Moderator: MBTA F40PH-2C 1050
rr503 wrote:Sure, profitability matters. But railroading isn't a business where you can measure success and failure across quarters. Decisions about investment and operations pay off over decades, a timespan that OR fails to capture -- to say nothing of the fact that infrastructure-intensive businesses rely on high costs to survive. There need to be better metrics than this.Some argue Return on Assets is more appropriate than Operating Ratio. Matt Rose gave an interesting interview in December's Railway Age magazine and it is available on line. To some degree you have to weight some of his points of view to the experience of running the only privately held Class 1 and one that operates with a higher competitive and economic advantage in a kinder marketplace than some other Class 1's past and present. He does speak about balancing multiple competing interests like long-term investment and top-end growth. And, in this vein, we do have 22 combined years of PSR with and post-EHH results indicating continued healthy capital expenditures, traffic growth, reasonable customer service and upward return on assets trends, even as operating ratio remained a focus throughout.
NRGeep wrote:EHH merely a symptom and a vehicle of predatory investors who by design are allNailed it! Hedge Fund thieves!
about short term gains by any means necessary before they get out of Dodge and
destroy their next company. These short term investors don't care about the big
picture and long term prospects of a given company; witness the layoffs and essential
infrastructure abandonments in the name of "shareholder value."
QB 52.32 wrote:The post-EHH short-term "apologies" are the tail while the longer-term results of continued healthy investment, growth, decent customer service results, and upward trending ROA the dog. Blaming PSR or EHH for positive capital investment to support capacity growth occurring some 15 years after PSR implementation and 9 years post-EHH is just wrong. What abandoned "reliever" lines would have precluded CN's need to increase capacity Winnipeg-Edmonton-Vancouver/Prince Rupert and would the time frame of that abandonment have foreseen the growth of international and oil traffic at that time? Didn't Harrison actually do things to improve CN capacity, service and growth with moves like the purchase and improvement of the EJ&E?The direct Calgary line (Drumheller Sub?) and the Ottawa Valley routes would have been helpful, but those losses were secondary to the sidings EHH tore up.
Focusing upon short-haul traffic moving on shorter, faster trains or low-margin traffic is akin to re-arranging the deckchairs on the Titanic. Some 25% by weight and 50% by value of traffic moving 750-2000+ miles still moves by highway and there is a HUGE iceberg of watershed trucking productivity gains looming. Shifts to an e-commerce retail economy are not a negative: large-scale movements from international producers to e-commerce DC's still occur and increases in the package sector helps railroads, even in medium-distance corridors, as long as they provide good service. Isn't it better to become more efficient and use the 80/20 rule to focus on the biggest bang for the buck so that you can most effectively meet the real, huge coming challenges? Unless you're advocating for changes much bigger than for-profit railroading and in the political and economic arenas.
QB 52.32 wrote:You're assuming that smaller intermodal trains automatically give you a speed advantage and are necessary for market share growth. CSX's intermodal train velocity has improved ~10% since PSR implementation including during periods of bad weather and peak demand. As long as you maintain horsepower:tonnage ratios, understand and manage to your customers' requirements, match infrastructure and infrastructure investment to the operation, and, deploy and invest in appropriate supporting technology, there's nothing to say you can't accomplish the same, if not more, with PSR than a system simply based upon running smaller trains (and with less long-term, riskier investment). I would also argue that as you become more efficient, your lower costs provide the opportunity for growth through greater penetration of existing markets or entry into new markets by overcoming structural railroad network barriers or allowing greater investment throughout the entire intermodal system.From today's news wire
And moving tonnage on fewer, longer trains also reduces fuel consumption. The practice better matches horsepower to tonnage and keeps locomotives running in their higher power range, which is more fuel efficient, Corbin says.Unless I'm misunderstanding something here, this is saying lower HP:Ton.
rr503 wrote:Look, there's a lot of the PSR theory that I like. But you've gotta admit that CN, CP and CSX under Hunter were disasters -- and not just in the short term, either. Hunter left CN something just short of an inoperable mess, with a disreputable safety culture to boot. You say the apology tours at CN were just for cracking the eggs while making the omlette, but the man was CEO for, what, ten years? Hardly the immediate disruption apology I'd imagine.With the kind of nitpick-proof results of 11% and 28% operating ratio improvement, 61% and 27% revenue growth, and 68% and 11% injury rate reduction at CN and CP, respectively, how could anyone admit anything except that he was successful? CSX is still in play, but certainly the 2nd year results look good and EHH deserves credit for setting the table. What I would allow is that one might debate the efficacy of his shock-and-awe methods (which we'll be able to compare over the next couple of years to the different ways PSR is now being implemented at KCS, NS and UP), or, the human costs, fairness, etc., but that's much bigger than EHH or railroads.
But let's lay aside Hunter for a sec; he is the human straw man. The issue with a singular focus on OR is that it discourages growth.
Take UP and BNSF. BNSF has been growing strongly for a while; UP not so much, despite their superior route structure. Driving that seems to be the fact that BNSF is a lot more flexible in its drive for profit. It doesn't reduce everything down to isolated, at-the-time-of-transaction efficiency questions, and thus allows itself to incur short term inefficiencies in pursuit of more traffic. So while UP can boast some ridiculously low OR (and, IINM, higher profits), BNSF has a larger traffic base, which means less risk, and more room to exert price pressure than its competitor -- which, to me, seems the more valid long term strategy. If traffic wasn't changing all that much, if railroads could rest on their laurels, then this'd be less of an issue for UP, but with the decline in coal and the inexorable increase in the volume of high value-added goods, railroads are gonna have to start playing a stronger hand when going after new traffic, lest their magic OR of 50 be off of a 4 dollar revenue base. It's that old adage: no pain, no gain.Your take on BNSF and UP over emphasizes what you think is a more growth-aggressive posture, missing the impact of network characteristics over route structure, both carriers' behavior including UP's 2018 growth rate in general & for intermodal 2.5 times that of BNSF, and the real results that BNSF's traffic volume and base is not less-risky than UP's (arguably the opposite). As easy as applying your no pain, no gain adage to "growth", you can just as well apply it to PSR. And, in the instance of your growth theory, I'd say only an addict would accept chronic pain for gains that could very well lead to amputations and shorter mortality.