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WSOR To Sell Controlling Ownership to Watco Companies, LLC
MILWAUKEE, WI, November 29, 2011 — The Wisconsin & Southern Railroad Co. (WSOR) and Watco Transportation Services, L.L.C. (Watco) announced today that they have mutually approved an agreement whereby Watco will acquire controlling ownership of the WSOR. The WSOR will join forces with Watco Companies, a family of short line and regional railroads across the nation offering a multi-faceted transportation business model dedicated to providing the highest level of customer satisfaction. The acquisition will allow the WSOR to expand its footprint throughout the Midwest, seek out new markets and cost effective routings for Wisconsin businesses, while maintaining the same level of service and commitment to the State of Wisconsin and its shippers that have defined its 30 year history.

The WSOR will remain an integral part of Wisconsin’s economy and is expected to play an even greater role in moving commerce safely and efficiently with the expected merger. William Gardner will remain as president indefinitely and looks forward to the upcoming challenges.

“Our state’s future prosperity depends on an efficient and well-maintained rail system with access to a multitude of markets for Wisconsin’s own raw materials and finished products,” stated WSOR president William Gardner. “Together, Watco Companies and the WSOR will play a vital role in meeting the growing needs of our customers and communities that rely upon rail as their primary means of transportation,” Gardner added.




Under the agreement, the WSOR will retain its existing corporate structure including its name and all operations necessary to serve its customers. WSOR headquarters will remain in Milwaukee, Wis., where dispatching, customer service and other administrative functions will continue. Correspondingly, any and all operating/grant agreements with state and local units of government will remain in effect. The WSOR will continue operating under the WSOR name and provide outstanding service to Wisconsin communities and rail customers.

“This transaction is positive for all involved. Our employees and customers, and the communities in which we operate will benefit from the synergies created between Watco Companies and the WSOR,” stated James Lombard, vice president of marketing and sales at WSOR.

“We are thrilled to have the WSOR join our growing family of railroad companies all sharing a common vision of customer satisfaction,” said Rick Webb, Watco’s chief executive officer. “Our Customer First! focus is the backbone of our business model and together our two Midwestern-based companies will foster dynamic partnerships with various public and private sector partners engaged in moving freight safely and efficiently,” Webb added.


“Our two organizations are going to be very complimentary working together as one,” Webb said. “The WSOR team has an excellent history of service to their customers that everyone can and should learn from.”

Watco Transportation Services filed a change of control notice with the Surface Transportation board today which is expected to become effective by the end of December. The projected date of the transaction is Jan. 1, 2012.

The WSOR is a regional railroad operating over 600 miles of track throughout south central Wisconsin and northeastern Illinois. Headquartered in Milwaukee, Wis., WSOR directly connects within the state with the western Class I railroads BNSF, Canadian National, Canadian Pacific, and Union Pacific. With access to the Belt Railway of Chicago, WSOR connects with the eastern Class I railroads CSX and Norfolk Southern. WSOR also has access to harbor facilities on the Mississippi River at Prairie du Chien and maintains several transloading sites within its system. The WSOR has terminal offices in Madison, Janesville & Horicon and employs 250 people. The WSOR is Wisconsin’s second largest railroad.












Watco Companies, L.L.C., based out of Pittsburg, Kan., is a privately held transportation services company operating more than 3,700 miles of track in 26 states. Watco is America’s largest privately-held shortline railroad company, operating 23 short line railroads, with more than 2,200 team members. Today, Watco operates 14 railcar repair shops, 4 locomotive shops and 19 mobile mechanical shops. The transload and Intermodal Services division currently manages 16 transload facilities, 7 warehouses and 1 intermodal location. For more information on Watco Companies, please visit www.watcocompanies.com.

As long as nothing changes their appearance and morals. It's going to be alright!

It is interesting how the 'giants' throw away sections of railroad as unprofitable, and then small start ups grow and become bigger.

"Our employees and customers...will benefit." I don't know how it is to work for the Wisconsin and Southern, but I have worked for Watco. I can't imagine any other outfit being as lousy to work for as Watco was. The lack of equipment maintenance, lack of rules compliance, etc. was simply appalling. I have a feeling the once proud W&S is heading straight down the drain.

"It is interesting how the 'giants' throw away sections of railroad as unprofitable, and then small start ups grow and become bigger."

There is a lot more to it than you'd think. First, regionals and shortlines generally have much lower labor costs than the Class 1s. This is not to say they are all a bunch of non-union outfits, because many are unionized and operating under collective bargaining agreements. But the pay does tend to be lower, and significantly at some operations, where starting pay for a conductor may be as low as $10 an hour. Second, regionals and shortlines often qualify for grants and loan guarantees not available to the Class 1 railroads. There are specific programs set up to preserve rail service in many states, as well as at the federal level. Many of the improvements that make the WSOR the impressive system it is today came through significant grants from the state of Wisconsin.

The Class 1s are mostly interested in long haul traffic, which is much less labor intensive than working branches and low-speed secondary lines. This is one of the biggest drivers of casting off branchlines. Rather than pay a 3-man crew to trundle around on a branch, spotting industries, and switching cars, they spin the line off for pretty much all the reasons in the first paragraph. Not saying it's right or wrong one way or the other, and you'll get different answers depending on who you ask, but this is essentially what the modern rail industry has boiled down to, much as the airlines rely more and more on regional partners to bring their traffic to the larger hubs for long haul flights.

I also think the growth you note comes from a mentality of "Well, they're working this branch, we could give them this one, also" when you're looking at a region with numerous branches, such as the areas of Wisconsin where the WSOR operates. The regionals and shortlines are generally eager for the work and have no problem with hiring more people, whereas many Class 1s are trying to keep their ranks as thin as possible.

Mike Derrick
http://www.shortlinesusa.com

I actually agree with what you say. When I first moved to Washington State in 1978, I think there were 4 BN switchers stationed in Wenatchee. I don't know if there are any now. I believe that what little fruit trade didn't go to trucks is handled by the Cascade & Columbia River (CSCD).

However, I wonder how much of this traffic was driven away by the big railroads, just because they wanted to only deal with long haul, inter modal, just stop for crew change and fueling jobs. I can remember debates 10 - 15 years ago about how the railroads might make more money if they would spend a little more time worrying about the local producers.

Of course, that isn't so much of an issue these days, since many producers have been moved overseas by the big corporations, and little guys have been driven out of business by government regulation and cheap competition. It seems that it is only lately, with the groundswell (finally) of "Build it in America" that there is a glimmer of interest in serving local industry. Most of this interest in serving that industry seems to come from short lines.

Barry

There is no doubt a substantial amount of carload traffic has been chased away by the Class 1s. If the company even still has a siding, if they want a single car a month based one what volume of business they do, it'll be a tough sell to get a Class 1 interested in it, let alone even find a single car for hire. I know one at least of our Class 1s sees switches from the mainline to an industry as nothing more than a liability. It's a place for a passing train to derail, a switch to be tampered with by vandals, or possibly be left open after a switching move. Therefore, if you are going to have a siding from a mainline to your industry, you can imagine what level of shipping it would take to convince the company you're going to generate enough revenue to exceed the liability of having a spur into your facility.

I will say, however, the Class 1s have done a good job encouraging transload operations. What seems like a company who may no longer ship by rail after their siding was removed may actually be trucking their product 10-20 miles away to a bulk facility where it is then loaded on freight cars. These terminals are appearing more and more on both the Class 1s and regionals/shortlines, and are essentially the modern replacement for what used to be a sea of spurs throughout industrial areas. Much more freight is being shipped in domestic containers, as well.

Mike Derrick
http://www.shortlinesusa.com