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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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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Have you seen the headline on the latest press release from CURE (Consumers United for Rail Equity), written in bold capital letters? It‘s rather shocking:

“BNSF CEO REFUTES CRITICISM OF RAIL REFORM”

Saints preserve us! Has BNSF Railway’s chief executive, Matt Rose, changed direction, broken away from the rail industry and endorsed CURE’s cure for the monopolistic actions of the big, bad railroads? Do Bob Szabo and company really, truly desire a healthy rail industry?

Well, just read CURE’s press release. Here it is, verbatim:

“Many freight rail company representatives and advocates have resorted to scare tactics and misrepresentations in an attempt to undermine the Surface Transportation Board Reauthorization Act of 2009 (S.2889), bipartisan reform legislation that would remove barriers to competition in the rail industry and improve rail customer access to protections in law against monopoly rail pricing and practices. But in a recent interview with the Nightly Business Report, Matthew Rose, CEO of Burlington Northern Santa Fe, made a statement that refutes that criticism, saying reform would still allow the rail road (sic) industry to effectively operate and make profits. Specifically, Mr. Rose said:

“‘But certainly we believe that a free market approach to transportation has served this country very well. And you can still have partial changes to the regulatory environment and allow the railroads to do what they need to do.’

“‘Mr. Rose’s comments demonstrate that, despite the heated rhetoric of opponents of legislation, Congress can pass rail reform that protects consumers and shippers while continuing to ensure a vibrant rail industry,’ said Bob Szabo, executive director of Consumers United for Rail Equity (CURE). ‘S. 2889 is bipartisan legislation unanimously approved by the Senate Commerce Committee that achieves this careful balance by restoring fairness for rail customers without damaging the industry’s ability to achieve continued growth. We urge Congress to ensure the enactment of S.2889 at the earliest possible date in 2010.’”

I’m not sure whether to be angry or laugh. I’m more inclined to choose the latter, but what bothers me is that people who don’t know any better might actually believe CURE’s line of, er, gobbledeegook.

groucho_marx.jpgAs Groucho Marx once said, “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.” He also said, “The secret of life is honesty and fair dealing. If you can fake that, you've got it made.” Or, “Those are my principles, and if you don't like them ... well, I have others.” Finally, “Why, a four-year-old child could understand this report. Run out and find me a four-year-old child. I can't make head nor tail out of it.”

If Groucho were still around and were asked to comment on the goings-on in Washington involving railroads, he’d probably resurrect these gems. He’d probably appreciate Norfolk Southern’s Wick Moorman, who recently referred to a group of “cynical and short-sighted shippers” who with the enthusiastic help of Senator Jay Rockefeller (D-W.Va.), chairman of the Senate Commerce Committee, are attempting to win reduced freight rates by tinkering with rail regulation, and a Washington attitude toward railroads that “is verging on schizophrenia.”

I asked Railway Age Contributing Editor Larry Kaufman to weigh in:

“Typically, CURE takes Matt Rose out of context, and in doing so, it ignores his rather direct statement:  ‘. . . we believe that a free market approach to transportation has served this country very well.’ Nothing in Rose’s statement endorses CURE and its hand-crafted effort to set the railroads back to the pre-Staggers era when railroads were financially crippled. Rose certainly did not refute any criticism of rail reform. On the contrary, a reading of his entire interview makes it clear that he does not disagree with justified criticism of the CURE bill.

“Congress may, in fact, be able to pass legislation that protects consumers and shippers while continuing to ensure a vibrant rail industry, as CURE claims, but the Rockefeller bill, S.2889, isn’t it. Szabo seems to think that calling something ‘bipartisan’ gives it dignity, whether deserved or not. The fact is there is no Republican or Democrat transportation policy, so a statement that a measure is bipartisan qualifies as meaningless. While there is much in S.2889 that would warm the cockles of a utility or chemical company’s heart, there is nothing in it that benefits railroads. Some compromise!

“As for ‘heated rhetoric,’ the railroads have been quite circumspect in their pronouncements, especially as they continue to try to work with Senate Commerce Committee staff to develop an acceptable bill. No, the heated rhetoric comes from CURE, which has been unable for 29 years to persuade the Congress that the Staggers Act needs amending.”

In American politics, anything goes, distortions included. Matt Rose, and for that matter all railroad chief executives, the Association of American Railroads, or any rail industry organization, have far too much class to resort to such tactics.

As Groucho Marx once said, “Quote me as saying I was misquoted.”

—William C. Vantuono, Editor, Railway Age

William Vantuono | Railway Age

By William C. Vantuono, Editor

More than a century ago, one of this magazine's chief editors remarked, “It may be true that experience is the best teacher. But a man is damned fool who cannot learn from anybody’s experience but his own.” This is perhaps the most important reason for a trade publication'“s existence, but it also applies to trade associations, and their annual expositions.

 After 18 years at Railway Age, I've attended dozens of industry trade shows. In recent years, two observations have caught my attention. One comes from suppliers, who expend a lot of time and money on these events: “The turnout is a bit disappointing. There should be more of our customers here.” The other comes from the railroads: “There are far too many trade shows. We’re too busy and have far too little staff to send people to every one.’

Points well taken. What’s the solution, Railway Supply Institute, Railway Systems Suppliers, Inc., Railway Engineering-Maintenance Suppliers Association, and American Railway Engineering and Maintenance-of-way Association?

Here’s your answer, railroads and suppliers: Railway Interchange 2011, Minneapolis, Sept. 18-21, 2011. Everybody-RSI, RSSI, REMSA, and AREMA-in one location, at the same time. All the railroad disciplines-mechanical, C&S, engineering-under one roof (Minneapolis Convention Center) and at one outdoor facility (Canadian Pacific’s Humboldt Yard). New technology. A wide variety of technical sessions. Best of all, the opportunity to see firsthand what your colleagues are doing.

Railway Interchange 2011 will be the biggest, most important railway industry exposition since the massive trade shows held "“back in the day” in Chicago. It has been close to a half-century since we had one of these events in the U.S. We strongly suggest you start planning for it, because September 2011 will be upon us sooner than you think.

railway-age-pullman-car-1883.jpgRailway Age’s own history is closely associated with such industry extravaganzas. In 1883, Chicago hosted the very first one, the month-long National Exposition of Railway Appliances, at the Inter-State Exposition Building, also known as the “Glass Palace” (where the Art Institute of Chicago now stands). The Exposition’s chief proponent and principal organizer was Railway Age President and Editor Elisha Hollingsworth Talbott, who joined forces with industry titans like George Westinghouse and George Pullman. The latter was responsible for building an opulent railroad car (pictured, below) for the Exposition.

John H. White, Jr. wrote about this car in the Winter 2010 edition of Chicago History magazine: “The most elegant form of railway travel was represented by a private car named Railway Age. In an interview with a New York Sun reporter, George Pullman explained that the car was one of the most luxurious ever placed on a pair of trucks. The car incorporated the best-of-the-best wheels, paneling, and lamps. It was painted Talbott Blue, a special blend of exterior paint mixed by Sherwin, Williams & Company and named in honor of the Exposition’s secretary and chief organizer. The observation room was paneled in oak, the floor covered in velvet carpets. The parlor was mahogany with inlaid panels and carvings from rare woods imported from all over the world. The bedroom was paneled in maple, the floor covered with amaranth (a purplish red) carpet. It would cost $75,000 to reproduce the car, and it was given to Talbott as a thank you by the exhibitors. Talbott and his wife took the car on a trip to Yellowstone and the Pacific Northwest. But the gift was too expensive for him to keep up, so within a few years, he sold it back to the Pullman Company, where it was used as a rental car.”

I wonder what happened to Railway Age’s first and only Pullman car. If you happen to know, drop me a line at wvantuono@sbpub.com.

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By William C. Vantuono, Editor

 

Creation of two new subway extensions in New York City is testimony to the drive and persistence that eventually gets very bigthings done in a very big city.

New York Mayor Michael Bloomberg stubbornly wanteda $2.1 billion West Side subway extension (the No. 7 Flushing Line) to helpcommercial development, and he's getting it. The city is funding it for the NewYork Metropolitan Transportation Authority, a state agency, and the tunneling machinehas been digging away.

On the other side of town, another tunnelingmachine is (at last!) grinding its way along the path of the first phase of the$4.8 billion Second Avenue Subway, long the dream of planners-and the nightmareof guardians of the public purse.

That such visionary public projects can prosper inthe budget squeeze that has strangled so many other worthy projects is eloquentevidence of the priority that public transportation is getting these days. Acity like New York, which Doug Bowen points out expects to add 1.5 millionpeople in the near future, really has no choice.

These two expansions are just the "top of the news"on the transit scene in New York. Under a revised five-year capital improvementprogram-slightly shrunk from the previous one, but still impressive-MTA NewYork City Transit will continue purchasing new subway cars. The most recentorder, for $87 million, went to Kawasaki Railcar USA for 23 new R-188s. Withall options exercised, NYCT will take delivery during the next few years on 123R-188s and refurbish 350 cars-$384 million worth of work. A $343 millioncommunications-based train control system from Thales (details, p. 8) is slatedfor the entire No. 7 line, including an update of the traditional technology onthe existing No. 7 route. Meanwhile, as noted in our recent Passenger RailPlanner's Guide (March issue), the $527 million reconfigured South FerryStation opened on March 16, expanding capacity and improving transfers to theStaten Island Ferry and other NYCT subways. Earlier, NYCT exercised optionswith Alstom Transport and Kawasaki for 382 R-160 cars on a contract originallyawarded in 2002. There are now more than 1,400 R-160s service, out of NYCT'sfleet of nearly 6,300 cars.

That's what I call rolling out the rolling stock!No wonder the transit car components business for companies like Wabtec, whichsupplies both the freight and passenger rail industries, is doing so well. Insome cases, were it not for rail transit, these suppliers would be struggling.Remember, we won't see an appreciable improvement in the freight car marketuntil 2012.

New York'sRenaissance Man: Legendary civil engineer William Barclay Parsons(1859-1932) designed the Interborough Rapid Transit, New York's first subway,and many other engineering marvels, among them the Cape Cod Canal. ParsonsBrinckerhoff, the engineering firm he founded in 1885 with his brother, Harryde Berkeley Parsons, is celebrating its 125th anniversary.

"William Barclay Parsons: A Renaissance Man of OldNew York" celebrates the life and accomplishments of this remarkable man.Written by PB Manager of Editorial Services Tom Malcolm, a senior member of thecompany's Corporate Communications Group, the book describes an individualwhose achievements were surpassed only by his modesty.

On the IRT's opening day, Oct. 27, 1904, ChiefEngineer Parsons gave the shortest speech amidst all the pomp and circumstance.He simply said, "I have the honor and very great pleasure to state that theRapid Transit Railroad from the City Hall Station to the station of 145thStreet, on the west side line, is ready and complete for operation."

Indeed, what more be said?

The next day, a reporter for The World newspaperasked Parsons, "Does it give you any emotion to have finished the first stageof your work-not to have it with you?" Parsons replied, in his usualunderstated manner: "I had a feeling this morning of pleasure-when I went intothe station to come downtown and saw the people rushing for the trains-it didgive a great feeling of pleasure, quite a little  emotion, the thought that I had been instrumental inbringing it to pass. I really felt that I had done something for somebody; thatI had helped people along a little bit. I stood there and watched them forquite a while, and it pleased me-yes, it made me happy."

The company that William Barclay Parsons founded all thoseyears ago today employs 14,000 people in 150 offices on six continents, doingthings ranging from strategic consulting to program and constructionmanagement. I think that would have made him happy. 

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By William C. Vantuono, Editor

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The Great Recession is receding (though some insist it mightbe reseeding). Traffic is returning to the railroads. Profits are up.Productivity is up. Operating ratios are falling. Take a look at Class Isecond-quarter earnings reports  ifyou're skeptical.

"The rails are now riding the recovery wave of expandingtraffic for major commodities haulings as well as strong year-over-yearcomparisons for intermodal movements," says Peter Toja of Economic PlanningAssociates, the industry's well-known freight car forecaster. "As of the secondquarter, all the major commodity groups were registering gains with theexceptions of coal and paper, which have rebounded in the second quarter but havenot yet overtaken their extremely weak starts. While we are gratified by thesecond quarter traffic results, we anticipate further commodity traffic flowimprovements as we proceed through the second half of this year and into 2011.Agricultural exports are rising, ethanol production is accelerating, thehousing markets are improving, light vehicle sales are expanding, manufacturingactivities have revived, and a stronger economy will stimulate greaterproduction of electricity. These activities will prompt the haulings of grain,ethanol and distiller grain, lumber, motor vehicles and parts, metals andproducts, chemicals, plastics, and coal. And, these improvements will extendinto 2011 and beyond."

That's great news. What does it mean for the industry'sfreight car builders, who are finally starting to experience a gradual upturnin orders after bottoming out yet again in the endless roller coaster ride ofthe railcar market? 

"Railcar orders are reflecting the rebound in traffic," saysToja. "After rising to 5,078 cars in the opening quarter of this year, ordersin the second quarter amounted to 4,886 cars. The first half strength in orderswas centered in coal and related service cars, covered hoppers, and tank cars.While we believe that replacement pressure was the driving force behind coalcar demand, the acceleration in ethanol production has sparked renewed interestin hi-cube covered hoppers and certain tank cars. The previously dormantsmall-cube covered hopper segment came back to life in the second quarter as1,307 cars were ordered."

Toja says he is "enthused by the outlook for commodity andintermodal haulings but is cautious with regard to new equipment demand in theshort term due to the still large amount of idle capacity in the rail system.Still, the improvements in major commodities markets will once again stimulatedemand for rail equipment during the longer term forecast horizon. It alsoappears that carbuilders are exercising caution at this early stage of recoveryin new equipment demand. While we appreciate the caution on the part of thecarbuilders as well as the multi-year orders portion of the existing backlogs,we would expect to see a pickup in second half production runs."

Looks like the carbuilders will have to wait a while longerbefore production really gets back on track, Toja notes: "We have lowered ourforecast of assemblies this year from 16,000 to 13,250 cars. Even withcontinued improvements in economic activities, the oversupply of railcars willdampen the rebound in assemblies next year. In 2011, we look for deliveries ofonly 19,750 cars. Beginning in 2012, far stronger economic activities willprovide support for certain railcar assemblies. The extremely low levels ofdeliveries this year and next will serve to intensify the pressure to replaceaged equipment in various fleets during the longer term forecast horizon. Afterthree dismal years, we look for deliveries to advance moderately to 31,000 carsin 2012 and then expand annually to the level of almost 60,000 units in 2015."

Mystery solved: In the June issue, I asked if anyone couldlet me know what became of Pullman car Railway Age built for the 1883 NationalExposition of Railway Appliances and presented to Railway Age Editor E. H.Talbott. My thanks to Adrian Ettlinger of the Railway and Locomotive HistoricalSociety, and  William Howes, aformer B&O and Chessie System executive. Howes came up with the following:

"The car was built by Pullman in January 1882 (or, perhaps,ordered in 1882 and completed in 1883), to Plan 117 as the only car in Lot 24.It was acquired by E. H. Talbot of Railway Age. It was sold back to Pullman inMarch, 1889 and became one of Pullman's private cars available for rent. Itsname was changed (probably in 1889) to Wildwood, which appears on an 1893Pullman list of private cars available for rent. The Wildwood was apparentlyremodeled and modernized about 1898 (Plan 117B). Records indicate that the Wildwoodwas wrecked on the Pennsylvania Railroad in early 1899. This seems to besubstantiated by the fact that the car does not appear on a 1901 Pullman listof private cars available for rent. Photos of the Wildwood taken by Pullman in1898 are available at the Smithsonian (negative numbers 4282 through 4285).Additional information on the car can probably be found at the Newberry Libraryin Chicago."

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By William C. Vantuono, Editor

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Recovering from the worst business downturn in nearly 80 years, U.S. Class I railroads earned an average rate of return on net investment of 9.60% in the 12 months ended June 30, 2010, compared with a year-ago ROI of 9.47%.

The nation’s two largest railroads had returns in the low double-digits. BNSF Railway earned 10.25% vs.10.20% a year ago, closely followed by Union Pacific, with a return of 10.02% compared with 9.15% in the prior 12-month period.

Canadian Pacific subsidiary Soo Line, smallest of the Class I railroads, was statistically the best performer in the 12 months ended with this year’s second quarter. Soo Line ROI was 16.30%, up from 11.06% a year ago.

Norfolk Southern earned an ROI of 9.44% in the latest 12-month period vs. 10.89% a year ago; CSX earned 8.54% vs. 8.59%; Kansas City Southern earned 8.43% vs. 6.79%; and CN subsidiary Grand Trunk Corp., 7.84% vs. 7.39%.

“Whether any of these ROIs meet the Surface Transportation Board’s revenue adequacy standard is not now clear,” says Luther S. Miller, our Senior Editorial Consultant. “In the view of the STB, which uses the information in rate cases and other proceedings, a railroad is revenue adequate if it earns the current cost of capital.”

The latest cost of capital determination by the STB was 11.5% for the year ended Dec. 31, 2009.

Take a look at the STB chart below. I think you would be hard-pressed to find another industry that has posted numbers as strong as these in difficult economic times.

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By William C. Vantuono, Editor

william-vantuono-web.jpgOne full issue of Railway Age, much less one page of it, wouldn’t come close to doing justice to InnoTrans 2010, “the best of the best,” as Publisher Bob DeMarco told me upon his return late last month from Berlin. “I can’t imagine it getting any better in quality or quantity. The thought of doing something on this scale in the U.S. is mind-boggling.”

Picture, if you can, a transportation expo with roughly 2,000 exhibitors, and 110,000 delegates representing close to 50 nations. Acres of indoor and outdoor exhibit space (“impossible to cover in just one week,” according to International Railway Journal Editor David Briginshaw, who was one of 12 Simmons-Boardman Rail Group staff to attend InnoTrans).

The U.S. railway industry was well-represented at InnoTrans. No fewer than 31 companies and organizations large and small—twice that of 2009—participated: AREMA, EMD/Progress Rail Services, GE Transportation, Nordco, Orgo-Thermit, Penn Machine, Portec Rail Group, RMI, Sperry, Wabtec, Western-Cullen-Hayes, to name a few. Add to these U.S. staff from companies like Siemens and Bombardier.

While the RSI/RSSI/REMSA/AREMA Railway Interchange 2011 at the Minneapolis Convention Center next Sept. 18-21, won’t match InnoTrans in size and scope, it nevertheless promises to be the North American railway industry’s “show of shows.” The Simmons-Boardman Rail Group—the only transportation trade publishing company with a truly global reach—will have a strong presence. We urge you to do likewise.

Exhibit space at Railway Interchange 2011 is now open. For more information, visit www.railwayinterchange.org.

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By William C. Vantuono, Editor

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If you happen to believe the popular misinterpretation of the Mesoamerican Long Count Calendar (Mayan Calendar), we won’t need any new equipment as of 12/21/2012, so don’t bother reading any further. If, on the other hand, you’d like some valuable analysis of the long-term freight car market (not from me, mind you), read on.

The analysis comes courtesy of Peter Toja and Economic Planning Associates. EPA has upped its freight car production estimate for 2011 from 19,800 units to 22,500 units, with more-substantial growth beginning in 2012. “After three dismal years, we look for railcar deliveries to advance moderately to 32,800 cars in 2012 and then expand annually to the level of 59,000 units in 2015,” Toja says. Here are highlights from EPA’s Oct. 30, 2010 overview:

“On the heels of rebounding traffic in commodity haulings and intermodal movements, demand for rail equipment is recovering. Equally important, equipment demand is broadening as orders are being placed for previously neglected categories such as small-cube covered hoppers, intermodal platforms, grain service hoppers, and hi-cube covered hoppers. Some of the other recently quiet categories are drawing interest as one railroad announced fourth-quarter orders for mill gons and coil cars while another indicated a forthcoming investment in its coal car fleet.

“While deliveries increased in both the second and third quarters, backlogs jumped from 10,462 cars at the beginning of the year to 19,267 units at the end of September. The backlogs as well as our anticipation of future growth in traffic should keep short- and medium-term assemblies of assorted railcars moving up gradually. The improvements in railroad traffic volumes, revenues, and profitability continues to gain momentum. Citing revenue gains across the board in all market sectors, the railroads are also looking to invest in facilities and equipment to accommodate future traffic expansion as well as to upgrade fleets to better-service customers. During the third quarter, the railroads specifically addressed their need to invest in equipment to service lumber and wood products, iron ore, steel, and coal. Investments are also being planned in other equipment types.

“Agricultural exports are rising, ethanol production is accelerating, the housing markets are stabilizing, light vehicle sales are expanding, manufacturing activities have revived, and a stronger economy will stimulate greater electricity production. These activities will prompt haulings of grain, ethanol and DDG, lumber, motor vehicles and parts, metals and products, chemicals, plastics, and coal.

“These improvements will extend into 2011 and beyond. We expect commodity loadings to advance 5.3% this year and 2.9% in 2011. From 2012 through 2015, annual growth in carloadings will moderate from 1.8% to 1.4%. Demand for intermodal services is rebounding strongly. We expect a 10.3% rebound in intermodal movements this year, followed by a 5.5% hike in 2011 and a 5.2% jump in 2012. From 2013 through 2015, intermodal traffic gains will be in the range of 3.5-5.0% per year.

“Some idle capacity will continue to dampen equipment demand. Given assemblies to date, current backlogs, and the builders’ conservative approach to managing backlogs, we expect deliveries of 13,500 cars this year. The cautious attitude of the builders is best exemplified by the fact that third-quarter backlogs of 19,267 still represented 5.2 quarters of assemblies at current production rates. Replacement pressures and technological advances as well as legislative measures will also play a role in promoting the demand for a variety of railcars.”

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By William C. Vantuono, Editor

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OK, it’s December. It’s the end of the year. The Holidays are here. We’re supposed to be spreading peace on earth and good will toward men (well, people). My boys’ O-gauge electric trains are running around the Christmas tree (the steam-powered Polar Express and a Conrail mixed merchandise train pulled by an SD70MAC—the Vantuono household has no problem with shared use). Maybe I should write a column in a more positive vein. You know—be thankful you work in a growing industry, the Class I’s will continue spending big capital bucks next year, here’s to a safe and prosperous 2011, deck the halls, etc.

My previous paragraph is going to be about as positive as I can get as I write this in early December 2010. Why? For one thing, based upon what I’ve been hearing, the halls of the statehouse in Columbus, Ohio, starting with the incoming governor’s office, are being decked with poison ivy. The windows will soon have high-powered rifles, with passenger trains in their gunsights.

Unfortunately, the passenger rail enthusiast Jolene Molitoris, who spent the past few years as Director of the Ohio Department of Transportation, has left the building. Many of us know Jolene. She was a coalition builder during her tenure in the 1990s as Federal Railroad Administrator, and she’s always been an advocate for passenger trains, particularly those that run north of 79 mph.

Now, according to Ohio Gov.-elect John Kasich, Jolene Molitoris and many others in Ohio who have been working on the 3C (Cleveland- Columbus-Cincinnati) passenger rail corridor belong to a cult—specifically, a “train cult.”

Let me guess—they’re led not by Jim Jones, but by Casey Jones.

Kasich, who for whatever reason is not fond of passenger trains, and who is always quick with a quip, said proponents of passenger rail service in Ohio are part of a “train cult.” This proclamation came during a press conference announcing Jolene’s replacement at ODOT: Jerry Wray, who is actually returning to his former post.

According to the Cleveland Plain Dealer, Wray retired as ODOT Director in 1999. What has he been doing for the past 11 years? He’s been vice president of Flexible Pavements of Ohio, an asphalt industry lobbying association. No wonder Kasich—who wants to take the federal government’s $400 million grant for the 3C corridor and build more roads with it—appointed him.

Beam me up, Scotty. There’s no intelligent life down here. And while you’re at it, get me a case of antacid. I think I’m going to be sick.

On second thought, maybe not. Word just came in that U.S. DOT Secretary Ray LaHood is taking Ohio’s spurned passenger rail funds (along with those of Wisconsin, whose incoming Governor, Scott Walker , is killing his state’s HrSR project), is going to redistribute the money to those existing grant recipients whose plans haven’t been derailed.

Here’s what Kasich actually said: “We’re not going to run some program that some train cult wants to support.”

Kasich made the cult remark when asked about his widely chronicled opposition to the 3C passenger rail corridor. He has said on numerous occasions that the project is “dead” when he takes office, calling it a “potential boondoggle for state government” and claiming the project “is being driven by special interests that would benefit from the train line’s construction.”

“Special interests”? Excuse me, Gov.-elect Kasich, but doesn’t your new ODOT head come from a lobbying firm? Am I missing something here?

I won’t mention that Kasich is a Republican. People might think I’m trying to influence them into believing that only Democrats support passenger rail. That’s not true, of course, and I’m not trying to influence you. There are plenty of Republicans that support passenger rail, like Arnold Schwarzenegger, who has been seen riding Chinese high speed trains (though not in California, just yet).

“So how does it feel to be part of the train cult?” wrote Jerry Bell, a reporter for Columbus Biz Insider. “At least two people seem ready to wear the label as a badge of honor. ‘Kasich has things backwards,’ said Ken Prendergast, executive director of All Aboard Ohio, a Cleveland-based advocacy group for passenger trains and better public transit. ‘The U.S. and especially Ohio are the weirdos of the world,’ Prendergast told us, ‘when it comes to our passenger rail development or lack thereof. Feel free to use that as a quote.’

“We did.”

Bell also mentioned Jack Shaner, deputy director of the Ohio Environmental Council, “which is pro-passenger rail all the way. He gave us an assortment of quotes via email. Here’s the snappiest:

“‘Most Ohioans would call someone wanting to invest $400 million in rail infrastructure and grow 8,000 potential jobs a capitalist, not a cultist,’ said Shaner, referring to the amount of federal money earmarked for the 3C project and the indirect and spin-off jobs that could result because of it.

“He also forwarded a news release that pro-passenger rail groups issued the day before Thanksgiving. Among its claims were that Amtrak sold out the passenger trains serving its seven stations in Ohio for the holiday weekend and its ridership in the state grew 14.6% in the fiscal year that ended Sept. 30.

“And Shaner had a parting shot for the governor-elect: ‘Don’t worry. No one’s trying to pry your cold, white-knuckled fingers away from that steering wheel. But if we want to attract new investment, slow the brain drain, and catch up with our competitors in North Carolina and elsewhere, we need to expand—not contract—our transportation options.’”

OK, enough venting (for now).

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