BNSF and the Brotherhood of Locomotive Engineers and Trainmen have reached a tentative agreement on wage and work rules issues that BLET says gives its members "the security of a five-year agreement, additional income and additional time off without a single giveback or rule change." Details of the agreement were not announced. It does not cover health and welfare issues, which will be addressed in industry-wide negotiations that will begin Jan. 1, 2010.
Stephen Speagle, BLET vice president assigned to work with BNSF, said, "The agreement is not all we wanted, no agreement ever is, but in this time of economic troubles and hardship, it is an honor for me and for the four BLET general chairmen to be able to present" the proposal.
Tuesday’s announcement by Berkshire Hathaway, Inc. and Burlington Northern Santa Fe Corp., presaging the former’s full acquisition of the latter, drew widespread general media attention to the U.S. freight railroad sector as few stories have in recent times. Analyst comments were also in abundance. Both the New York Times and Wall Street Journal covered the story with front-page headlines. A sampling of the reporting and/or commentary follows.
“Buffet Bets Big on the Future of Railroads. America's best-known investor, Warren E. Buffett, is making his
biggest bet yet on the nation’s economic future by buying, of all
things, a railroad.”
--The New York Times
“While this action has been widely viewed as a massive vote of confidence from one of the most respected investors of our time, we do not believe it will spark any further transactions in the rail space. More important, however, is the fact that we believe this could signal a more positive position for the rail industry in regards to pending legislation from capital hill. Indeed, we do not believe such an astute investor as Warren Buffett would have made his largest acquisition to date if he thought overreaching regulation was around the proverbial corner. . . . Berkshire Hathaway’s acquisition of BNSF brought to light the positive long-term prospects of the rail industry, while Union Pacific’s new agreement with Pacer and Norfolk Southern’s intermodal agreement with JB Hunt helped alleviate some of the concern about pricing pressures.”
--Dahlman Rose & Co. Director-Equity Research and Railway Age Contributing Editor Jason H. Seidl
“Christmas may have come early for Burlington Northern Santa Fe Corp. shareholders, but the company’s board came up short in extracting maximum value.”
“Warren Buffett is finally taking his own advice. The billionaire wrote an op-ed piece for The New York Times in October 2008, urging readers to buy U.S. stocks. Oddly enough, though, Buffett continued to play it safe with the cash held by his own company.”
"Is Warren Buffett’s $26 billion purchase of Burlington Northern Santa Fe railroad a bet on a 19th-century industry or the 21st-century economy? Neither, it seems—it’s the perfect hedge.”
"Berkshire Hathaway Inc.’s $44 billion deal to buy Burlingon Northern Santa Fe Corp. is basically a huge bet on coal, a fuel that powers Warren Buffett’s power plants at his MidAmerican Energy utility and plays a major role in the railroad business.”
“[A] $100 price implies mid- to long-term operating profit growth of about 11.4% annually ... the market was pricing for roughly 8% EBIT growth. However, we do not believe that 3-5 year profit growth of 11% is unreasonable. ... This kind of profit growth potential (vs. what is reflectedin the stocks) is one of the reasons we have been bullish on the railroads.”
“Seems to me that the bet that properly priced carbon will boost railroad freight doesn’t work so well when what the railroad happens to be carrying is a whole lot of coal. Maybe Buffett just likes playing with trains?”
--Andrew Leonard, Salon
“Isn’t it ironic that Buffett’s deal is sparking a lot of discussion about how railroads are an eco-friendly industry when much of Burlington Northern [Santa Fe’s] revenue comes from hauling coal? (The fossil fuel accounted for almost half the tonnage that the railroad hauled in the first nine months of the 2009). It is possible that carbon pricing would hurt not only truckers, but Buffett’s coal hauling railroad, too.”
--WSJ Deal Journal (blog)
“Montana political and agricultural leaders hope Berkshire Hathaway’s planned purchase of the Burlington Northern Santa Fe railroad will lead to lower shipping costs in Montana, but they doubt much will change. Gov. Brian Schweitzer, a farmer and rancher, said Tuesday he had spoken to both Warren Buffett, chairman of Berkshire Hathaway, and Matthew Rose, BNSF’s chairman, president and CEO. ‘I said to both of them that I look forward to working with both in the future to improve service and shipping costs for our farmers, our miners, and our merchants,’ Schweitzer said. U.S. Sens. Jon Tester and Max Baucus said they also are concerned about shipping rates for Montana farmers and other businesses."
Railway Age Managing Editor Douglas John Bowen was asked Tuesday by National Public Radio whether Berkshire Hathaway’s purchase of BNSF was “a big bet; hasn’t the recession hurt shipping?” Replied Bowen, ‘If you believe the future of American freight transportation extends beyond overreliance on rubber-tired vehicles, rail is the way to go; Mr. Buffett seems to believe that's the case.”
J.B. Hunt Transport Services, Inc. announced Thursday that it has reached an agreement with Norfolk Southern Corp. to develop a new intermodal transportation contract to provide both parties a platform to accelerate the conversion of traditional truck traffic to cost-effective, environmentally friendly intermodal transportation with service that is competitive with truckload moves.
"This multi-year agreement,” said the trucking giant, "will further establish the parties as the leading providers oftranscontinental and local intermodal service in the eastern half of the United States."
“Given the enormous confidence we have in the Norfolk Southern’s ability to provide the best intermodal service in the Eastern half of the U.S. and the obvious commitment NSC has made by the significant investments in their corridor development, we are delighted to have the opportunity to elevate our joint services into the future,” said Kirk Thompson, CEOof JBHT. “This new agreement will provide unparalleled intermodal service and value for U.S. shippers. The conversion of highway freight to the more efficient, cost-effective, safer and more environmentally friendly services that we jointly provide, will not only benefit shippers and the general public, but JBHT and NSC shareholders alike.”
“Our new services with J.B. Hunt will provide shared incentives to grow volume and revenues by converting substantial volumes of freight from highway to rail,” said Norfolk Southern CEO Wick Moorman. “We look forward to working with the J.B. Hunt team to offer new, high-speed, reliable, premium services to domestic intermodal customers over ourentire network, including our new Crescent Corridor route, from New England, northern New Jersey and Pennsylvania south to Memphis and New Orleans. This strengthened relationship between NSC and JBHT will offer significant benefits to shippers, communities, states, and the country by reducing highway congestion, fuel consumption, and emissions.”
Returning to familiar territory, Thomas Prendergast has been named the new president of MTA New York City Transit, MTA Chairman Jay Walder announced Thursday. Prendergast will start Dec. 1, succeeding Howard Roberts, who announced his resignation Wednesday.
Prendergast previously served as president of MTA Long Island Rail Road, and also was senior vice president of subways for NYC Transit. He arrives back in the New York metropolitan area after serving as CEO of TransLink, the expanding transit system serving metropolitan Vancouver, British Columbia.
Virginia Railway Express officials have denied Amtrak's challenge to a plan to have an international company operate the commuter rail service's trains. Amtrak is contesting VRE's plan to award a five-year, $85 million contract to Keolis Rail Services America to operate VRE trains, succeeding Amtrak, which held the operations contract for 17 years. Keolis would assume operations next July.
Amtrak says some "improper scoring" may have occurred when VRE reviewed the four applications for the operation and maintenance contract that the regional rail agency put out to bid in May. VRE Chief Executive Dale Zehner reviewed the procurement process and found Amtrak's challenge to have no merit, VRE spokesman Mark Roeber said.
Amtrak also failed to challenge the Oct. 16 decision within the 10 days allotted in VRE's request for bids, according to a letter Zehner sent to Amtrak on Nov. 2.
In a letter to commission members and other Virginia officials, the Federal Railroad Administration’s chief counsel said that, although the agency has no opinion on the suitability of Keolis, it is concerned about maintaining safety .It said the company selected for the contract must be able to communicate not only with Amtrak, which dispatches trains in and out of Amtrak’s Union Stationin Washington, D.C., but also with Norfolk Southern and CSX, landlords of the rail lines used by VRE. Amtrak also has filed a Freedom of Information Act request last month asking VRE to turn over copies of Keolis's proposal and evaluators' notes and score sheets. Zehner said in his letter that the request would be met once the two commissions vote on the contract.
The Rail Group of The Andersons Inc. had an operating loss of $1.1 million in the third quarter of 2008, down sharply from the $5.2 million it earned in the third quarter of 208.
In an earnings statement Thursday, the company said, "The group continues to be impacted by the double-digit declines in rail traffic." It added, "Gross profit from the leasing business was significantly less due mainly to lower utilization rates and the corresponding increase in storage expense from idle assets. The group now has approximately 24,000 cars and locomotives. The average utilization rate in the quarter was 74.4% in comparison to 93.3% for the same period last year."
The Andersons reported a corporate profit of $1.3 million in the third quarter on revenue of $601 million. Its best performer was the Grain & Ethanol Group, with operating income of $8.9 million, compared to year-earlier results of $9.4 million. Losses were reported by the Plant Nutrient Group and the Turf & Specialty Group.
American Railcar Industries, Inc. reported Thursday that it shipped approximately 610 railcars in the third quarter of 2009, compared to 3,120 in the third quarter of 2008, resulting in EBITDA of $9.1 million and net earnings of $1.1 million.
“As the weak economy is driving low demand for railcars, we shipped 71% fewer railcars in the third quarter of 2009 as compared to the same quarter of 2008," said James Cowan, president and CEO of ARI. "The weak railcar market has and will continue to require us to evaluate our production levels at all manufacturing locations and we plan to continue to adjust our workforce and production levels as needed. In addition, we have reduced overhead costs at all manufacturing locations as a result of reduced spending. Our railcar services segment continues to experience strong results with revenues increasing 32% in the third quarter of 2009 compared to the same quarter of 2008. Our balance sheet continues to be strong with $287.1 million in cash and $50.1 million in short-term investments.”
For the three months ended Sept. 30, 2009, revenue was $78.1 million and net earnings were $1.1 million or $0.05 per share. This compared with revenue of $217.2 million and net earnings of $7.4 millionor $0.35 per share.
For the nine months ended Sept. 30, 2009, revenue was $345.0 million and net earnings were $5.0 million or $0.23 per share. For the corresponding period up last year, revenue was $605.8 million and net earnings were $23.8 million or $1.12 per share.
Cubic Transportation Systems has won a contract valued at nearly $20 million to deliver new smart card-capable fare gates and ticket vending machines in nine San Francisco Municipal Railway (MUNI) subway stations in San Francisco. MUNI is partially funding the project with federal stimulus money. The new fare collection equipment is to be fully operational by the spring of 2011.
The company said it will install the equipment and software necessary to fully integrate the MUNI stations into the regional TransLink smart card network managed by the Metropolitan Transportation Commission (MTC). TransLink allows riders to use one convenient card to travel on MUNI and other public transportation systems in the Bay Area. Cubic also manages the TransLink system for MTC.
Cubic installed MUNI's existing bus fare collectionequipment 18 years ago.
L.B. Foster Co. of Pittsburgh has joined Covington, Ky.-based Lally Pipe & Tube and industry veteran Jim Legg to form LB Pipe & Coupling Products, LLC, to manufacture couplings and accessories for the waterwell, oil country tubular goods (OCTG) and American Petroleum Institute (API) markets.
LB Pipe & Coupling Products will occupy a manufacturing facility currently under construction in Magnolia, Tex.
"L.B. Foster is pleased to team with Lally in building this exciting joint venture. This will be the beginning of developing new opportunities in the future," said L.B. Foster Vice President Tubular Products Merry Brumbaugh.
MTA New York City Transit President Howard Roberts resigned Wednesday morning after 2 1/2 years as the chief executive of the largest U.S. subway and bus system. Roberts will step down November 30.
Roberts’ departure was not wholly unexpected, given the recent arrival of Jay Walder as MTA chairman; Walder has indicated he planned to revamp MTA corporate leadership during his tenure.
Some transit advocates credit Roberts for a series of reforms, including the reorganization of subway operations through assigning general managers to specific subway routes and giving those managers more responsibility and decision-making authority for those routes.
Detractors included some MTA directors who voiced frustration with ongoing subway delays and service disruptions. Others accused Roberts of being too comfortable with labor. Still others disparaged the general manager assignments to specific subway lines as thinly veiled cronyism.