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Thrice is nice

Written by Douglas John Bowen

Treat customers right. Trust your employees. Work with partners. Go get business. Reading & Northern sticks to a three-decade formula of success. 

One wonders if, for Reading & Northern Railroad Co., “R and N” might also stand for “Relentless and Noteworthy.”

The constant energy and effort emanating from the Port Clinton, Pa.-based regional railroad continues to garner honors even as staff insists such awards are benchmarks on the way to something better, not laurels to rest on. R&N last year was honored with a 2014 American Short Line & Regional Railroad Association (ASLRRA) Marketing Award.

“We maintain an entrepreneurial spirit and vision even though we’ve grown to be a successful railroad,” says R&N President Wayne Michel.

Such growth and success accounts for adding Railway Age’s 2015 Regional Railroad of the Year award to its trophy case, the third time R&N has been so honored, as it was in 2002 and 2011.

Adjusting to changing markets

R&N in 2014 set new company records for carload volume and revenue during the calendar year. It surpassed its previous carload record, set in 2011, with a 3.2% increase over 2013 levels to 24,365—“especially impressive considering the 21% decline in the anthracite coal unit train business, which fell due to severe price competition from foreign coal producers,” the railroad said, extending a decline evident since at least 2013.

And for 2015? “We have a chance for 20% revenue growth in 2015, and that may be conservative,” says R&N CEO and owner Andy Muller, Jr.

R&N’s commodity base is extensive as the railroad handles goods from more than 50 customers in nine eastern Pennsylvania counties. “Our merchandise business, which consists of a diverse mixture of commodities including wood pulp, paper, metals, food products, plastics, forest products, chemicals, and minerals, comprises close to 80% of Reading & Northern’s total traffic,” the railroad notes.

Muller insists on customer service, highlighted by a pledge to R&N’s customer base, which has resulted in R&N meeting a goal of serving all customers within a two-hour service window 99% of the time. “We try to do everything morally, ethically; we strive to treat the customer right,” Muller says.

Hiring the right kind of people is key, Muller notes. “We hire 100% for attitude. I don’t care where you went to school; I care about loyalty and commitment that’s shown. We hire for that, then you pay people” what that strength is worth, he says.

That philosophy has worked well. “Obviously we could not have achieved this growth and exceptional customer service without the hard work of the 180 plus men and women in the Reading & Northern family,” says Michel, noting an increase of 30 employees since 2011.

“We hire; we don’t contract as a general rule,” Michel adds, “and we don’t work people more than 40, 45 hours a week.” Combined with an “entrepreneurial perspective,” that enables R&N “to react quickly to changing market conditions . . . we are able to invest quickly in new facilities for ourselves and new customers to the railroad. These new facilities and new customers enable our company to grow our business. And our commitment to excellent service keeps our existing customers happy.”

As one example, Michel points to the development of new transloading facilities at Cressona and Penobscot, Pa., that “have been very successful and resulted in substantial business growth on the railroad,” and prompted ASLRRA’s 2014 Marketing Award, the second time the railroad has been so honored in the past five years. A year earlier, R&N opened the two new rail terminals to handle inbound metals for local customers. “These new facilities took significant truck traffic off the roads and helped support the local industries depending on this business, which employ 1,200 people in Schuylkill and Luzerne counties,” Muller says.

Reading & Northern’s sister company, Lehigh Gorge Scenic Railway, also had a record year, accommodating more than 72,000 visitors on its many steam- or diesel-powered excursion trains.

Energy in green

U.S. energy issues, laden with volatile debate, may swirl around any transport mode, but R&N is committed to run as “green” a railroad property as it can, benefitting both its bottom line and its environment.

The commitment of course includes its locomotive fleet, fully equipped through in-house retrofit work with heating systems to minimize engine idling in the winter. “We put electric plugs out along the railroad; anywhere we park, we just plug the locomotive in,” Muller quips, adding, “I don’t see anything idling when I come on this railroad.“

Locomotive engineers receive “best train handling practices” to maximize efficiency. Right-of-way maintenance include “several new rail greasers that apply environmentally friendly soy grease to the locomotive and car wheels to reduce the friction between the wheels and the rail,” the company says. R&N staff continuously keep track of alternative fuels technology being explored within the rail industry.

Adds R&N Executive Vice President Operations Tyler Glass, “On our higher density lines we brought in a contractor to profile the rail head, which enhances the ride of the wheels on top of the rail, which in turn also reduces the drag.”

R&N also adheres to infrastructure conservation as an energy approach. “Since 1983, we’ve never torn track up we’ve resisted the temptation for quick money through selling scrap, and kept our assets in at least passable condition,” Muller says. Increasing traffic now makes that long-term investment seem sound.

R&N’s environmental footprint efforts extend beyond the rails and the rail mode. Since 2013, R&N has offered a $5,000 electric car rebate to employees purchasing such vehicles, added to various federal and state packages, while offering free electric car charging privileges at its charging station in Port Clinton. So far, only three R&N employees have taken advantage, but Muller says “we’ll do it again,” while acknowledging, “Americans don’t dive into technology the way you think they would.”

Cooperation among the players

Opportunity exists for R&N with Norfolk Southern’s planned $192.6 million purchase of Canadian Pacific’s Delaware & Hudson Line, announced last November, which cuts across New York’s Southern Tier and through Pennsylvania, including R&N’s neighborhood.

“NS has been a terrific partner for us,” CEO Muller says. “When we have a business opportunity, they help make us work. We’ve never lost a customer (through partnership efforts). We don’t know how this [purchase] is going to play out, but we think we’re in the catbird seat.”

R&N customers also have proved to be able partners. Muller notes an effort by Allentown, Pa.-based Air Products & Chemicals, Inc. to obtain a grant to fix R&N track that only Air Products moves require, and then only a few times a year. Pennsylvania awarded the grant, intended to upgrade track speeds to 10 mph, which Air Products forwarded to R&N. R&N added its own money and upgraded six miles to 40 mph passenger, 30 mph freight speeds. An added benefit: “Now there’s no sitting in place for Norfolk Southern or [in the past] CP,” Muller observes. “I believe the better my service is to a Class I, with no bottleneck in place, the better it is for all. That’s going to be a very profitable improvement in the future.”

R&N’s direct dealings with government entities have resulted in a mixed bag. In 1997, R&N approached Pennsylvania’s Department of Transportation for permission to build a new bridge, adjacent to an existing one over the Lehigh River, and it received the go-ahead and a $14 million grant—in 2014.

“It’s hard to convince governments when you’re a smaller railroad,” Muller says, though the improvement will “allow progressive moves between Reading and Scranton that knocks two hours off trip times,” and eliminate a switchback reverse move.

R&N and NS also are cooperating with CAN DO, a Hazelton, Pa.-based economic development authority, to facilitate R&N’s access to Humboldt Industrial Park North, expected to occur in January 2017. The prize for R&N: 5,000 carloads of merchandise annually, or a boost of better than 20% from 2014’s record carload level. “It’s going to be a big thing,” Michel says.

Evolving rail landscape

Other issues have been more problematic. In December 2013, R&N filed a lawsuit seeking to stop the Pennsylvania Northeast Regional Rail Authority (PNRRA), based in Scranton, Pa., from proceeding with what R&N is calling a “no-bid” contract for rail service in nearby Lackawanna and Monroe counties. “The Authority refused to even consider our request to make a bid to be the operator,” R&N said at the time, instead renewing a contract with the existing operator for another five years.

Delaware Lackawanna Railroad Co. has operated over 88 miles of rail right-of-way in four eastern Pennsylvania counties, under contract with the PNRRA, since 1993; its current contract expires in 2015.

“We realize that given an open process with fair bidding that there may be others who win the right to operate,” said Michel. “However, we know taxpayers and shippers will be better off as a result of this process and we will have had a fair opportunity to participate.”

Muller stresses that Pennsylvania regional authorities such as PNRRA “did a wonderful thing in the 1980s; they literally saved these railroads.

“But now federal money and state money are competing with us every day. I’m surrounded by county-owned railroads,” Muller observes. We all compete for [frac] sand, and I have no problem competing, but if you compete against the government, you’re going to lose.”

Adds Michel, “We’d like the government to sell the freight franchise. If government also wants to operate a passenger franchise in the future, Scranton to New York [often discussed as an Amtrak or NJ Transit operating option] that’s fine, and we’ll be glad, even thrilled, to cooperate. We believe in passenger.” But, he says, “Let us bid.”

Both Muller and Michel promise more changes, more growth, are to come. Says Michel, “We’re still hungry. We will always grow the business.” 

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