July 12, 2021 11:59 AM

Was there not a law that said that US railroads had to be domestically owned hence Grand Trunk which had a separate charter from CN and DT&I

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Posted by Ulrich on Monday, July 12, 2021 12:06 PM

ronrunner

Was there not a law that said that US railroads had to be domestically owned hence Grand Trunk which had a separate charter from CN and DT&I

 

 

That brings up a good question.. what constitutes the nationality of a corporation? Is it where the company is  headquartered? In what jursidiction the company is chartered? .. where the majority of its shareholders live?.. I don't know. CN (for example) has shareholders in Canada and the US as well as in other countries.. Americans as well as Canadians make up its workforce and senior management.. So is CN Canadian, American, multinational? Were the CN KCS merger to go through CN US would retain an American Headquarters.. I'm not sure if this would be a legal requirement or simply good form and the prudent thing to do in order to give Americans the impression that CN US is based in the US. Likely the CN US would be separately incorporated in the US as well.. for all intents and purposes an American corporation.. separate from the Canadian parent company. 

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Posted by Overmod on Monday, July 12, 2021 12:10 PM

zugmann
Although the "good idea - poor implementation" seems like a cop-out to me.

I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics.

Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.  

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Posted by charlie hebdo on Monday, July 12, 2021 12:12 PM

Inseparable.  PSR was developed to maximize short-term profitability. 

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Posted by Ulrich on Monday, July 12, 2021 12:13 PM

Overmod

 

 
Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.  
 

 

They're not mutually exclusive.. 

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Posted by Murphy Siding on Monday, July 12, 2021 12:48 PM

Overmod
 
zugmann
Although the "good idea - poor implementation" seems like a cop-out to me.

 

I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics.

 

Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.  

 

  Euclidean-type semantics. Laugh

Thanks to Chris / CopCarSS for my avatar.

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Posted by BaltACD on Monday, July 12, 2021 1:29 PM

greyhounds
 
zugmann
No worries - I believe PSR will be seen as one of the Great Failures of the 21st Century.  
I’ll disagree.  I see PSR as a good concept that has had some poor implementations.  It will get fixed, or people will be fired.
 
It’s easier to fix problems in the private sector than in government.  And it’s much quicker too.

My observation is that PSR came on CSX and wrecked all the existing schedules and replaced them with chaos.

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Posted by mudchicken on Monday, July 12, 2021 2:04 PM

The last time total government control happened, Colorado Midland, DL&NW and nearly D&SL got killed off by the first USRA in my backyard. Others suffered greatly until USRA was pressured to disband.

Thank god neither iteration of the Prince Plan ever happened.

Nuf sed.

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Posted by greyhounds on Monday, July 12, 2021 4:49 PM

Overmod
I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics. Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.  

Well, you can call it a cop-out, or you can call it a banana.  It doesn’t matter.  PSR works. 

 

1)    Whenever a major change such as PSR occurs there are going to be people who don’t understand it.  So, there are going to be problems until those people gain understanding or they get let go.

 

2)   Whenever a major change such as PSR occurs there are going to be people who won’t accept it.  They’ll fight it and try to make it not work.  So, there are going to be more problems until those people gain acceptance or they get let go.

 

3)   Whenever a major change such as PSR occurs there are going to be needed adjustments made to the original plan.   The Army has a saying: “No operational plan survives contact with the enemy.”  It’s pretty much the same in commerce.  “No operational plan survives contact with the customers.”  You’re going to have to adjust and accept changes.  That’s what is going on with PSR.

 
PSR is all about getting more efficient rail transportation.  It’s about getting more economic output while using fewer economic resources.  If someone loses their job with a railroad because of PSR it will be a hardship on that person.  But, for the overall economic welfare getting more for less is good.
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Posted by BaltACD on Monday, July 12, 2021 5:51 PM

greyhounds
 
Overmod
I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics. Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.   
Well, you can call it a cop-out, or you can call it a banana.  It doesn’t matter.  PSR works. 

 

1)    Whenever a major change such as PSR occurs there are going to be people who don’t understand it.  So, there are going to be problems until those people gain understanding or they get let go.

 

2)   Whenever a major change such as PSR occurs there are going to be people who won’t accept it.  They’ll fight it and try to make it not work.  So, there are going to be more problems until those people gain acceptance or they get let go.

 

3)   Whenever a major change such as PSR occurs there are going to be needed adjustments made to the original plan.   The Army has a saying: “No operational plan survives contact with the enemy.”  It’s pretty much the same in commerce.  “No operational plan survives contact with the customers.”  You’re going to have to adjust and accept changes.  That’s what is going on with PSR.

 
PSR is all about getting more efficient rail transportation.  It’s about getting more economic output while using fewer economic resources.  If someone loses their job with a railroad because of PSR it will be a hardship on that person.  But, for the overall economic welfare getting more for less is good.

PSR has been about cutting muscle and hamstring the organization from seeking a increased level of the business as more business, with the hacked apart physical plant will drive up costs exponentially thus trashing the 'God' of PSR the Operating Ratio.

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Posted by charlie hebdo on Monday, July 12, 2021 6:15 PM

BaltACD

 

 
greyhounds
 
Overmod
I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics. Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.   
Well, you can call it a cop-out, or you can call it a banana.  It doesn’t matter.  PSR works. 

 

1)    Whenever a major change such as PSR occurs there are going to be people who don’t understand it.  So, there are going to be problems until those people gain understanding or they get let go.

 

2)   Whenever a major change such as PSR occurs there are going to be people who won’t accept it.  They’ll fight it and try to make it not work.  So, there are going to be more problems until those people gain acceptance or they get let go.

 

3)   Whenever a major change such as PSR occurs there are going to be needed adjustments made to the original plan.   The Army has a saying: “No operational plan survives contact with the enemy.”  It’s pretty much the same in commerce.  “No operational plan survives contact with the customers.”  You’re going to have to adjust and accept changes.  That’s what is going on with PSR.

 
PSR is all about getting more efficient rail transportation.  It’s about getting more economic output while using fewer economic resources.  If someone loses their job with a railroad because of PSR it will be a hardship on that person.  But, for the overall economic welfare getting more for less is good.

 

PSR has been about cutting muscle and hamstring the organization from seeking a increased level of the business as more business, with the hacked apart physical plant will drive up costs exponentially thus trashing the 'God' of PSR the Operating Ratio.

 

It's just cost cutting dressed up with a fancy (but inaccurate) label, designed by folks who have a cavalier attitude about disposable labor ("let them go") like they were rolls of toilet paper. All for short term profits,  not about growing revenue and customer base. 

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Posted by charlie hebdo on Monday, July 12, 2021 6:16 PM

BaltACD

 

 
greyhounds
 
Overmod
I'd call it a cop-out until the 'correct' use of PSR techniques is clearly distinguished from the financier-optimized aspects.  Which is more than just Euclidean-type semantics. Of course, to get a sensible discussion you have to divorce discussion of 'railroads' as generators of effective transportation from 'railroads' as vehicles for maximum shareholder/owner perceived benefit.   
Well, you can call it a cop-out, or you can call it a banana.  It doesn’t matter.  PSR works. 

 

1)    Whenever a major change such as PSR occurs there are going to be people who don’t understand it.  So, there are going to be problems until those people gain understanding or they get let go.

 

2)   Whenever a major change such as PSR occurs there are going to be people who won’t accept it.  They’ll fight it and try to make it not work.  So, there are going to be more problems until those people gain acceptance or they get let go.

 

3)   Whenever a major change such as PSR occurs there are going to be needed adjustments made to the original plan.   The Army has a saying: “No operational plan survives contact with the enemy.”  It’s pretty much the same in commerce.  “No operational plan survives contact with the customers.”  You’re going to have to adjust and accept changes.  That’s what is going on with PSR.

 
PSR is all about getting more efficient rail transportation.  It’s about getting more economic output while using fewer economic resources.  If someone loses their job with a railroad because of PSR it will be a hardship on that person.  But, for the overall economic welfare getting more for less is good.

 

PSR has been about cutting muscle and hamstring the organization from seeking a increased level of the business as more business, with the hacked apart physical plant will drive up costs exponentially thus trashing the 'God' of PSR the Operating Ratio.

 

It's just cost cutting dressed up with a fancy (but inaccurate) label, designed by folks who have a cavalier attitude about disposable labor ("they get let go") like they were rolls of toilet paper. All for short term profits,  not about growing revenue and customer base. 

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Posted by Euclid on Monday, July 12, 2021 6:57 PM

 

What is wrong with short term profits?  The concept is presented as though you get less profit by having it arrive too quickly, and so with taking short term profit, you consume your profit-making apparatus and must go out of business.  Usually a business wants to make as much profit as possible, as soon as possible.   Give me an example of how and why a business would decide to avoid short term profits. 

 

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Posted by tree68 on Monday, July 12, 2021 7:28 PM

Euclid
Give me an example of how and why a business would decide to avoid short term profits. 

Because they want to keep some of that money for continued growth.

Of course, a company wants a certain amount of short term profit, although it's completely normal for a new company to operate at a loss for several years.  

An existing company would theoretically be operating at some level of profit, wisely using their income to foster growth as well as provide income for the owners.

When you say "short term profits" I would opine that many people think of vulture capitalists, who are simply interested in how much they can wring out of a company with no thoughts to future growth, or even future operation.  

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Posted by Euclid on Monday, July 12, 2021 7:55 PM

 

tree68
 
Euclid
Give me an example of how and why a business would decide to avoid short term profits. 

 

Because they want to keep some of that money for continued growth.

Of course, a company wants a certain amount of short term profit, although it's completely normal for a new company to operate at a loss for several years.  

An existing company would theoretically be operating at some level of profit, wisely using their income to foster growth as well as provide income for the owners.

When you say "short term profits" I would opine that many people think of vulture capitalists, who are simply interested in how much they can wring out of a company with no thoughts to future growth, or even future operation.  

 

Yes I have heard that charge about vulture capitalists.  That is what I had in mind when I mentioned taking short term profit at the expense of consuming your profit making apparatus and thus putting the company out of business.  But is that actually happening?  It seems that Labor says it is, but Labor sees PSR as a threat to jobs.  But if railroads are actually consuming their capital, would it not be obvious as the physical plant falls apart?  Is the Country actually going to just stand by as vulture capitalists rob us of our railroads?

 

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Posted by MidlandMike on Monday, July 12, 2021 9:22 PM

Euclid
...Is the Country actually going to just stand by as vulture capitalists rob us of our railroads?

Most citizens don't know and don't care.  Congress has thought of railroads as essential, but with more populist being elected, even that is not a guarantee.

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Posted by Convicted One on Monday, July 12, 2021 9:40 PM

Euclid
But if railroads are actually consuming their capital, would it not be obvious as the physical plant falls apart?  Is the Country actually going to just stand by as vulture capitalists rob us of our railroads?

How long does it take for deferred maintenance to snowball to the point it can no longer be explained as a "run of bad luck"?  Long enough for the stockholders  to make their get away? Broken Heart

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Posted by MidlandMike on Monday, July 12, 2021 9:43 PM

mudchicken
The last time total government control happened, Colorado Midland, DL&NW and nearly D&SL got killed off by the first USRA in my backyard. Others suffered greatly until USRA was pressured to disband.

The Colorado Midland is one of my favorite fallen flags.  Nevertheless, it was essentially a vanity project by a mine owner.  It had no friendly western outlet, and after the mining boom had little on-line traffic.  Other major railroads looked it over, but no takers.  USRA had no actual effect on its inevitable outcome.  Even if it had lasted a few more years, the aforementioned D&SL (w/D&RGW) would have finally buried it.

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Posted by Euclid on Monday, July 12, 2021 10:07 PM

Convicted One
 
Euclid
But if railroads are actually consuming their capital, would it not be obvious as the physical plant falls apart?  Is the Country actually going to just stand by as vulture capitalists rob us of our railroads?

 

How long does it take for deferred maintenance to snowball to the point it can no longer be explained as a "run of bad luck"?  Long enough for the stockholders  to make their get away? Broken Heart

 

If it is really happening, it is happening fast by definition of "short term gain."  I doubt that the damage could be hidden as a run of bad luck.  It almost has the ring of a conspriacy theory. 

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Posted by mudchicken on Monday, July 12, 2021 10:13 PM

MidlandMike
 
mudchicken
The last time total government control happened, Colorado Midland, DL&NW and nearly D&SL got killed off by the first USRA in my backyard. Others suffered greatly until USRA was pressured to disband.

The Colorado Midland is one of my favorite fallen flags.  Nevertheless, it was essentially a vanity project by a mine owner.  It had no friendly western outlet, and after the mining boom had little on-line traffic.  Other major railroads looked it over, but no takers.  USRA had no actual effect on its inevitable outcome.  Even if it had lasted a few more years, the aforementioned D&SL (w/D&RGW) would have finally buried it. 

....USRA moved all the traffic over to D&RG after they ran the CM plant into the ground. They were so bad that ATSF walked (ran) away from them.

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Posted by Shadow the Cats owner on Monday, July 12, 2021 10:36 PM

Greyhounds if my boss ran his company like a railroad that used PSR for their operation standards I would be unemployed alongside my 250 work kids aka the entire fleet of drivers we have.  Why PSR doesn't freaking give a crap about the customers that the railroads are supposed to service instead they impose demands on those same customers who don't have any other choice but to accept them.  

 

It's getting freaking ridiculous on the shipping times for our resins from Houston to Kansas City where they are interchanged to the BNSF.  Before PSR it was around 4 days.  Now it's between 1 week to well 3 months for one single car right now.  That one was sent from Houston towards Kansas city but had a bad order on it a bad brake shoe at an inspection.  It missed the train it was supposed to go on.  Rather than hold it till the next day so not to destroy the metrics on their yard they threw it on a train heading for El Paso.  It gets there then was forwarded towards freaking LA.  Then to Chicago.  Then instead of giving it to the BNSF in Chicago the UP sent it to Cheyenne then on to Salt Lake City.  They still have yet to interchange it with the BNSF.  We have already filed a complaint against the UP and still we are getting the runaround from the sales department.  Last track had this car due us in May someplace in Oregon.  Thankfully we ordered 20 cars of the same resin at the time as this screw up and got the other 19.  

 

If I had a driver doing that with a load of my customers products my carrier wouldn't be hauling cattle waste for a nickel in less than a week.  

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Posted by BEAUSABRE on Monday, July 12, 2021 10:51 PM

Biden has the solution, break up the Class 1's and you can pick whichever railroad you want to serve your facility

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Posted by ronrunner on Tuesday, July 13, 2021 6:45 AM

Do you and your family want to share the road at 70 mph with chlorine and sulfuric acid .Most of the high hazard stuff probably goes by rail .Chlorine bleach is a dilute the pure stuff is in railcars

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Posted by SD60MAC9500 on Tuesday, July 13, 2021 7:08 AM
 

Juniata Man

 


With regards to SD60MAC9500's post about Canada only having two Class 1's, not entirely the case. CSX and BNSF both have lines in Canada and I utilized interswitching to get from a CN served site to CSX. In fact certain regional railroads in Canada such as the late CMQ also were included in interswitching. I would also note that if you look at a rail map of the US, what you'll see is two carriers serving a very large chunk of territory in the west and two serving a large chunk in the east. Sure, CP, KCS and CN cover the central portion of the country and there you do have multiple carriers but, competitive switching doesn't cover hundreds of miles to reach an interchange. My recollection of the NITL proposal was the interchange had to be within 15-20 air miles of the captive shipper site. That certainly narrows the application.

As to the suggestion a captive shipper partner with a short line to gain access to another Class 1, if you're only rail connection is to a Class 1, how do you propose getting the short line involved? Further, when most short lines are carved out of a Class 1, the carrier selling or leasing the track to the short line includes a paper barrier preventing the short line from interchanging with any Class 1 other than the original owner.

I'll add one last thought; under competitive switching there is nothing that prevents the railroad serving the captive shipper from offering a more competitive rate and retaining the business. Whether the psr mindset at most Class 1's would allow them to do so remains to be seen.

CW

 

 

How much of Canada is served by BNSF and CSX? The exception proves the rule. The fraction of trackage pales in comparison to CN and CP. In that regard those two are anomalies that take the backseat.. Canada has more of an exclusive market. In that regard reciprocal swithcing may have it's place. However how do you fix interchange friction with RS stateside? Interline issues occur already with missed connections, and rate disputes. The problem we run into is the one size fits all. What works up North doesn't necessarily or will work down here. Similiar to the same argument with why we don't operate short fast freight like Europe.. Dynamics are not the same.

My suggestion of customers chipping in with a shortline for greater access while somewhat serious would require new RoW. Far as I know. No paper barriers exist on RoW constructed, and owned by a Shortline. Or should the customer construct their own spur and to another Class 1? Or better yet.. Maybe all future industrial sites should locate on shortlines that have access to multiple Class 1's. 

 
 
 
 
Rahhhhhhhhh!!!!
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Posted by SD60MAC9500 on Tuesday, July 13, 2021 7:13 AM
 

mudchicken

 

 
MidlandMike
 
mudchicken
The last time total government control happened, Colorado Midland, DL&NW and nearly D&SL got killed off by the first USRA in my backyard. Others suffered greatly until USRA was pressured to disband.

The Colorado Midland is one of my favorite fallen flags.  Nevertheless, it was essentially a vanity project by a mine owner.  It had no friendly western outlet, and after the mining boom had little on-line traffic.  Other major railroads looked it over, but no takers.  USRA had no actual effect on its inevitable outcome.  Even if it had lasted a few more years, the aforementioned D&SL (w/D&RGW) would have finally buried it. 

 

 

....USRA moved all the traffic over to D&RG after they ran the CM plant into the ground. They were so bad that ATSF walked (ran) away from them.

 

 

The Colorado Midland didn't have the best operating profile either though.. I can see why Santa Fe or anybody else passed on it. From what I've read the CM couldn't handle the traffic.

 
Rahhhhhhhhh!!!!
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Posted by Juniata Man on Tuesday, July 13, 2021 8:02 AM

BNSF has track in BC and Manitoba. CSX has a line in Quebec that runs from Beauharnois (near Montreal) down to Syracuse. Now, admittedly both of these are minor players in Canada and my original comment wasn't intended to imply they were. Both carriers do have experience with Canadian interswitching though.

The real point I was trying to make in my earlier post is that in about two thirds of the US, shippers have only two Class 1's, close to the 75% of Canada in which interswitching is possible. 

Class 1's in this country have a multitude of working interchanges that make competitive switching workable in the US. And this was one of the elements in the NITL proposal, the interchange had to be an existing, working location.

Insofar as a newly built short line connection to a competing Class 1, I don't see this being a practical solution. As mentioned previously, a proposed short line in Colorado faced a firestorm of opposition to reactivating an existing piece of railroad. New construction would face almost insurmountable hurdles of land acquisition and environmental clearances. 

I'll address one last comment to BEAUSABRE; perhaps my sarcasm meter wasn't functioning when I read your comment that Biden's solution is to break up the Class 1's but, I sure as heck haven't seen that anywhere. Perhaps you'd care to expound on your conment?

CW

 

SD60MAC9500
 

How much of Canada is served by BNSF and CSX? The exception proves the rule. The fraction of trackage pales in comparison to CN and CP. In that regard those two are anomalies that take the backseat.. Canada has more of an exclusive market. In that regard reciprocal swithcing may have it's place. However how do you fix interchange friction with RS stateside? Interline issues occur already with missed connections, and rate disputes. The problem we run into is the one size fits all. What works up North doesn't necessarily or will work down here. Similiar to the same argument with why we don't operate short fast freight like Europe.. Dynamics are not the same.

My suggestion of customers chipping in with a shortline for greater access while somewhat serious would require new RoW. Far as I know. No paper barriers exist on RoW constructed, and owned by a Shortline. Or should the customer construct their own spur and to another Class 1? Or better yet.. Maybe all future industrial sites should locate on shortlines that have access to multiple Class 1's. 

 
 
 
 
 

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Posted by Convicted One on Tuesday, July 13, 2021 10:03 AM

Euclid
If it is really happening, it is happening fast by definition of "short term gain."  I doubt that the damage could be hidden as a run of bad luck.  It almost has the ring of a conspriacy theory. 

I think you are making things too "black and white".  There are many flavors of "deferred" maintenance.  Not restriping a parking lot now, that you plan to repave in 2 years, just as a simple illustration.

A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

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Posted by Gramp on Tuesday, July 13, 2021 10:38 AM

I'd like to suggest getting a copy of the book "Good Profit" by Charles G. Koch. Refreshing account of creating a business. 

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Posted by Euclid on Tuesday, July 13, 2021 12:40 PM

Convicted One
 
Euclid
If it is really happening, it is happening fast by definition of "short term gain."  I doubt that the damage could be hidden as a run of bad luck.  It almost has the ring of a conspriacy theory. 

 

I think you are making things too "black and white".  There are many flavors of "deferred" maintenance.  Not restriping a parking lot now, that you plan to repave in 2 years, just as a simple illustration.

A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

 

If they were able to legally loot the assets of a major railroad and leave town without the railroad realizing what was happening, that would indeed be shrewd. But that looting is not what I am referring to as being a possible conspiracy theory.

By conspiracy theory, I am referring to the belief that such looting is actually happening under the guise of PSR.  It may be a popular belief, but where is the evidence that it is happening? 

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Posted by Convicted One on Tuesday, July 13, 2021 1:23 PM

Euclid
By conspiracy theory, I am referring to the belief that such looting is actually happening under the guise of PSR.  It may be a popular belief, but where is the evidence that it is happening?

That's likely a topic for a separate thread. I don't want to annoy people by making them feel we've hijacked their thread. 

And just to be abundanly clear, I do not have any "meat and potatoes" examples to share.  I'm not sure that a shrewd operator doing such a thing would put up any flashing signs to attract attention, fwiw.

You might try calling up CSX and saying "hey, paint your bridge", and see what kind of response you get.  Devil

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Posted by Paul Milenkovic on Tuesday, July 13, 2021 1:45 PM

Gramp

I'd like to suggest getting a copy of the book "Good Profit" by Charles G. Koch. Refreshing account of creating a business. 

 

Oh, the Humanity! 

"Good" and "Profit" in the same phrase?  Charles G. Koch!  Isn't he one of the Koch Brothers?

You should have warned us about your post that we could cover our eyes.

If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?

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Posted by CMStPnP on Tuesday, July 13, 2021 3:31 PM

Convicted One
A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

Railroads in good financial health defer maintenence on branch and some main lines where it appears the traffic is declining over time to a point where the line may no longer be viable and might need to be taken out of service.   It is efficient use of capital even though it might not be popular with train crews.   A well managed railroad can spot the decline 5-7 years before the traffic falls to a point where maintaining the line exceeds the revenue brought in by the traffic.

I have never heard of a railroad borrowing money to buy stock as a preference over maintaining it's phyiscal plant.    Further it is highly unlikely stock analysts would reward such a practice and very likely they would spot it and sound the alarm to investors.    

I keep seeing this scenario espoused over and over again in these forums but the specific railroad that is doing it is never mentioned nor are financial stats provided that prove the theory that investment in physical plant is well below what it should be for a steady state of maintenece.

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Posted by Convicted One on Tuesday, July 13, 2021 3:54 PM

Think about it...if they put up a flashing sign announcing "This is our future!"...what would all the other stockholders do?

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Posted by Juniata Man on Tuesday, July 13, 2021 4:55 PM

UP has used debt to finance stock repurchases. There may be others.

CW

 

https://seekingalpha.com/article/4377377-union-pacific-good-long-buybacks-last

 

CMStPnP

 

 
Convicted One
A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

 

Railroads in good financial health defer maintenence on branch and some main lines where it appears the traffic is declining over time to a point where the line may no longer be viable and might need to be taken out of service.   It is efficient use of capital even though it might not be popular with train crews.   A well managed railroad can spot the decline 5-7 years before the traffic falls to a point where maintaining the line exceeds the revenue brought in by the traffic.

I have never heard of a railroad borrowing money to buy stock as a preference over maintaining it's phyiscal plant.    Further it is highly unlikely stock analysts would reward such a practice and very likely they would spot it and sound the alarm to investors.    

I keep seeing this scenario espoused over and over again in these forums but the specific railroad that is doing it is never mentioned nor are financial stats provided that prove the theory that investment in physical plant is well below what it should be for a steady state of maintenece.

 

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Posted by Convicted One on Tuesday, July 13, 2021 5:06 PM

Juniata Man
UP has used debt to finance stock repurchases. There may be others.

I thought that was a big part of the discussion we had here earlier about CSX, that the hedgefund got control of the board, ordered debt financed stock buyback, and then sold their holdings at considerable profit.

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Posted by Juniata Man on Tuesday, July 13, 2021 5:37 PM

I have a recollection of that discussion but, wanted to leave it "may be others". UP I was sure of as I own UP stock. Main point was to respond to CMStPnP's comment he'd never heard of a railroad borrowing money to buy back stock in preference to maintaining its physical plant.

CW

 

Convicted One

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others.

 

I thought that was a big part of the discussion we had here earlier about CSX, that the hedgefund got control of the board, ordered debt financed stock buyback, and then sold their holdings at considerable profit.

 

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Posted by Convicted One on Tuesday, July 13, 2021 6:14 PM

I've been doing some interesting reading the past hour, searching old threads here. I had recalled there was a fund prior to Mantle Ridge that tampered with CSX, but could not place the name...it was "Children's fund". 

Other old threads I've found interesting include:

"Mantle Ridge Sells Most of It's Stake in CSX"

"So Why so Much Long Term Debt on the Balance Sheet?"

"Newswire: CSX Reports Record Earnings Thanks to Cost-Cutting, Efficiency Gains"

"Newswire: Analysts ask why Union Pacific isn't more like CSX"

 

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Posted by Euclid on Tuesday, July 13, 2021 6:22 PM

Convicted One
 
Euclid
By conspiracy theory, I am referring to the belief that such looting is actually happening under the guise of PSR.  It may be a popular belief, but where is the evidence that it is happening?

And just to be abundanly clear, I do not have any "meat and potatoes" examples to share.  I'm not sure that a shrewd operator doing such a thing would put up any flashing signs to attract attention, fwiw.

 

 

Certainly someone would notice if their railroad got stolen right out from under them.  It should not require flashing signs to reveal the caper. 

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Posted by MidlandMike on Tuesday, July 13, 2021 8:10 PM

mudchicken
....USRA moved all the traffic over to D&RG after they ran the CM plant into the ground. They were so bad that ATSF walked (ran) away from them.

Yes, did that run the D&RG into the ground or was it better built to handle the traffic?  In either case the USRA did the same to both railroads- send all the traffic their way in turn, and yet the CM died and the D&RG thrived.  If two students take the same test, and one passes and the other fails, I don't think the test is the problem.

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Posted by CMStPnP on Tuesday, July 13, 2021 9:05 PM

Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

But not causing deferred maintenence which was the other half of the assertion.   

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Posted by CMStPnP on Tuesday, July 13, 2021 9:10 PM

Convicted One
Think about it...if they put up a flashing sign announcing "This is our future!"...what would all the other stockholders do?

The investor calls are pretty frank about asking where money is being spent and the questions are very direct towards management.    Management may obfuscate but the stock analysts rarely do.   Nobody on the stock analyst side is shy about tip-toeing around an issue because it might lead to a sell off.   In fact most analysts are on the call because their firms are considering a purchase or they need to publish their analysis for clients to see and their butt is on the line in regards to discovery.    So I really do not have to think about it.   I have sat in on numerous conference calls (all of which are open to the public and announced).

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Posted by Gramp on Tuesday, July 13, 2021 9:38 PM

Paul Milenkovic

 

 
Gramp

I'd like to suggest getting a copy of the book "Good Profit" by Charles G. Koch. Refreshing account of creating a business. 

 

 

 

Oh, the Humanity! 

"Good" and "Profit" in the same phrase?  Charles G. Koch!  Isn't he one of the Koch Brothers?

You should have warned us about your post that we could cover our eyes.

 

Yup, "How Creating Value for Others Built One of the World's Most Successful Companies"

I have a hunch the rap artist who was ambushed (shot 64 times) while leaving Chicago's Cook County Jail the other day did not read the book. 

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Posted by tree68 on Tuesday, July 13, 2021 10:18 PM

Any problem with profit usually comes down to what people think is an appropriate amount (very subjective) and where it ends up (also subjective).

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Posted by Gramp on Tuesday, July 13, 2021 11:02 PM

tree68

Any problem with profit usually comes down to what people think is an appropriate amount (very subjective) and where it ends up (also subjective).

 

I agree with that on the surface. Fundamentally though, I think a whole lot of people do not have a clear, grounded understanding of the subject. A while back, Greyhounds posted one of the best explanations of creating wealth I have read.

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Posted by zugmann on Wednesday, July 14, 2021 5:53 AM

The other issue is that railroads (like all big corps) do not operate in a vacuum.  Their actions (or inactions) can and do have a direct consequence on the public at large of which they have to share this little rock we all live on. 

 

   The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by Juniata Man on Wednesday, July 14, 2021 6:25 AM

They have reduced their capex concurrent with borrowing money to buy back stock. They may not be deferring critical maintenance but, the capital reduction can be an indication they have decided to defer some projects.

CW


CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

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Posted by Euclid on Wednesday, July 14, 2021 9:38 AM

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Posted by Convicted One on Wednesday, July 14, 2021 11:36 AM

Euclid
Certainly someone would notice if their railroad got stolen right out from under them.  It should not require flashing signs to reveal the caper. 

Depends upon if they understand what they are looking at

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Posted by tree68 on Wednesday, July 14, 2021 12:15 PM

Euclid
It is widely agreed to include cost cutting, which includes cutting jobs. 

The problem that has been reported here is that all too many of the jobs that have been cut have been those that contribute to long-term growth, such as sales/marketing.  

Add to that the apparently intentional shedding of lower yield customers and it's not hard to imagine that PSR is, as has been suggested, all about moving money to the bottom line where it can be harvested.

One has to wonder how many rail customers share the feelings of ShadowtheCat with regard to reduced service levels, or even the complete loss of service.  Presumably such service is being charged a realistic price, but apparently the profit margin is not large enough to continue providing it.

LarryWhistling
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Posted by jeffhergert on Wednesday, July 14, 2021 7:01 PM

CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

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Posted by BaltACD on Wednesday, July 14, 2021 7:39 PM

jeffhergert
 
CMStPnP 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW   

But not causing deferred maintenence which was the other half of the assertion.    

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

When you spend $1M on maintenance but should have spent $5M - you are deferring maintenance.

Hired out on the B&O in the mid 60's - at that time I THOUGHT the property was in 'good repair' - as I found out throughout my career the state of the B&O at that time was far from 'good repair'.  Maintenance, while being performed, was not being performed to the extent that was really necessary.

If the funds MofW request for 'good maintenance' are not being provided at the level MofW requests - Maintenance is being deferred!

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Posted by Convicted One on Tuesday, July 20, 2021 11:13 AM

Euclid
It almost has the ring of a conspriacy theory. 

Perhaps so, but the same issues seem to be coming to the attention of many separate and disparate people.

 

https://transportation.house.gov/imo/media/doc/2021-5-12%20Letter%20to%20GAO%20on%20PSR%20Study.pdf

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Posted by charlie hebdo on Tuesday, July 20, 2021 1:11 PM

BaltACD

 

 
jeffhergert
 
CMStPnP 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW   

But not causing deferred maintenence which was the other half of the assertion.    

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

 

When you spend $1M on maintenance but should have spent $5M - you are deferring maintenance.

Hired out on the B&O in the mid 60's - at that time I THOUGHT the property was in 'good repair' - as I found out throughout my career the state of the B&O at that time was far from 'good repair'.  Maintenance, while being performed, was not being performed to the extent that was really necessary.

If the funds MofW request for 'good maintenance' are not being provided at the level MofW requests - Maintenance is being deferred!

 

The huge increase in weight of freight cars and length of trains likely takes a toll on track and thus requires more maintenance. 

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Posted by Euclid on Tuesday, July 20, 2021 1:14 PM

Convicted One
 
Euclid
It almost has the ring of a conspriacy theory. 

 

Perhaps so, but the same issues seem to be coming to the attention of many separate and disparate people.

 

https://transportation.house.gov/imo/media/doc/2021-5-12%20Letter%20to%20GAO%20on%20PSR%20Study.pdf

 

Well that is the list of grievances often presented by the labor unions.  However, it is not a list that confirms those problems are actually real.  Obviously Labor is focused on jobs, and part of PSR will eliminate jobs.  So they have a vested interest in finding the greatest number of reasons why PSR should be eliminated.  So even if it reads like a conspiracy theory, it does have a purpose.

The key would be to hear the response to this request to investigate the list of charges.  Can you find that response?   A formal investigation might confirm or deny these charges. 

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Posted by charlie hebdo on Tuesday, July 20, 2021 1:24 PM

Juniata Man

They have reduced their capex concurrent with borrowing money to buy back stock. They may not be deferring critical maintenance but, the capital reduction can be an indication they have decided to defer some projects.

CW

 

 
CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

 

 

CW: Using debt to finance stock buybacks is just another legal trick to get the stock price to increase.  Fewer shares =  a higher eps which attracts buyers.  Debt should be used for infrastructure and equipment investment to grow the business. 

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Posted by adkrr64 on Tuesday, July 20, 2021 1:38 PM

charlie hebdo
CW: Using debt to finance stock buybacks is just another legal trick to get the stock price to increase.  Fewer shares =  a higher eps which attracts buyers.  Debt should be used for infrastructure and equipment investment to grow the business.

What is so bad about using debt to finance the purchase of equity, especialy when interest rates are so low? Yes, financing the purchase puts debt on the books, but it also puts equity on the books; equity that has value and which can be sold in the future to repay the debt or return cash to the organization. If the re-purchase of shares also causes the value of the stock to rise, then the value of the just purchased equities increase, increasing the overall market value of the company.

Like anything, it is entirely possible to do this in an irresponsible way, creating excessive and possibly debilitating debt load, especially if the stock price drops substantially. But as a basic financial strategy, I see nothing wrong or unethical about it when done responsibly.

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Posted by Overmod on Tuesday, July 20, 2021 2:01 PM

adkrr64
What is so bad about using debt to finance the purchase of equity...

What he's saying is something rather different: that using that debt to maintain the critical income-generating aspects of the company might be a better opportunity use.  The market cap of the company doesn't matter if the company can't do the business that generates its income effectively.

 

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Posted by charlie hebdo on Tuesday, July 20, 2021 2:28 PM

It's interesting how Wall Street types in the past in corporations used to use watered stock to line their own pockets at the expense of its ongoing business growth. Now they use stock buybacks, often in disregard for it's ongoing (beyond a few quarters) business growth.  

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Posted by Convicted One on Tuesday, July 20, 2021 2:59 PM

adkrr64
I see nothing wrong or unethical about it when done responsibly.

'There's quite a few folks out there who feel little responsibilty other than to their own prioritites.

 

Pump, dump, and leave a debt riddled mess behind after they execute their exit

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