Latest News Continued

The U.S. Senate has passed H.R. 4213, the American Workers, State and Business Relief Act of 2010. The bill includes a one-year extension of the infrastructure investment tax credit for short lines, regionals, switching/terminal railroads, and contractors. House action is still required. The language approved by the Senate is as follows:

“Expenditures for Maintaining Railroad Tracks. The bill extends for one year, through 2010, the railroad maintenance credit that provides Class II and Class III railroads (generally, short line and regional railroads) with a tax credit equal to 50% of gross expenditures for maintaining railroad tracks that they own or lease. This credit is allowable against the AMT. This revision is effective for expenses paid or incurred in taxable years beginning after December 31, 2009. This proposal is estimated to cost $165 million over ten years.”

--> The U.S. Senate has passed H.R. 4213, the American Workers, State and Business Relief Act of 2010. The bill includes a one-year extension of the infrastructure investment tax credit for short lines, regionals, switching/terminal railroads, and contractors. Ho ...

After a series of meetings attended by 2,500 concerned customers, the New York MTA is sticking with most of the service cuts that stirred up such a ruckus when they were announced earlier this year and for the time being at least it is not withdrawing he most controversial change of them all—a proposal to eliminate free rides for students.

mta_logo.jpg

The MTA did ease some of its proposals, but in a statement Friday acknowledged that little has really changed as it prepares to submit its budget balancing plan to the MTA board next Wednesday.

MTA said its revised cuts “reduce the savings achieved by the service cuts from approximately $101 million annually to $93 million, adding $8 million to the approximately $400 million budget shortfall not yetaddressed by cuts. A related proposal to phase out student MetroCards will be taken up later in the spring to allow more time for the State and City to fund that program.”

MTA Chairman Jay H. Walder commented: “While our budget deficit forces us to move ahead with most of the cuts, we were able to take a number of the most painful cuts off the table based on what we heard from our customers.”

--> After a series of meetings attended by 2,500 concerned customers, the New York MTA is sticking with most of the service cuts that stirred up such a ruckus when they were announced earlier this year and for the time being at least it is not with ...

BNSF Railway Chairman, President and CEO Matthew K. Rose (top photo, with Railway Age Publisher Robert P. DeMarco) accepted Railway Age’s Railroader of the Year award rroty4.jpgbefore a capacity crowd at Chicago’s Union League Club on March 16, 2010. Rose, the magazine’s 47th Railroader of the Year, said he was “accepting this honor for the nearly 40,000 members of team BNSF, who in my eyes are all railroaders of the year—every year, 24 hours a day, seven days a week.” Rose added that he has “been blessed to have a tremendous leadership team [whose] vision has led us through some very challenging, but also very rewarding, times.”

 

Rose recalled that when he first became CEO of BNSF, he asked Railway Age Contributing Editor Larry Kaufman to interview many of the railroad’s previous chief executives. “I did this because I do believe that we have so much to learn from history,” he said. He asked Kaufman to write their stories and reflections of leadership for a book called “Leaders Count.” One of them was Rob Krebs, Rose’s mentor and immediate predecessor, and Railway Age’s 1996 Co-Railroader of the Year (with Gerald Grinstein). “When [Rob] became the head of the new BNSF, he had the challenge of blending two companies and two cultures,” Rose said. “Rather than let two different cultures battle it out to see which one prevailed, Rob saw it as an opportunity to create a new culture for a new company, incorporating the best of each culture into a new vision. I’m also grateful that, despite significant criticism, he recognized the need to reinvest and expand the railroad, even when volumes were soft. This later proved to be invaluable for BNSF’s ability to handle record volume. I know that BNSF and I later benefited greatly from the capex commitments Rob had made years before. It was such an instructive lesson to me that to this day I always tell people that the investments made today won’t really be felt for a number of years and potentially decades.”

 

rroty7.jpgKrebs attended the Railroader of the Year festivities, as did fellow honorees L. S. “Jake” Jacobson (1994), William E. Wimmer (2007), and Edward A. Burkhardt (1999). Second photo from top: Wimmer, Matt Rose, Burkhardt, and Krebs.

 

The past decade “is the one where railroads hit their stride,” said Rose. “One of the things that I’m most proud of is our ability to continue a strong capital spending program. A hallmark at BNSF is that we’ve been able to anticipate demand and invest in the needed capacity at the right time. Even as we faced economic uncertainty, we opted for balanced capital spending—recognizing the importance of investing in our locomotive and car fleets and physical plant to set the stage for service, reliability, velocity and, ultimately, growth.” Rose pointed out that, since 2000, BSF has acquired more than 2,500 locomotives at a cost of $4.2 billion, invested $2.6 billion to improve its car fleet across business units, with acquisition of more than 25,000 new freight cars. “Total capital that we have invested in the physical plant from 2000 to today, and including this year’s plan, is $24 billion,” he said. “Even in the face of the greatest recession in three-quarters of a century, as an industry, we will be investing about $9 billion in capital this year alone. This kind of investment really speaks to what has been called a ‘rail renaissance.’ Even in a downturn, the railroad industry’s management is continuing to invest at record levels, maintaining networks of unprecedented quality and safety, and expanding capacity. This is all being done on the basis of market decisions. It’s not about nostalgia for the peak traffic levels of 2006 and 2007.”

rroty6.jpg“With the investment we continue to see, BNSF and the industry are prepared,” Rose said. “I can promise with first hand knowledge that BNSF and the entire railroad industry is stronger and better-running than I’ve ever seen it. Investments are being made in the absence of any federal policy to incentivize them, or even to plan for them. We haven’t been waiting for ‘public partners’ or incentives to undertake this investment, haven’t built our business model around energy or environmental policy—[one] that should promote moving truck traffic to the rails to reduce emissions and the use of fossil fuels. Even with all of the talk you have heard about public-private partnerships, high speed rail funding and TIGER grants, the industry will still pay almost 99% of capital required. In fact, this continued investment and resulting capacity is taking place despite public policy—or at least its absence.”

 

The National Surface Transportation Policy and Revenue Study Commission on which Rose served “underscored the expanded role freight rail can play in surface transportation policy,” he said. “While my fellow commissioners knew what I supported, it was encouraging to see 10 other people from a variety of backgrounds espouse principles to grow the rail industry. In fact, the report specifically called for policies which would grow freight rail market share by 10 and even 20% to achieve not just transportation goals, but environmental and energy objectives. It called for an investment tax credit to incentivize capacity expansion, and a multimodal vision for goods movement that measures transportation funding against transportation network performance goals. I believe this would favor public projects with freight rail, and make freight rail’s requirements a national priority, for such things as project [location] and permitting. These issues are ground zero for expanding freight rail.”

 

rroty5.jpgThe Commission also called for what Rose described as “rational regulation” as applied to environmental, safety, and economic issues. “While we have ‘coined’ these words, I am worried that few people understand what it means and the impact to investment,” Rose said. “There is a clear trend in recent years toward [government] making our business more difficult and costly. The best example that I can give you is the Positive Train Control mandate—a $10 billion expenditure by 2015. The cost benefit ratio is 22:1. The railroads will have to cut other expenditures to pay for it. We spent $9 billion last year on maintenance and expansion, and we’ll spend $9 billion this year, except $700 million of that will be on the first steps of PTC implementation. What will fall out of the budget? What will fall out when the PTC spend is $1.2 billion a year in 2011? Expansion? Certainly! But what about tie replacement and other things that make the railroad safer? It’s not a threat, it’s just the way it is. Something has to give. There needs to be a more reasonable deployment of PTC, and Congress has to help us pay for it. Congress should enact a railroad tax credit this year!”

 

rroty3.jpgLooking to the future, Rose pointed out that many in attendance “have lived in the best of times as well as the worst of times in our industry. Assuming we all agree that rail renaissance is better than rail bankruptcy, how do we move forward? Let me throw a couple of guiding principles that might be obvious but are very important. The first is this issue in regard to economic regulation. Quite simply, the Staggers Act has been a whopping success because 25 years of economic certainty ensued after it was enacted. The rules of the game were settled, and players took the field. As a result, this industry is so efficient that it represents a global competitive advantage for the United States. Our private investments take pressure off of the public’s pavement investment and take millions of trucks off of our nation’s crowded highways. Our rights-of-way facilitate the growing passenger traffic across the country. Our pensions, employees and liabilities are secure and are not in any way the public’s responsibility. And, we’ve opened new markets to rail. All of this can be directly laid at the door of the Staggers Act. Its various beneficiaries, who are not all railroads, would be wise to study it and speak out about it.”

 

“Over the past 25 years of developing the industry’s stability, there have been some who want to change the oversight of the industry,” Rose said. “Some of that can happen without endangering the economic fundamentals of the railroad companies. It can actually improve our customers’ trust in our business model, and therefore policy makers’ trust in us. This is necessary if railroads are to be at the table in other policy debates, such as climate change and surface transportation reauthorization, and to rationalize heavy-handed safety mandates. Warren [Buffett] puts all of this talk under what he refers to as our ‘social contract’ with the country. The railroads need to make enough money to fulfill their destiny to provide capacity to move more of the nation’s freight. Public officials are starting to ask ‘how do we get more rail capacity?’ While we always start with the concept of balanced regulation, we are also having much broader discussions around tax policy, i.e., the dilemma of the highway trust fund as well as investment tax credits.”

 

rroty1.jpgSpeaking directly to the many suppliers in attendance, Rose said he’s ‘keenly aware that your economic well-being is tied to ours. The economic downturn has been even harder on the supplier industry than the rail industry overall. I think back to the 1999-2000 period when I was Chief Operating Officer. It was a terrible time for our suppliers; we saw many of them go out of business. Repeating this could have a negative impact on not just critical component availability, but technology development. That is the future of productivity in this industry, and we cannot take it for granted; we must work with our suppliers to protect it.”

 

This will involve “maintaining a healthy Class I industry so that we can continue to reinvest, which spends money that goes to our suppliers,” “having a unified voice for the supplier industry on Capitol Hill that can join with the freight rail industry in advocating for—or against—policies and proposals consistent with our interests,” and “developing together a set of plans that help us both succeed. I feel certain that your industry will return that call to action.”

 

Although Rose’s general outlook is “very optimistic,” he sees potential threats beyond the immediate challenges of the regulatory policy environment. These, he said, are “climate legislation that discriminates against coal or hurts the underlying economy, continued taxpayer subsidization of heavy trucks, opportunities to be taxed and ‘fee’d,’ and more obligations and potential liabilities with regard to passenger rail—and nothing but ‘incremental’ public funding commitments in return.”

 

But, in spite of all of this, Rose believes that the rail industry “has such a compelling business value that public policy will eventually turn proactive and be rail’s biggest supporter. I will continue to work toward that optimistic vision—educating lawmakers, promoting the value of freight rail.”

 

Rose closed his remarks by reiterating that BNSF is “honored by the investment that Warren Buffett has made. Our leadership team is humbled by him asking us to operate our company. He has given me specific instructions on how to make decisions. Here they are: ‘Run BNSF like it’s your family business that you will lead for the next 100 years’ always erring on the long-term view and remaining focused on the right investments, operating decisions, and leadership. It’s a good set of principles that we tried to do before the purchase. On the day our transaction closed, he called me to tell me he was looking forward to the first century of ownership of BNSF.”

 

rroty-2.jpgIn addition to accepting Railway Age’s 2010 Railroader of the Year award, Matt Rose accepted a scholarship for a BNSF employee to attend the Michigan State University Railway Management Program (RMP), now in its second year. Third photo from bottom: Ed Burkhardt, namesake of the RMP’s Edward A. Burkhardt Chair in Railway Management, presented the scholarship. Second photo from bottom: Burkhardt, FCM Rail Ltd. President Trent E. Marshall, Rose, and MSU Director of Railway Management Programs Dennis Neilson. FCM Rail Ltd. Chairman and CEO chairperson and CEO Dennis Gilstad established the program in 2008 and endowed the Edward A. Burkhardt Chair in Railway Management with a $1 million donation.

 

Bottom photo: Railway Age Associate Publisher George Sokulski presents Rose with a portfolio containing the company names and logos of all the industry suppliers who supported the magazine’s January issue.

--> ...

Citing strengthening traffic, J.P. Morgan analysts in an investor alert Friday raised their 2010 and 2011 profit outlooks for five major U.S. and Canadian railroads—CSX Corp.; Norfolk Southern Corp., Union Pacific Corp., Canadian National Railway, and Canadian Pacific Railway Ltd.

The Morgan analysts said freight volume trends “appear likely to be better than our prior forecasts for the next several quarters. Our sense is that there is room for the railroads to sustain stronger price-to-earnings ratio valuation.”

 

--> Citing strengthening traffic, J.P. Morgan analysts in an investor alert Friday raised their 2010 and 2011 profit outlooks for five major U.S. and Canadian railroads—CSX Corp.; Norfolk Southern Corp., Union Pacific Corp., Canadian National ...

robert-c.-lauby-fra.jpgThe Federal Railroad Administration has named Robert Lauby Deputy Associate Administrator for Regulatory and Legislative Operations in the Office of Safety, effective March 28, 2010. Lauby, who has more than 30 years ofexperience in railroad safety and regulatory affairs, will replace Deputy Associate Administrator For Safety Standards and Program Development Grady Cothen, who is retiring. Lauby’s title will be different from Cothen’s “to better reflect the responsibilities he is charged with,” FRA spokesman Warren Flatau explained.

Lauby has managed national and international-level programs for the National Transportation Safety Board and the FRA. His past experience also includes designing and testing brake systems for Amtrak and high speed rail systems, and developing and managing the NTSB’s National Railroad and Rail Transit Safety Program. Lauby has extensiveexperience participating with government and industry groups as a member of the RSAC (Railroad Safety Advisory Committee) since its inception, and as a member of the American Public Transportation Association Passenger Rail Equipment Safety Standards Committee. 

The FRA describes Lauby as the agency’s “leading expert on Positive Train Control deployment” and “instrumental in carrying out numerous initiatives related to the Rail Safety Improvement Act, including ECP (electronically controlled pneumatic) brakes.” As co-chair of the RSAC General Passenger Safety task force, he oversaw development of system safety programs, and passenger cardoor control regulations.
 
Lauby was “a key player in developing FRA’s High-Speed Passenger Rail Safety Strategy, a critical element of FRA’s High-Speed Intercity Passenger Rail Program under the American Recovery and Reinvestment Act and Passenger RailInvestment and Improvement Act.”  He also represents FRA on the RSAC Engineering task force, which was established to consider the use of alternate crashworthiness standards for passenger railcars used in high speed service. --> The Federal Railroad Administration has named Robert Lau ...

Canadian National says that an arbitrator’s award released Thursdayprovides three annual pay increases for 1,700 locomotive engineers represented byTeamsters Canada Rail Conference (TCRC)—a 1.8% wage increaseretroactive to January 1, 2009, 2.4% in 2010, and 2.6% in 2011. It alsoprovides dental plan improvements that go into effect on April 1, 2010.

Andrew Sims’ arbitration ruling setting the terms andconditions of a new three-year collective agreement expires on Dec. 31, 2011.

cn-logo.jpg

"With a secure labor agreement in place, we will nowwork to re-establish a positive dialogue with the TCRC, focusing on issues ofcommon interest for the company, its employees and its customers,” saidClaude Mongeau, CN’s president and chief executive officer.

The federal government named Sims in December 2009 toarbitrate the CN-TCRC contract dispute, after the company and union agreedto further negotiations and binding arbitration of wages and benefitsif renewed talks failed. The parties’ agreement ended a five-day strike.

 

--> Canadian National says that an arbitrator’s award released Thursdayprovides three annual pay increases for 1,700 locomotive engineers represented byTeamsters Canada Rail Conference (TCRC)—a 1.8% wage increaseretroactive to Janu ...

The Chicago Transit Authority will soon begin an extended test period on the prototype trainset of its new 5000-Series rapid transit cars from Bombardier. In this photo, taken by CTA official Bruce Moffat, car no. 5009, sporting one-of-a-kind graphics, heads a four-car train that carried Federal Transit Administration officials from the Quincy/Wells “L” stop to Midway Airport and return, on the Orange Line. The prototype, delivered late last year, will undergo a testing period expected to last until year-end, according to Chief Rail Equipment Engineer Walter R. Keevil. Ten prototype cars are on the property; delivery of the balance of the 406-car order is expected to commence in 2011.

cta-series-5000-bruce-moffat.jpgOrdered in 2006 under a contract worth $603.6 million, CTA’s new 5000-Series cars will replace older equipment, some more than 30 years old, such as the 2200-Series Budd cars that were purchased in 1969-70, and the 2400-Series Boeing-Vertol cars purchased in 1976-78. The new cars feature security cameras and aisle-facing seating, and a.c. propulsion. CTA says aisle-facing seating increases passenger capacity and comfort, adding six inches to the narrowest portion of a car’s center and more space for standees, with more support poles and straps in the center of the car. Aisle-facing seating also provides space for an additional wheelchair positions, increasing the total to two per car.

The 5000-Series cars also feature wireless connectivity to their electronic systems. With this feature, train operators can view live video from any railcar when the passenger intercom unit is activated. “This will ensure that operators are better-able to immediately provide information to first responders,” CTA says. “In the future, suitably equipped emergency vehicles could also access railcar video through the wireless connection.”

Diagnostic information is available in real time to shop personnel, enabling them to quickly identify problems and develop repair strategies. “This new diagnostic system will help reduce breakdowns and ensure that when problems occur, technical troubleshooting will begin in real-time, reducing the impact on customers,” CTA said.

Onboard cellular phone modems allow the CTA Control Center to communicate directly with customers in real time via audio and text messages using speakers and six visual displays in each car.

CTA’s long-range plans involve procurement and/or rebuilding of up to 800 rapid transit cars, including options for up to 300 additional Bombardier 5000-Series cars. Should CTA exercise those options, its contract with Bombardier will be worth close to a total of $1 billion. When the initial 406 cars were ordered, it was the largest railcar contract in CTA history.

--> The Chicago Transit Authority will soon begin an extended test period on the prototype trainset of its new 5000-Series rapid transit cars from Bombardier. In this photo, taken by CTA official Bruce Moffat, car no. 5009, sporting one-of-a-kind graphics, head ...

As part of a two-year service agreement, Amtrak has awarded Eta Phi Systems a project to upgrade the Passenger Information Display System (PIDS) on the Capitol and San Joaquin Corridors, Surfliner Service, and Altamont Commuter Express Line. The project includes upgrades to allow ETA (Estimated Time of Arrival) for announcements, informational messages, and special-event advertising on Amtrak’s newly purchased Daktronics signs.

“We rely on the PIDS to convey Capitol Corridor serviceupdates to our riders,” Capitol Corridor Joint Powers Authority Managing Director David Kutrosky said. “The PIDS has proven to be an effective communications tool. We are pleased to benefit from Amtrak’s latest PIDS improvement initiative in California and look forward to having new state-of-the-art displays along our corridor.”

Formed in 2003, Eta Phi Systems is a systems consulting and software development firm specializing in automatic vehicle location, passenger information, and communications systems throughout North America.

 

--> As part of a two-year service agreement, Amtrak has awarded Eta Phi Systems a project to upgrade the Passenger Information Display System (PIDS) on the Capitol and San Joaquin Corridors, Surfliner Service, and Altamont Commuter Express Line. The project includes upgrades to al ...

Dahlman Rose & Co. Thursday hosted a roundtable conference call on the Mexico-U.S. supply chain in which executives from Kansas City Southern “shared valuable insight about cross-border and Mexico operations,”according to Director-Equity Research and Railway Age Contributing Editor Jason Seidl. KCS “described solid 2010 freight shipment growth and favorable long-term prospects south of the border.”

kcs-new-scheme-2.jpgIs Mexico the new “promised land” for manufacturers? “Several macro factors have boosted Mexico’s competitive advantage as a global manufacturing hub,” Seidl notes. “The devaluation of the Mexican peso and the fact that China’s labor cost has generally been rising at a faster rate than that of Mexico have compelled several large international companies to move some, if not all, of their manufacturing to Mexico. The advantages are even more numerous for [U.S.] companies. Benefits include convenience, similar time zones, a young skilled workforce, a lower language barrier, and geographic proximity, which could lead to significant reductions in transportation cost.”

Near-sourcing is already occurring. “It appears that manyglobal companies have recognized the Mexican advantage in recent years,” Seidl says. “Major appliance and electronics manufacturers such as Sumsung, Sharp, Sony, LG, Whirlpool, and John Deere have established manufacturing facilities in the country. Chrysler and Fiat are establishing their presence. The Port of Lazaro Cardenas (a KCS development project) has seen its container capacity catapult to around 2.2 million TEUs from around 0.5 million TEUs a few years ago. While it may be too early to reach grand conclusions regarding a potential shift in global outsourcing trends away from Asia into Mexico, we believe that an increasing number of companies may identify a cost advantage in sending some manufacturing south of the U.S. border.”

This trend is already beginning to benefit Kansas City Southern. Chief Operating Officer Pat Ottensmeyer and Vice President Intermodal & Automotive Brian Bowers noted that Mexican carloadings have recovered more strongly than U.S. traffic. Volumes at KCS de Mexico are up more than 25% year-to-date from the same period last year. Much of the growth has been fueled by robust automotive shipments (up 70.2%), intermodal (up 46%), chemicals (up 22%), and metals (up 13%).

--> Dahlman Rose & Co. Thursday hosted a roundtable conference call on the Mexico-U.S. supply chain in which executives from Kansas City Southern “shared valuable insight about cross-border and Mexico operations,”according to Director-Equity Resea ...

In a message to stockholders in the 2009 Annual Report, released Thursday, Norfolk Southern CEO Wick Moorman says the company entered the new year with "positive momentum" and that “while the short-term economic outlook remains somewhat uncertain, the longer-term prospects for Norfolk Southern and the railroad industry remain very bright.”

wick_moorman.jpg

Moorman (pictured at left) cited the company’s strides last year in safety and service, along with cost control, continued investment in key projects, and pursuit of new business opportunities, and said “these same strategies will drive our continuing success in 2010 and beyond.”

“Our traffic levels increased sequentially in both the third and fourth quarters of 2009, and we’re confident many of the cos tefficiencies we achieved in 2009 will remain in place as we see rail traffic continue to increase,” Moorman said.

The annual report is available on the company’s Web site at www.nscorp.com

--> In a message to stockholders in the 2009 Annual Report, released Thursday, Norfolk Southern CEO Wick Moorman says the company entered the new year with "positive momentum" and that “while the short-term economic outlook remains ...
497
Page 497 of 618