Is this any way to run a railroad?
Here’s an example of what happens when all your eggs are in one (or two) baskets. There were 45 Class I railroads in the U.S. prior to deregulation in 1980 by Congress. Now, thanks to mergers and acquisitions, there are only seven, and only the Union Pacific and Burlington Northern Santa Fe operate west of the Mississippi. The result? You guessed it. Headaches.
Kelly Taylor, who heads up the Oregon Department of transportation’s rail division, describes the pain this way: “It’s a lack of competitive access that the shippers are really suffering from.”
To ensure profitability, she pointed out, the long haul lines employ a service they call “demarketing”. “They will raise rates in order to push business to other modes. It’s their way of congestion control, so to speak,” she said.
A vice president of sales and marketing for Roseburg Forest Products, which operates nine plants in Oregon employing 2,600, said there are few viable alternatives in rail service, making his company a captive of Union Pacific. Consequent increased rates , surcharges and a lack of cars all are having a negative impact on business, the VP said.
Monica Isbell, a transportation consultant based in Portland, conducted a survey of 21 Oregon companies dependent on rail service, and she offered these findings:
• All but one of the shippers experienced service problems with the railroads, some indicating that these issues were severe, long-standing and persistent. Problems included an insufficient supply of cars, failure to deliver empties when needed, loaded railcars that are not picked up from the rail spur when requested, delays in getting shipments to customers, sometimes forcing discounts or cancelled orders, and unresponsiveness of the railroads in solving problems.
• While rail service has declined over the past few years, rates have increased, often dramatically.
• Service from the shortlines was rated slightly higher than the Class I lines by respondents. Isbell said shippers understand that the shortlines often are unable to make improvements because of the service failures of the Class I lines. (A Class I railroad is an interstate line with annual operating revenues greater than $ 256 million annually. Shortlines operate intrastate.)
“Most of these companies feel powerless to change the situation, and they are afraid to complain for fear it could jeopardize further their already substandard service,” Isbell said. All the shippers believe service will worsen, or at best, remain the same, she added, “… because they don’t believe the railroads will invest enough to meet the growing customer demand”.
‘Captives’ and ‘cornering the market’ … “That’s America, I guess”, a shortlines official remarked.
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