In a rare media interview, Berkshire Hathaway, Inc. chief Warren Buffett told television's Charlie Rose that while Berkshire's own businesses (including BNSF Railway) have seen the bottom of the recession, the national economy isn't likely to register a comeback for two more years.
As Reuters noted in reporting the interview, the world's second-richest investor “made a big bet on the U.S. economy” when Berkshire agreed to pay about $26.4 billion for the shares of BNSF (about 77%) not already in its portfolio.
Buffett expressed concern about the rising national deficit.
“In the end, Congress is the one that determines the value of the dollar over time. If they follow policies that require us printing too much of it, monetizing debt and all that sort of thing, dollars will become worth a lot less,” he cautioned. “They've got to raise taxes now that income will go up as the recession ends anyway, but they're going to have to close the gap between expenditures,” he also said. “We cannot keep running fiscal deficits like we are currently without having a lot of consequences over time.”
U.S. freight carload traffic registered yet another decline during the week ended November 7, down 12.2% compared with comparable Week 44 of a year ago, the Association of American Railroads reported. Traffic also was down 19.6% from the comparable week in 2007. But U.S. intermodal traffic, though slipping 12.2% from a year ago, “showed incremental improvement from Week 43,” AAR noted.
Total volume on U.S. railroads for the week was 31 billion ton-miles, down 11.5% from 2008 and 14.7% from 2007. Four of 19 carload freight commodity groups gained ground, including grain (up 10%), nonmetallic minerals (up 2.8%), grain mill products (up 2.4%), and waste and scrap metal (up 1.6%).
Canadian railroads reported carload traffic fell 3.6% from the comparable week in 2008, while intermodal plunged 10% from a year ago. Mexico’s two major railroads reported carload traffic down 10.1% from the same week last year, with intermodal slipping a more modest 2.5%.
Combined North American rail volume for the first 44 weeks of 2009 on 13 reporting U.S., Canadian, and Mexican railroads was down 18.1% from last year, while intermodal fell 16% from 2008 levels.
Global Railway Industries has reported total revenue of C$16.9 million (US$16.1 million) for this year's third quarter, compared to C$15.1 million in the third quarter of 2008. Terry McManaman, chairman, president, and CEO of London, Ontario-based Global, said the lift came from passenger rail sources.
"Global's rail product and service offering to passenger rail and transit operators was the catalyst to our overall revenue growth in Q3, rising 12%," said McManaman. "Global subsidiary Bach-Simpson, whose customers are mostly commuter- and passenger-rail related, has generated a year-to-date sales increase of 59% and continues to forecast strong growth throughout the remainder of the year. Approximately 40% of Global's total revenues are generated from passenger rail and transit operators."
Continued weakness in the freight segment kept Global from posting an operating profit, though McManaman did say: "On a positive note, some of the freight railroads are starting to see some signs that several market groups are stabilizing, and if that is the case we expect a pent-up demand for our products for 2010 as rail work and maintenance programs resume to more normalized levels."
The company reported a third-quarter net loss of C$532,000 (US$507,000) compared to C$542,000 of net income in the third quarter of 2008. For the first nine months of 2009, a net loss of C$3 million (US$2.86 million) compared to C$1.3 million of net income for the same period in 2008.
"Due to the economic recession in 2008 and 2009 year-to-date, railroads continue to store about 20% of their locomotive and railcar fleets and maintain tight control over operating and capital expenditures to address reduced freight revenues and operating income," said McManaman. "The railroads' reduced spending has materially impacted Global's financial results in 2009 due to reduced locomotive and railcar maintenance and component sales being substantially lower than in prior years."
He said he expects the company will return to profitability in 2010.
"Despite lower demand for track & signal and railgear products, Global subsidiary G&B Specialties' sales and gross margins met management's expectations in the third quarter of 2009," said McManaman. "In 2009, G&B has been able to maintain the same level of sales compared to 2008, aided by new international sales, new customer penetration in local markets, and a higher average U.S. dollar."
McManaman continued, "Diminishing sales volumes in the locomotive and component markets, combined with the learning curve impact on the VIA Rail Canada ("VIA") project's margins, continue to negatively impact Global's largest subsidiary, CAD Railway Industries ("CADRI"), operating results and Global's overall financial results during the third quarter of 2009."
Fausto Levy, president of CADRI, said that "to date CADRI has delivered five remanufactured locomotives to VIA. CADRI's gross profit margins for the units in production under the C$101.5 million [US$97 million] VIA project have improved during Q3 versus Q2 and are expected to continue to improve as production line improvements are implemented. During the third quarter, we successfully negotiated a revised delivery schedule for the VIA locomotives which took into consideration prototyping and learning curve delays. Under the revised delivery schedule CADRI will deliver 8 locomotives to VIA in 2009."
Levy said CADRI "continues to experience decreased sales for locomotive maintenance and component parts. Management expects this trend to extend into early 2010 as railroads continue to store substantial numbers of locomotives and railcars."
Olin Corp. has purchased hundreds of Lat-Lon's solar tracking units, with built-in camera capability, to bolster security for its tank car fleet. Designed to provide "much more information than can be collected with traditional sensors," Lat-Lon says the pictures can show “the position of valves, hatches, brakes, condition of asset, weather, intruders, or damage," providing "increased security and safety by allowing the customer to act on a visual picture."
Clayton, Mo.-based Olin Corp. produces chlorine and caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen, potassium hydroxide, and bleach products, which are shipped by rail.
The camera captures pictures based on an event such as an impact or hatch opening, which matters to Olin executives such as Principal Software Engineer Don Loftis. “When an alarm is generated, the first thing I would like to do is go see the car. Now with the camera on Lat-Lon’s STU, that’s exactly what I can do,” Loftis says.
Images can be taken during the day as well as night. The camera has infrared capability and can capture a photo in complete darkness without intruders knowing that a picture was taken. The unit is powered by the sun and has a backup battery that provides the required power through the night. A patented Lat-Lon power system extends the life of batteries so that they do not need to be replaced as often.
The Charleston, Blue Creek & Sanderson Railway Co. (CB&SR) has asked the Surface Transportation Board for authority to lease and operate two Norfolk Southern lines totaling 30.6 miles in West Virginia. The lines run approximately from Charleston to Morris Fork and from Falling Rock to Blue Creek.
NS will retain operating rights for access to a potential future interchange with the Elk River Railroad.
CB&SR said its projected revenue would qualify it as a Class III carrier. The earliest the transaction may be consummated is Nov. 27, according to the STB.
RailAmerica, Inc. has reported third-quarter 2009 earnings from continuing operations of $3.5 million compared to $2.0 million for the third quarter of 2008. Third-quarter 2009 net income, which includes discontinued operations, was $3.5 million, compared to $2.9 million for the third quarter of 2008.
The company reported a third-quarter 2009 operating ratio of 76.7% vs. 81.5% last year.
John Giles, RailAmerica’s President and Chief Executive Officer, commented: "In the third quarter, we posted solid financia lresults generating adjusted EBITDA of $37.6 million, down 4% compared to the record third quarter of 2008 and up 7% compared to the second quarter of 2009. With the completion of the initial public offering in October, we have a strong balance sheet with approximately $130 million of cash and are well positioned to make strategic investments that will complement the opportunities we have to grow organically through freight and non-freight revenue growth and further productivity gains."
RailAmerica, Inc. operates of 40 railroads with approximately 7,500 miles of track in 27 U.S. states and three Canadian provinces.
The Association of American Railroads reported that freight rail carloadings were down 15.3% in October compared with the same month last year. But "while U.S. rail intermodal traffic remained down 11.2% in October compared with the same month last year, there continued to be incremental month-to-month gains--up 4% from September 2009," said the AAR.
The association said coal traffic was down by 92,764 carloads, a factor in October's drop that "likely was the result of a cooler-than-normal summer that has led to larger-than-normal utility coal stockpiles." However, grain was up 1% as a weaker U.S. dollar lifted grain exports. (The U.S. Department of Agriculture reported that grain deliveries by rail to ports surged in October.)
"October's intermodal numbers, along with the recently-announced increase in GDP for the third quarter, indicate that we are seeing some hope for improvement in the nation's economic situation," said AAR Senior Vice President of Policy and Economics John Gray. "While it is still too early to say we are on the road to recovery, railroads continue to take freight cars out of storage with over 11,000 cars back in service in October."
New Providence, N.J.-based Axion International Holdings, Inc. has announced that it has won a $957,000 contract from the U. S. Army for construction of two railroad bridges from nearly 100% recycled plastics.
The bridges will be built at Fort Eustis, Va., home of the Army Transportation Corps, with main structural components made entirely from recycled consumer and industrial plastics.
Axion said the new bridges will have rating capacities of 130 tons, "a new milestone in thermoplastic load bearing capacity, surpassing the current record held by Axion’s bridges at Fort Bragg, N. C., which are able to support loads over 73 tons for tracked vehicles and 88 tons for wheeled vehicles."
Austin, Tex.’s Capital Metropolitan Transportation Authority says it will begin testing its Stadler diesel multiple-unit (DMU) cars (previously categorized by the agency as diesel light rail transit, or DLRT) as early as next week. CapMetro has tested the equipment over its 32-mile rail route throughout 2009 primarily during morning hours, even as its opening date has been repeatedly delayed, but this marks the first testing during afternoons.
Trains will be running on simulated schedules comparable to what CapMetro will use when service begins sometime in 2010, with a March target the current plan.
"MetroRail will be traveling at full operating speeds, nearly twice as fast as freight trains," CapMetro said in a news release. "Additionally, train activity will increase significantly. For these reasons, motorists, cyclists, and pedestrians are encouraged to always expect a train, and to stay off the tracks."
MetroRail's route crosses about 70 streets, highways, and private drives. CapMetro has installed crossing gates at almost all crossings, including quad gates in some locations, but has had difficulties with operational timing throughout the year, contributing to the delay in commencing service.
Munich, Germany-based Knorr-Bremse Thursday said it has signed an agreement with the Chinese Ministry of Railways to equip 2,720 new cars for the Chinese CRH3 high speed train with braking and door systems. Of these, 1,280 cars will also be fitted with air-conditioning systems from Knorr-Bremse. The company valued the agreement at approximately $744 million, making it “the largest order that Knorr-Bremse has ever won,” the company said.
Knorr-Bremse’s local subsidiaries will work with Chinese joint-venture partners on the order, targeted for completion by 2012.
"This order represents an exceptional success story and provides further confirmation that Knorr-Bremse's strategic approach in China is on track," said Dr. Dieter Wilhelm, chairman of the Rail Vehicle Systems division.
The company credits its long-term presence in China, beginning in the 1970s, as one reason for its success. Knorr-Bremse has its own production facility in Suzhou, thereby meeting Chinese local-content requirements. The company also maintains a development center staffed by about 45 engineers, and has concluded a technology transfer agreement with the Locomotive and Car Research Institute at the Chinese Academy of Railway Sciences. Knorr-Bremse Rail Vehicle Systems has a workforce of roughly 1,400 employees in China.