July 2004
Bush backs $2 billion in federal aid for New York rail linkResponding to a personal appeal from New York Gov. George E. Pataki, the White House has agreed to support a plan that would permit New York City to convert unused 9/11 tax credits into around $2 billion in cash to help pay for a $6 billion one-ride rail link between the World Trade Center site and JFK International Airport. President Bush gave the news to Governor Pataki in a telephone call July 29. The costliest part of the project would be a three-mile tunnel passing under the East River to a point in Brooklyn where an elevated connector is to be built completing the link to existing AirTrain tracks to JFK. The aid package now backed by the President still requires the approval of Congress.
Texas approves Green Goat fundingThe Texas Emissions Reduction Program (TERP) has approved applications for funding totaling $24.39 million to acquire more than 25 RailPower Green Goat® locomotives. RailPower Technololgies Corp. said the applications came from three Class I railroads, two regionals, and three industrial switcher operators. RailPower said the exact number of its hybrid yard locomotives covered in the grant would be determined after discussions with TERP and the applicants.
RailAmerica profits sag; outlook cautiousRailAmerica reported $96.2 million in consolidated revenue from continuing operations for this year’s second quarter, a 12.7% increase over the corresponding period last year. Earnings, however, dropped to $406,000 from last year’s $6.7 million, due mainly to a $5.6 million charge related to the retirement of a former CEO and also reflecting higher fuel and casualty expenses. The price of RailAmerica shares dropped around 13% following the release of a report that lowered earnings expectations for the year, citing, among other considerations, "our pessimistic outlook on fuel, congestion, and service issues by the Class I railroads." The company’s chairman, Gus Pagonis said that "despite our cautious outlook for the second half of the year and the challenges the industry faces, we look forward to North American growth opportunities."
New York MTA’s new "core" capital program: $17.2 billionThe New York Metropolitan Transportation Authority today unveiled a proposed 2005-2009 "core" capital program totaling $17.2 billion. The program is aimed primarily at maintaining and improving the agency’s existing rail, bus, bridge, and tunnel systems, though there’s money to "advance" such costly new projects in Manhattan as the Second Avenue Subway, a new subway line to a convention and entertainment venue on the West Side, and extending the Long Island Rail Road into Grand Central terminal. The new core capital budget is about $2.2 billion higher than comparable expenditures in the five-year plan now nearing an end. About $500 million is for enhanced security. (Expansion projects would add about $10.6 billion to the new five-year plan.)
New York City Transit is due to get the largest share of funding under the core plan, a little over $12 billion. This includes $2.675 billion for new rolling stock, of which $1.87 billion will pay for 959 new cars for the "B" division; and $9.456 billion for infrastructure and facilities, including $1.876 for signals and communications.
The Long Island Rail Road’s share, $2.426 billion, includes $364 million for rolling stock and $2.040 billion for track and other fixed plant.
Metro-North is down for $2.409 billion, mostly for infrastructure and related facilities. (The State of Connecticut also helps fund Metro-North and plans to add new cars for the New Haven line as soon as financing can be arranged.)
MTA identified about $5.9 billion in "predicted" federal and other funding for the new program, leaving a gap of $11.3 billion "to be filled by other sources such as new MTA debt, new revenues, and state and city subsidies."
CPR sees solid second-quarter business growth Higher volumes and productivity improvements gave rise to a strong second quarter for Canadian Pacific Railway. "We handled significantly higher volumes of freight and still maintained a fluid level of operations," said President and CEO Rob Ritchie during today's announcement of performance results.
CPR revenues topped $1 billion, a 10 percent increase over the same period in 2003, due to growth in five of its seven business lines, including bulk commodities, intermodal, and industrial products. (The addition of 41 fuel-efficient, high-performance locomotives in the second quarter aided in the gains.) Profits rose to $84 million or 53 cents a share, from $34 million or 22 cents a share during the same period a year earlier, which included a special charge for job reductions, an asset write-down, and network restructuring. Excluding foreign exchange gains and losses on long-term debt and the 2003 special charge, income rose 23% to $104 million, or 65 cents a share, in this year's second quarter vs. $84 million, or 53 cents a share, in the comparable 2003 quarter. CPR's operating ratio, 78%, improved by 1.7 percentage points.
Operating income increased 19% to $221 million from $186 million in second-quarter 2003, excluding a special charge. Operating expenses also rose, coming in at $784 million compared with $728 million during the same period last year. This was due, in part, to an increase in compensation and benefits expenses, higher temporary costs to train additional crews, and outsourcing CPR's computing infrastructure.
Continued efficiencies from scheduled operations and a favorable hedge position largely offset the effects of a sharp increase in fuel prices and fuel consumed to move more freight, according to CPR.
Because freight volumes are expected to remain robust for the rest of the year, Ritchie said CPR will add 34 more locomotives in the fourth quarter.
KCS reverses earnings slide, cuts operating ratioDriven by the improved operating and financial results of Kansas City Southern Railway and Grupo TFM, Kansas City Southern (corporate) experienced a turnaround in the second quarter. The company reported a second-quarter net profit of $9.2 million, or 11 cents a share--a significant improvement from the comparable 2003 period's loss of $500,000 or 3 cents a share. The gain was somewhat less than analyst estimates of 16 cents a share, however.
KCSR saw an 5.2% increase in revenues in the second quarter, rising to $153.9 million from $146.3 million posted during the year-ago quarter--on the low end of analyst predictions of $153 million to $155 million. While KCSR operating income rose 22% to $23.1 million, operating costs and expenses increased by $4.1 million over second-quarter 2003. KCSR's operating ratio came in at 84.9%, improving two percentage points from second-quarter 2003.
"KCSR has now had five consecutive quarters of positive quarter-over-quarter revenue growth comparisons," said Michael R. Haverty, KCS chairman, president, and CEO in today's announcement of the company's second-quarter performance. "During that time, KCSR has significantly improved its operating metrics and customer service." Its two-year-old Management Control System (MCS) has helped. The railroad reduced equipment costs by about $16 million. "The results have been exceptional in providing a powerful tool to more efficiently handle every aspect of the transportation service plan," Haverty said. During second-quarter 2004, MCS was installed on the Texas Mexican Railway, "providing greater operational integration of KCSR and Tex-Mex."
KCS's equity earnings from Grupo TFM, which operates TFM, increased to $2.9 million, and its 80.1% operating ratio improved by 1.3 percentage points. "Cross border traffic interchange volumes and revenues between Grupo TFM and KCSR continue to increase, which speaks to the growing cooperation of the railroads as well as a strengthening North American economy," Haverty said.
Judge upholds MBTA's random-search policyA federal judge has denied petitions by two civil rights groups to block the Massachusetts Bay Transportation Authority from performing random searches of bags, parcels, and other carry-on items. The searches began on July 22, just days before the Democratic National Convention started in Boston.
Although the bags aren't opened and pass through an explosive-detection machine, the National Lawyers Guild and the American-Arab Anti-Discrimination Committee said that the new policy violates the Fourth Amendment because the person searched need not be suspected of criminal activity. The judge ruled that the "intrusion is limited and the MBTA has adequately prepared riders to expect the searches."
When the MBTA announced the controversial policy on July 12, General Manager Michael E. Mulhern said that it was not arrived at hastily. "The MBTA would not be moving forward with this security initiative unless I felt it was absolutely necessary in this city and during this time in our nation’s history," he explained.
KCS to upgrade 88 public grade crossingsKansas City Southern and the Mississippi Department have embarked on a five-year, $10 million crossing upgrade plan in which KCS will revamp 88 public crossings from Vicksburg to Meridian, Miss., through warning-level improvements and closures.
In some cases, crossbucks will be exchanged for signals and gates, and in others, signals and gates will be swapped out for signals and gates with flashers. Surface upgrades, valued at $1.8 million, also are part of the plan.
"This project is significant because it allows us to accomplish in five years what could otherwise take 30 years," said Allen Pepper, manager-public safety for KCS.
Work on the first 18 crossings is now under way, and KCS and MDOT are negotiating with municipalities and counties on crossing closures.
NS profits beat Wall Street estimates againNorfolk Southern has continued its winning ways through business volume increases, cost controls, and operating efficiencies, according to Chairman, President, and CEO David Goode, who announced the railroad's second-quarter performance today.
The railroad posted an operating ratio of 76.6%, dropping a notable 5 percentage points from last year's comparable quarter. Operating revenues were $1.8 billion, "the highest of any quarter in NS history" and 11% higher than in the same 2003 period, but operating expenses were up $53 million or 4% over second-quarter 2003. Additionally, NS net income rose by 55% to $213 million, or 54 cents a share, compared to 35 cents a share in the year-earlier period. Analysts had forecast earnings of just 46 cents a share. Income from rail operations improved 43% and set a record at $425 million.
"As we move into the remainder of the year, I am confident that NS can continue to leverage our operational momentum, again improve service quality, and energetically pursue new business and margin improvement," Goode said.
CSX posts record revenues, sees dip in operating ratioIn this year's second quarter, CSX Surface Transportation saw some turnaround signs. While the railroad's operating ratio, 85.2%, is still one of the industry's highest, it fell 1.1 percentage points from the same period a year ago. Revenues of $1.99 billion--an all-time high on record volume--were up from $1.90 billion in the 2003 period. Driving that boost was operating income of $280 million, an increase of $21 million from the year-earlier quarter. And earnings, minus a $9 million restructuring charge, were $128 million or 60 cents a share--beating analyst estimates of 58 cents a share. (The charge was due to CSX's now-complete program to eliminate some 900 nonunion management jobs, which is expected to save $80 million to $100 million annually.)
In today's announcement, CSX Chairman and CEO Michael J. Ward said that the revenue results, in particular, reflect "strong economic growth and high transportation demand," which will carry through the end of the year. He added that the "continued roll-out of our new operating plan will drive improvement in our service quality and an increase in capacity through increased asset utilization and improved network fluidity."
South Korea city picks Bombardier ART technologyThe City of Yong-in in South Korea has awarded a 35-year Build-Operate-Transfer concession to a consortium headed by Bombardier Transportation for an 11.5-mile rail transit system using Bombardier’s Advanced Rapid Transit (ART) technology. The five-year design-build portion of the contract is worth $600 million, of which Bombardier’s share will be approximately $200 million.
BNSF profits rise as operating ratio dropsRecord traffic volumes and a 2% average increase in prices pushed Burlington Northern Santa Fe Corp. to all-time high revenues and per-share earnings in the second quarter. Announcing the company’s results on July 27, BNSF chairman, President, and CEO Matt Rose also said that "equipment availability and crew capacity should enable us to maintain network fluidity and handle forecasted volume" in the fall peak season.
Second-quarter 2004 earnings of $249 million amounted to 67 cents a share, three cents above analysts’ expectations and 24% ahead of the 2003 quarter. Freight revenues rose 17% in this year’s second period to $2.64 billion. Operating expenses were up 16% to $2.18 billion due to volume and fuel price increases. Operating income increased 23% year-over-year to $508 million. BNSF’s operating ratio dropped to 80.7% this year from 81.8% a year ago.
UP traffic and revenues at record levels; profits aren’tUnion Pacific’s second-quarter 2004 revenues exceeded $3 billion, a record, and carloads and average revenue per car were at all time highs. But UP’s profits sank 45% to $158 million, battered by the high costs of congestion and soaring fuel prices. In the second quarter of 2003, the railroad earned $275 million. Operating income this year dropped to $359 million from $583 million in the 2003 quarter. The operating ratio in this year’s quarter was 88.1% compared to 79.9% a year earlier.
"We know we aren’t living up to the potential of this great company," said UP Chairman and CEO Dick Davidson, "but we remain absolutely focused on resolving the operational issues that have temporarily limited profitability. By year end, we will have graduated 5,000 trainmen, acquired nearly 750 locomotives on short- and long-term leases and taken steps to manage our business volumes. We believe these efforts will eventually allow us to catch up with the strong demand, improve network fluidity, and operate more efficiently so that we can translate this demand into bottom-line results."
Norfolk Southern maintains its lead in speedAmong the four largest U.S. rail systems, Norfolk Southern posted the highest average freight-train speed in the week ended July 16: 23.6 mph, compared with 23.4 in the prior week and (for historical comparison) 23.5 in the third quarter of 2003. In the same order, Burlington Northern and Santa Fe average train speeds were 22.2 mph, 21.7 mph, and 24.4 mph. Next was Union Pacific with reported speeds of 21.8 mph, 21.2 mph, and 22.9 mph. CSXT’s 19.9 mph average speed for the July 16 week was up solidly from its 18.9 mph performance in the preceding week, but below the 21.0 mph posted in last year’s third quarter. Average train speed is one of several performance measures required weekly by the Surface Transportation Board and posted each Wednesday on a website hosted by the AAR.
Wabtec sees continued strength in equipment marketAn 18% growth in sales propelled Wabtec to higher profits in the second quarter. Net income was $9 million, compared with $5.5 million in the second quarter of 2003. "Throughout the year, we have seen sustained growth in freight rail traffic, and the industry’s demand for new freight cars and locomotives continues to be strong," said Wabtec Chairman, President, and CEO William E. Kassling on July 23. He said aftermarket growth in the freight and transit markets had started to improve although it’s below historical peaks. The company’s Freight Group sales rose 14% from year-earlier levels, driven by demand for car and locomotive components. Transit group revenues were 30% ahead of the corresponding period last year, mainly because of aftermarket sales growth.
Congress delays spending bill until SeptemberCongress and the White House came close to agreement late in July on a new six-year highway-transit spending bill, but not close enough. The White House relaxed its stand and agreed to support funding of around $284 billion, a jump from the $256 billion the administration stubbornly stuck with for months threatening to veto any higher amount. The Senate, which had passed a $318 billion bill, seemed willing to accept a lower figure but not one as low as the compromise measure. Negotiators will resume bargaining in September.
TTX enlarges and modifies a busy fleetTTX has been ordering new equipment and beefing up its maintenance forces to cope with "increased overall demand exacerbated by seasonal surges [that] is going to place additional stress on the TTX fleet."
TTX President and CEO Andrew F. Reardon said in a statement posted on the company’s website July 19 that TTX will accept delivery of new flat cars valued at $600 million in 2004, a record. He also described an extensive modification program for a large part of the company’s existing fleet to meet the changing needs of customers.
TTX is extending the length of the platform on five-unit spine cars from 48 feet to 53 feet, reflecting the move of the domestic intermodal market away from the 48-foot container. Similarly, 48-foot well cars are being modified to 40 feet, reflecting "the rail industry’s desire to use the 40-foot well to improve the efficiency in on-dock loadings and in transporting more international containers in any given train length." The well car modifications are being performed at TTX’s Hamburg and Calpro Division shops and one contract shop. TTX’s Calpro and Acorn shops are doing the spine car work.
In another program that’s being carried out at the Acorn shop, TTX is modifying the deck on much of its trilevel vehicle fleet (the low-level flush deck car) to accommodate a bilevel rack. Reardon said this responds to a shift in consumer demand from smaller automobiles to SUVs.
In response to "a newly emerging market," Reardon said TTX has further plans to modify 800 89-foot cars to carry new Class 8 highway tractors along with other large loads, including recreational vehicles.
DMJM+Harris to study third track for LIRRThe New York MTA has allocated $4 million for an analysis by DMJM+Harris of the scope, cost, and environmental impact of a proposed third track on a 10.5-mile stretch of the Long Island Rail Road main line between Bellerose and Hicksville. Proponents say the project would increase reverse-commuting options and eliminate five grade crossings, among other benefits. Completion of the analysis will pave the way for a request for federal funding. The local match is not yet assured, although LIRR has included the project in its proposed capital budget for 2005-2009. MTA Executive Director Katherine Lapp has asked all three of the agency’s rail operators—Metro-North and the New York City Subway as well as LIRR—to find "internal efficiencies and other measures" to close an anticipated 2005 budget gap of more than $500 million that could grow to $1 billion or more in 2006.
L. B. Foster says legislative impasse delays ordersL. B. Foster Co. has reported net income of $1.3 million for the second quarter of 2004, up from $1.1 million for the same period last year. Net sales in this year’s quarter were $76.8 million, compared with $75.6 million in the 2003 period.
The company’s president and CEO, Stan Hasselbusch, said performance has been constrained by the failure of Congress to pass a new highway/transit spending bill. "While we expect the amount of funding under this legislation will be larger than its predecessor TEA-21, passage will not result in increased activity in our Rail and Construction businesses until the second quarter of 2005," said Hasselbusch.
Portec announces record results and an acquisitionPortec Rail Products, Inc., earned net income of $1.464 million in the second quarter of 2004 and $2.21 million for the first half of the year—both records. In the corresponding periods of 2003, Portec reported net income of $1.292 million in the second quarter and $2.110 million for the first half.
Portec also announced plans to acquire 100% of the shares of Salient Systems for a combination of cash and stock. The value of the transaction is estimated at $12.4 million to $14 million, depending on the price of Portec shares at closing. Portec said the combination will strengthen its position in "the growing market for Friction Management, Wayside Detection, and Operating Asset Data Management."
Salient provides data collection and software management systems designed to enable railroads to do predictive maintenance.
Harsco wins Australian businessHarsco Track Technologies (HTT), the railroad track maintenance division of Harsco Corp., will supply a Stoneblower advanced-technology track surfacing machine to Australia’s Queensland Rail. To be manufactured in HTT's Michigan and Australian facilities, the unit is slated for delivery in late 2005.
The fully contained, self-propelled Stoneblower--developed in partnership with Network Rail (formerly Railtrack plc)--serves as an alternative to traditional tamping and track renewal methods. It pneumatically injects ballast under ties without disturbing the pre-existing ballast foundation.
Network Rail has surfaced more than 8,000 miles of track with its 20 Stoneblowers, and reports that "track durability is three to four times better than traditionally tamped track."
Holland acquires Canadian flash-butt welding companyHolland L.P., a supplier of electric flash-butt welding equipment, has acquired British Columbia-based E.O. Paton International Holdings. The deal will allow Holland to "better serve" the market for both fixed-plant and mobile operations.
Dennis Shears, former E.O. Paton president/owner and current Holland employee, will assist with marketing and global sales to the railroad industry.
"Good railroading" lops 4.6 points off CN operating ratioCN posted record quarterly net income of $C327 million in this year’s second quarter, an increase of 34% over the second quarter of 2003. This came out to $C1.13 a share, handily beating the Thomson First Call estimate of 98 Canadian cents.
Operating income rose 32% to $C575 million, and the operating ratio dropped 4.6 percentage points to 65.5% from 70.1% in the comparable 2003 period. The railroad also reported first-half free cash flow of $C587 million, up from $C350 million in first-half 2003.
CN President and CEO E. Hunter Harrison said he was "delighted" with the railroad’s performance.
"I’m especially proud that CN is making the most of a strong North American economy," said Harrison. "The fluidity of our network, coupled with solid operating efficiencies and productivity advances--key benefits of CN’s precision railroading practices--positioned the company superbly to handle a 10% increase in second-quarter freight volume at low incremental cost. This allowed us to deliver our revenue gains directly to the bottom line. And that’s what good railroading is all about."
Freight car order backlog swells to 51,466Orders for 19,970 new freight cars were placed in the second quarter of this year, and 10,071 new cars were delivered, according to preliminary figures compiled by the Railway Supply Institute’s ARCI (American Railway Car Institute) committee. This brought first-half orders to 37,732 and deliveries to 20,083. The undelivered backlog on July 1 was 51,446, compared with 42,242 on April 1, 2004, and 33,383 on July 1, 2003.
Keystone Corridor improvements acceleratedAn amended agreement between Amtrak and the Commonwealth of Pennsylvania calls for the state and the railroad to share equally the cost of a $145.5 million program to increase speeds and service on the 104-mile Keystone Corridor between Philadelphia and Harrisburg. The goal is to decrease local-train travel time to 105 minutes from 120 minutes by the fall of 2006, and to offer 90-minute express service. The number of round-trip trains will be increased to 13 from 9.
The "reinvigorated" plan was announced in Philadelphia July 20 by Pennsylvania Governor Edward G. Rendell and Amtrak President and CEO David L Gunn.
"This is an extremely important project for several reasons," said Gunn. "First, it will bring the Harrisburg Line to a state of good repair after years of deferred maintenance, greatly improving service to passengers using this growing route. Second, it demonstrates how incremental improvements to existing rail corridors can go forward at reasonable cost and show real results in the near term. Third, it is a living example of a project among the eight Tier I corridor routes in Amtrak’s five-year plan." He added that "if other corridor projects are to succeed, federal matching funds are critical."
Crossing fatalities rise, trespasser deaths dropIn this year’s first four months, U.S. grade crossing fatalities rose to 117 from the 102 reported in the corresponding period last year, a 14.7% increase. Trespasser deaths totaled 123 in January-April 2004, a 10.9% decline from the 138 trespasser deaths reported in the 2003 period.
NJ Transit again dips into capital for operating fundsNJ Transit has adopted an FY 2005 operating budget of $1.34 billion, 2.9% above the prior year, and a capital program that at $1.19 billion is about even with FY 2004.
Passenger fares and other system-generated revenues are expected to pay for $618.7 million or not quite half of FY 2005 operating costs. State subsidies will contribute $278.7 million, and the remaining gap will be filled by the diversion of $356 million in capital funds to the operating budget.
The 2005 capital program devoted mainly to maintaining the system in state of good repair. It includes funds for the continued planning and design of a new trans-Hudson rail link.
CN consolidates bulk commodities business unitsCN has consolidated its U.S. business unit responsible for grain, fertilizer, and coal with its Canadian business unit that handles grain and fertilizer into a new bulk commodities business unit. It will be headed by Ross Goldsworthy, who previously was vice president of the Canadian unit.
CN transports grain, oilseeds, specialty crops, and processed grain products from Canada and the U.S. Midwest to continental markets in North America and to terminals at ports for export by vessel to overseas markets. It also serves the fertilizer industry with links from potash mines and large fertilizer producers to major markets in North America, and through single-line access to many Mississippi River barge terminals and major Gulf ports. CN also hauls shipments of coal and coke for customers across North America and for export overseas.
Jim Foote, CN executive vice president-sales and marketing, called formation of single bulk commodities business unit "another step in the evolution of our sales and marketing organization. It recognizes that many of our bulk customers have operations, or serve markets, on both sides of the Canada/U.S. border and offshore."
CN trackworkers ratify contractCN trackworkers represented by the Brotherhood of Maintenance of Way Employees on former Wisconsin Central territory have ratified a three-year agreement with CN that provides wage and benefit improvements. The agreement affects 470 employees.
DOT’s Credit Council: Faster processing, or more red tape?The U.S. Department of Transportation says its newly-established Credit Council, which is charged with oversight and management of DOT direct loan and loan guarantee programs administered by the Federal Railroad, Federal Highway, and Maritime Administrations as well as the Office of Small and Disadvantaged Business Utilization, will create a "more expedient and streamlined" application review process, without sacrificing each administration’s autonomy to approve or disapprove loans. For example, RRIF (Railroad Rehabilitation and Improvement Financing) loans for short lines and regionals will continue to be submitted to the FRA, with final decisions the responsibility of the FRA Administrator.
DOT Assistant Secretary of Budget and Programs/Chief Financial Officer Linda Combs says the Credit Council—which is based on the FHWA’s TIFIA (Transportation Infrastructure Finance and Innovation Act) Credit Council—will speed applications by offering "a fully coordinated and integrated review of incoming applications and current loan portfolios" and by "standardizing oversight of the financial review process" DOT-wide.
DOT's Credit Council is comprised of the Assistant Secretary for Budget and Programs/CFO, who serves as chair, the Under Secretary of Transportation for Policy, the General Counsel, the Assistant Secretary for Transportation Policy, the Federal Highway Administrator, the Federal Transit Administrator, the Federal Railroad Administrator, the Maritime Administrator, and the Director of the Office of Small and Disadvantaged Business Utilization. It’s scheduled to meet quarterly.
CN closes BC Rail transactionCN has completed its $1 billion transaction with the British Columbia government to acquire BC Rail Ltd. and the BC Rail Partnership, collectively known as BC Rail, and the right to operate over BC Rail’s infrastructure under a long-term lease. CN says it "will now commence the step-by-step integration of BC Rail into its North American system." CN received regulatory clearance to complete the transaction on July 2.
Pricing initiatives strengthen Greenbrier resultsA strong economy and rising rail traffic have helped Greenbrier Companies strengthen revenues and earnings, but other initiatives also have been paying off, according to President and CEO William A. Furman. Early this year, "a team was put in place to aggressively manage steel and scrap surcharge issues with customers and suppliers," said Furman in a corporate performance report on July 14. "The increase in manufacturing margins and pricing on recent orders reflects the successes realized in this area."
Greenbrier reported net earnings of $6.4 million for its third fiscal quarter, which ended May 31, more than double the $3 million earned in the comparable period a year ago. Revenues rose 63% to $225 million.
The company delivered 3,600 cars in its third quarter (including 600 produced in a prior period) and ended the quarter with a backlog of 9,700 cars valued at $600 million. By June 30, the backlog had grown to a month-end record of 14,300 cars valued at $840 million.
Furman noted that while Greenbrier has only 15% of North American carbuilding capacity, its backlog represents 25% of the total North American freight car backlog. The company also has operations in Europe.
UP questions "tone," not facts, of Times articleResponding to "serious allegations" by The New York Times related to grade-crossing accidents, Union Pacific CEO Dick Davidson protested that though "much of the factual information" was correct, "the tone creates the impression of a company that does not follow the rules."
"That is not the kind of company we are," said Davidson in a letter to employees posted on the railroad’s website on July 11, the day the first article in The Times series was published.
That article, focusing on UP, appeared on the front page of a widely distributed Sunday edition and took up three pages inside the paper. The narrative began with the description of an alleged tampering-with-evidence episode on UP—a "cover-up" that Times Reporter Walt Bogdanich called "a stark example of how some railroads, even as they blame motorists, repeatedly sidestep their own responsibility in grade-crossing fatalities. Their actions range from destroying, mishandling or simply losing evidence to not reporting the crashes properly in the first place."
UP acknowledged that The Times’s investigative reporter had uncovered lapses that needed attention.
"During the course of the reporter’s investigation, we learned that some of our reporting and compliance processes were not as thorough as we expect," said a UP media statement. "When we learned of these breakdowns in our processes, we took immediate corrective actions. . . . We have changed our procedures to ensure that proper notification is made in the future. We initiated a further, comprehensive audit of all reporting requirements to identify and correct any other shortcomings."
UP also acknowledged that "in several dozen instances," it had failed to comply with a requirement that it notify the National Response Center by telephone of grade crossing fatalities.
In his letter to UP employees, Davidson had this to say with respect to "allegations [that] concern destruction of evidence after crossing accidents":
"Union Pacific’s policy is clear. We do not destroy information or evidence needed for legal proceedings. A few years ago, the courts began to expand the kind of material they expect us to retain in grade crossing accidents. In October 2002, we instituted major changes to our processes to ensure that this wider range of materials is kept. Additionally, we will initiate a program to install video cameras on our locomotives to ensure accurate recording of crossing incidents."
UP did not specifically address the question of railroad event recorders, or blackboxes, which The Times said were often unreliable. Just days before The Times began publication of the results of its seven-month investigation and analysis of grade crossing accidents, the Federal Railroad Administration initiated a rulemaking proceeding proposing that railroads invest around $22 million to replace existing blackboxes.
Ex-UTU presidents sentenced to prisonTwo former United Transportation presidents who pleaded guilty to extortion charges-—Byron Boyd, Jr., 57, and Charles L. Little, 69--have been sentenced to two years in prison by a federal judge in Houston. They had entered into plea agreements with the government, admitting they accepted gifts from lawyers who in return gained preferred access to injured union members. They had faced maximum sentences of 20 years in prison.
Plea bargaining won sentences of three years probation for two other former UTU officials: Ralph Dennis, 52, who was the union’s director of insurance, and John Rookard, 58, special assistant to Boyd. U.S. District Judge Sim Lake handed down the sentences on July 9.
Assistant U.S. District Attorney Edward Gallagher said the practices in question could be traced to the enactment 94 years ago of the Federal Employers Liability Act, allowing railroad workers to sue their employers for unlimited damages. The Houston Chronicle quoted ex-UTU chief Boyd as saying, "The system has gone on for generations, and the system goes on as we stand here today."
MBTA moves ahead with random searchesThe Massachusetts Bay Transportation Authority announced July 12 that its controversial "random searches of bags, parcels and other carry-on items" will begin prior to the Democratic National Convention. Persons refusing to be screened will be denied access to the transit system.
"This is not a step to which we arrived at hastily," said MBTA General Manager Michael E. Mulhern. "The MBTA would not be moving forward with this security initiative unless I felt it was absolutely necessary in this city and during this time in our nation’s history."
UP struggles to manage soaring demandFacing "unprecedented customer demand," Union Pacific announced July 8 that it’s taking new steps "to protect the system from additional congestion." The railroad acknowledged that previous actions–including acquisition of 500 new locomotives and the hiring and training of 3,200 new train operators–have fallen short.
"Our velocity has remained stubbornly flat for several weeks," said Jack Koraleski, the railroad’s executive vice president-marketing and sales, in a letter to customers. "There has been no improvement in terminal dwell. Spot power imbalances continue to be a problem, and yard congestion remains in several key locations such as the Pacific Northwest, Northern California, and Texas."
"We must control the volume of business in several of our key corridors and terminals by limiting carloadings as well as reducing the overall inventory of railcars," Koraleski said.
The railroad’s new steps to manage growth affect all six of its commodity groups. They include:
* "Creating an allocation system for certain shipments to protect critical terminals from overload.
* "Temporarily limiting the number of rock and aggregate materials carloads handled in Texas.
* "Consolidating selected automobile and chemical trains.
* " Regulating the volume of selected agricultural commodities.
* " Capping the number of incremental train starts."
"We are aware that in some cases alternative methods of shipment will be a challenge given the huge demand and strain on all forms of freight transportation today," Koraleski said as he announced the new restrictions to shippers.
"If demand for freight transportation continues to surge into 2005 and we approach the limits of our physical capacity in key corridors, we will refine our methods to manage the flow into our network," he added. "We also will need to balance investments in capacity with adequate financial returns to ensure long-term viability."
Debt offering to finance CN acquisitionCN is currently conducting an $800 million debt offering to finance a portion of its recent acquisition of the railroad and marine holdings of Great Lakes Transportation LLC and its acquisition of BC Rail Ltd., which includes the right to operate over BC Rail right-of-way under a long-term lease. The GLT transaction received regulatory clearance on July 2 and is expected to close by mid-month. The BC Rail deal is also expected to close around the same time, now that a consent agreement with Canada’s Competition Bureau has been obtained.
The debt offering consists of $300 million in 4.25% notes due 2009, and $500 million in 6.25% debentures due 2034. CN said it expects to close the financing on July 9. It is being made in the U.S. under the shelf-registration statement CN filed in October 2003 for up to $1 billion in debt securities. Lead managers of the debt offering are Citigroup and JPMorgan. Others are Banc of America Securities LLC, Harris Nesbitt, Scotia Capital, BNP PARIBAS, Banc One Capital Markets Inc., RBC Capital Markets, and Wachovia Securities.
Timber Rock grows to 290 milesThe Timber Rock Railroad (TIBR) announced July 2 that it would begin operations July 3 over 122 miles of track between Silsbee and Somerville, Tex., that it is leasing from Burlington Northern and Santa Fe. This will expand TIBR’s operations to 290 miles. TIBR interchanges with BNSF at Teneha, Kirbyville, Beaumont, and Somerville, Tex., and with Kansas City Southern at Deridder, La. The short line was founded in 1998 and is one of nine small roads owned by Watco Companies of Pittsburg, Kans.
Intermodal continues double-digit growthU.S. railroads hauled 217,549 trailers and containers in the week ended June 26, a 10.6% increase over the corresponding week last year. Trailer loadings were up 14.4% and container volume was up 9.2%. Carload traffic rose 2.4% to 341,798 units, with 10 of 19 commodity groups registering gains.
Canadian railroads reported carload traffic of 67,035 units in the week ended June 26, up 7.7% from last year. Intermodal volume in Canada rose 0.8% to 41,471 trailers and containers.
Mexico’s TFM railroad moved 12,331 units of carload freight during this year’s 25th week, a 42.0% increase over the same week last year, and 2,012 originated intermodal units, a 45.1% decrease from 2003.
On third vote, TransLink approves airport lineAfter twice voting down a proposed airport rail link as too costly, the board of directors of Vancouver’s TransLink reversed itself on June 30 and approved the controversial C$1.5 billion project in an 8-4 vote. Two board members reportedly changed their votes after they were persuaded by a new study that a less expensive, surface light rail line was not a realistic option. The Richmond-Airport-Vancouver (RAV) line will involve extensive tunneling. The project now proceeds to best and final offers from two competing consortia—SNC-Lavalin/Serco and Bombardier-led RAVxpress. Unless, of course, the board changes its mind.
CN clears last hurdle in BC Rail acquisitionCN expects to close its $1 billion takeover of BC Rail operations by mid-July, now that the final approval needed—a consent agreement with Canada’s Competition Bureau—has been obtained.
The consent agreement supports CN’s initial pledge to share merger efficiencies with BC Rail shippers and assure them competitive transportation options through an "Open Gateway Rate and Service Commitment." "Shippers will be able to choose CN to reach markets, enjoying faster transit times, or they can route traffic over BC Rail to three connecting railways at the Vancouver gateway at lower rates and with better service than exist today on BC Rail," CN said in a statement announcing the consent agreement. CN negotiated agreements for connecting service at Vancouver with Canadian Pacific, Burlington and Northern Santa Fe, and Union Pacific. The consent agreement, CN added, will also maintain competitive rates and service for grain shippers in the Peace River region.
The Competition Bureau began its review of the CN/BC Rail transaction after CN and the British Columbia government announced Nov. 25, 2003, that CN would acquire all shares outstanding of BC Rail and the right to operate over BC Rail under a long-term lease. Provincial legislation approving the deal became law in December 2003.
Australian RailAmerica transaction one step closerThe Australian Competition and Consumer Commission (ACCC) has approved the sale of RailAmerica’s Freight Australia operation to Pacific National, an Australian-based rail freight logistics company. The transaction now awaits approval of the State of Victoria, the final consent needed to close the $200 million deal. RailAmerica says it now expects closing of the transaction to occur in third-quarter 2004. Originally, it had anticipated to close the deal in the second quarter.
FRA proposes upgraded event recordersThe Federal Railroad Administration wants the railroad industry to install sturdier and more sophisticated event recorders on its locomotive fleet. The cost would be around $22 million, FRA said at a news conference announcing the publication of a Notice of Proposed Rulemaking in the Federal Register of June 30.
"The proposed rule would establish standards to make sure event recorders survive accidents in new and existing locomotives," said the agency. "It would also phase out the use of magnetic tapes as a data storage medium with current ‘black boxes.’ FRA is also proposing that improved event recorders collect and store additional data, including emergency braking systems, locomotive horns, and text messages sent to the engineer’s display regarding directives and authorized speed. The proposed rule would also simplify existing standards for inspecting, testing, and maintaining event recorders by railroads."
Got a service problem? Try CN’s new Service DepartmentCN customers experiencing problems that cannot be resolved through the railroad’s sales department now have a new resource: A Service Department whose function is "resolving customer issues that aren’t fixed through the daily business process." These can be transportation, equipment, billing, or other service issues. The new department is headed by Michael K. Mohan, who has been promoted to vice-president-service. Mohan will direct the department’s activities across the CN system, with Service Department heads in each of CN’s three regions reporting to him. Mohan reports to James M. Foote, CN’s executive vice president-sales and marketing.