February 2006
Rotem in line for $306 million contractA 6-5 vote by the Southern California Regional Rail Authority (SCRRA) has put the Korean firm Rotem in position for a commuter railcar contract worth $306 million, with options. The board set 5 p.m. on March 3, local time, as the line for the filing of any protest.
SCRRA’s base contract is for 87 cars (54 trailers and 33 cab units) for SCRRA’s Metrolink commuter operation. Also approved were the first two of four SCRRA options. One is for 10 additional cab cars at a cost of $17.79 million and the other is for 10 more cab cars at a cost of $17.86 million. Three additional contract options are for 24 trailer cars and 10 cab cars to be delivered to the South Florida Regional Transportation Authority, which operates Tri-Rail commuter service.
SCRRA said these will be the first commuter railcars in the U.S. to incorporate crash energy management technology “to further enhance the safety of passengers and crew members in collisions, especially those of an extreme nature.”
Rotem is the rolling stock subsidiary of the Hyundai Automotive Group. Rotem also has a pending order for 32 diesel-powered cars for North Carolina’s Triangle Transit Authority for planned service in the Raleigh-Durham area.
line extension for short line/regional contestRailway Age has extended the line for its annual Short Line/Regional Railroad of the Year awards. Short line and regional carriers are invited to submit entries by Thursday, March 2, describing what they deem to be outstanding achievement in one or a combination of areas. These include, but are not limited to, turnaround situations; consistent excellence; innovation in operations or maintenance; marketing; customer service; enhanced productivity; community relations; safety improvement; and ingenuity in dealing with the unexpected.
Each of the more than 500 smaller roads in Mexico, the U.S., and Canada is eligible for an award and may nominate itself. Size is not important. In the past, awards have gone to carriers ranging from 20 miles to nearly 2,000 miles. In some years, separate awards are given for regional and short line carriers.
The 2006 winners will be awarded specially designed plaques at the American Short Line and Regional Railroad Association Annual Convention in Orlando, Fla., this April. Articles describing their achievements will appear in Railway Age’s April issue, which will be distributed at the show.
Entries should be submitted to: Marybeth Luczak, Executive Editor, Railway Age, 345 Hudson Street, 12th Floor, New York, N.Y., 100l4. E-mail: mluczak@sbpub.com. Fax: (212) 633-1863. Entries should contain the name, position, and contact information of the nominator and an approximately 500-word description of the achievement(s) of the nominated railroad.
Entry forms are not essential, but may be obtained by clicking here.
ardier marks a milestone at La PocatiereAt its plant in Pocatiere, Que., ardier marked completion of the 1,000th carbody in a contract to build 1,172 M-7 commuter railcars for New York MTA's Long Island and Metro-North railroads. ardier noted that this was the second time La Pocatiere had crossed the 1,000-car threshold: the first was in 2003 with a contract for 1,030 cars for MTA New York City Transit.
“Producing 1,000 carbodies is by itself a milestone indicative of success, and you should all be proud of the work you are doing here,” ardier Chairman and CEO Laurent Beaudoin told employees. “This site was the backbone of our rail operation when we launched it 30 years ago, and is at the heart of our North American organization today.”
Portec posts record results for 2005Portec Rail Products, Inc. reports that it earned $1.4 million on sales of $21.7 million in last year's fourth quarter and $5.8 million on sales of $90.8 million for the full year. In 2004, the company earned $976,000 on fourth-quarter sales of $18.7 million and $4.2 million on full-year sales of $60.4 million. “Our 2005 results are a record for the company as total revenues grew by 31% and net income increased by 43%,” said President and CEO John S. Cooper. He said each of four core businesses had higher operating profits for the year, and two late-2004 acquisitions, Salient systems and Kelsan Technologies, added $11.7 million in sales and $1.4 million in net income in their first full year with the company.
Rail s rise in CanadaThe Transportation Safety Board of Canada says it counted 1,246 railway s last year, up 9% from over the 1,138 s recorded in 2004 and up 18% from the 2004-2005 average of 1,055. The rate per million train-miles was 13.04 2005, compared with 12.29 in 2004 and the 2000-2004 average of 11.67. There were six main-track collisions last year, compared with five in 2004 and a five-year average of seven; 94 non-main-track collisions, down from 116 in 2004 and a five-year average of 106. The board reported 195 main-track derailments in 2005, up from 152 in the prior year and a five-year average of 133; and 538 non-main-track derailments, up from 450 in 2004 and a five-year average of 392.
Wabtec reports improved earnings and strong backlogWabtec announced today that a 20% increase in locomotive and car component sales resulted in earnings per diluted share of 34 cents and net income of $16.4 million in last year's fourth quarter vs. per-share earnings of 20 cents and net income of $9.2 million in the prior-year quarter. Operating expenses as a percentage of sales dropped to 14.9% from 17.6%.
“With our multiyear backlog over $1 billion including options we are optimistic about future prospects,” said Wabtec Chairman William E. Kassling. The company reaffirmed that it expects 2006 earnings of $1.50 per share excluding expenses for possible restructuring actions now under study.
“We continue to evaluate various ways to improve our cost position and increase our gross margin,” said Fred J. Neupaver, who became president and CEO of Wabtec on Feb. 1. He added that “demand in our core sector remains strong and we are actively pursuing a variety of new business opportunities and growth initiatives.”
CPR sets change at the top for May 5Robert J. Ritchie's 11-year reign as CEO of Canadian Pacific Railway will end on May 5 when he steps down following CPR's annual general meeting, the company's board of directors announced today. Ritchie will be succeeded as CEO by Fred Green, who has been president and chief operating officer since November 2005.
Both Ritchie and Green rose through the ranks at CPR. Ritchie joined Canadian Pacific Ltd. in 1970 as a research analyst and moved to CPR in 1972. He was named president in 1990 and given the additional title of CEO in 1995. Green came to CPR in 1978 and held positions in operations and marketing before being named president last year.
CRR's board also announced that its chairman, Ted Newall, will retire from that position following the May meeting and will be succeeded by Director John Cleghorn.
In a separate announcement, CPR's board said it is increasing the company's quarterly dividend by 25% to C$0.1875 per share, payable to shareholders of record on March 31.
The good times rollThe first two months of 2006 saw continued strong performance by the railroads, with traffic steady or slightly better and revenues up strongly, due to higher rates supported by improved service.
Norfolk Southern Vice Chairman and CFO Henry C. Wolf put the picture into perspective at an investor’s conference in Miami on Feb. 15.
“As we all know, for the past two years in particular, the pricing environment has been much more favorable for rail transportation as a result of higher freight demand and constrained capacity in the truck market,” said Wolf. “Concurrently, our service product has improved as a result of our TOP [Thoroughbred Operating Plan] and TOP 2 service plans. Network capacity and reliability have produced the opportunity to convert traffic from the highways, much of which has been gained in a collaborative fashion with the truckload carriers. These factors along with rising truck pricing in general support improved pricing for our service.”
Wolf offered some specifics: “Over the past year, we estimate that 50% of our book of business was renegotiated and re-priced and approximately the same percentage will be available in 2006. As part of our pricing strategy, we are generally shortening the term of our contracts and deploying more effective escalators to ensure that pricing reflects current capacity and demand in the freight marketplace.”
A “great day” for DM&EAfter eight long years, the Dakota, Minnesota & Eastern has finally received the go-ahead to build a new line into Wyoming's Powder River Basin. “This is a great day for DM&E,” said President and CEO Kevin V. Schieffer, shortly after the Surface Transportation Board announced its final decision yesterday.
The STB's approval, Schieffer noted, “affirms the project's overwhelming public benefits,” which include “a tremendous positive impact” on agriculture, grain prices, and economic development, and help in lowering energy costs and expanding rail capacity nationally.
DM&E filed its application seeking authority to construct the line in 1998. In 2002, STB approved the project--a decision that was later appealed and sent back to the federal agency for addition action.
Yesterday's decision will be finalized after a customary 30-day waiting period.
BNSF sees another strong year in the makingBNSF Railway expects freight revenue growth of 10% to 13% in 2006, Chief Financial Officer Thomas Hund told the BB&T Capital Markets Transportation Services conference in Miami today. Hund said the railroad is looking for earnings-per-share percentage growth in the mid-teens, an operating ratio still below 77%, free cash flow of around $700 million after dividends, and continued improvement in return on invested capital (ROIC), which hit 10.1% in 2005, up from 7.9% in the prior year. BNSF plans to invest $2.4 billion in capital improvements this year, up $221 millioon from last year.
ardier shutters Auburn, N.Y., plant ardier Transportation has decided to close its rail- and aerospace-product production facility in Auburn, N.Y., by the end of May. The company cited a “lack of sufficient workload” as the primary reason for the shutdown, which will affect approximately 160 employees.
Discussions with union representatives have addressed incentive packages, employee benefits, and a range of other issues, according to ardier.
“We know this is a difficult situation for our employees, but what we have put on the table treats them with fairness and consideration,” said ardier Transportation, North America, President William Spurr, who noted that the company's Plattsburgh, N.Y., facility will not be impacted.
STB approves DM&E's new coal lineThe Surface Transportation Board has reaffirmed its approval of Dakota, Minnesota and Eastern's application to construct and operate a 280-mile rail line into Wyoming's Powder River Basin.
“Despite certain potential adverse environmental impacts, not all of which can be fully mitigated, the proposed project has demonstrated transportation benefits and would further the public interest,” said STB, during today's announcement.
DM&E has been trying to join BNSF Railway and Union Pacific in the Powder River Basin since 1998, when it first applied to the STB for access. In January 2002, the STB signed off on the plan, citing its benefits. STB said that "the introduction of a viable and safe competitive rail service by a third carrier" would be as much as 390 miles shorter than the existing carriers' routes to the areas served by DM&E and would offer "reliable service for midwestern utilities to obtain coal in a period of increased energy demand." But several groups in Rochester, Minn., filed an appeal.
In 2003, a federal appeals court vacated and partially remanded the STB's decision, pending further review. The STB was asked to take a “second look” four environmental issues: the question of whether mitigation for increased horn noise is warranted; the relationship between vibration and horn noise; the impact of any potential increased coal usage and related air emissions from this project; and assurances that the procedures to govern the historic review were in place.
The STB's Section of Environmental Analysis conducted an independent review of those issues and produced a detailed Supplemental Environmental Impact Statement, on which the Board based its recent decision.
Following STB's 2002 decision to approve the line, the DM&E's application is still subject to 147 environmental mitigation conditions. Among them: the imposition of 11 noise mitigation measures, including grade crossing improvements and grade-separated crossings in Rochester, Minn., and Pierre, S.D., that would reduce horn sounding to “some extent.” Today's final decision modified one of those conditions, requiring DM&E to provide assistance to communities or other entities interested in developing quiet zones. The STB pointed out, however, that funding quiet zones is the “responsibility of the community, not the railroad,” under Federal Railroad Administration regulations. The change, STB noted, is “unlikely to require DM&E to incur any increased financial burdens.”
STB's environmental oversight of the project will allow communities or other interested parties to “seek redress if there are unanticipated environmental problems or material changes in the facts and circumstances upon which our approval is based.” The railroad will be required to file quarterly reports.
Late last fall, DM&E CEO Kevin V. Schieffer predicted that the STB would make a final announcement sometime this year and announced that the railroad would request federal funding to finance this construction as well as other rail renewal projects.
SAFTETEA-LU--the new transportation bill enacted last summer--authorizes $35 billion in Railroad Rehabilitation and Improvement Financing loans, with a minimum of $7 billion set aside for smaller roads. Under this provision, DM&E is seeking $2.5 billion for:
* A 900-mile project, including the PRB extension and upgrade of some 600 miles of existing track in Minnesota and South Dakota.
* A 250-mile IC&E upgrade of lines in Iowa to attract new ethanol production and other business, and improve service for existing customers.
* A 150-mile DM&E upgrade of the western end between Wall, S.D., and Colony, Wy.
* A 30-mile IC&E upgrade of its line from Marquette, Iowa, northward to attract new rail business.
BNSF supports the National Guard and ReserveBNSF Railway has become the first railroad to sign the Department of Defense's “5-Star” Statement of Support in recognition of and appreciation for “the sacrifice and service” of National Guardsmen and Reservists.
By doing so, the railroad has fulfilled the requirements of the National Committee for Employer Support of the Guard and Reserve (ESGR), a DOD agency. It has reviewed its human resources policies to ensure compliance with the Uniformed Services Employment and Re-Employment Rights Act; adopted policies and programs that are “above and beyond” the requirements of that act, and will promote training for supervisors to effectively manage employees who serve; and will advocate employee service in the National Guard and Reserve while continually promoting ESGR's mission.
More than 400 BNSF employees have been called to duty in the armed forces since Sept. 11, 2001, and 195 were on active duty as of Jan. 31, 2006. The railroad offers enhanced and extended benefits to these employees.
According to ESGR, less than 1% of employers of Guardsmen and Reservists in the United States have achieved the “5-Star” level of recognition.
AAR: For suppliers, a bigger roleCiting the need for “a more formal and channeled structure for suppliers to voice issues and concerns and to more fully participate in the technical workings of the association,” the Association of American Railroads is implementing “enhancements and improvements” to its Associates Program, established four years ago for railway industry suppliers as welol as Class II and III railroads.
AAR is establishing an Associates Advisory Board and voting seats on several industry operating committees. The Board will include nine Gold Level-only associate members serving three-year terms, with the AAR President and Senior Vice President-Safety and Operations serving as ex officio members. Initially, three members will be appointed by AAR to serve one-, two-, or three-year terms. As their terms expire, their successors will be elected by the associate members. The Board will elect its own chair. In addition, AAR is expanding associate member participation to 30 voting seats on selected AAR safety and operations committees. Once the transition is complete at the end of this year, those seats will be filled by a vote of the Associate Advisory Board.
“Railway suppliers are critical to the success of the railroad industry,” said AAR President and CEO Edward R. Hamberger. “The steps we are taking will ensure that their voice is heard as the railroad industry moves forward.”
Railway Age’s small road of the year competition: Enter now!Railway Age is now accepting entries for its annual Short Line/Regional Railroad of the Year awards. The 2006 winners will be awarded specially designed plaques at the American Short Line and Regional Railroad Association Annual Convention in Orlando, Fla., this April. Articles describing their achievements will appear in Railway Age’s April issue, which will be distributed at the show.
Short line and regional carriers are invited to submit entries describing what they deem to be outstanding achievement in one or a combination of areas. These include, but are not limited to, turnaround situations; consistent excellence; innovation in operations or maintenance; marketing; customer service; enhanced productivity; community relations; safety improvement; and ingenuity in dealing with the unexpected.
Each of the more than 500 smaller roads in Mexico, the U.S., and Canada is eligible for an award and may nominate itself. Size is not important. In the past, awards have gone to carriers ranging from 20 miles to nearly 2,000 miles. In some years, separate awards are given for regional and short line carriers.
Entries should be submitted to: Marybeth Luczak, Executive Editor, Railway Age, 345 Hudson Street, 12th Floor, New York, N.Y., 100l4. E-mail: mluczak@sbpub.com. Fax: (212) 633-1863. Entries should contain the name, position, and contact information of the nominator and an approximately 500-word description of the achievement(s) of the nominated railroad.
Entry forms are not essential, but may be obtained by clicking here. The entry line is Friday, Feb. 24, 2006.
Railway Age works with the winners to publicize the awards in online and national media.
REMSA offers scholarship programThe Railway Engineering-Maintenance Suppliers Association will award five $2,000 scholarships to the full-time employees and family members (spouses, children, or grandchildren) of REMSA member companies for the 2006-2007 academic year. Eligible students should have an interest in railway-related careers and be enrolled, full time, in an accredited two-year or four-year college program. Applications must be submitted by May 5. All applicants will be notified of their award status in July.
For details, contact REMSA Executive Director Judi Meyerhoeffer at: 417 West Broad Street, Suite 203, Falls Church, VA 22046; Phone: (703) 241-8514; Fax: (703) 241-8589; Email: home@remsa.org; Website: www.remsa.org.
G&W forges ahead with Australian sales, purchases Joint-venture partners Genesee & Wyoming, Inc. (GWI), and Wesfarmers Ltd. are selling their Western Australia operations and some assets of the Australian Railroad Group (ARG) to Queensland Rail (QR) and Babcock & Brown Ltd. (B&B). The pricetag: $956 million, plus “certain completion adjustments” amounting to $18 million.
QR will own “above-rail” train operations and B&B, “below-rail” track operations. The sale is expected to close in second-quarter 2006. QR and B&B have already made a $66 million deposit.
The sale “is in the best interests of GWI's shareholders,” GWI Chairman and CEO Mortimer B. Fuller said during today's announcement. “The value of the business to others in the Australian infrastructure and transportation sectors, such as QR with an already strong position in Australia's east coast rail markets, is greater today than the value that we could create for our shareholders over the long term. Meanwhile, the cash proceeds will enhance GWI's financial capacity to execute our acquisition strategy.”
The move is allowing GWI to increase its investment in a “solid regional railroad” based in South Australia, said John C. Hellmann, president of GWI. The small-road holding company has entered into an agreement to purchase Wesfarmers' 50% stake of ARG's Adelaide-based South Australian operations for $15 million. The business, renamed as Genesee & Wyoming Australia Pty. Ltd., will be a 100%-owned subsidiary of GWI.
“Our local customer base is strong and we see good opportunities to increase our business in the South Australian market, particularly in the natural-resources sector,” noted Hellmann.
GWI began investing in the South Australia rail market in 1997, privatizing rail for the first time in that country.
Greenbrier lands $100 million orderAmerican Honda Motor Co., Inc., has awarded a $100 million contract to the Greenbrier Companies for Auto-Max cars. According to Greenbrier, this is the “largest order ever” for the deep-well, articulated railcars, which can carry sport utility and carry-over vehicles, compact pickups, and minivans in a tri-level configuration and can be converted to haul large SUV's and pickups in a bilevel configuration.
“This lead order will launch production of the newly improved Auto-Max railcar on one full production line,” said Greenbrier President and CEO William A. Furman, adding that he anticipates “additional orders in 2007 and beyond.”
“Recent new railcar orders for over 14,000 platforms include double-stack railcars, covered hopper cars, mechanical refrigerated boxcars, various car types for the European market, and now AutoMax,” Furman reported during today's announcement. “Our fiscal 2006 production plans and previous announced financial outlook factored these orders into account.”
UP orders another 60 low-emission switchersUnion Pacific has awarded a contract to Mt. Vernon, Ill.-based National Railway Equipment Co. to supply 60 new low-emission, diesel switchers. The 2,100-h.p. triple-genset (generator-set) units will be used in UP's Los Angeles Basin rail yards. Powered by 700-h.p. U.S. Environmental Protection Agency non-road Tier 3-certified diesel engines, they are projected to reduce emissions of nitrous oxides and particulate matter by up to 80% while using as much as 40% less fuel compared to current low-horsepower locomotives.
The order follows UP's fall purchase of 111 similar, low-emission switchers from RailPower Technologies and Wabtec Corp. subsidiary Motive Power Industries.
“We have and will continue to work hard in building the most environmentally friendly locomotive fleet in North America,” said Bob Grimaila, vice president-environment and safety for UP.
Delivery of the first 30 National Railway Equipment units is expected this year, with the remaining 30 coming on line in 2007.
Americans see railroads as the wave of the futureResults of a Harris Poll released today show that most Americans view railroads as the preferred future mode for moving passengers and freight.
“Freight railroads (63%) come far ahead of all other modes that adults would like to see have an increasing share of freight transportation,” said the polling organization. “They are followed by air freight (35%) and trucks (24%).”
Asked to name two preferred means of passenger transportation, the poll respondents listed commuter trains (44%), long-distance trains (35%), local bus service (23%), and airlines (23%). Harris said safety and energy efficiency were seen as top priorities for passenger transportation.
As for opinions on transportation financing, Harris reported these findings:
“State government (36%) and local government (27%) are seen by the largest numbers of adults as having the main responsibility for ‘maintaining and improving transportation in your community.’ Fewer think that the federal government (16%) or private companies (10%) should have this responsibility.
“When it comes to the transportation system ‘in the nation as a whole,’ two-thirds (68%) of adults believe this should be a responsibility of the federal government. Relatively few see this as the responsibility of state government (13%), local government (2%), or private companies (8%).”
The nationwide poll of 1,961 adults conducted online by Harris Interactive® between Dec. 8 and Dec. 14, 2005.
Amtrak: “Efficiency Incentive Grants”The annual dance involving the White House and Congress over the next fiscal year’s budget has begun anew, with President Bush proposing $2.77 trillion for the year that begins Oct. 1, 2006. Of that amount, there is a record request of $8.87 billion for transit, though it’s less than what Congress authorized last year. The FY2007 proposal for Amtrak is $900 million—the same amount the Administration proposed for FY2005 and a reversal of last year’s zero—but there are significant strings attached, as well as some curious language.
The $900 million includes $500 million for capital, and—in place of operating funds and debt service, both of which are pegged at zero—$400 million for “Efficiency Incentive Grants to encourage reform,” which presumably could be denied if Amtrak fails to enact certain Administration requirements and does not “better-manage all its resources, including Federal and state contributions, ticket revenue, and other sources.” The Administration wants Amtrak to phase out overnight trains and restructure routes, overhaul food and beverage service, consider contracting out to private operators, and weigh labor costs against ticket revenues. According to the States for Passenger Rail Coalition, “The Administration believes that only a financially constrained budget will force Amtrak [to enact these requirements].” By contrast, Amtrak’s $1.2 billion FY2006 Congressional appropriation included $490.05 million for operations, $772.2 million for capital and debt service, and $31.38 million for efficiency incentive grants.
Transportation Secretary Norman Mineta said the Administration’s proposal is designed “to help Amtrak make the transition to a new and better model of intercity passenger rail.” He said that for FY2006, “we demanded reform, and over the past year, both Amtrak and the Congress have responded.” He added that the $900 million was proposed “in recognition of this progress, and with the expectation that we will see much more by the end of the fiscal year.”
Industry observers say Mineta’s statement amounts to the same thinly-disguised rhetoric and playing-with-numbers he used last year during a national tour to justify the Administration’s zero-dollars figure. “I suppose the fact that the FY2007 proposal for the Amtrak budget was not zero, but $900 million, should be cause for some optimism,” commented Capitol Corridor Joint Powers Authority Managing Director Eugene K. Skoropowski. “However, a railroad cannot be run on zero dollars. Back to square one, again. Hopefully, Congress will do its thing, and Amtrak will implement efficiencies without having to destroy the remaining skeletal national network of trains that we have, and the onboard services that make trains unique and attractive above almost all other forms of travel. . . . How shortsighted we are. How discouraging are the current transportation policies. Maybe we can eke Amtrak through another year until more visionary people arrive in decision making positions in Washington.”
The Administration’s $900 million proposal “brings President Bush back to the levels he proposed two and three years ago, except of course that inflation has eroded the value of $900 million,” said National Association of Railroad Passengers Executive Director Ross Capon. “Moreover, the budget does not contain any request to fund a federal/state partnership to develop new routes and services—a program that the Administration, Congress, and states all have said they support.”
“Hopefully, the Administration recognized that Congress soundly rejected last year’s proposed zero, and is now expressing some flexibility to negotiate a more realistic budget,” said Capon. “It will also be important to see what the Administration means when it says, ‘The budget proposes allowing DOT to target Federal subsidies based on Amtrak’s progress making reforms.’ It is generally recognized that Amtrak has been working to ‘better manage all its resources’ at least since 2002, when David Gunn arrived.”
The outspoken Gunn’s temporary replacement, Acting President and CEO David Hughes, took a non-confrontational tack when he responded to the Administration’s proposal by saying, in a statement, “This is the first step in a nine-month process. Last year, Congress voted and the President signed an appropriation for Amtrak of $1.3 billion for FY06. This year, we again look forward to working with Congress and the Administration as we make the case for federal support.”
Amtrak is under a mandate to achieve a certification from the DOT Inspector General by July 1, 2006, that it has achieved “operational savings.” Commented Capon: “Amtrak is working on a number of fronts to assure that it will get that certification—most conspicuously, reducing personnel requirements on many dining cars. If the Administration is determined to expand the amount of outside micromanaging Amtrak must contend with, that is more of a Trojan horse than an olive branch.”
Critics of the Administration’s passenger rail stance (one of whom characterized it as “Fourth-world”) say it is inconsistent with the President’s publicly stated goal of reducing U.S. dependence on foreign oil. “A key ingredient in any fight to beat that [dependence] must be development of a more robust rail passenger system,” said Capon.
It’s not just passenger rail that would be adversely affected by the Administration’s FY2007 budget proposal. Freight railroads would be impacted as well, as it would eliminate the Railroad Rehabilitation and Improvement Finance (RRIF) loan guarantee program, which is designed to assist short lines and regionals with investment capital needs. Last year’s SAFETEA-LU bill enlarged RRIF from $3.5 billion annually to $35 billion, and there were changes that made it simpler for railroads to be approved for loans. The Administration, according to one observer, “argues that the railroads are private companies and do not require public assistance.” Further, “the railroads already received tax breaks in 2004, including relief from paying the 4.3-cent per gallon fuel excise tax.”
FreightCar America again wows Wall StreetFreightCar America today announced fourth quarter 2005 earnings of $17.6 million on sales of $267.3 million, compared with a loss of $9.6 million on sales of $179.7 million in the prior-year quarter. In afternoon trading, the company’s stock was up 6.44% to $61.95. It has virtually tripled since the company went public last year. The company attributed the improvement to “increased sales volume, operating leverage due to higher volume, improved productivity, and the impact of the pass-through of increases in raw material prices to our customers with respect to all of our railcar deliveries.”
President and CEO John E. Carroll Jr. said orders for new railcars totaled 5,305 units in the fourth quarter, a 120% increase over the fourth quarter of 2004; the backlog of unfilled orders reached a record 20,729 units on Dec. 31, 1005, compared with 11,397 units on Dec. 31, 2004. For the year ended Dec. 31, sales were $927.2 million and net income was $45.4 million, compared with sales of $482.2 million and a loss of $25.9 million for the previous year.
CSX co-founder Tom Rice dies at 93W. Thomas Rice, one of the 20th Century’s most influential railroaders, died in Richmond, Va., on Feb. 5, at the age of 93. Rice was chairman of SCL Industries when that company and the Chessie System, then headed by Hays T. Watkins, were merged into CSX in 1980. Tom Rice began his railroad career in 1934 as a track supervisor on the Pennsylvania Railroad. In World War II, he directed Military Railway Service operations in both the Pacific and European theaters, earning the Legion of Merit with two Oak Leaf clusters. Retiring from active duty in 1946 (he later rose to the rank of Major General in the Army Reserve), Rice worked successively for the Richmond, Fredericksburg & Potomac, becoming its president in 1955; the Atlantic Coast Line, which he joined as president in 1957; and the Seaboard Coast Line, of which he became president in 1967 with the merger of ACL and the Seaboard Air Line.
Bush's proposed 2007 budget gets low marks from transit industryWhile it's just a starting point for Congressional debate, President Bush's proposed FY 2007 budget has disappointed many in the transit industry. The proposal--which adheres to the SAFETEA-LU transit program in most respects with $8.97 billion in guaranteed funding for FY 2007--provides only $100 million of the $200 million authorized for the year for a new program meant to assist the development and construction of such smaller fixed-guideway projects as commuter rail, streetcars, trolleys, and certain bus rapid transit systems. The American Public Transportation Association calls the move “indefensible,” since there are currently 322 new-starts projects in construction or authorized for final design or preliminary engineering under SAFETEA-LU.
Additionally, the budget assumes the imposition of $59 million in fees on Northeast Corridor commuter railroads in each of FY 2006 and 2007 to support Amtrak spending. Such fees would force fare increases and service reductions, according to APTA.
As proposed last year, the Administration also plans to freeze the Department of Homeland Security budget for the Targeted Infrastructure Protection program, including transit and ports, at the $600 million level. “We are concerned not only about the level of funding, but also the uncertainty of how much will be allocated to transit security, since this program funds a variety of security efforts in non-transit areas,” said APTA, which has pointed out that transit security needs are in excess of $6 billion.
Employment up 3.59% in 12 monthsClass I railroad employment increased 3.59% to 164,877 in the 12 months ended mid-December 2005, reports the Surface Transportation Board. There were increases in all categories: executives, officials, and staff assistants, up 6.39% to 9,540; professional and administrative, up 0.20% to 13,678; maintenance of way and structures, up 4.69% to 34,337; maintenance of equipment and stores, up 2.48% to 30,310; transportation (other than train or engine), up 0.41% to 7,354; and transportation (train and engine), up 4.21% to 69,658.
Freight railroad safety shows solid improvement in 2005The Federal Railroad Administration’s preliminary accident report for the first 11 months of 2005 shows improvement almost across the board. The total accident/incident rate for Class I railroads declined 1l.1% from the prior-year period. The train accident rate dropped 10.3% and the yard accident rate was down 14.8%. There were also declines in the rates of yard accidents (14.8%); highway-rail incidents (8.42%); trespasser incidents (4.81%); and incidents involving employees on duty (4.81%). The only negative figure in the FRA’s report was the rate of incidents affecting passengers on trains, which was up 24. 46%. Accident rates, as opposed to the actual number of occurrences, take into account such exposure-to-risk factors as train-miles operated and employee-hours worked.
Air pollution report “extremely misleading,” says AARThe Association of American Railroads says a report, “Danger in Motion: It’s Time to Clean up Trains and Boats,” published jointly by the State and Territorial Air Pollution Program Administrators (STAPPA) and the Association of Local Air Pollution Control Officials (ALAPCO), is “extremely misleading, leaves out important facts, and greatly distorts the environmental record of the nation’s freight railroads, which provide the most fuel efficient and environmentally friendly way to move goods and products across our nation.”
STAPPA and ALAPCO say that the U.S. Environmental Protection Agency “has already adopted a comprehensive cleanup strategy for other new diesel engines, including trucks, buses, and non-road engines, such as construction and farming equipment. In those cases, EPA standards call for approximately a 95% reduction in fine-particle pollution and a 90% reduction in NOx.” EPA should “take immediate action to adopt a similar cleanup strategy for new locomotives and marine diesel engines. . . . Although EPA promised in 2004 to propose more effective standards for these engines by mid-2005, the agency has not yet moved forward to do so.” EPA’s current regulatory requirements for locomotive and marine diesel engines are “extremely modest.”
The report claims that, over the next 25 years, locomotive and marine diesel emissions will annually cause 4,407 premature adult mortalities, 8 infant mortalities, 2,076 cases of chronic bronchitis, 5,653 cases of non-fatal myocardial infarction, 1,916 respiratory-related hospital admissions, 1,405 cardiovascular-related hospital admissions, 2,204 emergency room visits from asthma, 5,110 cases of acute bronchitis in children, 73,452 asthma exacerbations in children, 105,707 cases of upper and lower respiratory symptoms in children, 370,453 lost work days, and 2,171,620 minor restricted activity days.
“If left unchecked, locomotive and marine diesel engines could produce nearly half the particulate matter pollution from all diesel engines by 2030, more than a quarter of the emissions of nitrogen oxides (NOx), a pollutant which can be converted in the air either to fine particles or to ozone, and high levels of toxic air pollutants,” the report claims. “Locomotive and marine diesel engines today are legally permitted to emit pollutants at much higher rates than trucks, buses or non-road diesel engines. A typical train, for example—even one that meets new railroad emissions standards—will emit as much particle pollution over its life as nearly 500 trucks.”
AAR countered by saying that the report “failed to include EPA data which show that locomotives contribute less than 2% of fine particulate matter pollution, while industrial plants, agriculture, utility plants, and other stationary sources produce a whopping 72%. . . . The railroad industry is investing millions in new locomotives that are even cleaner and greener, as well as implementing new technologies to reduce emissions in rail yards . . . adding hybrid locomotives . . . and new genset locomotives with smaller engines based on advanced emissions technology. . . . Railroads are currently working with states such as California and Texas on programs targeted at reducing emissions in areas with serious air quality issues.” AAR pointed out to Railway Age that a typical road locomotive, over a 30-year life span, will haul thousands of trains, the equivalent of tens of thousands of trucks.
Last week, Union Pacific announced that it will be ordering 60 genset switcher locomotives, which have three 700-hp diesel engine/generator sets instead of a single prime mover. In a concept similar to DOD (displacement on demand) in an automotive engine, where half the cylinders shut down under lighter loads, a genset locomotive uses only as much power as load conditions demand, saving fuel and cutting down on emissions. A prototype designed and built by National Railway Equipment Co. has been testing on UP in the Los Angeles basin. UP and other railroads have placed numerous orders for Green Goat hybrid switcher locomotives designed and built by RailPower technologies. These locomotives use a small diesel engine to charge a bank of batteries used for traction power. For line-haul power, General Electric is currently working on a design for a hybrid that would use recycle the energy created by dynamic braking back into the traction motors, instead of exhausting it as heat through resistor grids.
“The facts speak for themselves,” AAR President and CEO Ed Hamberger said. “Railroads contribute less than 2% of the emissions” covered in the STAPPA/ALAPCO report.
Schwarzenegger proposes major rail investmentsCalifornia Gov. Arnold Schwarzenegger has proposed investing $290 million into rail lines used by freight and passenger trains in the Los Angeles basin to relieve congestion and eliminate grade crossings.
The funding is contained in the governor’s proposal to issue $222 billion in bonds to finance infrastructure improvements throughout the state. Los Angeles County, he said, suffers from severe congestion resulting from increased rail freight coming out of the ports of Los Angeles and Long Beach and a growing Metrolink commuter rail system.
Schwarzenegger’s plan entails two track extensions south of Los Angeles Union Station, a new connection to the BNSF Railway main line on the west side of the Los Angeles River, and triple-tracking an eight-mile stretch of line north of La Mirada. The largest chunk, $214 million, would be for constructing five grade separations.
The state legislature must now consider the bond proposal and decide whether to place it (or another version of it) on this year’s election ballot.
Hurricane, acquisition costs affect KCS financialsResidual impact of hurricane damage to Kansas City Southern’s Gulf Coast customer base combined with TFM (now “Kansas City Southern de Mexico, S.A. de C.V.”) and Texas Mexican Railway acquisition costs and increased fuel costs created a substantial increase in KCS operating costs in fourth-quarter 2005. The company posted a net loss for the quarter of $4.1 million, or $0.05 per diluted share, compared with a net loss of $1.4 million, or $0.02 per diluted share, in the fourth quarter of 2004. Consolidated operating expenses were $341.6 million vs. $147.2 million in the prior-year period. The effects of Gulf Coast hurricanes Katrina and Rita resulted in an estimated $12.8 million reduction in operating income. Consolidated revenues reached a record $388.2 million, a $213.6 million increase, but that came substantially as a result of the acquisitions of the Tex Mex and KCSM.
For full-year 2005, KCS reported consolidated earnings of $1.03 per diluted share, compared with $0.25 per diluted share in 2004. KCS also achieved record consolidated revenues of $1.35 billion, an increase of $712.5 million, primarily due to the Tex Mex and KCSM acquisitions. Operating income for 2005 was $61.0 million, compared to $83.5 million for 2004, reflecting a third quarter charge of $37.8 million to increase claims reserves, a second quarter non-cash, pre-tax charge of $35.6 million related to the reversal of deferred profit sharing benefits in Mexican operations, and a $24.8 million reduction due to the Gulf Coast hurricanes. Net income was $84.9 million, compared with 2004 net income of $15.7 million.
How secure are we? More than 250 people joined Railway Age for its second-annual “Railway Security Forum & Expo,” held in Washington, D.C., earlier this week. The two-day event, presented in cooperation with the Association of American Railroads, American Short Line and Regional Railroad Association, American Public Transportation Association, and Railway Supply Institute, was a sell-out, jam-packed with lessons learned from both the rail passenger and freight industries.
In the aftermath of 9/11 and the Madrid and London transit system bombings, the conference's nearly 40 presenters addressed such pressing topics as security legislation and funding, cybersecurity for information-technology and control systems, hazmat transport, emergency preparedness, radio communication interoperability, and technology. Twenty-five table-top exhibitors were on hand, showcasing their latest initiatives, in addition to conference sponsors: Alstom, Bombardier, e-RAILSAFE, Hatch-Mott MacDonald, IPIX, and Siemens.
Among the “Railway Security Forum & Expo's” featured speakers were London Underground Managing Director Tim O'Toole, Transportation Security Administration Assistant Secretary of Homeland Security Kip Hawley, and Rep. Peter T. King (R-N.Y.), Chairman of the House Homeland Security Committee.
O'Toole underscored the importance of investing in employees and ensuring that they're trained to work in concert with emergency response, when and if the unthinkable happens. His agency proved that lesson's value last July. And Hawley and Rep. King emphasized the importance of risk-based decision-making relating to rail security funding--an approach the Department of Homeland Security has already begun.
Look for a full conference-proceedings report in the March 2006 issue of Railway Age.
EMD awarded contract for more low-emissions locosFlorida East Coast Railway has ordered four SD70M-2 high-horsepower, low-emissions locomotives from Electro-Motive Diesel, Inc., formerly the Electro-Motive Division of General Motors. The 4,300 h.p. units--d.c.-traction versions of the SD70ACe's--meet the U.S. Environmental Protection Agency's tough Tier 2 emissions regulations. When delivery is completed in the third quarter, they will be used to support new business and provide additional capacity for aggregate and intermodal moves.
CP Rail sets earnings records in 2005Canadian Pacific Railway’s operating income broke through the billion-dollar mark for the first time, increasing 27% to just over C$1 billion for full-year 2005, compared to 2004. Operating revenues, driven partly by rate increases but also by greater volume, grew 13% to C$4.39 billion, with increases in six of seven business lines. Net income rose to a record C$543 million, a 32% increase over 2004. Diluted earnings per share increased 45% to C$3.30. The operating ratio improved 2.6 percentage points to 77.2%.
Records were also set in fourth-quarter 2005. Net income was C$135 million, compared with C$129 million in fourth-quarter 2004. Operating revenue grew by 14% to C$1.17 billion, compared with C$1.02 billion in the prior-year period, and there were double-digit increases in five of seven business lines. Operating income rose 30% to C$302 million. Operating expenses were C$865 million, compared with C$789 million in the fourth quarter of 2004. “Approximately 60% of the increase was due to higher fuel costs, driven largely by record high crude oil prices and increased refining margins,” CPR said. However, the railroad said it recovered all of its fuel price increases through surcharges and hedging. The fourth-quarter operating ratio improved by 3.1 percentage points to 74.1%.
“Our solid performance as we ended the year illustrates the high level of engagement by our workforce, outstanding execution of scheduled operations, and our success in improving yield,” said CPR CEO Rob Ritchie. “We have a tested and proven business model that is producing quality service, giving CPR pricing strength in our markets. Our franchise is sized and positioned for more success in what is expected to be a continuing strong market environment characterized by growing demand.”
That sizing and positioning includes staff reductions of 820 jobs (about 5% of the work force) over the past three years. An additional 400 management and office staff positions will be eliminated in 2006, mainly through early retirement. CPR is also restructuring its field operations to give more control to regional personnel.