Larry H Kaufman is a veteran transportation journalist and commentator and a Contributing Editor to Railway Age.
The death recently of A. E. (Ted) Michon reminded me just how difficult transitions can be for those who must go through them.
My conservative friends will not agree with this essay. So be it. I am tired of hearing the demands that Amtrak either show a profit or that it be put to a merciful death.
The worst kept secret in the railroad industry for more than a month has been the identity of the new chief executive of Canadian Pacific Railway. For the record, E. Hunter Harrison was named president and chief executive of CP on Friday, June 29.
While the railroad world waits for the Canadian Pacific Railway board of directors to name a permanent chief executive to succeed acting CEO Steve Tobias, some railfans are whiling away the hours speculating on the good things that would come from a merger of CP and Kansas City Southern Railway.
To you I say: Do not hold your breath.
As this is written, much of the railroad world awaits the Thursday, May 17, vote by Canadian Pacific share owners. Early book betting says that insurgent hedge fund Pershing Square Capital Management and its head William Ackman will take a majority if not all of the seven contested board seats.
Congress can't seem to get out of its own way when it comes to reauthorizing the surface transportation program. It's approaching three years since the silly-named SAFETEA-LU expired in September 2009.
Here we go again.
A “friendly” GOP House committee chairman has introduced legislation that would reauthorize the expired surface transportation program. Without benefit of any hearings, the bill introduced by Rep. John Mica (R-Fla.) would continue highway and bridge spending at levels near those of the measure that expired more than two years ago.
What is — and should be — very disturbing to railroads is a provision that would allow states to increase the permissible maximum weight of trucks and cargo from the current 80,000 pounds to 97,000 pounds, a 21% increase.
That might not be so bad, if truckers already were paying their allocable share of the cost of building and maintaining the highways the public provides. They do not. Independent studies say the big rigs now pay about 20% less than they should, and there is no realistic belief that the Republican-controlled House will increase taxes on truckers.
To the extent that trucks do not pay their allocable share, they are effectively subsidized, and that allows them to price their services at lower rates than they would if they pay their full share. That allows trucks to divert traffic from railroads, which own and maintain their rights-of-way and pay ad valoremtaxes for the privilege.
Trucking interests already are in full defensive mode, decrying the behavior of railroads in attacking one of their best customers — trucks. It is true that trucks have become a significant and valued customer of rail intermodal service, the fastest growing business railroads have. Just look at J.B. Hunt and what it has invested in intermodal containers.
That does not mean railroads should simply accept the proposed legislation. If given the payload increase of the bill, truckers would become more competitive with rail on more traffic. Truckers would not hesitate to abandon intermodal and convert traffic back to all-highway movement.
Trucks use intermodal for one reason only. It makes economic sense. Trucks use four times as much fuel as railroads to move one ton of freight one mile. Rail rates are less than trucking costs. Intermodal allows truckers to avoid paying drivers more, and it allows truckers to overcome the impact of new, more restrictive, driver hours of service regulations.
That’s why trucks increasingly are on trains. It isn’t to be charitable. It is to make money. And that’s why if they are allowed to load trailers with an additional eight tons of freight, they will.
Seismic market shifts in the oper- ating leasing marketplace for railcars are providing new opportunities for lessors to put cars parked in the grass back into revenue service. For lessees facing lease terminations for equipment they need, the opportunities look more like risks. This month, I’ve interviewed my partner David Nahass, who represents both lessors and lessees in a variety of situations. Here is what he has to say about this evolving operating leasing marketplace.