Guilford: the worst?

Judging the amount of freight I see,Pan -Am is doing just fine. I see it both at home and work and have been for some time now. The railroads as a whole Pan-Am included are one of the industries here in the US that hire vetrens to the best of there ability. Good jobs at good wages.

I still wonder if Guilford could have done better if Big Dave had been more positive. Could they have gotten labor concessions? The industry norm is two man crews. Everyone else got them, but they bought out, or paid short crew allowances. Would the short crew payments have been cheaper than the strike? They lost customers by dragging out the strike. There was only so much management and scabs could cover.

I wonder what opportunities were missed by letting main lines get to a 10-25 mph state. The push for business is to reduce inventory by keeping stock low, and delivering it fast. This slowness also causes the need for more crews and equipment, since it takes many times more time to make the same trip. They are finally getting better. This is imperative, since the paper industry is slowly drying up.

I think that if Alan Dustin and Spencer Miller were still running their respective railroads, they would have had to had abandoned things. I still feel that a positive management could have had the foresight to look for new opportunities. This could have headed off the need to cut costs to the point of the terrible conditions, to which the company descended into.

I sincerely wish Dave, Jr. good luck.

I agree. Like you said it's certainly interesting to ponder where we would be today had things been different... I know their attitude and focus has drastically changed for the better but I am seeing some of the old games creeping back in. Time will tell what happens I guess.

If Big Dave had been more positive, he would not have been Big Dave. A combatively you-need-us-and-we-don't-need-you approach to shippers, consignees, and employees got him up the ladder at both PRR and PC, and that contraction-is-the-sole-way-to-survive approach kept him in sway in the various iterations of Guilford. The counterproductivity of that approach did eventually become apparent to the other partners, and steps were taken. The rebranding and re-imaging were no mistakes since Guilford had become so identified with Fink 1.0. Fink 2.0 is definitely experiencing too many problems, but upcoming the fifth anniversary of PAS joint venture should be a reminder that the primus inter pares of the partnership had, still has, and probably will continue to have a far more service-oriented approach than its former stock-holder -- the PRR -- did.
We'll see how much longer the Pony's patience has to go before its modulus of elasticity is reached.

I'm not so sure that given the context of time and the changing challenges/opportunities over Guilford's history a more-objective analysis wouldn't validate its leadership as having taken best-advantage of its situation for the most part. For folks who think NS has deep claws into Pan Am at this point, I think that's a bit of a misread. Pan Am, given it's resources and the economics of it's system, has simply pared down to the most economically-viable core for them, commercially positioned to take advantage of 2 competing deep-pocketed Class 1's actions. If you took a view of their strategy playbook over time and within a dynamic environment, in a nutshell this is how I think it would read:

PHASE 1: Given the rail industry crossroads grappling with unsustainable costs and the question of what to do with Conrail, take advantage of the opportunities by putting together the long-thought MEC-B&M-D&H system and an attempt to build a system extending to southern and western gateways within the context of the Reagan administration's bid to hand Conrail to NS.

PHASE 2: Given the failed attempt at becoming a sizable Northeast/Midwest player and the decision to "let Conrail be Conrail", focus inward to rationalize what is left. Obviously, at this point leadership believed draconian measures had to be taken for the long-term sustainability of their truncated system.

PHASE 3: Given the above rationalization needs and ascendence of a dominanat healthy Conrail, retreat to the basic most profitable core aligned with Conrail to support the rationalization and take advantage of Conrail's market power.

PHASE 4: Given the Conrail split, reposition to take advantage of 2 class 1's competing networks into New England.

PHASE 5: Given the rising market power of rail and the resultant action of CSX's pricing and consequential impact on NS's New England market as well as it's own opportunities, maintain core position, take advantage of NS investment to strengthen its connection as well as cash into the core, and leverage 2 competing strong Class 1 connections, supporting a growth (vs. rationalization) posture.

The Draconian measures to cut costs directly caused two preventable lengthy strikes that eventually were stopped by Executive order due to rail transportation in New England being at a stand still.

The effects of that those strikes are still felt today. One only has to take a trip in the cab to see how many customers were lost in the late 80s never to come back. They lost Erving paper during the 87 strike and were told last year to never step foot on their property (when the RR wanted to talk to them about rail service).

This is just one of many examples. The strikes of the late 80s caused a downturn of traffic unlike anywhere else. On other railroad systems, of course there are customers that have left rail due to economics and other factors, but not to the extent as here.

From Guilford's leadership position mid-1980's they must have calculated a pretty dire situation that lead them to take the drastic actions they did: their industrial traffic base was continuing to erode as well as lighter-loading commodities, like Erving's paper, were under pressure from/shifitng to truck and TOFC; they were hemmed in by Conrail and would not be allowed their "break-out" to build a long-haul competitive system; there wasn't the kind of money being made needed over the long-run except in the paper business; their relationship with labor up to that point wouldn't allow for the radical changes they thought necessary; and, in the end analysis given the business they were in, they weren't risking everything.

At this point, I don't think you can blame the Guilford strikes for causing any major downturn in long-term sustainable rail traffic in New England. If something belonged on rail, it found new networks (like intermodal, transloading or relocation to another railroad). What the strikes probably did was precipitate New England traffic changes more quickly and in more of an upheaval than if the evolution simply worked out on an economic basis. And, at least on the ex-B&M, that traffic that naturally flows to/from the NS network (and historically via NS's predecessor networks) is now returning.

Emblematic of an untempered view of Guilford/Pan Am's management without context is the Wikipedia entry for the company (http://en.wikipedia.org/wiki/Pan_Am_Railways" onclick="window.open(this.href);return false;) that speaks of mismanagement and by extension inferring that they are less successful in the Maine paper market (slightly more than 50% market share) vs. those railroads serving Wisconsin's paper market (80% market share) as a result. However,with competing truck/intermodal rates coming out of Maine half those coming out of Wisconsin, it's no wonder that's the situation and a big part of the real story in that case is what a difficult environment Guilford/Pan Am operates in. Certainly in the 1980's, probably true to today, amongst the worst of the worst.

You're noting every reason in the book outside of the most obvious. Take it from someone who used to work for, and is still heavily in tune with this railroad, Pan Am is it's own worst enemy, not trucks, or the economy. The Mills have been CRYING for better service for years. There are some that only move a 1/4 of their traffic via rail but would like to see it much higher, past 50%. Pan Am has never had the infrastructure to make that happen. I use the Mills for example because they are the largest provider of carloads, but there are many other customers who have offered to PAY for a dedicated switcher all day. WTE aka Kramers is one example, and that's 1/2 mile from Deerfield.

There is no excuse to still be short crewed. People are out there crying for jobs that would kill for a shot at $20-30/hr, even with all of the RR BS attached.

I fault the ones writing the checks more than the people int he trenches. Sometimes you have to make difficult decisions with not a lot to work with, and that is what the GM on down have to do here. For instance, right now there is no functioning production tamper in District 3. For real? How can you run a RR like that...

So far Mellon shown little interest in spending their own money. Despite the positive steps made recently (with a large influx of foreign cash), the industry would be better off if he sold.

newpylong wrote:You're noting every reason in the book outside of the most obvious. Take it from someone who used to work for, and is still heavily in tune with this railroad, Pan Am is it's own worst enemy, not trucks, or the economy. The Mills have been CRYING for better service for years. There are some that only move a 1/4 of their traffic via rail but would like to see it much higher, past 50%. Pan Am has never had the infrastructure to make that happen. I use the Mills for example because they are the largest provider of carloads, but there are many other customers who have offered to PAY for a dedicated switcher all day. WTE aka Kramers is one example, and that's 1/2 mile from Deerfield.

There is no excuse to still be short crewed. People are out there crying for jobs that would kill for a shot at $20-30/hr, even with all of the RR BS attached.

I fault the ones writing the checks more than the people int he trenches. Sometimes you have to make difficult decisions with not a lot to work with, and that is what the GM on down have to do here. For instance, right now there is no functioning production tamper in District 3. For real? How can you run a RR like that...

So far Mellon shown little interest in spending their own money. Despite the positive steps made recently (with a large influx of foreign cash), the industry would be better off if he sold.

Despite your association with the company, unfortunately, you have it backwards about what is driving things. The market and economics majorly drive the environment and decision-making, even for Pan Am, despite your anecdotes. Why would anyone refuse to take advantage of any situation if it truly offered benefit? Sure, like any human endeavor you can point to this or that not making sense, but, at the meaningful core it's not the small things that really count. What an emotional point of view that does not take into account the complete view of those looking at the entire system fails to see, is that it's about long-term sustainability: something can't just generate carloads --- it has to make money over the long-run that will allow reinvestment in the business. And, for railroads it is particularly crucial because it takes a lot of investment in motive power, cars, and infrastructure that has to earn the returns worthy of making them there instead of someplace else.

So, for a power-hungry system you take away power to sit at a customer with an opportunity cost that you will have to go get another piece of equipment (not to mention additional employees)--- surely someone has looked at the numbers and said it doesn't make sense. Similarly, if there is potential for new paper traffic, I am sure someone has done the math within Pan Am's reality and determined that they can't justify whatever investment is necessary in the example you cite. Lastly, those additional employees don't just cost $20-30/hour...try doubling it with benefits...and rail traffic has peaks and valleys in a cost-driven environment so railroads manage their labor forces intensively and are seldom willing to have anything more than a small buffer. This is amplified for Pan Am and Pan Am Southern in it's current construct given the tough environment in which to make sufficient money and returns over the long-run.

Sure, there's no doubt that there's been an element to Guilford's management that has a tough and rough edge, but, business leaders lead by hard objective facts and self-interest, and, I think Guilford/Pan Am has for the most part been no different, like it or not. I've seen and had to deal with the same dynamic as Guilford/Pan Am in many phases of my own career, like it or not, but, taken objectively, for the most part it is not the leaders' emotions, but, instead their response to the markets in which they operate and economics and environment of the business that determine the essential important core of their decisions.

QB 52.32 wrote:

newpylong wrote:You're noting every reason in the book outside of the most obvious. Take it from someone who used to work for, and is still heavily in tune with this railroad, Pan Am is it's own worst enemy, not trucks, or the economy. The Mills have been CRYING for better service for years. There are some that only move a 1/4 of their traffic via rail but would like to see it much higher, past 50%. Pan Am has never had the infrastructure to make that happen. I use the Mills for example because they are the largest provider of carloads, but there are many other customers who have offered to PAY for a dedicated switcher all day. WTE aka Kramers is one example, and that's 1/2 mile from Deerfield.

There is no excuse to still be short crewed. People are out there crying for jobs that would kill for a shot at $20-30/hr, even with all of the RR BS attached.

I fault the ones writing the checks more than the people int he trenches. Sometimes you have to make difficult decisions with not a lot to work with, and that is what the GM on down have to do here. For instance, right now there is no functioning production tamper in District 3. For real? How can you run a RR like that...

So far Mellon shown little interest in spending their own money. Despite the positive steps made recently (with a large influx of foreign cash), the industry would be better off if he sold.

Despite your association with the company, unfortunately, you have it backwards about what is driving things. The market and economics majorly drive the environment and decision-making, even for Pan Am, despite your anecdotes. Why would anyone refuse to take advantage of any situation if it truly offered benefit? Sure, like any human endeavor you can point to this or that not making sense, but, at the meaningful core it's not the small things that really count. What an emotional point of view that does not take into account the complete view of those looking at the entire system fails to see, is that it's about long-term sustainability: something can't just generate carloads --- it has to make money over the long-run that will allow reinvestment in the business. And, for railroads it is particularly crucial because it takes a lot of investment in motive power, cars, and infrastructure that has to earn the returns worthy of making them there instead of someplace else.

So, for a power-hungry system you take away power to sit at a customer with an opportunity cost that you will have to go get another piece of equipment (not to mention additional employees)--- surely someone has looked at the numbers and said it doesn't make sense. Similarly, if there is potential for new paper traffic, I am sure someone has done the math within Pan Am's reality and determined that they can't justify whatever investment is necessary in the example you cite. Lastly, those additional employees don't just cost $20-30/hour...try doubling it with benefits...and rail traffic has peaks and valleys in a cost-driven environment so railroads manage their labor forces intensively and are seldom willing to have anything more than a small buffer. This is amplified for Pan Am and Pan Am Southern in it's current construct given the tough environment in which to make sufficient money and returns over the long-run.

Sure, there's no doubt that there's been an element to Guilford's management that has a tough and rough edge, but, business leaders lead by hard objective facts and self-interest, and, I think Guilford/Pan Am has for the most part been no different, like it or not. I've seen and had to deal with the same dynamic as Guilford/Pan Am in many phases of my own career, like it or not, but, taken objectively, for the most part it is not the leaders' emotions, but, instead their response to the markets in which they operate and economics and environment of the business that determine the essential important core of their decisions.

You're applying a 10,000 foot view or general business logic to a company that has shown anything but. Easy to do when the only exposure you've had is through reading messages or hearsay. I have provided many concrete examples that defy business logic and I could give you many more. That's all I am going say on the subject.

qb52. most posters including you have no appreciation for railroad economics. you all attempt to cloud the issue with amazing irrelevancy. its not the mundane considerations of the elements of railroading. there are no payback models used in deciding what crews to hire or power or the myriad of other small potatoes. it's whether to want the business and price accordingly or toe consider the new business too much bother. i've tried over the years to get fink & company in the rubbish business. i gave up with devens recycling although they may finally have a move. although the people have changed over the years, i still believe the mindset is to price to avoid business. after all, isn't it easier to fall back on 'we don't want the business unless we can make money". i submit that guilford pricing people have no idea of marginal cost-volume-profit models. as with any largely fixed cost operation, few will support incremental business simply because no one has taught them that the 'nth' car is 100% profit. ken patrick

newpylong wrote:You're applying a 10,000 foot view or general business logic to a company that has shown anything but. Easy to do when the only exposure you've had is through reading messages or hearsay. I have provided many concrete examples that defy business logic and I could give you many more. That's all I am going say on the subject.

Well, you're applying a vew that can't get out of its own way due to emotions and an axe-grinding bias. Easy to do when you don't understand the business and when you don't feel good about the company. Your examples are anecdotal and until you've been involved in railroad marketing or finance decision-making, it's obvius you're not going to get it. You don't even get the significance that the company's best economic opportunity has significant competition with the rest of the situation only going down hill from there. Their calculus lead them to take the risks and course of action in the 1980's as well as skimp on the feel-good frosting on their cake in their on-going business, not because of incompetence.

KEN PATRICK wrote:qb52. most posters including you have no appreciation for railroad economics. you all attempt to cloud the issue with amazing irrelevancy. its not the mundane considerations of the elements of railroading. there are no payback models used in deciding what crews to hire or power or the myriad of other small potatoes. it's whether to want the business and price accordingly or toe consider the new business too much bother. i've tried over the years to get fink & company in the rubbish business. i gave up with devens recycling although they may finally have a move. although the people have changed over the years, i still believe the mindset is to price to avoid business. after all, isn't it easier to fall back on 'we don't want the business unless we can make money". i submit that guilford pricing people have no idea of marginal cost-volume-profit models. as with any largely fixed cost operation, few will support incremental business simply because no one has taught them that the 'nth' car is 100% profit. ken patrick

KEN, you gotta be kidding! Anyone with a half-shred of business sense and more than a very narrow rail experience like your own, understands that closely managing your power and crew costs are essential, especially in a tough environment like Pan Am's. As I said in previous posts, no railroad management is going to reject opportunities that truly benefit themselves as they see it. Your Devens move to Barbers was short-haul at a time when they obviously were not interested in business contributing on the margin. You misread (surprise!) railroading's economic structure when it is actually mixed cost and not simply fixed cost, hence a mixed approach to how to look at business contributing on the margins. Afterall, KEN, over the long run, marginal traffic can only buy long-term success if it allows for returns that can justify reinvestment in the business. Everything you know and everything you suggest, at least in this forum, is based upon marginal business and ideas that defies understanding of the much more significant business and concepts of railroading.

qb52. i call to your attention stb railroad cost proceedings ep772, ep664 and nor 42121. there are many others . revenue adequacy is prime. hence my assertion that guilford's pricing is counter-productive to fiscal health. i really appreciate your thinking that crews and power are over-arching. not so. again, i feel comfortable is opining that most posters herein do not contemplate the larger concept of totality. i'm sure guilford's pricing methodology does not consider marginal attributes. if so, we would see significant increases in railcar volumes. as for your dismissive comment about devens recycling, please understand that my bried interaction with guilford pricing was that guilford wanted $3k+ per car devens to ohio. csxt wanted $1600 from westboro. since a cst daily road freight went by devens' switch, i opined that $300 switch charge and $1600 was correct. i don't know how it worked out. my thrust was to, simply, take trucks off the road while increasing railroad revenues. i know greed is an element in railroad pricing. i, as a purest, who actually created unique railroad cars and the bulk materials intermodal business, remain perplexed by the continuing anachronistic thinking exhibited in these posts. ken patrick