William Vantuono

William Vantuono

With Railway Age since 1992, Bill Vantuono has broadened and deepened the magazine's coverage of the technological revolution that is so swiftly changing the industry. He has also strengthened Railway Age's leadership position in industry affairs with the conferences he conducts on operating passenger trains on freight railroads and communications-based train control.

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william-vantuono-web.jpgBy William C. Vantuono, Editor

Russia. China. Japan. France. Britain. Belgium. Germany. Spain. Italy. Taiwan. South Korea. The first two countries are the newest additions to the high speed rail club, which many in the U.S. have been wanting to join. Yes, we’ve got our own version of a high speed train, Amtrak’s Acela Express. But compared to the 200-mph-plus trains that rocket across other corners of the globe, our present service is, well, a beginning.

“The United States is a developing country in terms of rail,” Siemens Transportation Systems senior official Ansgar Brockmeyer told The New York Times last month, while riding Russia’s first true high speed train, the Sapsan. Developing country? Us, the United States of America, the nation that went, in the space of about a decade, from catapulting one astronaut into a 15-minute suborbital flight on top of a modified ballistic missile to landing 12 of them on the moon using purpose-built spacecraft during six missions and returning them safely to the earth?

I well remember the days, in the 1990s, when the major suppliers of high speed technology—Siemens, Alstom, Bombardier, and a few other companies that have since been absorbed by the “Big Three”—began declaring that high speed rail was dead here. With the exception of Acela, there was nothing to show for their time, efforts, and money except a trail of canceled projects, political opposition (or worse, apathy), and broken dreams. Opportunity lay elsewhere, they said, and they were right (see first paragraph).

But opportunity knocks once again in our third-world-of-passenger-rail nation. (Remember, we have the world’s finest freight rail system.) I’m sure the Big Three, and a few other potential players, haven’t forgotten the good old days of high hopes and nothing else, but I get the impression that this time, it’s serious business. The President of the United States is dangling an $8 billion high speed carrot, and while it won’t buy much more than a handful of upgraded freight rail corridors handling passenger trains not much faster than 110 mph, it’s a start.

High speed rail in the U.S.? I used to say, with a touch of sarcasm, “Not in my lifetime.” Perhaps I was wrong. I’d love to be wrong.

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By William C. Vantuono, Editor

william-vantuono-web.jpgThe Federal Railroad Administration is now evaluating a tall stack of applications for high speed passenger rail projects—roughly $100 billion worth for an $8 billion ARRA (American Recovery and Reinvestment Act of 2009) grant program. Federal Railroad Administrator Joseph Szabo, based on his staff’s recommendations, will be the one to sign off on which projects are funded, and for how much. Given that demand far exceeds supply, he’s going to have to make some tough choices.

The selection process, says FRA, is “merit-based,” an approach Administrator Szabo reiterated during his luncheon address at Railway Age’s “Passenger Trains on Freight Railroads” conference last month. It’s in official documents, as well. From the Federal Register: “The evaluation and selection criteria are intended to prioritize projects that deliver transportation, economic recovery, and other public benefits, including energy independence, environmental quality, and livable communities; ensure project success through effective project management, financial planning, and stakeholder commitments; and emphasize a balanced approach to project types, locations, innovation, and timing.”

The selection process, as published in the FRA’s High Speed Rail Strategic Plan and in the Federal Register, spells out the requirements. A given project either meets the criteria, or it doesn’t. So it follows that the selection process is fairly cut and dried.

Or is it?

Let’s assume two things. First, Administrator Szabo has every intention of sticking to the letter of the law, and to the intent of the program, by awarding project grants based on merit. Second, any program involving government dollars is going to involve politics. That’s just the way it is. Anyone who doesn’t believe this needs a serious reality check.

In the case of HSR—actually, “HrSR” (“higher speed” rail, incremental improvements to existing freight rail corridors to enable  90-125 mph passenger trains)—the political game-playing will mostly come from the states. Case in point: A project in one Midwest state, we’re told, does not meet all the FRA’s criteria, in terms of project management, environmental and ridership studies, financial plan, technical score, etc. The state agency in charge of submitting the grant application asked the FRA for guidance. The FRA basically said, “You don’t meet the criteria; don’t submit the application.” We’re told, however, that this state’s Republican governor ordered the agency to submit the application anyway. Why? Because if it’s rejected, the governor can go to his constituents and claim that the Democrats running Washington won’t give his state the funds for a project that will create jobs.

Partisan politics as usual? Of course. Did you expect anything different?

Another disturbing thought: Will states that are worse off economically (i.e., high unemployment level) have their projects approved over those from other, less-beleaguered states, even if their applications don’t fully meet the FRA’s criteria? Put another way, will there be pressure from the White House to make exceptions for political reasons, thereby funneling money away from projects that are more deserving?

We’re not saying that one project may be better than another, and we have no firm evidence to suggest that the process will be tainted by political considerations. But there are examples of this happening with projects of national interest or significance. 

Recall that, following President John F. Kennedy’s bold directive in 1961 that the United States land a man on the moon and return him safely to the earth by 1969, NASA built its massive Mission Control facility outside of Houston, Tex.—900 miles away from Cape Canaveral, Fla., where the Apollo spacecraft were assembled and launched. Why? Because Vice President Lyndon Johnson, whom Kennedy placed in charge of the space program, wanted the facility in his home state. Talk about bringing home the bacon!

President Obama has said the $8 billion grant program is a “down payment” on HSR. Let’s hope the down payment isn’t on a sub-prime railroad.

Comments? Email me at wvantuono@sbpub.com.william-c.-vantuono-signatu.jpg

By William C. Vantuono, Editor

So, it looks like we’re going to have at least some form of high speed rail in this country, after all these years. Some of my European and Canadian supplier colleagues—you know, the people who build those really fast passenger trains, and who have been banging their heads against the wall for a very long time—are still pinching themselves. No, you don’t have to wake up. You’re not dreaming.

In October, when introducing the keynote speaker at Railway Age’s 16th “Passenger Trains on Freight Railroads” Conference in Washington, D.C., I looked out over a sea of about 180 people—nearly 50% more than what our conference usually draws. What recession? There’s opportunity to be grasped!
But how much? Are the freight railroads on board? After all, it’s their tracks these “higher speed” passenger trains will be using, with significant improvements, of course.

matt-rose-ptfrr.jpgBNSF chief executive Matt Rose (left), our keynoter, and one of the driving forces behind the industry’s OneRail Coalition, effectively spoke for the freight rail industry when he said that BNSF does indeed support higher speed passenger services. BNSF, he said, “is proud of its relationship” with the passenger services it either hosts or operates, and believes that new and expanded passenger rail, including high speed, is essential for economic, mobility, safety, and environmental reasons.

Great. So, how far will $8 billion go?

No amount of money will go very far if it’s not spent wisely, Rose said. Carefully targeted investments in our national freight rail infrastructure will be absolutely needed if higher speed passenger rail services are to be realized.

“It all comes down to the money,” Rose stressed. “If it’s not spent effectively, there is more risk of doing damage than the opportunity to help. We must invest at levels that will make rail better than the best alternative.”

In particular, Rose referred to Positive Train Control, which at present represents a $10 billion price tag for the federally mandated implementation, by 2015, of PTC on shared-use and hazmat-traffic rights-of-way. He said that the requirement, essentially an unfunded mandate, could siphon capital funding away from other capital investments in the railroads’ infrastructure.

The real foundation of railroad safety, Rose said, is “good ties, track, and ballast,” investment in which has typically produced a good return. The ROIC (return on invested capital) for PTC remains to be seen, but it’s generally believed to be about $600 million, based on a $10 billion investment.

That’s not a very favorable return.

Should the feds shoulder much of the cost of PTC on freight lines hosting passenger trains? Yes, if it means that hard-earned capital dollars are going to be siphoned away from track, ties, ballast, new locomotives, new freight cars—all those things our railroads need to stay viable and keep growing, and which private investment dollars pay for.

Make no mistake: The industry, as Rose stated, will meet the PTC mandate by 2015. (Well, it is the law.) But there is good reason to be concerned. Let’s hope that those making the decisions and doling out the dollars on Capitol Hill have enough foresight to realize that our freight rail system must remain healthy and strong. If it doesn’t, you may as well forget about those fast passenger trains.

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william-vantuono-web.jpgLet me make this perfectly clear: Warren Buffett is not Snehal Amin. (Remember him? He’s the hedge fund honcho who tried, and failed, to hijack CSX.) Warren Buffett understands railroads. Warren Buffett likes railroads. 

If Warren Buffett can be compared to any railroad tycoon from yesteryear, it would be James J. Hill, the Empire Builder (bottom). Hill built what is today much of the northernmost portion of BNSF’s 27,000-mile system. He is said to have been ambitious but not ruthless, an idealist blessed with an incredible business savvy. He also is said to have possessed a great sense of purpose, a desire to create something with great social as well as economic value. Oh sure, Hill made a bundle pushing the Great Northern westward, bringing the Northern Pacific and Spokane, Portland & Seattle into his railroad portfolio, but who would have denied him his riches?

The modest Mr. Buffett, on those rare occasions when he grants an interview, is refreshingly down to Earth, and knowledgeable about what he chooses to invest in. If anybody actually deserves to own a railroad lock, stock, and barrel, it’s Buffett. If anybody actually deserves to be fabulously rich, it’s Buffett.

Buffett spoke at length about BNSF and the railroad industry with PBS’s Charlie Rose (no relation to Matt), who does not practice MTV-style journalism or scream in your face. Read on:

• “I felt it was an opportunity to buy a business that is going to be around for 100 or 200 years, that’s interwoven with the American economy in a way that if the American economy prospers, the business will prosper. It is the most efficient way of moving goods in the country. It is the most environmentally friendly way of moving goods, and both those things are going to be very important. But the biggest thing is [that] the United States is going to do well. I mean, we can’t move the railroad to China or India.”

• “You spend money in this business regularly every day. You’re spending a lot of money to repair track, add rolling stock, whatever it may be. So . . . it will continue to be capital-intensive and regulated. . . . [I]f we get a reasonable return on the added capital investment—because it will take added capital investment—we’ll do OK. A reasonable return is good. . . . We’re building things that are essential to society, and people need our services. . . . And we should get a decent return on that—enough to encourage us to keep putting money into the business, but we’re not entitled to spectacular returns.”

• “We will wean ourselves off coal over time, [but] we can’t change the 40% of electricity generation that comes from coal next week or next month or next year. There will be more grain to move, and there will be more [freight] of all kinds . . . whatever it may be. There will be more things moving around this country 10 or 20 or 30 years from now.”

Wow.

This isn’t Wall Street talking. Contributing Editor Larry Kaufman has a lot more to say about that in our cover story.

What may Buffett be thinking about, long-term? Think electric power generation—wind farms—transmission line rights-of-way—railroad rights of way—inexpensive electrification—electric locomotives—improved railroad efficiency and lower costs. Maybe even high speed trains.
Get the picture? It’s not too far-fetched.

By the way, in case you’re wondering why Buffett sold all his shares in Union Pacific and Norfolk Southern: “I’ve done that just to facilitate the [BNSF] transaction. I think they’re good investments, and I would have held them if [the BNSF transaction] hadn’t happened.” And oh yes, he does have a model railway in his attic: “I hope they don’t make me sell it for antitrust reasons.”

Happy Holidays. Prosperity, good health, and an excellent safety record in 2010.

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By William C. Vantuono, Editor

At 50, Matt Rose, Railway Age’s 2010 Railroader of the Year, is among the youngest of our industry’s top echelon.

bnsf_rose_3.jpgRose (left, with me in his Fort Worth, Tex., office) has two advantages. First, he joined our industry at a critical point in its history, around the time the Staggers Rail Act was passed. He had a chance early on to work under the experienced guidance of several highly regarded veterans, and learn from them. Second, he’s young enough to have many years to go—and a chance to help determine our industry’s direction, to nurture its growth, to provide guidance, to influence public opinion. Thanks to the dedication of Matt Rose and others, there’s a growing recognition that this old “smokestack industry” of ours truly represents the future of transportation, and is key to America’s economic stability and growth.

Just ask Warren Buffett. 

Rose has great respect for his predecessors, as he told me for our cover story: Upon his elevation to chief executive, “The first thing I did was spend time going around and seeing some of the former executives of the Burlington Northern and the Santa Fe, because they were a fairly large group. I commissioned Larry Kaufman to go out and do video interviews, which resulted in a book that he wrote about the past leadership of BNSF. (Leaders Count: The Story of the BNSF Railway, by Lawrence H Kaufman. Texas A&M University Press, 2005.) I got a glimpse into people like Dick Bressler and Bob Downey. I met Ben Biaggini, and of course I had worked under Rob Krebs. And so I had a lot of different glimpses into the leadership of railroads past.”

To paraphrase John F. Kennedy, let the word go forth from this time and place, to friend and foe alike, that the torch has been passed to a new generation of railroaders—hired post-Staggers, tempered by mergers and cost cutting, disciplined by a committment to safety, proud of their heritage—and unwilling to witness or permit the undoing of their ability to invest growth capital, to which this industry has always been committed.

An eight-year high: Railway Age’s annual survey of the passenger railcar market (p. 48) shows that 1,141 new cars valued at nearly $2 billion were delivered to passenger train operators in the U.S. and Canada in 2009, the highest number since 2001’s 1,332. On Dec. 31, 2009, builders had a backlog of 2,580 new cars on order and undelivered. The operating agencies told us that they plan to place orders in 2010 for an additional 1,382 cars. New railcar deliveries last year were nearly double the 596 cars delivered in 2008. In addition to new cars, manufacturers and company shops delivered 677 rebuilt cars in 2009.

Examine our tables, and you get a picture of a vibrant, growing passenger rail industry. There’s been a dramatic turnaround, and it’s picking up steam. We began our annual survey many years ago, after the production of passenger railcars reached such a low point that the American Railway Car Institute stopped counting them. Today, the monetary value of the passenger railcar market is approaching that of the freight car market—and may well surpass it next year.

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By William C. Vantuono, Editor

william-vantuono-web.jpgWhile Florida and California’s high speed rail projects are getting the most attention in the media (probably because 200-mph passenger trains are considered a whole lot more exciting than those that operate at “only” 90 or 110 mph), they’re actually receiving less than half of the $8 billion under President Obama’s HSR iniative.

Yes, $3.5 billion is $3.5 billlion more than we’ve ever had for “true” high speed, but it represents a fraction of the cost of a full buildout for either project.

Who’s going to benefit from the remaining $4.5 billion (and probably a substantial portion of whatever additional funding may be available for high speed)?

Amtrak.

Yes, you heard me right—Amtrak. The $4.5 billion has been awarded to state projects, most notably in the Chicago hub, and it supports incremental improvements to current or planned Amtrak services—creation of HrSR (higher speed rail, an acronym we should get comfortable using). The Northeast Corridor and its feeder routes benefit as well, with $500 million awarded for state-led improvements.

As expected, the grumbling has already started. As Managing Editor Doug Bowen points out, “Not content with his own state’s triumph, Florida Rep. John Mica took time to publicly disparage FRA funds of $1.1 billion bestowed to upgrade Chicago-St. Louis service to 110 mph. But other observers found the route, part of an eight-state plan advanced for the Chicago Hub, a good fit for HrSR opportunity, potentially reducing travel times between the two Midwest cities by up to two hours, compared with current schedules of 5½ hours or more. Less noticeably, the Chicago Hub also received $244 million to upgrade Amtrak’s Detroit-Chicago service.”

Add to all this Amtrak’s Cascades Corridor, which scored $598 million because Washington State’s DOT presented a strong case for incremental improvements linking Portland, Ore., with Vancouver, B.C., via Seattle; Wisconsin, $822 million, to improve service between Chicago and Milwaukee and extend it to Madison; North Carolina, $520 million, to upgrade the Piedmont route to 90 mph operation; and Ohio, $400 million, for the Cleveland-Columbus-Cincinnati (3C) Corridor.

True (“very”) high speed rail is long overdue. But as far what will be up and running first, I’m putting my money on HrSR, and Amtrak.

engine-999-front.jpgPlug and play locomotive: Norfolk Southern’s prototype battery-powered switcher locomotive, developed by the railroad’s Research & Test group, has been getting high marks. Vice President Operations and Planning Support Gerhard Thelen described No. 999 (pictured) as “very quiet and responsive,” with power “available immediately” and “evidence of better adhesion than a GP38.” Equipped with 1,080 12-volt AGM (absorbent glass mat) batteries, 999 can operate three shifts in a 24-hour period before needing recharging, which only takes two hours before she’s fully juiced and ready to roll again.

What’s next? A road version of this zero-emissions unit that will use regenerative dynamic braking to recharge the batteries, coupled to a conventional booster road unit that will supply extra power for starting a train. Impressive!

 

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By William C. Vantuono, Editor

 

william-vantuono-web.jpgMichael Ward’s reputation as a highly effective railroad manager is eminently well deserved as the cover story of our March 2010 illustrates. “As a company, we’ve done a great job at responding to this downturn, and we’re going to be ready when the economy comes back,” he told me in late January. “We’ve got the resources, and we can deploy them relatively rapidly.”

 

There are many ways to measure a railroad’s progress. The stock price is one of them. One year after U.S. Class I stocks reached their lowest point, we took a  look at how they have been doing. The Big Four had more than doubled in value. CSX was leading the way—up 135%. Union Pacific grew 104%; BNSF and Norfolk Southern, 100%. Quite an accomplishment.

 

One thing that the best managers cannot control is legislation that could drastically affect their company’s future value to shareholders. I became acutely aware of this while attending the railroad industry’s annual march on Washington, Railroad Day on the Hill. The organization and planning that go into this event is monumental, and I’m sure that it has some sort of impact.

 

Just how much impact—on a government mired in partisan gridlock and filled with politicians more interested in payback than progress—remains to be seen.

 

“Congress is a reactive body, not a proactive one. It talks in sound bytes. Most Congressmen and Senators are more concerned with how they spin an issue, rather than how they plan to deal with it.” Who said that? A railroader? No. A journalist? No. Then who?

 

A special assistant to Sen. Charles Grassley (R-Iowa). Need I say more?

 

How about this exchange: Sen. James Inhofe (R-Okla.) was the only Senator who actually was present at one of five meetings in which I participated. We explained the issues of concern to the railroads. He listened politely, but overall seemed rather bored. As we were taking our leave, I jokingly remarked, “Well, Senator, it looks like we’re going to get a whole lot more snow in the Northeast than you get in Oklahoma.”

 

Inhofe promptly woke up, and climbed on his imaginary soapbox: “After seven years, I’ve won my battle with Al Gore! He’s been proven wrong! Global warming caused by greenhouse gas emissions is the greatest hoax ever perpetrated on the American people! THERE WILL BE NO CARBON CAP AND TRADE LEGISLATION! I GUARANTEE IT!”

 

Thank you for sharing that, Senator. Excuse me, but I need to find the men’s room (I didn’t actually say that). 

 

To be fair, Sen. Frank Lautenberg (D-N.J.), who usually makes it a point to be present at Railroad Day on the Hill meetings (especially for a delegation from New Jersey), was undergoing chemotherapy that day. His Senior Policy Advisor, David Garten, was very supportive, and said what I thought was the most encouraging statement I heard: “We will not support any legislation that hurts the railroad industry.”

 

Sen. Rockefeller, are you listening to your Commerce, Science, and Transportation Committee colleague (and fellow Democrat)?

 

As the AAR’s Ed Hamberger has observed, the industry now needs to go back to Congress and keep pounding away at the issues. Railway Age will do its part. Next month, we’ll have a special feature on the AAR’s “Great Expectations: Railroads and U.S. Economic Recovery” report. Our working title is a similar take on Charles Dickens:  “Great Expectations;  Hard Times.”

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By William C. Vantuono, Editor

 

william-vantuono-web.jpgGas taxes aren’t the only way to fund public transportation programs, but it’s the route the State of New Jersey has taken, and up until now it’s worked pretty well. The state’s gas-tax-supported Transportation Trust Fund (TTF) is largely responsible for some of the most ambitious transit programs undertaken anywhere. Without it, where would New Jersey be?

 

The state is about to find out. As of 2011, the TTF will be bankrupt, with all revenue going toward debt service. Former Governor Jon Corzine temporarly averted a crisis a few years ago by restructuring the debt. Now, however, it may be time to face the music, and it’s not a pretty tune.

 

Despite the fact that New Jersey has the nation’s third-lowest gas tax-—a tax that hasn’t been raised since 1988 (which may be attributable in large part to the state’s heavy investment in public transportation)—the new administration of Governor Chris Christie is adopting that familiar old political refrain: “Tax-and-spend isn’t the way to go.”

 

What? Does this really make any sense  in a state that has been successfully taxing gasoline to pay for its transportation system?

 

New Jersey is faced with other problems, like a $300 million operating shortfall at New Jersey Transit. Like many North American transit agencies, NJT says it can handle that with service reductions and fare increases. But NJT is also considering, as Executive Director Jim Weinstein told me, delaying other important capital programs. Fortunately, one of them isn’t the new Trans-Hudson Express Tunnel (p. 38), a joint venture of NJT and the Port of Authority of New York  & New Jersey.

 

What about other critical capital programs? NJDOT Commissioner Jim Simpson (FTA Administrator under George W. Bush) told me that a gas tax increase is a “non-starter, off the table.” He also told me that “the state has a spending problem first when it comes to transportation infrastructure,” “there’s too much politics involved in infrastructure spending,” “if we doubled the gas tax we’d still have the same problem,” “we have to re-examine the entire capital program,” which the prior administration “bonded the heck out of,” and “we have to rein in spending.”

 

I’m sure that’s exactly what the people of New Jersey want to hear.

 

Sorry fellas, but it probably ain’t gonna work. How many times can you refinance debt? How are you supposed to maintain and expand your rail network, or fix your crumbling highways and bridges? Who’s supposed to pay for this? The federal government?

 

Yes—partially, at least. Simpson said SAFETEA-LU reauthorization should include “a new-starts megafund” and “more ability to flex highway funds over to transit.” A Republican appointee, he praised the Obama Administration for loosening some of the guidelines on federal funding, and the ability for states to flex money. He recommended public-private partnerships and design-build-operate-maintain projects—both good ideas—as a way to finance capital projects. NJT already has two very successful DBOMs, Hudson-Bergen Light Rail and the RiverLINE diesel interurban. He also said there are “too many federal programs. There should be just two categories, transit and highways.”

 

Based on his experience at FTA, Simpson said the FRA and FTA, to eliminate duplication, should be merged into a single agency called the Federal Railroad and Transit Administration (FRATA—sounds like a Starbucks drink). This agency would handle safety regulations and grant programs.

 

These are all good ideas, but the ones dealing with state transportation funding problems seem like a way to avoid the obvious, simplest solution: Raise the gas tax to where it needs to be. People may scream and yell that they shouldn’t be taxed for something they don’t use (“I don’t take the train. Why should I pay for it? I don’t have kids in public school. Why should I pay school taxes?”).

 

You may lose the next election, but at least you’ve done what’s neccesary for the greater good of your constituents. Isn’t that what being a public servant is all about?

 

Am I being disingenuous? Naïve?

 

Most people hate the word “tax.” It’s un-American, dammit! It’s one reason why we threw all that tea into Boston Harbor and sent King George III packing. Perhaps “gas tax” is a poor choice of words. Maybe it should be called a “transportation investment contribution.”

 

In any case, how much money are we talking about? Ten cents a gallon extra? I’m already paying close to $3.00 a gallon for premium. What’s another 10 cents—about $1.50 every time I fill up? What will I have to give up? Half a Grandé FRATA at Starbucks?

 

So, you drive to work? Why should you pay for my commuter train, you say? Here’s why: I’m not forced to drive, thereby freeing up valuable highway space that your car could be using. Yes, by you forking over that extra 10 cents a gallon, I won’t be staring into your rearview mirror in bumper-to-bumper traffic.

 

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By William C. Vantuono, Editor

william-vantuono-web.jpgChina is well ahead of the United States in high speed rail, with plans to invest nearly half a trillion (that’s trillion with a “t”) dollars through 2012 on a national network of rail lines, most of which would be dedicated (“true” or “very”) high speed lines with passenger trains operating at speeds up to 220 mph. Some 1,200 miles of HSR will open this year alone, at a cost of $50 billion. The country’s longer-term plans call for high speed routes expanding beyond China’s borders, linking Shanghai to Singapore and New Delhi and connecting Beijing and Shanghai to Moscow, Tehran, Prague, and Berlin. The Beijing to Shanghai system will be finished by early 2012, cutting travel time to four hours from 10 (pictured, a Chinese high speed train on the Zhengzhou-Xi’an line). By comparison, traveling by Amtrak from New York to Chicago on the Lake Shore Limited, a similar distance (about 1,000 miles), takes about 20 hours. 

Now, following the Obama Administration’s $8 billion in starter funds for U.S. HSR systems, the Chinese want to leap across the Pacific and export and license their HSR expertise to the U.S., supplying technology, rolling stock, engineers—and financing. They’re attempting a jumpstart in California, where in the 19th century the Union Pacific hired thousands of Chinese laborers to build westward the nation’s first transcontinental railroad. The Golden Spike ceremony of 1869 at Promontory Summit, Utah, is a long time and distance away from San Francisco and Los Angeles, but those two cities, separated by 465 miles, represent an initial, $43 billion HSR link in a statewide system envisioned by the California Rail Authority. The Authority,which received $2.25 billion in federal HSR grant funds, needs up to $12 billion in private financing for this project, and the Chinese Ministry of Railways has taken a first step, signing cooperation agreements with the State of California and General Electric.

The MOR’s deal with GE is described as a framework agreement to license MOR technology. GE says the agreement stipulates that 80% of the content of locomotives and related control systems would have to be sourced from U.S. suppliers, with final assembly occurring in the U.S. The MOR would license its technology and supply engineers as well as up to 20% of the components. This agreement is similar to those that rolling stock suppliers to the domestic rail transit market like Siemens, Alstom, Bombardier, Kawasaki, and Hyundai-Rotem have with U.S. transit agencies.

Described by a World Bank transportation specialist as “engineering driven— they know how to build fast, build cheaply, and do a good job,” the Chinese Ministry of Railways says it is “the most advanced in many fields ... willing to share with the United States.” In an extensive interview with The New York Times, Chinese MOR HSR program chief Zheng Jian said his agency “can provide whatever services are needed. ... HSR requires a lot of high technology—we would send many high-end engineers and high-end tchina-hsr.jpgechnicians.”

The State of California seems highly interested in China’s plans, but at the same time the HSR Authority is looking at other proposals from the railways and suppliers of Japan, Germany, South Korea, Spain, France, and Italy. In these cases, the railways are closely aligned with suppliers—for example, SNCF/Alstom/SYSTRA; Deutsche Bahn/Siemens; or RENFE/Talgo.

But besides domestic content requirements, any effort the Chinese attempt to make in U.S. HSR will be filled with requirements and obstacles they don’t have to deal with in China: elected politicians, labor unions, U.S. Immigration, EPA, OSHA, ADA, etc., etc. Aside from exporting goods on container ships, the Chinese have virtually no experience dealing with U.S. regulatory and political bodies. By contrast, railway suppliers like Bombardier, Siemens, Alstom, Talgo, and Ansaldo already have years of U.S. experience behind them. According to The Times, “Zheng said repeatedly that any Chinese bid would comply with all American laws and regulations.”

Easier said than done.

Then there is the issue of intellectual property. Zehn indicated that all of the HSR technology would be Chinese, but according to The Times, “State-owned Chinese equipment manufacturers initially licensed many of their designs over the last decade from Japan, Germany, and France. While Chinese companies have gone on to make many changes and innovations, Japanese executives in particular have grumbled that Chinese technology resembles theirs, raising the possibility of legal challenges if any patents have been violated.” There is some precedent, as this is similar to a scenario the U.S. freight rail supply community has dealt with in the past. For example, several domestic suppliers have grumbled to Railway Age that, after licensing agreements expired, Chinese suppliers continued manufacturing patented, U.S.-design, AAR-approved freight car components without permission.

China is well-stocked with capital and appears ready to bring it to the U.S. HSR table. According to The Times, “China’s mostlystate-controlled banks had few losses during the global financial crisis andare awash with cash now because of tight regulation and a fast-growing economy.The Chinese government is also becoming disenchanted with bonds and looking to diversify its $2.4 trillion in foreign reserves by investing in areas like natural resources and overseas rail projects. [The MOR] has already begun building HSR in Turkey, Venezuela, and Saudi Arabia, and is looking for opportunities in seven other countries, notably a route sought by the Brazilian government between São Paulo and Rio de Janeiro.”

Interestingly, an automobile assembly plant that until late last week turned out Japanese and American cars—the General Motors/Toyota NUMMI (New United Motor Manufacturing Inc.) joint venture in Fremont, Calif., which produced the Toyota Matrix/Pontiac Vibe sport-compacts plus other Toyota models—is shutting down after 25 years, eliminating nearly 5,000 jobs. One idea under consideration is converting the factory to the assembly of HSR equipment, according to California HSR Authority Board Member David Crane, who is also a member of the state’s Economic Development Commission. Instead of Japanese auto parts, Chinese-sourced rail equipment components would arrive through thenearby Port of Oakland.

Regardless of how the Chinese interest in U.S. HSR pans out, swapping automobiles for high speed trains is something the State of California and the Obama Administration would love to see happen.

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By William C. Vantuono, Editor

william-vantuono-web.jpgThough safety is always good business in the railroad industry, the Railroad Safety Improvement Act of 2008, which kicked-started the industry down the path to Positive  Train Control, was never meant to be a business proposition.

For the purposes of the 2015 deadline and the technology that the railroads and their suppliers are scrambling to develop, PTC is about safety. Period. Anyone who tries to soften the blow of the financial burden of this unfunded mandate by claiming that the railroads will reap “business benefits” from PTC is barking up the wrong logic tree.

Business benefits could come, eventually—provided the railroads move well beyond the basic overlay systems they will install over the next few years to a true moving-block system, which involves a wholesale replacement of existing signaling and train control technology.

The AAR commissioned Oliver Wyman to conduct a study, “Assessment of the Commercial Benefits of PTC.” It’s 93 pages long, but to understand what they’re talking about, just look at p. 2:

“Outside of safety benefits, two key assumptions underlie the majority of projected commercial and operational railroad benefits from PTC: that it will increase rail line capacity and network velocity. Benefits ranging from reduced capital investments in new track, to reductions in customer safety stock levels, are all tied to predictions related to these factors, which are expected to be realized through two primary means: 1) implementation of ‘precision’ or ‘optimized’ dispatching, which would greatly reduce train delays and allow more trains to move over each rail line; and 2) improved over-the-road train performance through improved train control information/signaling, supporting reduced spacing between trains, which ultimately would reduce train delays. The largest benefits calculated to date for PTC derive from the assumption that precision dispatching can be used in conjunction with PTC to achieve greater line capacity on U.S. rail routes. We found no direct relationship between precision dispatching and PTC.”

Various cost-benefit ratios are being lobbed (or lobbied) about; the worst of these is the FRA’s own 20:1 (though an AAR official has told me that “we’re looking at a ratio as high as 24:1”). At least the FRA is not trying to paint an unrealistic picture.

Here’s what the industry is saying: “No one is against improving safety—we especially. We’re not questioning that PTC can improve safety, and we’re committed to getting it done. However, only 3% of all train accidents are train control-related (i.e., PTC will not prevent accidents caused by broken rails or broken axles). We have existing, far-less-expensive technology at our disposal that will deliver essentially the same safety benefits, at a much lower cost. Much of it is already in place. PTC, which will decrease capacity and slow us down, will have to be paid for by our customers. If they’re unwilling to do that, they’ll take their business back to the highways. Care to guess what happens to safety, in terms of transportation-related casualties? You folks want PTC? Then you need to help us pay for it. Period.”

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