The decision of US Railcar LLC and American Railcar Industries to join forces to compete for business in a growing U.S. passenger railcar market has several historic elements, not the least of which is a return to passenger railcar manufacturing for one of America's oldest railway supply companies.
Back in the heyday of American passenger railways, American Car & Foundry was one of the largest manufacturers of freight and passenger rail equipment. ACF Industries, as the company was later known, and its predecessor companies have roots in the U.S. railcar manufacturing industry that date back to 1873. ACF left the passenger railcar business around the same time as many of its domestic contemporaries—Budd, St. Louis Car, Pullman Standard—but remained in business because it was also a successful manufacturer of freight cars. American Railcar Industries (ARI) acquired ACF’s assets in 1994, and today is a major North American manufacturer of covered hopper and tank cars and certain freight car components, as well as a provider of repair/rebuilding and fleet management services. ARI’s principal investor is Carl Icahn, who through Icahn Enterprises LP has a 54% stake in the company (which is publicly traded on the NASDAQ as ARII).
America’s passenger rail renaissance, aided in no small measure by the Obama Administration’s commitment to developing passenger rail corridors including high speed and creating domestic manufacturing jobs, has brought ARI back to the passenger railcar business. St. Charles, Mo.-based ARI has entered into a joint venture with Columbus, Ohio-based US Railcar, LLC to design, manufacture, and sell North American-compliant DMUs (diesel multiple units.). The joint venture is named US Railcar Company, LLC. It is led by President and CEO Michael P. Pracht, a rail industry veteran with extensive experience with several major global railway supply companies. Production will be based in Arkansas, where ARI manufactures freight cars. The joint venture plans to produce railcars for commuter and regional passenger rail service.
According to US Railcar, LLC Managing Member Barry H. Fromm, who will serve as a Director of the joint venture, “One of US Railcar Company’s goals is to reestablish FRA-compliant DMU production in the U.S.” As Chairman and CEO of Value Recovery Group, Inc. (VRG), Fromm led a group of initial investors in the purchase of assets from the former Colorado Railcar Manufacturing LLC, which ceased operations in late 2008.
There’s also a mildly ironic twist to the joint venture: In the late 1940s, ACF, in an attempt to export North American passenger rail technology overseas, designed and built the first Talgo train for Spain (see text of a July 12, 1954, Time magazine article, below).
“These are extraordinary times with growth opportunities for passenger rail in the U.S.," said Pracht. “The US Railcar Company DMU is designed to enable new, cost-effective and environmentally friendly passenger rail service across a range of corridors and routes, all with a proven, existing equipment platform already in service.” The DMU was prototyped through a demonstration project in 2002 and, according to Pracht, “is currently the only DMU that is fully compliant with Federal Railroad Administration passenge requipment safety regulations as stated in 49 CFR Part 238. This means the US Railcar Company DMU can be quickly pressed into service using existing freight railroad rights-of-way.”
Ten DMUs are currently in service in Florida, Alaska, and Oregon. Available in both regional and intercity configurations, the DMU “is well suited for incremental corridor development at speeds from 79 to 90 mph,” says Pracht. “Platform enhancements currently anticipated include a diesel-electric upgrade and increasing speeds to 125 mph, making this American-made DMU an attractive solution for both mature and emerging passenger rail agencies aroundt he country.” As well, the company has been working with industrial designer Cesar Vergara, principal of Vergarastudio, on improving and modernizing the DMU’s existing design.
For ARI, re-entering the passenger railcar market is way to strengthen its operations in a severely depressed freight car market. “ARI is excited to participate in this opportunity to join US Railcar and bring ARI’s long and proud freight rolling stock manufacturing heritage to the passenger equipment sector,” said ARI President and CEO James Cowan. “Our commitment toexpand and diversify our manufacturing program results from our desire to grow,and build on the expected federal commitment to passenger rail as part of a balanced national transportation system. Through this partnership, we look forward to being an integral part of that new growth with modern passenger rail equipment built in the U.S.”
The joint venture is structured to enable ARI to provide USRailcar Company, LLC with its railcar production experience, and for VRG to provide government contracting experience. ARI and VRG representatives will have equal representation on the joint venture’s board. VRG is an economic development consulting, government advisory services, and asset recovery and management firm that represents state and local governments, commercial banks, private investors, and several federal agencies.
—William C. Vantuono, Editor, Railway Age
RAILROADS: Will All Go to Talgo?
(From the July 12, 1954 edition of Time)
For several hours in Manhattan last week, the presidents of the four biggest eastern railroads met with the train builders of ACF Industries to discuss a radical train. The roads: New York Central; New York, New Haven & Hartford; Baltimore & Ohio and the Pennsylvania. The train the railroaders had in mind was similar to ACF’s swift “Talgo” express, whichhas been running for four years on Spanish railroads.
Built of aluminum and other lightweight metals, Talgo’s cars are only 7 ft. 6 in. from floor to ceiling, 4 ft. lower than current coaches.I nside, travelers sit in reclining airplane-type seats, look out big picture windows, and put their luggage in forward compartments. The low train can whip into curves smoothly at 90 m.p.h., v. the 50-60 m.p.h. of today's flyers. It weighs only one-third as much as current trains, requires only 40% as much fuel for the same speed, can be built at an estimated $1,300 a seat, v. $2,300 for present cars. The Midwest's Rock Island Railroad has already ordered one of thenew trains from ACF for Christmas 1955 delivery.
On the 157-mile run between New Haven and Boston last week, the New Haven’s new president, Patrick B. McGinnis, who wooed stockholders with the promise of better passenger service, put on a demonstration of ACF’s speedy train. With special ICC permission, the engineer disregarded the 60-m.p.h. speed limit on curves, and went into the turns at 87 m.p.h. On the long straightaways, he pushed ACF’s Talgo up to 102.8 m.p.h. and pulled into Boston in 150 minutes. Though it was a stop-and-start experimental run, the time was still ten minutes better than the best previous record.
After his ride, fast-flying President McGinnis said: “If enough Eastern roads get together, we can jointly order on a wholesale basis.In that case, I’d place an order within months.”
The Federal Railroad Administration’s latest safety report, released Jan. 29, shows that trespassing caused 399 of the 649 rail fatalities reported in the first 11 months of 2009. This figure was down 7.2% from the prior year and 15% better than the 475 trespasser deaths reported in 2006. Now, the FRA is moving to further improve the record.
The agency has announced that the City of West Palm Beach, Fla. and the South Florida Regional Transportation Authority (SFRTA), among other partners, will participate in the Trespass Prevention Research Study. FRA said the SFRTA area experienced 10 fatalities due to illegal trespassing in the first eight months of 2008, half of which occurred in the West Palm Beach area. “Research done by FRA in the region will help the agency better understand trespassing issues and assist in the development of national guidanceon trespass prevention,” the agency said.
“Efforts like this research study have the potential to reduce the number of trespassing injuries and fatalities in a big way,” said FRA Administrator Joseph Szabo.
“We applaud the Obama Administration's commitment to building America’s high speed rail system. Siemens is ready to not only bring its proven high speed train technology to the U.S. market, but also to build the systems right here in the United States,” said Oliver Hauck, president of Siemens Mobility in the U.S.
“Siemens makes a line of trains that run up to 220 mph that are currently operating in Germany (pictured, the Velaro), China, Russia, and Spain,” the company said in a statement Thursday. “These trains are a match for the systems proposed for California and Florida.” Siemens also produces a line of trains that operate between 110 mph and 125 mph that it saidwould fit the requirements of higher speed rail (HrSR) on existing freight/passenger corridors, such as in the Midwest.
“We can also design and implement rail automation and electrification equipment to move high speed rail systems safely, efficiently, and with as little impact on the environment as possible,” said Hauck.
“Siemens is the market leader for LRV production in North America,with half the market share for those currently being built,” the company said. “Additionally,Siemens manufactured one-third of the cars currently in use in 13 cities,including Denver, Charlotte, San Diego, and Portland.” Siemens also announced last month thatit would lead the consortium involved in the $321 million upgrade of the PortAuthority of New York and New Jersey’s PATH rapid transit system’s signalingand train control system with CBTC (communications-based train control).
Trinity Industries, Inc. said that during the fourth quarter of 2009, TrinityRail® shipped approximately 1,350 railcars and received orders for approximately 510 railcars. For the year ended Dec. 31, 2009, TrinityRail® shipped approximately 9,100 railcars. On Dec. 31, 2009, its backlog totaled approximately $195 million, representing 2,320 railcars.
The RailcarLeasing and Management Services Group reported fourth-quarter revenues of $87.1million and operating profit of $30.8 million. Trinity Industries Leasing (TILC) had approximately 50,090 railcars in its fleet on Dec. 31, compared to TILC’s 47,850 cars on Dec, 31, 2008. Lease fleet utilization rose to 97.8% as of Dec. 31, 2009, compared to 97.2% as of Sept. 30, 2009.
Trinity Industries, which also operates Inland Barge, Emery Equipment, and Construction Products groups, had net income of $14.6 million, or $0.19 per common diluted share for the fourth quarter. Net income for the same quarter of 2008 was $43.3million, or $0.54 per share.
For the year ended Dec. 31, Trinity reported a net loss of $137.7 million, or $1.81 per common diluted share—results that Trinity said “include an after-tax charge of $243.3 million in the second quarter for the impairment of goodwill related to its rail businesses.” Net income was $105.6 million, or $1.33 per common diluted share, excluding the special charge. Net income for 2008 was $280.9 million, or $3.45 per common diluted share.
Revenues for the fourth quarter of 2009 were $508.2 million, compared with revenues of $883.8 million for the same quarter of 2008. Revenues for the year ended Dec.31, 2009, were $2.6 billion, compared to $3.9 billion in 2008.
“Despite a challenging year, our businesses did a good job of remaining flexible and making adjustments as demand shifted and changed,” said Timothy R. Wallace, Trinity's chairman, CEO, and president. “Our manufacturing flexibility, backlogs, and strong liquidity proved to be critical assets as we navigated through the downturn in 2009. I am pleased with the strength of our liquidity at the end of the fourth quarter. We had $681 million in unrestricted cash and short-term marketable securities, which contributed to a total liquidity of$1.35 billion as we ended the year.”
Atlanta-based RMI announced that the South Carolina Public Railways (SCPR) has decided to implement RMI’s RailConnect® Transportation Management System (TMS). SCPR also plans to implement RMI’s mCrew module forremote train crew reporting, and ShipperConnect® to provide its customers with real-time information on their shipments.
“By implementing the advanced features of RailConnect TMSsuch as mCrew and ShipperConnect, our train crews, managers, and customers will all have more timely information to support operating decisions,” said SCPR President Jeff McWhorter.
SCPR is a division of the South Carolina Department of Commerce and operates the Port Terminal Railroad, which provides switching services to terminals of the State Ports Authority, interchanging with CSX Transportation and Norfolk Southern; and the East Cooper & Berkeley Railroad, a short line that serves BP Chemical and Nucor Steel.
RMI also announced that it was awarded Union Pacific’s Partnership Award in a presentation that took place at UP’s inaugural Intermodal Symposium in Omaha.
RMI said that in the past year it has enhanced its OASIS Terminal Operating System to support UP’s HUB Group business, chassis roadability initiatives, and UMLER data utilization.
New Jersey Gov. Chris Christie’s declared intention to slash $32.7 million from New Jersey Transit’s state operating support could drive train and bus fares up 20% to 30% and exact severe service cuts, according to labor leaders who have met with NJT officials to protest the plan.
The cutbacks, if enacted, would take place in June. Public hearings would be held across the state prior to the move.
NJ Transit said it would announce more specifics following the regular monthly meeting of its Board of Directors Wednesday. “We expect the executive director to talk in detail about NJ Transit’s budget challenges for fiscal year 2010 and 2011,” an NJ Transit spokeswoman said. “The budget plans have not been finalized and there will be a process for public input on how to balance the budget.”
Even before the governor’s announced intent, fare increases already were being contemplated due to a projected $200 million gap in NJ Transit’s fiscal year 2011 budget. New Jersey’s fiscal year begins on July 1.
Management changes at CN continue under the new administration of President and CEO Claude Mongeau. The most recent changes have taken place in CN’s marketing group, where Executive Vice President and Chief Marketing Officer Jean-Jacques Ruest has announced the appointments of six senior officers. • Vee Kachroo, vice president, industrial products. Kachroo, based in Montreal,“has extensive experience in forest products and metals and minerals marketsand was most recently assistant vice-president, sales, for these two groups atCN, ” said Ruest.• James Cairns, vice president, petroleum and chemicals. Cairns is based inCalgary, “a growth area for CN. Cairns developed innovative products in hismost recent position as assistant vice-president of CN domestic intermodal andground transportation, and previously spent three years working as director ofmarketing for CN's petroleum and chemicals unit.” • Andy Gonta, vice president, bulk. Gonta, based in Edmonton alongside thecompany's Network Operations Centre, will be responsible for CN’s grain,fertilizers, sulphur, and coal businesses. “Gonta was a successful vice presidentof automotive sales and marketing prior to undertaking the CN Railroad MBAprogram to enhance his railroading skills. He has held a number of seniorpositions in operations since completing the program in 2005.” • Paul Waite, vice president, intermodal. Waite, based in Toronto, will overseeboth domestic and international intermodal services. “He has wide experience inrail intermodal and was instrumental in developing CN's industry-leading IMX(Intermodal Excellence) model.” • Keith Reardon, vice president, supply chain solutions. Reardon, based in Chicago,will be responsible for CN’s non-rail transportation activities intransloading, freight-forwarding, warehousing, vessels, docks, and a smallgroup of supply chain experts serving all business units, as well as marketingactivities for the company's automotive business. “Reardon has developedleading-edge skills in non-rail and supply chain activities, and will play akey role in leveraging CN's rail franchise and developing new growthopportunities.” • Doug MacDonald, vice president, corporate marketing. MacDonald, based inMontreal, will oversee marketing planning, e-business innovations, andstrategic account planning activities, “areas in which he has several years ofexperience. MacDonald will also lead the regional sales groups that focus onthe growth of small accounts.”
CN also announced that Stan Jablonski, most recently senior vice president, sales, hasagreed to serve as senior advisor to the company through the organizationaltransition of the marketing group “after several years of exceptionalcontribution to CN,” said Ruest.