Wednesday, November 30, 2011

A muddy supplier crystal ball

Written by  Tom Simpson, Executive Director, Railway Supply Institute

If there is one thing I've learned in my 23 years in the railway supply industry, it's that we are an optimistic bunch. Deal us a series of hardships and we can always look ahead to better times because those better times have always come.

The economic problems our country has faced the past two years have hit certain segments of the railway supply industry hard, but strong Class I capital spending has buoyed other segments. We are all happy to move into 2011 and we do so with that railway supply optimism.

The devastation that the huge downturn in new freight car and locomotive orders has brought to our industry will impact us for years to come. While orders are starting to pick up, companies who reacted to the downturn the only way they could—by cutting costs and reducing capacity—will only slowly begin to rebuild capacity. That prudent action is of little solace to component suppliers who eye the ARCI order and delivery statistics carefully every quarter. At meeting after meeting, the industry expresses hope that the great shifts in freight car and locomotive demand from year to year can somehow be smoothed out to allow for better strategic planning.

Yet, those continuing strong capital expenditures have the communication and signaling and maintenance-of-way sectors enjoying relatively strong years. That strength will continue into the coming years.

Despite ongoing threats, this Congress did little to harm or help suppliers. STB reauthorization and the threat of rail reregulation didn't come to pass. But neither did tax credits for railroad capacity improvements; tax credits for the purchase of new, more energy-efficient freight cars; SAFETEA-LU reauthorization, or dramatically increased funding for Amtrak.

The RSI crystal ball is relatively muddy. Passing rail legislation in the new Congress will continue to be difficult. Incoming House T&I Chairman John Mica (R-Fla.) has been a friend of railroads for a long time. He has been critical of Amtrak but supportive of high speed rail. SAFETEA-LU reauthorization will be complicated by efforts to reduce the size of government and a need to find sources to pay for it.

RSI will be carefully watching the usual legislative issues ensuring that the voice of the railway supplier is heard—a job made more difficult by the large number of new Congressmen and Senators elected in November. Of special importance to us is preservation of the Section 130 Grade Crossing Safety program. In a similar vein, continued federal funding for Operation Lifesaver is crucial. Also of special importance to us is preservation of liability caps in the aftermath of passenger rail accidents. Suppliers are often innocent participants in liability cases and should not be threatened by litigation.

With the election placing the future of HSR development in this country in question, now is not the time to force an impractical Buy America policy on the HSR supply industry. It's time to standardize the various Buy America policies, develop a clear and transparent waiver process, and provide tax credits and other incentives for those companies who near 100% compliance. We need to move ahead with development of HSRl quickly and not get mired in Buy America issues.