January 2003
Independent Draft Gear acquiredHansen, Inc., parent company of A. Stucki Company, has acquired the assets of Independent Draft Gear, Farrell, Pa., which reconditions and tests draft gear of all makes and models, principally for the freight car repair market. A. Stucki Company, Pittsburgh, Pa., is a supplier of constant-contact side bearings, resilient friction wedges, and body side bearing plates and wedges for new freight cars and for the freight car repair market. Independent Draft Gear has been organized as a business unit of the A. Stucki Company and will be managed by its current president, William R. Kiefer.
"The combination of these two market leaders reinforces the technical base of IDG and expands its market presence," said A. Stucki Company in a satement released today. "In addition, by capitalizing on the strengths of the two organizations to meet the needs of their customers, the growth of both Stucki and IDG is expected to accelerate."
TFM performance boosts KCS earningsStrong earnings from Kansas City Southern’s Mexican affiliate Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (TFM) helped KCS report net income of $54.2 million (87 cents per diluted share) in 2002, compared to $30.7 million (50 cents per diluted share) for 2001, an increase of $23.5 million. TFM contributed a $14.3 million gain in earnings over 2001.
KCS’s 2002 consolidated operating income declined $7.4 million compared to 2001 as a result of a $17 million decrease in revenues. The decrease was partially offset by lower operating expenses, which declined $9.6 million. In 2002, KCS Railway (KCS’s U.S. Class I) revenues declined $12.7 million compared to 2001, primarily as a result of lower coal and automotive revenue. Revenue from other subsidiaries decreased approximately $4.3 million due to volume declines. KCSR’s 2002 operating expenses were $6.1 million lower than 2001, due mostly to a decline in costs associated with fuel, casualties, and adjustments related to insurance settlements. Operating results were adversely impacted by the Management Control System (MCS)-related congestion issues that impacted third quarter operations. The operating ratio for KCSR was 89.2% for 2002, compared to 88.3% for 2001.
"During 2002, Grupo TFM provided a substantial contribution to our net income and it continues to be a significant driver of the company's profitability," said KCS Chairman, President, and CEO Mike Haverty. "During the tough economic environment facing North America over the past several years, Grupo TFM management has done a tremendous job of operating the strongest rail franchise in Mexico and has been able to maintain its revenue base and control its cost structure. When the economy begins to improve, Grupo TFM is poised to take advantage of its leadership position in the NAFTA transportation marketplace. As we look toward 2003 and beyond, we are confident that the our strategic direction under the new MCS operating platform will provide opportunities for continuous improvement in both operational effectiveness and efficiency. Our focus is firmly set on improving domestic operations and generating stronger growth in our operating income."
Bigger brackets brought out for Amtrak’s Acela ExpressNew, heavier-duty stainless steel yaw damper brackets designed to replace trouble-plagued original units are scheduled to be installed and tested on Amtrak’s high speed Washington-New York-Boston Acela Express electric trainsets beginning next week.
The yaw dampers, attached to the power car carbody and suspension, are used to reduce carbody sway and promote high speed stability. The trainsets’ manufacturer, a consortium of Bombardier Transportation and Alstom Transport, had to design a new yaw damper bracket after the original units began cracking, sidelining the Acela Express fleet for several days last August. Cracks were found in the brackets as well as their attachment points to the carbody; a temporary fix involving welding and frequent inspections has kept the trainsets in service. The Acela Express operates at speeds as high as 150 mph. Amtrak has 19 trainsets on the property but only 13 are currently in service, as Amtrak has wanted to make sure its well-patronized, airline-competitive high speed schedules are protected.
The Acela Express, extremely popular with Amtrak’s Northeast Corridor business travelers, has been plagued by mechanical problems. Difficulties involving excessive truck hunting and wheel wear delayed introduction by more than one year. Other problems such as sticking restroom doors ("crapper doors that don’t work," quipped Amtrak President and CEO David Gunn last year) are among some 200 individual fixes and modifications that have been addressed. Practically all the glitches have been remedied, except for one rather visual flaw: The power cars are currently operating without the shrouding that would normally conceal their pantograph mounts and other roof-mounted electrical gear. The lightweight shrouds, which are attached by bolts, were found to be shaking loose at high speeds and in some instances peeling off, like a can top, creating a safety hazard. A permanent fix is being sought.
Mechanical and electrical problems also delayed introduction of 15 HHP8 electric locomotives. Most of the glitches on those units, which are based on the Acela Express power car technology, have been ironed out as well.
The new yaw damper brackets have been given the blessing of the Federal Railroad Administration. They will also be installed and tested on Bombardier’s JetTrain, a 150-mph turbine-electric locomotive based on the Acela Express power car. The JetTrain’s carbody, trucks, and other components are virtually identical to those of the Acela Express. Bombardier developed the JetTrain with an FRA grant obtained through the Next Generation High Speed Rail Program.
NS knocks two points off operating ratio Norfolk Southern posted an operating ratio of 81.5% for 2002, more than two points lower than its 2001 figure of 83.7%. For the year, net income was $460 million ($1.18 per diluted share), up 23%, compared to $375 million ($0.97 per diluted share) in the year-earlier period. Railway operating revenues set a record high—$6.27 billion, 2% higher than 2001. Railway operating expenses were $5.1 billion, down $51 million, or 1%, from 2001.
Gains in general merchandise and intermodal offset declines in coal traffic in 2002. General merchandise revenues of $3.65 billion increased 3% compared with 2001 and set a record. Intermodal revenues of $1.18 billion, a 5% improvement over 2001, were the highest in NS history. Coal revenues decreased 5% for the year to $1.44 billion.
"I am pleased with the substantial improvements in income and operations during 2002 in a year filled with challenges for everyone in business," said NS Chairman, President, and CEO David R. Goode. "The [intermodal] revenue growth reflects the introduction of new services that enabled conversion of highway movements to rail as well as improvements in ontime reliability and service speed. The value of service improvements is making itself apparent. Our results show that Norfolk Southern is on course and headed in the right direction."
BNSF, Ferromex offer new intermodal serviceBurlington Northern and Santa Fe and Ferrocarril Mexicano have introduced a new transborder intermodal service that "significantly reduces" transit times between major U.S./Canadian markets and Mexico. The new, truck-competitive service uses the El Paso, Tex., border crossing. For example, seven- or eight-day transit times are available between Los Angeles or Chicago and Mexico City or Guadalajara. "This matches transit times offered by over-the-road service providers today," says BNSF.
The new service is initially targeted for freight moving between Guadalajara or Mexico City and major North American markets including Southern California, Northern California, Chicago, Baltimore, Philadelphia, New York City, and major Canadian markets. Prices for the service can be found online at the BNSF Mexi-Modal website (www.bnsf.com/business/mexico/meximodal). The prices contain all components of the shipment including bridge crossing at El Paso, Tex., and Inbond with Mexican customs.
Ferromex intermodal service with BNSF began last year with time-sensitive automotive parts into and out of Mexico, using Ciudad Juarez, Chihuahua, as the cross-border point.
Dallas: Rail transit does boost property valuesNIMBYs take note: Office and residential properties near suburban Dallas Area Rapid Transit rail stations increased in value far more than comparable properties not served by rail, according to a study prepared for DART by Drs. Bernard Weinstein and Terry Clower of the University of North Texas Center for Economic Development and Research. The study compared the values of 3,924 properties located within a quarter-mile of 23 DART stations against 4,898 comparable properties not near a station.
According to the study, between 1997 and 2001, the mean value of 47 office properties near DART increased 24.7%, compared with an increase of 11.5% for 121 properties not near the stations, giving the DART office buildings a 53% advantage. The mean value of 3,262 residential properties near DART increased 32.1% versus an increase of 19.5% in the mean value of 4,393 properties not near the stations, for a 39% advantage.
"The findings of the data analysis confirmed our expectation of higher market values for residential and office properties located in close proximity to a light rail station," the study says. "DART rail is an amenity-enhancing service most keenly affecting the market values of properties where people live and where there are comparatively high concentrations of non-industrial jobs – i.e., office buildings."
CPR closes 2002 with record resultsA combination of cost containment measures and growth in several business sectors helped Canadian Pacific Railway post a record C$857 million in operating income—C$16 million or 2% higher than 2001—and a best-ever operating ratio of 76.6% in 2002. These results were achieved despite the effect of a second year of depressed grain shipments caused by the Canadian prairie drought. CPR’s net income in 2002 was C$496 million, an increase of C$124 million or 33% over 2001—a result of higher operating income, lower income taxes, and a stronger Canadian dollar. Diluted earnings per share in 2002 were C$3.11, an increase of C$0.77 or 33% over 2001.
Excluding non-recurring items and the effect of foreign exchange gains and losses on long-term debt, CPR’s net income in 2002 was C$407 million, an increase of C$27 million or 7% over the comparable results in 2001. On the same basis, diluted earnings per share were C$2.56 in 2002, an increase of C$0.17 or 7% over 2001. CPR’s operating expenses in 2002 were C$2.81 billion, a reduction of C$49 million or 2% from 2001 (excluding non-recurring items in 2001).
Overall, 2002 revenue was C$3.67 billion, down C$33 million or 1% from C$3.70 billion in 2001, due to the effect of the drought on grain as well as lower shipments by coal mining customers. These losses were offset by growth in the intermodal, automotive, and sulphur and fertilizer sectors. Grain revenue was off 16% and coal declined 7%, but intermodal increased 10%, continuing a seven-year growth trend. Automotive revenue was up 9%. Sulphur and fertilizer revenue grew by 5%. Excluding the effect of drought on grain revenue, which was more than 30% below normal in CPR’s Canadian collection area, revenue grew about 3% in 2002.
"CPR's diverse commodity mix is one of our underlying strengths, and our marketing and sales team used this strength to overcome the effect on our grain revenue of a prolonged drought," said President and CEO Rob Ritchie. "At the same time, we managed pressures on expenses by being unrelenting in every area of the business. This was our safest year ever for train operations, and our employees achieved their best on-the-job safety record. Service levels improved through the year as we continued to build on scheduled railway operations. Productivity, measured in employee workload and freight car utilization, was at an all-time high. I expect to see continued improvement in these areas in 2003. General economic uncertainty, unpredictability of the forthcoming grain crop, fuel prices, and increasing insurance, pension, and benefit costs mean that we will be dealing with a year not unlike 2002, and our past performance indicates we can manage these issues well."
Freight car deliveries hit bottom in 2002—and should bounce backThe North American freight car building industry delivered 17,714 new cars in 2002, the fewest in 15 years, according to figures released by the American Railway Car Institute Committee of the Railway Supply Institute. However, increased orders and backlogs are indicating that the industry is beginning to recover.
Last year’s total appears to be the bottom of a steep drop from the more-than 75,000 cars that were delivered in 1998. There were 4,801 new cars delivered in the fourth quarter of 2002, fewer than forecast, but slightly more than fourth-quarter 2001. More encouraging, says ARCI, are the 28,457 cars ordered last year, two-thirds of which were ordered in the last six months of the year—43% more than in 2001. That amounts to a current backlog of 18,402 cars—more than double the year-earlier backlog total.
“We believe the worst is behind us, says RSI Executive Director-Washington Thomas D. Simpson. “We look for continued strengthening of the sector in 2003.”