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

vantuonoportrait.jpgMost catastrophes don’t happen as the result of a single failure. There’s usually a series of oversights or smaller failures that eventually lead to a much larger, more awful occurrence.

Last month’s tragic wreck on the Washington Metro’s Red Line, a rush-hour rear-end collision at speed that claimed nine lives and caused numerous serious injuries, resulted from a combination of factors. While it will take several months for the National Transportation Safety Board to issue an official report on the crash, we can piece together a few parts of the puzzle.

The crash itself, NTSB investigators said the next day, resulted from a failure of the Metro’s automatic train control system to detect the presence of the train that was hit. That train had come to a full stop just north of the Red Line’s Fort Totten station. This condition is known by signal engineers as a blackout.

Train operator Jeanice McMillan, 42, had no chance to stop the following train as it rounded a curve at speed. She hit the emergency brake button, but it was too late. She and eight passengers perished as her train, equipped with the Metro’s oldest, original 1000 Series railcars, slammed into the stopped consist, telescoped, and tore open like an aluminum soda can. Both trains were operating in automatic mode.
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While the train control system failure apparently caused the wreck, the dead and the injured may have had a much better chance had the train been equipped not with 1970s-vintage 1000 Series cars, but with the Washington Metropolitan Transit Authority’s newer railcars, which are built to recent, much stronger crashworthiness standards. In 2006, the NTSB recommended that WMATA accelerate retirement of its 1000 Series cars, but the agency said it could not. Why? As WMATA wrote to NTSB three years ago, it was “constrained by tax advantage leases, which require [us] to keep the 1000 Series cars in service at least until the end of 2014.”

Those tax advantage leases, better known as sale-in/lease-out or lease-in/lease-out, were, until outlawed in 2004, a method of financing that enabled funding-constrained public transit agencies to acquire new equipment that they otherwise would not have been able to afford and sorely needed funds for operations and maintenance.

As the Wall Street Journal reported on June 26, “Such agreements . . . typically involved banks buying or leasing municipal assets such as railcars and leasing them back to their original owners. They enabled the banks to claim tax deductions on the depreciation. Those deductions were otherwise worthless to the [transit agencies], since they don’t owe taxes. In return, the agencies got large slugs of cash. [WMATA] estimates it netted around $100 million from its deals. . . If the agency had wanted to break the leases . . . it would have had to pay penalties and fees on top of the cost of buying newer railcars.”

What we have here is an extreme case of unintended consequences. Money doesn’t necessarily buy safety, but it will pay for things like new transit cars and communications-based train control technology that could lessen the effects of a wreck or even prevent its occurrence.

One could forcefully argue that if WMATA, like most transit agencies, didn’t have such a hard time acquiring operating and capital support from its political masters, it may not have had to depend upon complex financing mechanisms to acquire new and better equipment.

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Comments? Email wvantuono@sbpub.com.

william-vantuono-web.jpgThose of you who have been involved in the high speed rail business for a while may recall, with acid reflux, Herb Kelleher, the man who, with some creative legal shenanigans, single-handedly succeeded in killing the Texas TGV in the early 1990s. Let’s go back to Don Itzkoff’s “High Speed Currents” column in the July 1991 issue of Railway Age (p. 14) for some perspective:

“[Its] emergence into the national spotlight parallels a new, broader acceptance of high speed ground transportation as a significant future travel option for Americans. But recent events in Austin . . . teach a lesson in reality as well—that changing the entrenched domestic, political, economic, and institutional order to accommodate new high speed ground transportation systems will not be easy.

“In Texas, the opposition came from Southwest Airlines. Southwest, which itself was an upstart carrier when it challenged the established majors two decades ago, tried to prevent both high speed rail franchise applicants, Texas TGV and FasTrac, and the Texas High Speed Rail Authority from continuing the application process (in part on the terms that the Authority’s directors were improperly staggered) and succeeded in postponing hearings for a week. Southwest attorneys also interposed literally hundreds of objections to evidence introduced by both applicants and other parties, creating such disruptions that FasTrac moved that Southwest be fined for abuse of process. At the Authority’s hearing that commenced on March 25, a small army of Southwest lawyers assaulted the applications of both prospective franchises on every conceivable front.”

It gets better: “Not content to leave the battle solely to his lawyers, Southwest Chairman Herb Kelleher waded into the fray, too. Kelleher derided high speed trains as ‘gussied-up prairie schooners,’ called the concept a ‘somersault backward into the 19th century,’ and threatened to move Southwest’s corporate headquarters out of the state of Texas entirely. The Texas High Speed Rail Authority ultimately rejected the arguments of Kelleher and his lawyers, voting unanimously to award the franchise to Texas TGV. But Southwest drew blood through its campaign of attrition, and the battle may only be beginning.”

Kelleher proved quite shrewd. He probably knew that, just like the TGV’s effect on French domestic air service, 200-mph trains streaking across the Texas prairies would send his airline, which at that time was still a mostly regional carrier, crashing and burning. His tenacity paid off for him. The Texas TGV died, as did other high speed rail projects, such as Florida Overland eXpress (killed by another Texan).
It has taken nearly 20 years to overcome the entrenched order that Don Itzkoff so eloquently talked about in these pages. We now have an enlightened Administration in Washington (thank you, Mr. President, for this month’s “leaner-meaner-cleaner” cover line), and a supportive Congress. It’s going to take a lot more money than Obama’s initial $13 billion to build a high speed network in this country, but it’s a good start, $13 billion more than we’ve ever had.

Favorable opinions on high speed rail are coming from unexpected places. Commenting on the state of America’s automotive industry in the July 2009 issue of Car & Driver Magazine, David E. Davis Jr.—the dean of automotive journalists—said: “If I were [Obama’s] car czar, I would strongly suggest that we can have no national automotive policy until we have fully comprehensive transportation and energy policies. This is serious business. We desperately need high speed transcontinental trains based on the European and Japanese models, just as we need some modern version of the old interurban rail systems.”

I had to take off my bifocals and hold Car & Driver up to my nose to make sure I wasn’t imagining things, especially since I’d gotten used to reading silly anti-passenger-rail rants from (thankfully) now-retired columnist Patrick Bedard, who once called the New York City subway the “electric sewer.”
Then there’s this from Association of American Railroads President and CEO Ed Hamberger: “America’s freight railroads support the goal of increased passenger rail investment. It’s good for our economy and the environment when more people and goods move faster by rail.” Our privately owned freight rail network, he said, “is the literal foundation for high speed rail in America.” And of course (and we agree): “We are critical stakeholders that need to be engaged from the very beginning of project planning and development. Passenger and freight efforts to grow and expand must complement, not compromise, one another.”

Be sure to attend our 16th Annual Passenger Trains on Freight Railroads Conference, Oct. 19-20 in Washington D.C. Click here for more information.

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By William C. Vantuono, Editor

One of the best ways to compare the performance of the railroads against the economy is to examine some of the data that economists—those people that practice “the dismal science”—crunch for a living.

william-vantuono-web.jpgThe Association of American Railroads Policy & Economics Department now makes much of this information readily available monthly on its website (www.aar.org) through Rail Time Indicators, described as “a non-technical summary of many of the key economic indicators potentially of interest to U.S. freight railroads.”

One indicator is of particular significance, and we offer examples in the charts at right. This is the Purchasing Managers Index (PMI), released by the Institute for Supply Management (ISM, formerly the National Association of Purchasing Managers).

The PMI, says AAR, “is a compilation of data on new orders, inventory, production, supplier deliveries, and employment, based on a survey of several hundred supply managers at manufacturers throughout the U.S. It is considered a key indicator both of actual ‘on-the-ground’ conditions as well as sentiment for what the near- to medium-term will hold.”

A PMI greater than 50 indicates that overall manufacturing is expanding. AAR points out that the PMI in July 2009 was up to 48.9 from 44.8 in June—the seventh straight monthly increase and the highest since August 2008. The “new orders” component of the PMI rose to 55.3 in July 2009 from 49.2 in June 2009. That’s the highest it has been since August 2007.

“Of all the economic indicators tracked in this report, right now the PMI might be the most optimistic,” AAR notes. “It’s now about at the level it was for much of 2007 and 2008. As such, it might be accurately foretelling a brisk upcoming turnaround—or it might be an unreliable outlier signifying nothing.”
(Of course, we all know it’s the former—right?)

Quoting ISM: “The . . . more leading components of the PMI—the New Orders and Production Indexes—rose significantly above 50%, thus setting an expectation for future growth in the sector. . . . Overall, it would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue.”

What’s the PMI’s correlation to freight rail traffic? Says AAR: “Since January 2005, the PMI has corresponded reasonably closely with the following month’s rail carloads, excluding coal and grain. (Due to seasonality issues such as harvests, the role of exports, and other factors, carloads of coal and grain are more volatile and less closely tied to manufacturing than other commodity categories. And since the PMI focuses on manufacturing, it makes sense to exclude coal and grain when comparing rail traffic to it.) This close relationship has not always held in the past and may not hold in future. If it does continue to hold, rail carloads should swing more strongly upward to match the big recent increases in the PMI.”

Not too dismal, eh? 

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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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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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