Shippers Get Their Chance to Bitch

Senior executives from the biggest U.S. and Canadian railroads presented their plans for handling freight during the peak season this fall to a standing-room-only crowd of nearly 500 shippers at a forum on Thursday, September 9^th, 2004 in Kansas City. Railroad  customers from around the country attended the program sponsored by the Association of American Railroads at the Kansas City Airport Marriott hotel. The program, the first held by the association since 2000, was in response to shipper complaints for the past several months that deliveries are bogging down and being delayed. Union Pacific and CSX are  among the railroads that have faced the biggest congestion issues.

Shippers at the forum complained that unpredictable service hasn't gotten much better. They said they're worried that even small disruptions can ripple through the network to  worsen congestion. The nation's largest railroad companies said they're ready for the peak season, but the assurance did little to ease the crowd.

"When you're at capacity, there just isn't much  wiggle room," said Richard C. Walters, manager of North American distribution for Air Products and Chemicals Inc. Doug Kratzberg, rail transportation  manager for Exxon Mobil Corp.'s global services unit in Houston, said Union Pacific Corp. and Fort Worth-based Burlington Northern Santa Fe Corp. missed 10 of 14 car-switching appointments during a recent two-week period.

The railroads' presentations were similar to reports they filed with the Surface Transportation Board earlier this summer. Rail executives provided statistics on train speed, hiring plans and rail cars on their system. Surface Transportation Board chairman Roger Nober also spoke at the program.

Kansas City Southern, for example, indicated it had added 52 locomotives, boosting its fleet 10 percent since the start of the year. In addition, it has hired more conductors through the first half of the year than it did in all of 2003.

Burlington Northern Santa Fe Railroad, the countries second-biggest carrier, has added 3,700 flatcars and hired nearly 1,800 employees so far in 2004.

Still, as the economy heated up, congestion became a  problem in the rail industry. When demand for rail services grew, parts of the country experienced bottlenecks, which led to delivery delays, switching problems and empty rail cars taking longer to return to their proper location.

Nober said railroads must balance the needs of individual shippers with the constraints on the overall system. But balancing became more difficult, he said, as the economy improved sharply and railroads  faced the uncertainty of the grain harvest and a heavy influx of imported products. "All of the major carriers are in an aggressive hiring and training mode," he said. "But it's not that easy to add new resources in the rail industry. It's not an industry that can easily turn on a  dime."

Although Thursday's session dealt with current service issues,  Nober said the railroad industry faces a long-term problem regarding boosting capacity to meet customer demand. The cost of capital for railroads exceeds the return of investment by about 50 percent industry-wide, he said. For publicly owned companies, "that's going to be a constraint on investment," Nober said. "It hits railroads more because they're so capital-intensive."

After their presentations, rail executives answered questions from the customers, representing 340 companies that rely on railroads to move their goods. Most of the questions came from shippers reporting problems in the Gulf Coast and Southwest, where much of the congestion has been reported. In both regions, a Union Pacific executive said, operations are beginning to improve. "You'll see continuous improvement in train velocity during the peak season in California, Arizona and Nevada," said Dennis Duffy, the company's executive vice president of operations. "It'll continue into 2005." (Abstracted from The Dallas Morning News and The Kansas City  Star)

Posted: 09/13/04