Railway Age’s 2021 Regional Railroad of the Year is the Lake State Railway (LSRC), which won the Railway Age 2018 Short Line of the year award. During the presentation of that award, CEO John Rickoff ended his remarks by saying, “Now we need to come back and win it again as a regional railroad.” Here’s how LSRC achieved this goal, as told by Executive Vice President and Chief Operating Officer Mike Stickel.
FROM SUCCESSFUL SHORT LINE TO RESILIENT REGIONAL
This was an ambitious goal at the time, since LSRC was a long way from being considered a regional railroad. However, LSRC quickly positioned itself to be eligible by becoming a 373-mile Class II with the acquisition of CSX’s Saginaw Subdivision to Plymouth, Mich., in 2019. The acquisition from CSX did not come with many online carloads, but it was a strategic transaction that improved service and economics for both CSX and LSRC. LSRC finished 2019 having executed a flawless startup on the new rail line and had a pipeline charged with many business development opportunities.
And then COVID-19 hit. 2020 was a very challenging year for the railroad industry as well as many others. Due to COVID-19, the second quarter was shocking, as numerous manufacturing facilities shut down due to COVID-19 restrictions. Lake State Railway was not any different: Our two largest-volume customers were completely shut down for six weeks between March and May. Despite these shutdowns, along with other industries pulling back due to the “unknown,” LSRC was able to grow the business in third- and fourth-quarter 2020 while setting up 2021 to be a very positive year.
LSRC was able to grow the business by leveraging a tried-and-true small-road marketing tool: transloading. While LSRC has had success locating new industries along our railroad over the years, our team focused on transloading, as it is the quickest avenue for acquiring new business. As the year progressed, we successfully brought on many new transload customers. As of this writing, we have been able to onboard nine new customers at six transload locations along our railroad. These new customers are projected to add approximately 17,500 carloads on an annualized basis, going forward.
What’s even better is that virtually all of this traffic was a modal shift from trucking. Winning business back from the highways, bolstering our carload counts, adding carloads to interchange with our Class I partners all while the public enjoys the environmental and public safety benefits of truck vs. rail—that’s what regionals and short lines do best! Along the way, our Class I partners have been great to work with by helping to mutually develop economics that work for our customers during startup and from a long-term perspective.
LSRC successfully worked with the Michigan Economic Development Corp. and MDOT to obtain grant money for five of the project locations. In some cases, significant jobs were added in depressed areas—Flint, Mich., for example. In all cases, the customers have benefited from improved economics.
• Alpena, Mich.: Two new transload locations. Inbound traffic for a large cement producer. Outbound agricultural business. This business will take up to 1,000 trucks off the road each year, provide better economics for the growers, and supply an Express unit train facility resulting in more carloads for our Class I partner.
• Bay City, Mich.: A small-scale transload facility was expanded at a new location, with two tracks and the ability to feed propane to a large part of northern Michigan.
• Flint, Mich.: The former auto loading facility in Flint, last used in the late 1990s, was rehabilitated into a state-of-the-art auto loading facility. Work included rehabbing a long-out-of-service former mainline for two miles and constructing a 44-car spot facility at the former Buick loading site. This facility will eliminate the need to move finished vehicles on a longer highway haul, resulting in fewer trucks on the road and improved economics for the OEM. LSRC added 15 jobs as a result of this transload, along with several additional jobs via subcontractors to load and unload the vehicles. This once-blighted area of Flint received several million dollars of investment as well, helping to build back an area of town that had been vacated for decades. Also, we did a truck conversion of a steel coiled wire customer. The customer was trucking from East Coast ports and now receives multiple loads a week via rail.
• Gaylord, Mich.: A second track was added to our transload facility, which now handles finished lumber products and propane.
• Greenbush, Mich.: A new 35-car spot facility was built to accommodate a high-volume waste receiver and finished forest products.
• Saginaw, Mich.: LSRC’s Saginaw transload doubled in capacity, with a total of four tracks and approximately 125 car spots. LSRC expects this facility to reach close to 2,000 carloads this year.
LSRC has built new or rehabilitated out-of-service industry tracks totaling more than six miles for these transload projects since 2019. These transloads will be a significant source of carload traffic for LSRC while having the ability to accommodate additional growth in the future. The LSRC team will continue to identify new opportunities for each of the transload sites while meeting the competitive and demanding needs of industry located within a peninsula state such as Michigan.
LSRC finished 2020 very strong, and 2021 is projected to be an all-time record for the company. In the three years since LSRC won the Railway Age Short Line of the Year award, we have been able to more than double our carload traffic. The nearly 30,000 carloads shipped in 2018 have grown to a projected 65,000 carloads for 2021. Additionally, LSRC has been awarded two CRISI grants over the past four years that will result in a $33 million investment in the northern portion of the railroad. LSRC marketing initiatives have been recognized by winning the ASLRRA Marketing/Business Development award three out of the past four years. Our growth looks to be sustainable for years to come. In a time period where growth in our industry is stagnant, we have been able to execute a plan and exceed our own high expectations.