RAILPAX Version 2.0

goodnightjohnwayne wrote:
Actually, there was no correlation between the sudden, largely unexpected bankruptcy of Penn Central the long, slow and very predictable decline of GM and Chrysler. Similarly, the government had a degree of responsibility in collapse of Penn Central, especially since the regulators forced the NYC and PRR to combine with the money losing NH. In contrast, GM and Chrysler didn't suffer from excessive regulation, and even managed on occasion have safety and fuel economy regulations rolled back, while a 25% tariff protected their vital light truck market.

I think your the first person to say the failing of the Penn Central was unexpected. You even said in your own post the Gov't had a hand in it forcing the NH in to the deal. So in the creation of the Penn Central we have two struggling rail roads reluctantly merging with a rail road in the final throws of death forced in to the mix and you say every one at the time expected success ?

If the fall of Chrysler and GM was so predictable why did everybody get caught off guard ? Im not saying they weren't making dumb moves because they were but that's a far cry from saying the collapse of GM was slow coming and predictable

goodnightjohnwayne wrote: In the end, it's too soon to declare victory with GM and Chrysler. It's worth remembering that when the Government created Conrail, it took years for the business to turn around, and it only was accomplished through labor concessions. In contrast, it's pretty much business as usual for the UAW at GM and Chrysler. In contrast, the railroad unions eventually accepted the reduction of train crews from 5 to only 2 men, a move which not only made Conrail selfsupporting, but made the entire freight railroad sector profitable.

Im not sure 16 plants closing, thousands out of a job and 3 major GM brands gone business as usual. I don't think its fair to compare the railroad Unions to the UAW its and apples to oranges (which are both fruit) comparison. The UAW isn't forcing GM to have 5 people doing a 2 person job ( why did a diesel need 5 people? 1person can do it but 2 makes sense ) the UAW has done some combining of the skilled trades as well. Did the railroad union make wage concessions ?

goodnightjohnwayne wrote: What "economies of scale?" I have a hard time seeing the "economies of scale" in a nationwide network, that outside of a couple of corridors, is composed largely of once daily, and even three-a-week, long distance trains. Even the corridors are increasingly equipped with different types of rolling stock due to state funding. If anything, Amtrak lacks "economies of scale."

Marketing, maintenance facilities, purchasing power ( locomotives come to mind) ticket reservation systems. Those are just a few big ones that come to mind im sure there are others.

goodnightjohnwayne wrote: Nonsense. The sort of barcode scanners required for online ticketing are compact, cheap and are in use at every retail store in North America. The cost of equipping a Conductor with a barcode scanner would probably than a single weeks wages for a union employee.

It's not the cost of the scanner that's the issue its connecting that scanner with the ticket reservation system in real time on a moving train that cost the big money. That being said I still think its a long over due change.

goodnightjohnwayne wrote: Why should "cleaning and maintaining equipment" be the function of railroad employees? I'd argue that contract labor should be used, which would eliminate fixed benefit costs.

While I agree with you on the high fixed benefit cost issue I don't think subbing it out is the solution. The cars are owned by the Amtrak, operated daily by Amtrak employees and almost never leaves the rails. So why trust your capitol to the low bidder?

goodnightjohnwayne wrote: Privatization only works if the government is willing to let an enterprise fail. During the Reagan administration, Conrail was allowed to "sink or swim," and fortunately, Conrail was able to swim. Of course, it isn't possible for passenger rail to be selfsustaining.

So your advising to privatize things then let the company entrusted with doing the gov't bidding fail ? would you apply that same logic to social security. Have people conscripted to pay in for years and then say oh well the wal street crooks who were the low bidder went belly up OOPS. The only thing less productive the gov't is a contractor who only works for the gov't . The real issue here is gov't employee accountability, privatizing is not the solution to that problem. Regan loved Gov't spending and I doubt he had the political will to let conrail fail.

I don't think any form of people moving in this country is self sustaining. The railroads were the only form of transportation in the country built with private money. If gas taxes were levied to a point they were able to pay it forward on the highway system I bet passenger rail would become real popular again. I would make the argument that the public funded tax exempt interstate lead to the decline of the private passenger and freight rail industry

On the PC Bankruptcy
Believe it or not, the fall of PC was unexpected. If you read the books on the bankruptcy, the books describe how PC managed to hide their losses. While begging congress for money and even making a movie about the situation that was shown quietly to congress, the company also kept paying dividends and declaring profits. They were able to do this because David Bevan, CFO, was quite similar to the Enron accounting team in that he juggled paper profits and losses between subsidiaries and sub-entities in a way that generated a handsome paper profit for the Penn Central, despite the fact that the main holding, the railroad, was bleeding excessively.

On Economies of Scale
As for economies of scale, there are arguments for and against subsidizing freight carriers directly rather than starting a company like Amtrak. On one hand, as JohnWayne points out, the direct labor pool is more flexible. Today Amtrak cannot switch a consist en route except for a handful of points. If the passenger trains were operated by the Class I's under direct subsidy, there's the possibility a yard goat and crew could run in from somewhere like Conway or Argentine briefly to swap cars. On the other hand, would it be useful for roads with one train/day to maintain a passenger department? The amount of administrators required to market and operate a passenger train, and manage a dining car, and supply a sleeper car, is enormous. Should the government subsidize CN to employee 100 people for just the CofNO? Or should it use Amtrak, where a fraction of each of those 100 people work on the CofNO, as on the Cardinal, and Chief?

On Paying Subsidies Direct to Class I's
Finally, direct subsidy can be dangerous to the railroad. In the late 1980's, the state of Indiana and the South Shore Line had a serious argument about cost allocation and the state couldn't or wouldn't pay the full subsidy. Former CEO John Darling once stated, on this board, that he could either pay the insurance bill or the mortgage. He paid the insurance bill and Citi foreclosed on the railroad. Granted the problems were deeper that that (C&MW anybody?) but when the feds are your biggest customer and they don't pay, that's a big hole in the budget.

On former CSS CEO John Darling
You can find Mr. Darling's post here at the link below. If you know the South Shore as well as I do, it was unmistakable that this was him. I wrote him immediately via PM and asked him if it was he, provided I would not reveal this. As you may know, we lost him a few years back (and lost a guy with amazing railroad experience and bylines in fan magazines). As such, I think we can accurately quote him now:
http://railroad.net/forums/viewtopic.ph ... ge#p664927

BigLou80 wrote:[
I don't think any form of people moving in this country is self sustaining. The railroads were the only form of transportation in the country built with private money. If gas taxes were levied to a point they were able to pay it forward on the highway system I bet passenger rail would become real popular again. I would make the argument that the public funded tax exempt interstate lead to the decline of the private passenger and freight rail industry

Well said!

That is why in europe full high speed & commuter trains, trollies trams and long distance service abound and gas is 5 dollars a gallon or more. Our government is in essence paying people to use automobiles by not charging them the full price in gas taxes that it costs to keep the roads in a good state of repair. Some governor's recent actions involving funds for a rail tunnel from a certain garden state comes to mind.

trains news wire had a report that the recovery % of highways is around 50% . we you take into account non highway roads , free car parking etc , i bet it drops even further .

I have my Wayner Amtrak Car Spotters, v1 (1972) and v2 (1973). I can vouch Mr Deasy, cars with open sections were taken into Amtrak service. What those sections were used for, I cannot tell you.

As a child, I twice rode in open section Pullmans: Both times were on the City of Saint Louis, the first in 1963, and the second in 1967. While the footprint is the same of the superliner/viewliner "roomette", I can assure you the bed was wider and the mattress thicker than what Amtrak passes off as sleeping space now. Indeed, the upper berth windows on the UP National (1956, PS, 6 roomettes, 4 Double Bedrooms, 6 open sections) and the headroom of a single level car made the upper berth far more desirable than its current Amtrak counterpart.

Further, the classic Pullman Roomette (tm) was a better facility, with private wash and toilet, and again a better bed), than the current alleged Amtrak incarnation. The roomette of Amtrak is really the enclosed section used on the early Union Pacific Streamliners, and was no longer offered for manufacture in Pullman's catalog before Pearl Harbor.

As far as returning passenger service to the railroads ... the infrastructure (coach yards, shops, commissaries, stations) is GONE, and re-creating it is a substantial investment. As a shareholder on a Class I (IRA position in UNP), if my BOD proposed returning to service, I'd take a look at the business plan, and then organize a shareholders revolt; the Board would have had to have consumed the Jonestown Kool-Aid.

HBLR wrote:

BigLou80 wrote:[
I don't think any form of people moving in this country is self sustaining. The railroads were the only form of transportation in the country built with private money. If gas taxes were levied to a point they were able to pay it forward on the highway system I bet passenger rail would become real popular again. I would make the argument that the public funded tax exempt interstate lead to the decline of the private passenger and freight rail industry

Well said!

That is why in europe full high speed & commuter trains, trollies trams and long distance service abound and gas is 5 dollars a gallon or more. Our government is in essence paying people to use automobiles by not charging them the full price in gas taxes that it costs to keep the roads in a good state of repair. Some governor's recent actions involving funds for a rail tunnel from a certain garden state comes to mind.

Incorrect. Europe maintains an elaborate network of intercity and interurban trains because of high population densities, not to mention a history of public ownership of railways. In Europe, freight railroading is downright backward by North American standards, while passenger rail is heavily subsidized, not just for the sake of public transportation, but to maintain employment. In many cases, regional services have been spun off by nationalized railways, and are supported by local and regional governments. Overall, European railways are horribly overstaffed and under perform in terms of freight service.

In North America, gas taxes are lower than in Europe, but keep in mind that China actually subsidizes gasoline to encourage automobile purchases. Another issue for state and local gas taxes is that revenues aren't spent for highway upkeep, but frequently go to unrelated expenses, such as public employee pensions and retiree health benefits.

Finally, high gasoline prices would not aid passenger rail in North America. It's worth noting that even before 1920, the Electric Traction companies were in decline, and at that time, gasoline was far more expensive proportionately than it is today, the roads were largely unpaved and cars had to be hand cranked to start. The interurbans and trolley even disappeared during the gas rationing of WWII, and since fares were typically fixed at just 5 cents, it's clear that the advantages of the personal automobile outweighed the inconvenience of waiting for a trolley or train.

It's worth noting that since union wages and benefits increase far in excess of the rate of inflation, passenger rail fares would most likely increase more quickly than the costs of automobile ownership. In other words, increasing the cost of automobile ownership and usethrough taxation will only increase intercity and commuter fares as the unions demand pay increases.

David Benton wrote:trains news wire had a report that the recovery % of highways is around 50% . we you take into account non highway roads , free car parking etc , i bet it drops even further .

Irrelevant. Without a highway system, intercity passenger rail stations, outside of a handful of major metropolitan areas, wouldn't be accessible. Today, free, or reasonably price parking is the most important amenity than a passenger rail station can offer. After all, the cost of airport parking is one of the best arguments for passenger rail.

John_Perkowski wrote:I have my Wayner Amtrak Car Spotters, v1 (1972) and v2 (1973). I can vouch Mr Deasy, cars with open sections were taken into Amtrak service. What those sections were used for, I cannot tell you.

In some rebuilt dormitory cars, Amtrak provided open sections for male crew members and roomettes for female staff. It's worth noting that Amtrak also used open sections in revenue sleepers for crew accommodations. Were these sections also sold as passenger accommodations during periods of peak demand? Possibly? Probably? It doesn't really matter since the original poster didn't specify as to whether the people sleeping in the sections were paying passengers, or whether the berths were in a revenue sleeper or a non-revenue dormitory car.

John_Perkowski wrote:As a child, I twice rode in open section Pullmans: Both times were on the City of Saint Louis, the first in 1963, and the second in 1967. While the footprint is the same of the superliner/viewliner "roomette", I can assure you the bed was wider and the mattress thicker than what Amtrak passes off as sleeping space now. Indeed, the upper berth windows on the UP National (1956, PS, 6 roomettes, 4 Double Bedrooms, 6 open sections) and the headroom of a single level car made the upper berth far more desirable than its current Amtrak counterpart.

The headroom in the upper berth of a Viewliner Roomette is adequate.

John_Perkowski wrote:Further, the classic Pullman Roomette (tm) was a better facility, with private wash and toilet, and again a better bed), than the current alleged Amtrak incarnation. The roomette of Amtrak is really the enclosed section used on the early Union Pacific Streamliners, and was no longer offered for manufacture in Pullman's catalog before Pearl Harbor.

The "classic Pullman Roomette" was developed for a clientele largely composed of single, male business travelers. It's worth noting that the all Roomette sleepers were the first to leave service and many were converted to coaches. I can't criticize Amtrak for abandonning single passenger roomettes, since the business travel market had disappeared a decade before Amtrak came into existance.

As far as the UP Streamliners, I've never seen a floorplan, although I can appreciate an enclosed section was entirely viable.

John_Perkowski wrote:As far as returning passenger service to the railroads ... the infrastructure (coach yards, shops, commissaries, stations) is GONE, and re-creating it is a substantial investment. As a shareholder on a Class I (IRA position in UNP), if my BOD proposed returning to service, I'd take a look at the business plan, and then organize a shareholders revolt; the Board would have had to have consumed the Jonestown Kool-Aid.

No Class 1 railroad would even entertain the suggest of resumed passenger service. The opportunity for maintaining private passenger rail operators through subsidizes ended with the bankruptcy of Penn Central, and as previously noted, the concept failed in Canada where the biggest passenger rail operator, the CN, was government owned at the time.

Tadman wrote:On the PC Bankruptcy
Believe it or not, the fall of PC was unexpected. If you read the books on the bankruptcy, the books describe how PC managed to hide their losses. While begging congress for money and even making a movie about the situation that was shown quietly to congress, the company also kept paying dividends and declaring profits. They were able to do this because David Bevan, CFO, was quite similar to the Enron accounting team in that he juggled paper profits and losses between subsidiaries and sub-entities in a way that generated a handsome paper profit for the Penn Central, despite the fact that the main holding, the railroad, was bleeding excessively.

I wouldn't compare David Bevan with Jeffrey Skilling, since David Bevan was never charged. In all fairness to the CFO of Enron, a number of convictions were based on an "honest services" law that was later overturned.

The real similarity between Enron and Penn Central is that both companies should have downsized far more quickly, and both had profitable diversified business lines that were later salvaged after bankruptcy. Penn Central had a brilliant real estate development arm and invested in a number of very successful concepts, such as as business jet leasing - an idea that was 30 years ahead of its time. Of course, Penn Central wasn't allowed to downsize because of the regulatory environment.

Tadman wrote:On Economies of Scale
As for economies of scale, there are arguments for and against subsidizing freight carriers directly rather than starting a company like Amtrak. On one hand, as JohnWayne points out, the direct labor pool is more flexible. Today Amtrak cannot switch a consist en route except for a handful of points. If the passenger trains were operated by the Class I's under direct subsidy, there's the possibility a yard goat and crew could run in from somewhere like Conway or Argentine briefly to swap cars. On the other hand, would it be useful for roads with one train/day to maintain a passenger department? The amount of administrators required to market and operate a passenger train, and manage a dining car, and supply a sleeper car, is enormous. Should the government subsidize CN to employee 100 people for just the CofNO? Or should it use Amtrak, where a fraction of each of those 100 people work on the CofNO, as on the Cardinal, and Chief?

Amtrak really doesn't have any "economies of scale" when it comes to Long Distance services. Look at the scale of the former Pullman sleeping car operation and compare that with Amtrak's very limited sleeping car fleet. In many ways, George Pullman's original 19th century operation was very advanced in terms of labor practices and customer service - and George Pullman was smart enough to get out of the money losing dining car business. In comparison, Amtrak is running a relative small scale operation outside of the corridors, and even worse, the rolling stock fleets are permanently divided because of the NYP clearance issue.

The issue of direct passenger rail subsidies to private Class 1 railroads came and went in the Nixon era. We can't turn back the clock. However, it's never too late to have a reappraisal of current practices.

Tadman wrote:On Paying Subsidies Direct to Class I's
Finally, direct subsidy can be dangerous to the railroad. In the late 1980's, the state of Indiana and the South Shore Line had a serious argument about cost allocation and the state couldn't or wouldn't pay the full subsidy. Former CEO John Darling once stated, on this board, that he could either pay the insurance bill or the mortgage. He paid the insurance bill and Citi foreclosed on the railroad. Granted the problems were deeper that that (C&MW anybody?) but when the feds are your biggest customer and they don't pay, that's a big hole in the budget.

The South Shore was really the very last of the privately owned interurbans. I never fully understood the political backstory of the bankruptcy. At the time, I merely assumed that the decreased freight revenues had tipped the scales towards insolvency, and the politicians wanted a public authority that would be staffed with political appointees.

Tadman wrote:On former CSS CEO John Darling
You can find Mr. Darling's post here at the link below. If you know the South Shore as well as I do, it was unmistakable that this was him. I wrote him immediately via PM and asked him if it was he, provided I would not reveal this. As you may know, we lost him a few years back (and lost a guy with amazing railroad experience and bylines in fan magazines). As such, I think we can accurately quote him now:
http://railroad.net/forums/viewtopic.ph ... ge#p664927

Considering the industrial decline in the Gary, Indiana region in the 1980s, it's clear that the South Shore had an uphill battle. Moreover, you can't staff a private company with politically connected insiders. The typical public authority has less accountability to the taxpayers than a private sector railroad receiving limited subsidies to maintain a passenger rail operations. The beauty of a public authority is that it allows elected leaders to provide jobs to friends and supporters. A public authority can also issues bonds and rack up large public sector debts without oversight by a state legislature. Technically, public authority debts are kept off the books, which is very nice way of funding patronage.

goodnightjohnwayne wrote: Incorrect. Europe maintains an elaborate network of intercity and interurban trains because of high population densities, not to mention a history of public ownership of railways. In Europe, freight railroading is downright backward by North American standards, while passenger rail is heavily subsidized, not just for the sake of public transportation, but to maintain employment. In many cases, regional services have been spun off by nationalized railways, and are supported by local and regional governments. Overall, European railways are horribly overstaffed and under perform in terms of freight service.

In North America, gas taxes are lower than in Europe, but keep in mind that China actually subsidizes gasoline to encourage automobile purchases. Another issue for state and local gas taxes is that revenues aren't spent for highway upkeep, but frequently go to unrelated expenses, such as public employee pensions and retiree health benefits.

Finally, high gasoline prices would not aid passenger rail in North America. It's worth noting that even before 1920, the Electric Traction companies were in decline, and at that time, gasoline was far more expensive proportionately than it is today, the roads were largely unpaved and cars had to be hand cranked to start. The interurbans and trolley even disappeared during the gas rationing of WWII, and since fares were typically fixed at just 5 cents, it's clear that the advantages of the personal automobile outweighed the inconvenience of waiting for a trolley or train.

It's worth noting that since union wages and benefits increase far in excess of the rate of inflation, passenger rail fares would most likely increase more quickly than the costs of automobile ownership. In other words, increasing the cost of automobile ownership and usethrough taxation will only increase intercity and commuter fares as the unions demand pay increases.

There are several factors involved in this country's affection with the automobile, with convenience being one, relatively low fuel prices another (although oil companies seem capable of sustaining profitability with those prices). Another big issue is our rejection of urban planning. Even our densely populated areas, like the northeast, are poorly planned....I would suggest not "planned" at all, but "evolved" over the years. Urban sprawl afflicts smaller communities as well and does not fit well with public transit. Unfortunately, far too many see the issue of urban planning as some sort of attack on freedom, while not acknowledging the fact that being stuck in endless traffic is also affecting their freedom to move about as they please. Americans, IMO, see urban planning as a "foreign" concept, not compatible with our values of freedom...of course, they probably don't even realize that the interstate highway system is something we copied from the Germans.

Johnwayne, I'm not quite sure what your point is - if Bevan is different than Skilling because Bevan was never charged, but Skilling was charged and indicted based on a later overturned law, what's the diff? The bottom line is there was a pattern over covering up big operating losses with paper profits.

Relative to Pullman, Amtrak does not have economies of scale. Relative to a modern class I road that would only operate one LD train, such as CN with CofNO, Amtrak does have economies of scale. It's not hard to figure out.

Tadman wrote:Johnwayne, I'm not quite sure what your point is - if Bevan is different than Skilling because Bevan was never charged, but Skilling was charged and indicted based on a later overturned law, what's the diff? The bottom line is there was a pattern over covering up big operating losses with paper profits.

I thought it was important to point out that the parallels between Bevan and Skilling weren't quite as obvious as they would seem at first glance. Yes, there was some creative accounting at Penn Central, but as to whether it was criminal, either by the standards of the early 70s or even our own decade, is a matter of conjecture. I did have to mention the overturn of the vague "honest services" law just to show how ambiguous that matter really is.

Tadman wrote:Relative to Pullman, Amtrak does not have economies of scale. Relative to a modern class I road that would only operate one LD train, such as CN with CofNO, Amtrak does have economies of scale. It's not hard to figure out.

First of all, that ship has sailed. I can't imagine any Class 1 railroad even entertaining the notion of re-entering passenger rail. More to the point, even if it was possible, no start-up would utilize the same business model as Amtrak. In many respects, Amtrak operates in something of a time warp, using union labor and paying uneconomic wage and benefit scales for onboard service, not just operating crews. Yes, that's how the private sector operated back in 1971. That's the way Amtrak still operates.

First may I ask leeway from the Moderators to respond to Messrs. Dunville and Wayne's thoughts regarding Penn Central creative accounting.

Daughen and Binzen clearly noted such, and I heartily recommend as a read to anyone who wants a lesson in how the game was played when "we only talked M's, and not B"s". However, one item that personally caught my attention was when reviewing the PC 1968 Annual Report (I was a returning student majoring in Accounting at UofI at that time) the Net Income reported for the year ending 1968 was some $100M. But a more careful review showed a deteriorating cash position, an increase in loans, and the best of all was the Special Charge made directly to Retained Earnings of some $150M and captioned to the effect of "pre- merger and merger integration expenses". In short Mr. Dunville, that term we both love; a WRITE OFF.

goodnightjohnwayne wrote:I can't imagine any Class 1 railroad even entertaining the notion of re-entering passenger rail. More to the point, even if it was possible, no start-up would utilize the same business model as Amtrak. In many respects, Amtrak operates in something of a time warp, using union labor and paying uneconomic wage and benefit scales for onboard service, not just operating crews. Yes, that's how the private sector operated back in 1971. That's the way Amtrak still operates.

Most of this I agree with; I would point out however that NS has expressed interest in operating whatever commuter rail Georgia wants to run to Lovejoy/Griffin from Atlanta. Not that that will ever happen.......