November 2005
P&W names Conti to succeed Harrold as presidentDirectors of the Providence & Worcester today elected P. Scott Conti to succeed the late Orville R. Harrold as president. Conti joined P&W in 1988 and became vice president-engineering in 1999. Harrold, president of the railroad since 1980, died unexpectedly on Nov. 22 at the age of 73. He went to work for the Pennsylvania Railroad in 1960 after serving as a captain in the U.S. Marine Corps, and joined P&W as chief engineer when it began independent operations in 1973.
P&W received Railway Age's 1999 Regional Railroad of the Year Award in recognition of its innovative marketing initiatives as well as overall excellence.
Orders rise, jobs drop at Bombardier TransportationBombardier Transportation, a unit of Bombardier, Inc., booked new business valued at $2.1 billion in the fiscal quarter that ended Oct. 31 and achieved a book-to-bill ratio of 1.1 for the first nine months of the year. During that period, new orders exceeded revenues by $303 million. Quarterly earnings before taxes (excluding special items) were $39 million. Major orders received included 131 multilevel commuter cars for New Jersey Transit and 60 new four-car EMU trains for Austrian Federal Railways.
In announcing quarterly results on Nov. 30, Bombardier said restructuring of its train-building unit continues: “Workforce reductions totaled some 5,500 positions at the end of the third quarter. The Wakefield, U.K., manufacturing site ceased activities in October, two months ahead of schedule. The two remaining sites are expected to cease activities in the last quarter of the current fiscal year.”
At the corporate level, Bombardier reported before-tax earnings of $27 million despite “challenging industry conditions” that affected its aerospace activities.
CN completes Canadian labor agreementsCN now has new contracts with all of its unions in Canada following ratification of an agreement that applies to 115 active workers represented by the Algoma Central Association of Railway Unions. The agreement, extending from Feb. 1, 2005, to Jan. 30, 2010, is similar to those with other unions in the improved wages and benefits that it provides. Algoma Central was formerly part of Wisconsin Central, which CN acquired in 2001.
Ferrosur will be folded into FerromexTwo of Mexico’s three original large railroad concessions stemming from privatization of FNM (Ferrocarriles Nacionales de Mexico) in the mid-1990s will be combined into one carrier when Ferrocarril del Sureste (Ferrosur) becomes part of Ferrocarril Mexicano (Ferromex) in a deal announced late last week.
Grupo Mexico, majority owner of Ferromex, said that a subsidiary, Infraestructura y Transportes Ferroviarios (ITF), will purchase Ferrosur from investment firm Sinca Inbursa and copper cable manufacturer Grupo Condumex for $307 million in an all-stock transaction. SI and GC are part of the vast Carlos Slim empire. Slim is reportedly the wealthiest man in Latin America, with business holdings ranging from copper cables to cigarettes to telecommunications and restaurants. The crown jewels of his organization are cellular company America Movil and telephone company Telmex.
At 4,600 route-miles, Ferromex, which is 26%-owned by Union Pacific, is Mexico’s largest railroad in terms of size but second to Kansas City Southern-owned Transportacion Ferroviaria Mexicana (TFM) in revenues. Ferrosur is a 900-route-mile regional carrier stretching from Mexico City east to Coatzacoalcos on the Gulf of Mexico; it also reaches Veracruz, an important Gulf port. Acquisition of Ferrosur gives Ferromex direct access to Veracruz, which is also served by TFM. Grupo Mexico says the acquisition will strengthen the transportation system in Mexico and stimulate competition.
NTSB proposes new safety measures for hazmat trainsThe National Transportation Safety Board today issued four safety recommendations arising out of its investigation of a Norfolk Southern collision at Graniteville, S.C., on Jan. 6 that killed the train engineer and eight other people. One of three derailed tank cars carrying chlorine was breached, resulting in the fatalities.
NTSB found that “the crew of Train P22 failed to reline a main line switch after using it, leading to the subsequent and unexpected diversion of train 192 into an industry track where it struck train P22 and derailed.” The board sent the following recommendations to the Federal Railroad Administration:
1. Require that, along main lines in non-signaled territory, railroads install an automatically activated device, independent of the switch banner, that will, visually or electronically, compellingly capture the attention of employees involved with switch operations and clearly convey the status of the switch both in daylight and in darkness.
2. Require railroads, in non-signaled territory and in the absence of switch indicator lights or other automated systems that provide train crews with advance notice of switch positions, to operate those trains at speeds that will allow them to be safely stopped in advance of misaligned switches.
3. Require railroads to implement operating measures, such as positioning tank cars toward the rear of trains and reducing speeds through populated areas, to minimize impact forces from accidents and reduce the vulnerability of tank cars transporting chlorine, anhydrous ammonia, and other liquefied gases designated as poisonous by inhalation.
4. Determine the most effective methods of providing emergency escape breathing apparatus for all crewmembers on freight trains carrying hazardous materials that would pose an inhalation hazard in the event of unintentional release and then require railroads to provide these breathing apparatus to their crewmembers along with appropriate training.
NS alone passes STB's revenue adequacy testIt’s been known for some time that Norfolk Southern was officially “revenue adequate” last year, earning an 11.64% return on investment. The Surface Transportation Board has now announced that all other U.S. Class I railroads were revenue inadequate in 2004—most didn't even come close to the 10.1% return that the STB figures was the industry’s cost of capital. BNSF came in with an ROI of 5.84%, CSX transportation, 4.43%; Grand Trunk, 5.95%; Kansas City Southern, 8.3%; Soo Line, 3.28%; and Union Pacific, 4.54%.
In a decision published Nov. 23, the STB said that the ROIs of four carriers were reduced by including special charges related to asbestos and environmental issues as expenses in calculating net railway operating income. Without these charges, BNSF would have reported an ROI of 7.43%; CSXT, 4.51%; Soo Line, 7.56%; and UP, 5.27%.
BNSF and New Mexico agree on major line saleIn a triumph for shared use of rail right-of-way, BNSF Railway and New Mexico have reached agreement on the sale of 300 miles of BNSF main line between Belen, N. Mex., and Trinidad, Colo., to the state for commuter operations. BNSF will retain freight easement rights on the line. The transaction will also give the New Mexico DOT 13 acres of BNSF's yard at Albuquerque. The sale is priced at $76 million and will be closed in segments. Completion of the transaction is subject to other agreements anticipated by early next year.
New Mexico Gov. Bill Richardson called the agreement “a major breakthrough that will help traffic congestion, reduce pollution, attract new businesses, and revitalize our rural economies along the Rio Grande Corridor and beyond.”
BNSF will receive most of the proceeds from the sale in 2006. The company will record a non-cash loss of $75 million in this year's fourth quarter and expects to record a gain of $25 million in the first quarter of 2006.
Bombardier's Mathieu moves to Railpower as CEOJose Mathieu, formerly vice president of Bombardier Transportation in New York City, has joined Railpower Technologies Corp. as president and CEO. Railpower Chairman Norm Gash announced the appointment on Nov. 29, effective immediately. Trained as a mechanical engineer, Mathieu was with Bombardier for 23 years.
“Jose brings engineering, operations, manufacturing, and product services experiences to Railpower as the company moves into full scale production of its yard and road switcher locomotives,” said Gash.
Railpower maintains headquarters in Vancouver, B.C., and engineering offices in Erie, Pa.
Greenbrier shifts work out of CanadaGreenbrier Companies will reduce production at its TrentonWorks freight-car facility in Nova Scotia to a one-line operation effective Dec. 5, cutting about 400 jobs. Greenbrier said it's shifting new-car production to plants in the U.S. and Mexico, which have “an overall lower cost structure, greater operating and work rules flexibility, established global sourcing initiatives, and favorable foreign exchange rates.”
Farm group to acquire Canadian grain carsThe Farmer Rail Coalition and the government of Canada have reached an agreement in principle on a C$205 million lease/purchase transaction under which the coalition will acquire 12,000 government-owned grain cars. The farm group will be able to sublease the cars to grain shippers or rail carriers. The agreement requires the approval of CN and Canadian Pacific Railway for access to their lines.
South Dakota and BNSF agree on Core line saleAfter prolonged negotiations, South Dakota and BNSF Railway have reached final agreement on BNSF's acquisition of the state-owned Core line. BNSF will pay $40.3 million into the state's Railroad Trust Fund for the 328-mile line, which runs from Aberdeen to Mitchell, Mitchell to Canton, Canton to Sioux City, and Mitchell to Sioux City. As part of the agreement, which was announced Nov. 23, BNSF will allow “certain access rights” to the Core line by smaller South Dakota-based railroads.
South Dakota acquired the Core line from the Milwaukee Road in 1980. BNSF has been operating the line for the state since 1981 with an option to purchase.
“The purchase of the Core line continues our successful partnership with and commitment to the state and freight rail shippers over the last two decades to revitalize and upgrade these once-abandoned rail lines,” said Peter J. Rickershauser, BNSF's vice president network development. “We look forward to continuing to grow business in South Dakota and investing in this line as an integral part of our extensive rail network.”
Operation Lifesaver reaches out to new audiencesAs part of a “rebranding” effort to extend its reach, Operation Lifesaver, Inc., has launched a new website (http://www.oli.org) and logo. ”The new website makes it easier for visitors to find safety tips and statistics and locate Operation lifesaver contacts in their states,” said the organization's president, Gerri Hall. She described the new logo as “a stylized railroad crossbuck that more clearly ties the group to rail safety.”
Visitors to the website will find expanded safety statistics, a “Results” section describing OL's efforts over the years, an expanded guide to local and national information sources, and new information on driver safety training. A “For Kids” section offers games and other appealing training aids as well as a new light rail safety link.
China looks to Germany and Japan for high speed trainsChina has ordered 60 high speed trains from Siemens and is reported to be in final negotiations with Kawasaki for an additional 60 trainsets.
The order for 60 trains based on Germany's ICE technology was signed in Berlin on Nov. 10. Siemens will produce the trains in a joint venture with Tangshan Locomotive & Rolling Stock Works. Incorporating features from the ICE 3 trains now running in Germany and the Velaro-E trains Siemens has delivered to Spain, the Chinese trains are scheduled to go into service in 2008 on the new Beijing-Tianjin high speed line.
According to a press report from Japan over the weekend, China appears to be close to ordering an additional 60 trains based on Kawasaki's Shinkansen high speed technology.
China plans ultimately to invest $85 billion in a 7,500-mile system of 186-mph trains, according to the Tokyo report.
American Short Line and Regional Railroad Association President Richard F. Timmons named Railway Age Railroader of the YearRichard F. Timmons, President of the American Short Line and Regional Railroad Association, has been named 2006 Railroader of the Year by railroad industry trade journal Railway Age.
“Late last year, the short line and regional railroad industry scored a landmark victory in Congress with passage of H.R. 4520, the American Jobs Creation Act of 2004,” said Railway Age Editor William C. Vantuono. “Section 245 of that legislation gives Class II and Class III railroads the opportunity to earn tax credits against their federal tax liability through qualified railroad infrastructure investments. In light of the enormous investments that small railroads need to make in order to remain competitive and viable in today's freight transportation market, getting this legislation passed was critical. The hard work and perseverance of hundreds of short line railroaders, customers and suppliers, led by Rich Timmons and the American Short Line and Regional Railroad Association, made it all possible. It's a prime example of what a committed grass-roots effort can accomplish.”
"I am honored to receive this award, not for myself but on behalf of the tremendous effort made by the short line railroads and our suppliers and contractors,” said Timmons. “The rehabilitation projects made possible by this credit will allow the short line industry to take a huge step forward. It will make more short line track 286 ready, give small shippers increased access to longer heavier trains and help short lines win back much needed traffic from the highways. I think it will come to be viewed as the most important piece of federal railroad legislation since the passage of the Staggers Act."
Richard F. Timmons is the 43rd recipient of Railway Age's Railroader of the Year Award, which was started by Modern Railroads magazine in 1964 as the “Man of the Year” award. Railway Age acquired Modern Railroads in 1992 and has presented the award annually since then. Timmons will receive the award, one of the most prestigious in the railroad industry, on March 21, 2006, at Chicago's Union League Club.
Past recipients are:
Recipients under Modern Railroads:
1964: D. W. Brosnan, Southern Railway System
1965: Stuart T. Saunders, Pennsylvania Railroad Co.
1966: Stuart T. Saunders, Pennsylvania Railroad Co.
1967: Louis W. Menk, Northern Pacific Railway
1968: William B. Johnson, Illinois Central Railroad
1969: John W. Barriger, Missouri-Kansas-Texas Railroad
1970: John S. Reed, Atchison, Topeka & Santa Fe Railway
1971: Jervis Langdon, Jr., Penn Central Transportation Co.
1972: Charles Luna, United Transportation Union
1973: James B. Germany, Southern Pacific Transportation Co.
1974: L. Stanley Crane, Southern Railway System
1975: Frank E. Barnett, Union Pacific Railroad
1976: Dr. William J. Harris, Jr., Association of American Railroads
1977: Edward G. Jordan, Conrail
1978: Robert M. Brown, Union Pacific Railroad
1979: Theodore C. Lutz, Washington Metropolitan Area Transit Authority
1980: John G. German, Missouri Pacific Railroad Co.
1981: Lawrence Cena, Atchison, Topeka & Santa Fe Railway
1982: A. Paul Funkhouser, Family Lines Rail System
1983: L. Stanley Crane, Conrail
1984: Hays T. Watkins, CSX Corp.
1985: John L. Cann, Canadian National
1986: Raymond C. Burton, Jr., Trailer Train Co.
1987: Willis B. Kyle, Kyle Railways
1988: Darius W. Gaskins, Jr., Burlington Northern
1989: W. Graham Claytor, Jr., Amtrak
1990: Arnold B. McKinnon, Norfolk Southern
1991: Mike Walsh, Union Pacific
Recipients under Railway Age:
1992: William H. Dempsey, Association of American Railroads
1993: Raymond C. Burton, Jr., TTX Co.
1994: L. S. “Jake” Jacobson, Copper Basin Railway
1995: Edwin Moyers, Southern Pacific Transportation Co.
1996: Robert D. Krebs, AT&SF, and Gerald Grinstein, Burlington Northern
1997: Paul M. Tellier, Canadian National
1998: David R. Goode, Norfolk Southern
1999: Edward A. Burkhardt, Wisconsin Central Transportation Co.
2000: The Railroad Worker (award changed to “Railroader of the Century” for 2000)
2001: Michael R. Haverty, Kansas City Southern Railway
2002: E. Hunter Harrison, Canadian National/Illinois Central
2003: Richard K. Davidson, Union Pacific
2004: Robert J. Ritchie, Canadian Pacific Railway
2005: David R. Goode, Norfolk Southern
2006: Richard F. Timmons, American Short Line & Regional Railroad Association
L.B. Foster buys Boeing plant at PuebloTo increase the production capacity of its Rail Products unit, the L.B. Foster Co. has purchased the 55,000-square-foot former Boeing Delta III Rockets Parts facility in Pueblo, Colo. The Pittsburgh-based company, a long-time supplier to the rail industry, will manufacture insulated rail joints and assemble Electro 20 Lunricators at the Pueblo plant.
Stan Hasselbuch, L.B. Foster's president and CEO, said the plant occupies nine acres at Pueblo Munmicipl Airport Industrial Park and is well suited as a rail fabrication and stocking facility. About 30 new jobs will be created.
In addition to supplying products to the transportation, construction, utility, and energy industries, L.B. Foster holds 13.4% of the diluted common shares of the Detroit, Minnesota & Eastern. DM&E recently announced that it will seek a $2.5 billion federal loan to build and rehabilitate 1,300 miles of railroad in four states, including an extension into the Powder River Basin coalfields.
Bay Area starts work on 50-year rail blueprintA series of community workshops beginning Nov. 29 will start a process under which Bay Area leaders hope to develop “a comprehensive blueprint to improve and extend passenger railroad, rapid transit, and high speed rail service over the next 50 years.” The Metropolitan Transportation Commission, which represents nine Bay Area counties, Bay Area Rapid Transit, Caltrain, and the California High-Speed Rail Authority will host the workshops. Community input will be sought on extending the existing rail system, with proposed alignments and stations; managing rail sharing between passenger and freight trains; and planning rail oriented growth.
UP warns of continuing coal capacity problemsIn a letter to customers dated Nov. 18, Union Pacific said it hopes to lift its South Powder River Basin Force Majeure notice on Nov. 24 “assuming that BNSF finishes this year's work on Logan Hill as currently planned.” But “the joint line still requires extensive repair work to restore its full capacity,” said UP. The plan for 2006 is to undercut 91 miles, rehabilitate 25 turnouts and three bridges, and re-lay 8.4 miles of rail.
“Even after the Force Majeure ends,” cautioned UP, “it is still necessary for all stakeholders in the Powder River Basin--receivers, producers, and carriers--to work together to maximize loadings. Demand for the rest of 2005 and throughout 2006 is strong. It may exceed capacity of the supply chain…. [projected] 2006 demand by UP customers alone is more than 18% above the tons that we expect to move this year.”
UP said capacity projects completed or under way include investing $30 million to extend the third main line track north of Reno Junction; installing CTC in Iowa and Nebraska; constructing a third main track for coal train servicing in North Platte; adding run-through track and fueling capacity in Kansas City; providing surge capacity by double-tracking at the Gasonade River Bridge west of St. Louis; and lengthening the Chateau siding in St. Louis proper.
Young to replace Davidson at UP helm Jan. 1James R. Young will succeed Dick Davidson as president and CEO of Union Pacific Corp. on Jan. 1. He will remain president of Union Pacific Railroad, a position he has held for the past year.
Davidson, who has been UP's CEO for nine years, will continue to serve as chairman. He said Young has “a strong record of leadership in our company and will be an outstanding chief executive officer.” Young, 53, joined UP in 1978 in the finance department. He became executive vice president and chief financial officer in 1999.
CN eyes 60% operating ratio by 2010At its 2005 Investors Conference in New York City Thursday, CN laid out a five-year financial agenda calling for annual revenues exceeding C$9 billion and “an operating ratio closing in on 60%” by the end of 2010. (CN's operating ratio in this year's third quarter was 63.3%, substantially below the industry average.)
For the more immediate future, CN said it expects to increase per-share earnings by 20% in this year's fourth quarter and is targeting a 10% to 15% increase in 2006 earnings.
Major elements of what CN calls its 2010 Vision include growth strategies for intermodal and merchandise traffic, new capacity investments, and “a Smart Yard concept to make traditional switching practices more flexible and efficient.”
Mineta assails Amtrak as a business failureU.S. DOT Secretary Norman Y. Mineta called Amtrak “one of the worst performing business enterprises in America” as he defended the Amtrak board's decision to fire the railroad's President and CEO David Gunn.
“The administration is willing to invest federal dollars in passenger rail service,” Mineta told the Association for a Better New York at a meeting in New York City. "But we aren't willing to continue funding the present system,” he said. “We aren't even willing to consider funding tinkering around the edge.”
Mineta's emphasis in his first major speech on Amtrak during the current crisis was on the railroad's failure as a business enterprise. Nowhere in his prepared remarks did he mention that Amtrak carried a record number of passengers in the fiscal year that ended Sept. 30, a statistic that Amtrak partisans are fond of citing.
Responding to those critics who wonder why the United States cannot afford the kind of trains provided by other developed countries, Mineta said, “The United States is not Europe or Japan. Passenger rail simply cannot compete with air travel in most markets in the United States. The country is simply too large; our population centers are too distant.”
He reiterated his frequently stated position that the future of passenger trains in this country lies in regions or corridors where there is demand for them.
“Unless you're taking the train for the experience of taking the train, you do not ride Amtrak from New York City to Los Angeles, or Denver, or probably even Chicago,” said Mineta. “Not when you can make the trip by air in hours, rather than days, and, in most cases, at a lower price. On the other hand, many of us prefer to take the train from New York to Washington, D.C., or Boston. On those routes, Amtrak basically splits the market with airlines. And a lot more
Americans would like to take a fast and efficient train system from Boston to New York, or Sacramento to San Francisco, instead of driving.”
As to who will replace Gunn at Amtrak's helm, Mineta suggested that the search might take a while. ”Board President [David] Laney told Congress two days ago that nobody fully understands the complexities of this task," said Mineta. “And that's why the board will study the issue before making any decisions.” Whoever is chosen to succeed Gunn, Mineta said, will be “a turnaround CEO, not a liquidator.”
CPR expects to earn more, spend lessCanadian Pacific Railway delivered the kind of message to financial analysts today that investors like to hear: CPR said it expects to grow revenue by 6% to 8% in 2006 based on volume growth, higher rates, and increased yield.
At the same time, CPR will cut planned capital spending next year to the C$810-825 million range from this year’s estimated C$900-$920 million. One reason CPR will be able to reduced capital outlays is that it funded a major capacity expansion in the West this year. The railroad discussed its expectations for 2006 at its annual analyst workshop in Calgary.
“You couldn’t think up a case this loony if you tried”Ohio Republican Congressman Steven LaTourette, chairman of the U.S House Subcommittee on Railroads, opened a hearing on governance issues at Amtrak on Nov. 15 with scathing criticisms of the Bush Administration and the Amtrak board. The hearing addressed questions that have been raised about the “legality” of the board that fired Amtrak President and CEO David Gunn on Nov. 9.
“I happen to believe that Mr. Gunn was doing a reasonable job with the hand he was dealt. But there are deeper issues here, whether one is a supporter or opponent of Mr. Gunn,” said LaTourette. He went on to describe a situation that he said is “now such a mess that I have heard it said that you couldn’t think up a hypothetical case this loony if you tried.”
“The key issue we will be examining is whether Amtrak’s board of directors is legally functional,” said LaTourette. “That affects, among other things, the company’s authority to fire Mr. Gunn, and to hire a new CEO. The sad reality is—even using the quorum standards and personnel count of Amtrak and the Administration—the company has been without a quorum for at least part of the time since June 2003. The [Bush] Administration knew from Day 1 exactly when each prior director’s tenure ended and did not make timely nominations. The Administration wears two other hats in this saga—as the optional holder of one seat on the board and as Amtrak’s preferred shareholder. Yet neither the DOT legal establishment nor Amtrak’s general counsel apparently took any preventive action—except the very thin reed of authorizing executive committees—when disaster loomed.”
”Besides Amtrak’s dereliction in following normal corporate procedures, we still have a ‘denial’ psychology by the Administration,” added LaTourette. “Right now there are no nominations pending in the Senate other than those of the two individuals now serving under claimed recess appointments. That’s it. To put it another way, if all the Administration’s pending nominees were confirmed this afternoon, almost none of the legal procedures about the quorum ‘head count’ at Amtrak would be resolved.”
Operating-crew numbers riseWith traffic at record levels, the number of train and engine crew members employed by Class I railroads rose to 68,799 in September, a 5.19% increase over September 2004, according to the Surface Transportation board. Total employment rose by 3.62% to 163,748 this September. The category of executives, officials, and staff assistants showed the largest percentage increase, with employment up more than 9% to 9,504.
Subway food test planned by AmtrakAmtrak will begin a four-month test of on-board food service operated by the Subway® restaurant chain on its New York City-Albany Empire Service trains on Nov. 17. “With so many of our passengers already familiar with Subway, we expect this pilot will be a positive first for Amtrak,” said Barbara Richardson, Amtrak’s marketing and sales vice president. Paul Landino, a development agent for the sandwich-and-salad chain, noted that Subway restaurants “have a reputation for maximum flexibility and being able to operate in areas that traditionally many other restaurants can’t operate in.” Under a license agreement, Subway will pay Amtrak a portion of gross receipts. Based on experience gained during the pilot, Amtrak plans to seek competitive bids from food vendors in 2006.
CN and UTU sign tentative U.S. pactCN and the United Transportation Union have reached a tentative 10-year agreement covering approximately 300 conductors working on CN lines in Wisconsin, Illinois, and Northern Michigan. Details are being withheld pending completion of the ratification process in December.
“I don't trust you, and I don’t think this Congress can trust you.”Members of the House Transportation and Infrastructure Railroads Subcommittee held a hearing today on Amtrak governance in which Amtrak Board Chairman David Laney and U.S. DOT General Counsel Jeffrey Rosen were questioned about the dismissal of Amtrak President and CEO David Gunn and on the legality of Amtrak’s board, which will consist of only two members once Congress recesses for the winter.
Subcommittee members were largely supportive of Gunn, who testified that his dismissal was unexpected, “despite the disclaimers of Laney and Rosen.” “Only one person was hostile to me,” Gunn told Railway Age. That was John Mica (R-Fla.), who Gunn said “gave one of his classic performances: Privatize the Northeast Corridor and make millions. What baloney.”
Gunn, who is fairly thick-skinned, said he took umbrage that Laney and Rosen characterized his job performance as “lackluster.” “Amtrak performed pretty well this year,” he said, citing, among other improvements, a $120 million cash carryover from FY 2005.
Laney testified Gunn was fired because his “refusal to go in several new directions meant that Amtrak would continue on its present course—flat operating losses, unsustainable labor costs, and money-losing long distance [trains], food services, and more.” Gunn said all of those concerns were being addressed in Amtrak’s long-term strategic plan released earlier this year—a document in which he had a major role creating and which Laney endorsed and praised. It was only a short while ago that Laney was praising Gunn on his performance.
That’s why “none of this makes any sense,” said Gunn. “Why would Laney create a managerial problem for himself by firing me? The operation was running well.” Gunn contends that the DOT’s real motives are to break up Amtrak, not reform it. “I think the DOT was counting on us to go belly-up,” he said. “That didn’t happen, so they needed to get rid of me.” Would he return to his post, if asked? “If a legal authority asked me to return, I would,” he said. “We’re doing too well. I would want to see things through.”
At the hearing, Rep. Robert Menendez (D-N.J.) was particularly critical of Laney and Rosen. “Mr. Laney, Mr. Rosen, I'll be very blunt here: I don’t trust you, and I don’t think this Congress can trust you,” he said. “My worst fear is that you are trying to sell off the Northeast Corridor to a group of investors who will use it to get huge tax breaks from the depreciation.” Laney denied the charge.
Rep. Jerrold Nadler (D-N.Y.), a staunch Amtrak supporter, testified, “It is obvious what is going on here. The Amtrak Board of Directors has become a front for the Bush Administration and people who want to destroy Amtrak. Their goal is to dismantle the railroad. When Gunn refused to go along with the ‘Bush Board’ on actions that would cripple the railroad, most notably the spin-off of the Northeast Corridor, he was fired. The ‘Bush Board’ had to resort to these tactics because the Administration cannot get Congress to do its bidding and break up Amtrak. . . . [Gunn’s] firing is a sign of the lengths Amtrak opponents will go to in order to eliminate passenger rail service in this country. It must be stopped.”
What happens next? Sources told Railway Age that Transportation Secretary Norman Mineta may make “a major announcement” in New York City on Thursday regarding Amtrak and, in particular, the Northeast Corridor.
BNSF switch safety demo under wayA $1 million switch position monitoring pilot program, approximately half of which is financed by the Federal Railroad Administration, is under way on a 174-mile section of BNSF Railway dark territory in Oklahoma.
The test involves installation of wireless communication devices at 49 switches between Tulsa and Avard, Okla. Train dispatchers at BNSF’s Network Operations Center in Fort Worth, Tex., will monitor the devices to identify when hand-operated switches are set in the wrong position. If a switch is misaligned, the dispatcher directs a train to stop until railroad crews in the field confirm it is safe for the train to proceed.
The FRA is contributing $527,308 to the test. BNSF is providing an additional $472,680 for the cost of equipment.
“If successful, this technology will prevent needless accidents and make a large part of the nation's rail network safer,” said FRA Administrator Joseph H. Boardman. Approximately 40% of all main line track is dark territory and carries about 20% of all rail traffic. Thus far in 2005, there have been nine accidents involving misaligned switches in dark territory resulting in ten fatalities and over 600 injuries, according to FRA.
FRA says this project “is the latest in a series of actions taken by FRA to improve switch safety in dark territory. In October, an Emergency Order was issued directing railroads to immediately re-instruct employees on how to operate these switches and to communicate whenever a switch is operated. In May, FRA began the process to develop a federal rule addressing proper switch operation. And, in January, FRA distributed a Safety Advisory to railroads recommending ways to improve their switch operating procedures. The project also fulfills a major element in FRA's National Rail Safety Action Plan, [which] targets the most frequent, highest risk causes of accidents; better focuses the inspection resources of FRA; and accelerates research efforts that have the potential to mitigate the largest risks.”
UTU's planned return to AFL-CIO stallsThe United Transportation Union announced Nov 9 that it “will not, at this time,” rejoin the AFL-CIO, owing to the failure of a required two-thirds majority of delegates to approve a $5-per-month dues increase. UTU said the dues increase would also have helped to “continue to fight off membership raids by the Brotherhood of Locomotive Engineers and Trainmen, continue our fight to protect our crew-consist agreements, and make necessary upgrades to UTU computers.”
CPR selling 92-mile line to Indiana carrierUnder an agreement announced Nov. 8, Canadian Pacific Railway will sell its 92.3 mile line between the Indiana towns of Fayette and Bedford to the Indiana Rail Road (INRD). CPR did not disclose the terms of the sale but said it would have “a modest gain” from the transaction.
INRD is an Indianapolis-based regional carrier that operates 155 miles between Indianapolis and Newton, Ill., over former Illinois Central track.
“We are excited about the growth opportunities this acquisition will bring,” said INRD President and CEO Thomas G. Hoback. “We see strong opportunities in Terre Haute and other on-line points to bring our unique brand of scheduled service and innovative marketing ideas to these customers.”
Rail transit wins big at New York polls New York State voters on Nov. 8 approved a $2.9 billion transportation bond issue, half of which will go to the Metropolitan Transportation Authority of New York. Two major projects will benefit: New York City Transit's Second Avenue Subway and the Long Island Rail Road's East Side Access Project. The latter will bring LIRR trains into Grand Central Terminal as well as into their present terminus, Penn Station. MTA Chairman Peter Kalikow said the new bond money would ease the way for up to $4 billion in additional federal aid for the two projects.
Texas voters approve Rail Relocation FundA state constitutional amendment to create a taxpayer-supported Rail Relocation Fund won the approval of 54% of Texas voters on Nov. 8. Funding must still be provided by the state legislature. The Austin Express-News quoted the author of the proposal, Democratic legislator Ruth Jones McClendon of San Antonio, as saying that the vote “gives the legislature clear direction to develop a process to move dangerous freight lines and to provide funds for railroad safety and relocation projects.”
David Gunn: “I did the honorable thing”When he came out of retirement to accept the position as Amtrak’s President and Chief Executive Officer little more than three years ago, David L. Gunn—a highly respected career railroader with more than 40 years’ experience operating freight trains and running transit systems in the U.S. and Canada—said he didn’t need the job, and if his superiors didn’t like the job he was doing, they could fire him. He’d return to his home in Nova Scotia.
That’s exactly what happened earlier today, when Amtrak’s four-person, Bush-Administration-appointed Board of Directors (only one of which—Chairman David M. Laney—has been confirmed by the U.S. Senate), released Gunn, saying that Amtrak “needed to intensify the pace and broaden the scope of its reforms.” He was reportedly let go because of “philosophical differences” with the Board, most likely a clash over the Board’s vote in September to authorize splitting off the Northeast Corridor, an idea backed by the Bush Administration. That apparently was the straw that broke the camel's back.
Chief Engineer David Hughes has been named Acting President and CEO, and the Board “has launched a national search to find the railroad’s next leader.”
“The Board members came in this morning and asked me to resign. I refused, so they fired me,” Gunn said in an interview this afternoon with Railway Age Editor William C. Vantuono. “I feel at least that I did the right, honorable thing. I wasn’t going to abandon our people.” He said that the Bush Administration’s people wanted to implement their plan, “which is destroying Amtrak.” “I stood in their way,” he said. “That’s why they fired me.”
Gunn, a veteran of the Santa Fe and Illinois Central railroads who made his mark in transportation by turning around transit systems in Boston, New York City, Washington D.C., and Toronto, spent the past three-plus years streamlining Amtrak’s management structure, improving financial controls, and implementing many state-of-good-repair programs on plant and equipment. “If you want an example of getting fired for producing good numbers, this is it,” he said. “It’s an upside-down world we live in.”
The biggest question: Who will want Gunn’s job? Presumably, it will have to be someone willing to be more aggressive in carrying out the Administration’s plans for “reforming” Amtrak and intercity passenger rail.
“David Gunn has helped Amtrak make important operational improvements over the past three years,” said Laney in a prepared statement. “Amtrak's future now requires a different type of leader who will aggressively tackle the company’s financial, management, and operational challenges. The need to bring fundamental change to Amtrak is greater and more urgent than ever before. The Board approved a strategic plan in April that provides a blueprint for a stronger and more sustainable Amtrak. Now we need a leader with vision and experience to get the job done.”
“I have known David Gunn many years and respect the work he did to help streamline and stabilize Amtrak,” U.S. Transportation Secretary Norman Mineta said in a prepared statement. “However, it is the job of Amtrak’s Board to make decisions that are in the best interest of Amtrak. I am confident in the Board’s judgment and its belief that different leadership is needed to address the serious challenges facing the company. The U.S. Department of Transportation stands ready to support Amtrak as it reforms its long distance services, upgrades the Northeast Corridor, and establishes new fiscal accountability measures and will continue to work with Congress to ensure the future of intercity passenger rail.” (Just two days ago, following a highly critical General Accountability Office report, Mineta said that Amtrak needs to “clean up its act and become more accountable to taxpayers and the traveling public.”)
“Anything they’ll tell you is bulls_t,” Gunn told Railway Age in his characteristically frank, shoot-from-the hip manner. Citing the 93-6 vote in the Senate approving an Amtrak reathorization bill earmarking nearly $12 billion in mostly capital investment over the next few years, Gunn said “it doesn’t compute. The Administration is serious about taking this place apart.”
Gunn’s ouster has prompted a flurry of mostly angry reactions:
“Today’s decision to fire David Gunn is wrong, ill-advised, and further proof that the Bush Administration doesn’t want Amtrak to succeed,” said Sen. Tom Carper (D-Del.), a former Amtrak Board member. “Strangely, this decision comes just a week after the Senate overwhelmingly approved an Amtrak reform bill in one of the most pro-Amtrak votes I’ve ever seen. Ninety-three senators are now on record supporting a meaningful and thoughtful Amtrak reform bill. It’s unfortunate that the Administration, through the Board, would rather play games with Amtrak’s management than engage Congress on how to make Amtrak stronger. Today’s action was taken by a weak Board with questionable legitimacy. It is just one in a long line of poorly thought-out proposals to come out of the Bush Administration. Earlier this year, the Administration proposed to eliminate all funding for Amtrak and reform it through the bankruptcy courts. Then they proposed splitting off the Northeast Corridor. Now they’re firing someone who’s actually made real progress at bringing some much-needed change to Amtrak.”
Sen. Trent Lott (R-Miss.), who with Sen. Frank Lautenberg (d-N.J.) cosponsored the successful Amtrak reathorization bill, called the Amtrak Board’s action “a step backward.”
“The manner in which Mineta has handled this is disgraceful,” said one industry observer. He described the Secretary as “widely regarded in the railway industry as little more than a Bush Administration puppet.” Mineta’s pronouncements on Amtrak, particularly, the FRA awarding grants to Amtrak only if it “demonstrates that it has reformed its acquisitions practices,” have sounded like “the petulant parent who threatens to punish a misbehaving child by cutting off his allowance.”
David Laney was previously on record as opposing Administration plans to break up Amtrak. He “is now seen as a part of that effort,” said the National Corridors Initiative. “Many people believe that the Administration will attempt to sell off the Northeast Corridor to a consortium of private interests. Administration officials are reportedly in the process of meeting with the private-sector organizations involved.”
Other sources have told Railway Age that a possible scenario would involve retaining federal ownership of the NEC but placing operations under the auspices of a public/private partnership that would include a federal/multi-state consortium. That model, Gunn maintains, won’t work, given a railroad’s unique (compared to other transportation modes) need for fully integrated operations and infrastructure.
What happens next? “The Administration is running out of time,” Gunn told Railway Age. “They have to do a lot of the dirty stuff this year, because next year is an election year, and what they’ve got in mind will be very unpopular.” Gunn predicted that, within the next few months, “there will be a lot of train-offs and other service cutbacks.”
GAO report on Amtrak stirs more debate The General Accountability Office’s most recent report on Amtrak (the sixth in the past three years) has hit nerves on both sides of the current debate over why and how Amtrak should be reformed.
U.S. Transportation Secretary of Norman Y. Mineta, whose calls for radical restructuring (some say destruction) of Amtrak have largely been ignored by Congress, promptly issued a statement saying that the Department of Transportation “would implement recommendations to strengthen its oversight of Amtrak.” He said Amtrak must “take quick steps to address the recommendations made in the Nov. 3 GAO report that require Board or management action. For the past several years, I have been urging Amtrak to clean up its act and become more accountable to taxpayers and the traveling public. I hope this report will be a turning point for Amtrak. There simply is too much at stake to let the company deteriorate any further.”
Mineta directed the Federal Railroad Administration to require Amtrak “to submit plans to improve financial reporting and management practices, [and] demonstrate how it will improve its acquisition practices before receiving federal taxpayer grants. The FRA will award grants to Amtrak once it demonstrates that it has reformed its acquisitions practices. Amtrak also will be required to develop and share with the DOT clear measures of overall corporate performance. These new measures will be used to help the DOT issue annual reports to Congress on Amtrak’s progress in making needed reforms. These reports will include recommendations for ways Congress can help Amtrak reform.”
The National Association of Railroad Passengers quickly weighed in on Mineta’s statement, saying that “more layers of bureaucracy will not help Amtrak improve and grow.”
“It seems Rube Goldbergesque for Secretary Mineta, an Amtrak Board member, to direct FRA to secure still more information from Amtrak on top of what is already required and likely to be required by Congress, and ask FRA to write an annual report for Mineta to read,” said NARP Executive Director Ross B. Capon. “Mineta should focus on his most pressing Amtrak responsibility—working for a full, bipartisan slate of seven voting Board members. As things now stand, when Congress adjourns, the Board will have just two members—Mineta (in practice, his representative Jeffrey Rosen) and Chairman David Laney. The other two current members (both Republicans) are recess appointments that expire when Congress adjourns. Mineta has been on the Amtrak Board since June 28, 2001. If Amtrak is really the mess he claims, you would expect him to show a real hands-on interest and to acknowledge some responsibility. But he has not attended one Board meeting over that 52-plus-month period. [His] comments about Amtrak are not credible and must be measured against Amtrak’s considerable progress of recent years.”
(Editor’s note: Rube Goldberg, cofounder of the National Cartoonists Society, was one of history’s most famous and prolific cartoonists. He was best known for his “Rube Goldberg Machines,” devices described as “exceedingly complex and performing very simple tasks in a very indirect and convoluted way.” Among Goldberg’s cartoon titles and characters were “Boob McNutt,” “Foolish Questions,” “Lala Palooza,” and “Professor Lucifer Gorgonzola Butts,” inventor of “Professor Butts’ Self-Operating Napkin.”)
Rep. Corrine Brown (D-Fla.) Ranking Member of the House Subcommittee on Railroads, released her own sharp criticism of Mineta’s latest pronouncement: “What Congress really ought to be looking into is how many GAO reports, IG reports, and Taskforce Reports have to be done before we deal with Amtrak. We ought to look into how much those ridiculous investigations have cost U.S. taxpayers and our nation’s passenger rail system.”
In a Nov. 4 letter to Mineta, Brown said the GAO report is “a strong indictment of your Department.” Noting that he has been on the Amtrak board for more than four years, Brown asked Mineta, “How is it that you were unaware of the issues that you term an ‘unprecedented indictment’? Are we in Congress to presume that Amtrak’s Board . . . is not capable of managing Amtrak’s operations? If, as you claim, the report shows that Amtrak has been a ‘systemic failure,’ shouldn’t Congress assume the same for Amtrak’s Board? Given your unquestioned support for GAO’s findings, I suggest you review [GAO’s] answer to that question: ‘Although responsible for managing the affairs of the corporation and ensuring good stewardship over resources, Amtrak’s Board has not exercised sufficient oversight of the corporation or held management accountable for results.’”
“It seems to me,” concluded Brown, “that the time spent drafting [your Nov. 7 statement] would have been better spent carrying out your duties as a member of the Amtrak Board and reviewing the [Bush] Administration’s own failures and ineffectiveness in addressing critical intercity passenger rail issues.”
“Amtrak has complied with much-strengthened accounting controls under the terms of the July 2002 emergency $100 million DOT loan, and subsequent appropriations bills,” Ross Capon noted, adding that “the Administration’s ‘plan’ for intercity passenger rail was dead on arrival at Capitol Hill. The Senate on Nov. 3 voted 93-6 for a version of reform with no significant ideas from the Administration’s bill. The Administration's attack on long-distance trains . . . has not resonated on Capitol Hill. The House, on a June 29 voice vote, rejected Administration and committee efforts to scale back Amtrak funding sharply, and voted 269-152 to drop ‘kill-long-distance-trains’ language.”
Some members of Congress press on with their own versions of Amtrak reform legislation and anti-Amtrak rhetoric. Rep. Pete Sessions (R-Tex.) has introduced H.R. 4214, the “Reforming Amtrak’s Inefficient Lines (RAIL) Act,” described as “a bill designed to cut Amtrak’s operating costs by eliminating money-losing routes and services . . . part of [my] effort to trim the nation’s fiscal burden by eliminating or significantly reducing wasteful and inefficient government programs that burden American taxpayers. . . . “Congress has a duty to be responsible with taxpayer money. If we continue to spend it to subsidize services that do not operate efficiently, we are giving the taxpayers a raw deal. Instead, we should lessen the burden on taxpayers by reducing or eliminating wasteful and inefficient government spending. One way we can do this is by eliminating routes and services on which Amtrak consistently loses money.”
The RAIL Act, which is co-sponsored by Reps. Joe Wilson (R-S.C.) and Marsha Blackburn (R-Tenn.) calls for discontinuing service on the Southwest Chief, California Zephyr, Empire Builder, Coast Starlight, and Silver Star; discontinuing food and beverage service “unless revenues from the service exceed its cost, including labor,” and eliminating sleeper cars, dining cars, lounge seating, checked baggage service, and onboard entertainment. Sessions singled out these trains and services for discontinuance based on an October 2004 Amtrak Monthly Performance Report and a recent U.S. DOT Inspector General report on onboard services costs of long-distance trains.
Sessions’ announcement prompted this strong response from Capitol Corridor Joint Powers Authority Managing Director Gene Skorowposki, who runs one of the most successful intercity passenger rail services in the U.S.:
“Let’s find a Congressional sponsor to introduce the ‘Reforming the Highway System’s Inefficient Roads Act’ to rip up the roads that don’t make money, or are not jammed with traffic, since they are obviously not needed, and the ‘Reforming the Airlines Inefficient Service Operations Act’ so we can find out what happened to the $15 billion [Congress] gave the airlines last year, close those inefficient money-losing airports, and get rid of the inefficient airlines. Let all [in Congress] who want to eliminate Amtrak service to their districts come forward and go on record with what Amtrak services they want to take away from their constituents. Do you want to bet if this will ever happen?”
Skoropowski, who has spent more than 30 years in passenger railroading and who is this year’s recipient of Railway Age’s W. Graham Claytor Award for Distinguished Service to Passenger Transportation, provided a laundry list of the various efforts on the part of the federal government to reinvent Amtrak in the past few years: “We had the ‘run it like a business’ directives, which [won’t work] because of federally imposed requirements normal businesses would never be required to follow. Then we had the ‘glidepath to self-sufficiency,’ whereby [gradually eliminating] Amtrak’s operating subsidy would be supplanted with the provision of adequate federal capital funding—which was never provided. Then we had the ‘Amtrak’s business model is flawed’ argument, as if there is no other creature of government with any flaws. Now we have ‘efficient operation of the business’ legislation proposed, which miraculously will give us a ‘functioning business that is profitable,’ just like all the other ‘businesses’ created by legislation.”
“It takes financial resources to accomplish any successful business, public or private,” said Skoropowski. “The U.S. DOT loves to point to ‘California’s success’ [with intercity passenger rail]. Yes, but it happened because California voters provided billions of dollars of state capital funding 15 years ago, and it took that long to get where we are today. Even California cannot continue to invest 100% state capital dollars in its passenger rail program. We need a federal partner, and we need Amtrak. The bottom line is that ‘success’ comes when a large investment of capital funding is made. The Northeast Corridor has had a partial investment, and the rest of the country not much else besides rolling stock—and even that is now 15 or more years old. What do we need to do to get the attention of Congress and get them to make the right decisions?”
A new Class I on the horizon?Dakota, Minnesota & Eastern CEO Kevin V. Schieffer announced today that DM&E would seek a $2.5 billion federal loan to finance a 1,300-mile rail construction and renewal program, including a 262-mile extension into the Powder River Basin coalfields of Wyoming. The new transportation bill enacted last summer--SAFETEA-LU--authorizes $35 billion in Railroad Rehabilitation and Improvement Financing (RRIF) loans, with a minimum of $7 billion set aside for smaller roads. South Dakota Republican Senator John Thune authored an eleventh-hour amendment to SAFETEA-LU containing language making loans attractive to projects like that of DM&E. A loan could be repaid, for example, with earnings from the financed project. There's a 90-day time limit for processing loan applications.
The loan for Cedar American Rail Holdings, Inc., subsidiaries DM&E and Iowa, Chicago & Eastern will cover:
* A 900-mile project, including DM&E's 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 of its system 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.
“If we succeed, we'll be the next Class I railroad in the United States,” said Schieffer, noting that Cedar American's projects will help improve rail capacity nationwide. “What happens in the Powder River Basin affects the entire country--That's not a big secret," he said. "Our orders are behind three to four weeks, as is the rest of the national transportation system. We do not have the capacity to keep up. There's no redundancy or backup to recover if there is a little hiccup here and there. When you look at the impact [the DM&E and IC&E projects] have on the national rail capacity picture, there's a very compelling argument to be made.”
DM&E has been trying to join BNSF Railway and Union Pacific in the PRB since 1998, when it first applied to the Surface Transportation Board for access. In January 2002, the STB signed off on DM&E's plan, but several groups in Rochester, Minn., filed an appeal. In 2003, a federal appeals court vacated and partially remanded the decision, pending further review. The STB was asked to take a “second look” at such issues as the combined effect of noise and vibration in houses near the tracks in Rochester, Minn., where train traffic could increase from three per day to 37; historic preservation; and possible future pollution caused by the increased availability of PRB coal that would be burned in Midwest and Northeast power plants.
Schieffer said today that a final STB decision is expected in January. “Now that the regulatory approval process is coming to a close, we're left with [how to finance the projects],” he said. Federal funding makes sense, he said, pointing out that BNSF and UP set a precedent for such funding with projects to rebuild 480- and 400-mile coal lines, respectively, in the late 1980s and early 1990s. Authorization of those programs subsequently expired. In the late 1990s, the RRIF program was enacted, and DM&E's PRB project did not qualify. Now, with Senator Thune's provision, it does.
“We certainly have a lot of work ahead of us: The loan has to be approved, not only by the federal government, but by our shareholders,” Schieffer said, noting that shareholders have already “put $40 million in capital at risk” for engineering and analysis work. The utility companies also will play a role in the decision-making process. “Competitors [railroads] will be off to races to pick off potential customers and make our business plan less viable," Schieffer said. "If the utility industry allows that to happen, the project will not go forward. The next six months will be a fairly critical test. We will work with our friends in the utility industry--who have encouraged us [on this project] over last seven or eight years--to resist temptation and stick with us to make this project work. We do have to have a solid business plan to make it work, but it will not happen if there is a defection of industry for short-term gains. If this [opportunity] goes away, it won't be coming back.”
If approved, construction could start by the end of 2006 and be completed in fall 2009, Schieffer said. After 10 years of operation, the new PRB line could move up to 100 million tons of coal annually.
Wall Street's reaction? The projects “should be considered a threat to BNSF's and UP's current duopoly, but shouldn't have any economic impact on either carrier for the next three to four years and a relatively minor impact even then,” said Morgan Stanley's James Valentine. “DM&E won't have access to any of [the Class I's] current captive utility plants and [they] are unlikely to provide the economics to DM&E to interchange coal for delivery on [their] lines. All this means that under a worst case scenario, in three to four years, BNSF and UP could feel downward pricing pressure only on tons that [they] hand off to other carriers or the river system, which have historically already been at very competitive transportation rates.”
Amtrak: Yet another GAO report surfacesIn the 39 months that David Gunn has been president and CEO of Amtrak, the Government Accountability Office (GAO, formerly known as the Government Accounting Office) has produced no fewer than six reports on Amtrak and its operating and financial condition. Are these reports really necessary?
On the same day that the U.S. Senate passed, by a 93-6 margin, a six-year, $12 billion Amtrak reauthorization bill (Amendment 2360 to S. 1932, “Deficit Reduction Omnibus Reconciliation Act of 2005,” introduced by Senators Trent Lott (R-Miss.) and Frank Lautenberg (D-N.J.), and the same as S. 1516, the “Passenger Rail Investment and Improvement Act of 2005”) the GAO released a 165-page report, “Amtrak Management: Systemic Problems Require Actions to Improve Efficiency, Effectiveness, and Accountability.” The report can be accessed at the GAO website at www.gao.gov.
The House Transportation & Infrastructure Committee took the report and issued a press release stating that “a two-year investigation by the GAO into Amtrak's management and spending practices uncovered numerous procurement abuses, inadequate financial controls, and questionable spending, leading GAO to predict that Amtrak's current $1 billion annual operating loss will increase by $400 million a year by FY 2009.” The press release goes on to say, among other things, that “Amtrak procures $500-$600 million in goods and services per year, but was unable to provide GAO with detailed, comprehensive data on total spending," and, "There is no company-wide strategic plan or cost containment strategy.”
Many industry observers are saying that the press release is misleading, and is based on GAO information that itself is misleading. For example, the release states, “Over $500,000 in performance bonuses were given to Amtrak managers, despite the lack of measurable performance goals. These awards were issued even though the company's financial picture had not been finalized. David Gunn, Amtrak's current president, received a substantial cash performance bonus, although the performance goals in his employment contract were never filled in.” Page 73 of the GAO report identifies these “performance bonuses” as $551,765 in SERP (Supplemental Executive Retirement Plan) awards given to 27 managers over a five-year period, for an average of about $20,000 each.
Now, the T&I Committee has formed an “Amtrak Working Group,” the purpose of which is “to evaluate the information from the GAO, the Amtrak Inspector General, and the Department of Transportation Inspector General.” Rep. Richard Baker (R-La.), who chairs the group, said, “As we assess the current federal role and look to future opportunities to meet intercity passenger rail transportation needs, it is imperative that any system we adopt or continue to support operates in an efficient and businesslike manner. This GAO report has raised very serious questions about the planning, acquisition procedures, cost controls, and financial management at Amtrak.” The Amtrak Working Group “has been asked to determine whether there is sufficient information to warrant the establishment of a formal Congressional taskforce to address this issue,” said T&I. The group has until Feb. 17, 2006, to report back to the full Committee.
The National Association of Railroad Passengers criticized the working group’s creation, saying, “We believe that [Railroad] Subcommittee Chairman Steven LaTourette (R-Ohio) has been a good, diligent, and fair chairman. We are distressed at the apparent circumvention of him and his subcommittee. GAO has studied Amtrak endlessly over the past decade. It is not clear why this report warrants creation of a working group. The last thing we need is yet another 'group' to study Amtrak.”
Rep. James Oberstar (D-Minn.) ranking member on the full Committee, said, "I don't understand why we need a special working group to study this report when we already have a Subcommittee on Railroads.”
NARP added, “The GAO's ‘projection’ that Amtrak's losses will ‘grow by 40% within four years’ ignore the cost-saving measures that Amtrak has instituted, and continues to build on. In FY 2005, Amtrak used $570 million in federal funds for operations (as opposed to capital). That is projected to decline to $540 million in FY 2006. Amtrak's total revenues increased $18 million or 0.9% in FY 2005 vs. the previous year. Employee headcount fell from 24,877 at the end of FY 2001 to 19,177 at the end of FY 2005, a decline of 5,700. Amtrak ridership rose 8%, from 23.5 million in FY 2001 to 25.4 million in FY 2005. The debate is best summarized in David Gunn's Sept. 2 letter to JayEtta Hecker, GAO's Director of Physical Infrastructure.”
In that letter, Gunn said: “There is no silver bullet to fixing Amtrak, nor is there a certain ‘cookie cutter' approach that can be taken. I, and my management team, feel that steady incremental improvement is best. During the past 36 months, we have focused on maintaining liquidity, cleaning up the books, rebuilding plant and equipment, and building an organization that can manage the budget and control costs. I think the results speak for themselves. We did all the work with fewer people and still kept our operating needs flat.”
What about all those GAO reports, that one observer says compromise Amtrak management’s ability to run the railroad, because they divert so much attention away from day-to-day operations? Said Gunn in his letter: “I have worked in the rail industry for 40 years and understand this business. At times the focus of the [latest GAO] report seemed to be more concerned with our process for achieving results rather than with the actual results. I understand that as you finish this [report], another one starts on our relationship with the commuter authorities on the Northeast Corridor.”
As one observer told Railway Age, "The GAO tells Congress only what it wants to hear."
Train accident and employee injury rates dropThe Association of American Railroads said Nov. 3 that Federal Railroad Administration statistics show “significant gains for railroad safety in 2005.” The AAR said data for this year’s first eight months indicates an 11.6% gain in overall rail safety as measured by the train accident rate, and a 16.1% decline in employee injury rates from the same period in 2004--”the safest year for employees in the history of the railroad industry.”
AAR President and CEO Edward R. Hamberger said that over the last 24 years, accident rates have declined by 63% and employee injury rates by 77%. “Much of this progress can be tied to the rail industry’s investment in new technology and in employee training,” said Hamberger.
FRA increases joint-bar inspection frequencyU.S. DOT Secretary Norman Y. Mineta said Nov. 4 that a new Federal Railroad Administration rule will increase “the number of detailed inspections” of continuous welded rail joint bars by at least 11% per year. The rule takes effect Dec. 2. The DOT announcement noted that the National Transportation Safety Board had identified joint-bar failure “as the probable cause of three serious train accidents, which resulted in two fatalities, more than 350 injuries, and the release of hazardous materials in Minot, N.D., Flora, Miss., and Pico Rivera, Calif.” Federal Railroad Administrator Joseph H. Boardman said these were “tragic accidents that did not have to happen. They should be a constant reminder to railroads that they simply must do as better job of inspecting and maintaining their tracks.”
Trinity tops its own (and Wall Street’s) projectionsStrong performance by its Rail Group helped Trinity Industries increase its revenues to $742.5 million in this year’s third quarter, up 31% from the same quarter last year. Third quarter earnings reached $33.1 million or $0.65 per common share, exceeding the company’s own earlier estimate of $0.50 to $0.57 cents and the Wall Street consensus estimate of 63 cents. Third quarter earnings last year were $900,000.
Trinity’s Rail Group revenues rose to $492.2 million in this year’s third quarter from $315.2 million in the 2004 period. Revenues of the Railcar Leasing and Management Services Group increased to $44.0 million from $36.5 million. The Inland Barge and Energy Equipment groups also reported increased business.
Trinity Chairman, President, and CEO Timothy R. Wallace said the company shipped 5,685 railcars during the quarter. He said railcar earnings “continue to improve as a result of the cost saving measures we have in place and the efficiencies associated with our long production runs.”
California HSRA approves environmental reportThe California High Speed Rail Authority has approved an Environmental Impact Report (EIR)that it says brings a 700-mile high speed train system “a giant step closer.” The proposed system—for which funding still needs to be found—would link Sacramento, San Francisco, Los Angeles, and San Diego with trains capable of carrying 68 million passengers a year. Issued in draft form in 2004 with the Federal Railroad Administration, the environmental statement contains 64 technical reports and attracted comments from 2,000 public and governmental agencies.
KCSR restructures locomotive ownershipKansas City Southern Railway Company and an undisclosed Mexican affiliate have purchased 75 SD70MAC locomotives from General Motors affiliate El-Mo-Mex, Inc., for $32.625 million plus the assumption of approximately $95.9 million in debt and accrued interest. KCSR intends to sell all of the locomotives to an unaffiliated third party and enter into a long-term, leveraged lease of the units.
The 75 SD70MACs were originally acquired by TFM through a 20-year lease from the Electro-Motive Division of GM in the late 1990s. (At the same time, which was soon after TFM’s start-up, TFM acquired 75 AC4400 locomotives from GE Transportation Systems.) Last year, GM spun off EMD to private investors; the company is now known as Electro-Motive Diesel. GM is also getting out of he locomotive leasing business and created El-Mo-Mex as an SPC (special purposes corporation) in order to sell the 75 SD70MACs to KCSR, which now has full ownership of TFM.
Greenbrier earnings rise, backlog declinesThe Greenbrier Companies reported net earnings of $10 million for the fiscal quarter ended Aug. 31, up 33% from the prior-year period, on revenues that grew 31% to $265 million. Greenbrier delivered 3,300 new freight cars in this year’s quarter compared with 3,000 in the 2004 quarter. The manufacturing backlog in North America and Europe was 9,600 cars valued at $550 million on Aug. 31, 2005, compared with 13,100 cars worth $760 million on Aug. 31, 2004.
Acquisitions push KCS revenues to recordKansas City Southern reported record revevnues of $384.6 million in the third quarter of 2005 due to the consolidation of the Texas Mexican Railway and Mexico’s TFM railway with the Kansas City Southern Railway.
A number of disparate developments affected KCS’s third quarter performance. A $135 million tax settlement in Mexico was the main contributor to third quarter consolidated net income of $$110.5 million. The company’s U.S. operations experienced strong business in July and August, but Hurricane Emily hurt July operations in Mexico, and September operations in both the U.S. and Mexico were hurt by hurricanes Katrina and Rita. The three storms cut operating income by $12 million in the third quarter.
China orders another 300 U.S. locomotivesThe Chinese Ministry of Railways (MoR) has placed a $450 million order for 300 6,000-hp GE Transportation locomotives. GE will complete the order in cooperation with Qishuyan Locomotive and Rolling Stock Works. Earlier, China’s MoR announced an order for 300 EMD 6,000-hp a.c. units for an undisclosed sum. EMD is working with Dalien Locomotive works on that order.
Announcement of the GE order came one day after the MoR’s chief economist said China planned to invest $248 billion in its rail system by 2020 and planned to sell stock in its railways to overseas investors to help finance the program.
John M. Dineen, president and CEO of GE Infrastructure’s Rail Business, said the locomotive agreement announced Nov. 2 will “enable GE to better compete to replace China's current fleet of 6,600 main line locomotives over the next 15 years.”
GE said its Incremental Train Control System™, CTS-2™ switch machines, and Locotrol™ distributed power “will also play an important role in helping the MoR realized its goals of increasing velocity, capacity, productivity, and reliability throughout China’s rail network.”
Rail collisions up 5% over last yearU.S. railroads reported 166 collisions in the first eight months of 2005, a 5.1% increase over the 158 reported in the same period last year. January-August accident/incident statistics were posted on the Federal Railroad Administration’s website on Nov. 1. They showed a 1.3% increase in trespasser fatalities, to 317, and a 5.5% decline in grade crossing fatalities, to 241. Total fatalities reported by the railroads were up 1.5% to 605. Train accidents wee responsible for 26 deaths.
STB orders EIS for Alaska rail expansionThe Surface Transportation Board today announced an environmental impact study in connection with the Alaska Railroad’s plan to build 80 miles of new rail line. The new construction—the Northern Rail Extension Project--would extend from an existing line at Eielson Air Force Base near the town of North Pole south of Fairbanks to a point near Fort Greeley and the Donnelly Training Area near Delta Junction. The project could also include construction of a 15-mile spur from Flag Hill to the Blair Lakes Military Training Area. It will make all major military installations in Alaska accessible by rail through Fort Greeley. The EIS will examine the potential impacts of the proposed route, the “no build” alternative, and possible alternative routes.
China plans railway IPOsTo help raise $248 billion for railway investment over the next 15 years, China plans initial public offerings for one or more of its rail lines in 2006 or 2007. In comments published today in London’s Financial Times, Huang Min, chief economist pf China’s ministry of railways, said private investors would be offered minority positions in national rail systems and controlling ownership of local lines. “I hope overseas investors will think this is an opportunity and will invest and take a direct role in operations,” said the official.
Green assumes presidency at CPRCanadian Pacific Railway Executive Vice President and Chief Operating Officer Fred Green has been appointed President of the railroad. He retains the position of Chief Operating Officer. Rob Ritchie continues as Chief Executive Officer. Green’s appointment took effect today.
Green joined CPR in 1978 and has held senior management positions in operations and marketing across the railway's network. As president, he will be responsible for the railway's Information Services, Human Resources, Industrial Relations, Government Relations, and Communications and Public Affairs functions in addition to his current responsibilities for all Operations and Marketing functions.
In other management appointments, Jane O'Hagan has been named Vice President-Strategy, Research, and New Market Development. Tracy Robinson was appointed Vice President and Treasurer.
Hawley, TSA head and former UP exec, to address Railway Age security conferenceKip Hawley, assistant secretary of homeland security for the Transportation Security Administration, will give a special luncheon presentation at the 2006 Railway Security Forum and Expo on Jan. 30. With more than 20 years of transportation and technology experience in the private and public sectors, Hawley will address today's homeland security challenges and how TSA is preparing for the future. The luncheon is to be jointly attended by Forum registrants and Simmons-Boardman Publishing Corp.'s Maritime & Port Security 2006 attendees in Washington, D.C.
Nominated by President Bush and appointed to his current position on July 27, Hawley played an instrumental role in developing TSA shortly after 9/11. He was tapped by Secretary of Transportation Norman Mineta to lead “Go-Teams” of government- and private-sector experts to build the new agency.
Hawley is no stranger to the railroad industry. He has held executive positions at Union Pacific and at such supply-chain services companies as Arzoon. Among his other transportation roles, Hawley served on the Air Traffic Services Subcommittee of the Federal Aviation Administration, and was appointed to the National Commission on Intermodal Transportation in 1992 by President George H.W. Bush. Earlier, he was a deputy assistant and special assistant to President Reagan. In addition, he served as the deputy assistant secretary and executive director of governmental affairs for the Department of Transportation, responsible for strategic planning for departmental legislative proposals and budgets.
The 2006 Railway Security Forum and Expo--presented by Railway Age in cooperation with the Association of American Railroads, American Short Line and Regional Railroad Association, American Public Transportation Association, and Railway Supply Institute--will tackle such issues as:
* What best practices can railroads use to secure vulnerable freight and passenger infrastructure?
* How can railroads work with state, local, and federal governments, and law enforcement officials on emergency preparedness?
* How can hazmat shipments be protected?
* What can be done to safeguard computer and control systems?
* How can the industry achieve vital, interoperable radio communications with emergency responders?
* What new security technologies really work? And how can railroads get the funding to purchase them?
Among the experts onboard to address these topics are London Underground Managing Director Tim O'Toole (keynote speaker); MTA Capital Construction President Mysore Nagaraja; FRA Acting Associate Administrator for Safety Jo Strang; CSX Transportation Assistant Vice President-Public Safety and Environment Skip Elliott; ASLRRA Railroad Police Committee Chairman and Arkansas & Missouri Police Chief Ron Sparks; MARTA Assistant General Manager-Police & System Safety Eugene Wilson, Jr.; SEPTA Assistant General Manager-Public Safety Jim Jordan; J B Hunt Transport Service, Inc., Director of Security and Audits Johnie Wood; PB Transit & Rail Systems Vice President-Communications and Signals Harvey Glickenstein; AAR Senior Vice President-Government Affairs Obie O'Bannon; and APTA Chief Counsel and Vice President- Government Affairs Daniel Duff.
The "Railway Security Forum and Expo" also will feature table-top exhibits from security technology providers.
For more information, please visit the "Railway Security Forum and Expo" website.