Western Railroad Discussion > BNSF's Rose rips PSR

http://trn.trains.com/news/news-wire/2019/01/08-class-is-mum-on-bnsf-chairmans-criticism-of-precision-scheduled-railroading?utm_source=Yesmail&utm_medium=email&utm_campaign=News_TIN_190111_00000

Always had great respect for Matt Rose

And thus we are witnessing the difference between a stockholder-held railroad and a privately-held railroad. PSR espouses the Friedman Doctrine (look it up), whereas Mr. Buffett and Mr. Rose still believe in service and corporate responsibility in society. === === = === JLH



Edited 2 time(s). Last edit at 01/11/19 09:33 by highgreengraphics.

Good for him to tell what customer service is all about and not being a Lemming. 

Highgreen, exactly my thoughts too.

One thing Rose hit on deserves more attention.  That all this PSR stuff could lead to re-regulation.  The STB basically let small shippers be ignored although they did let them testify at a hearing but, nothing came of it.

As UP moves deeper into the PSR mode, and with their new hire of Jim Vena, plus JOC e-zine noting that UP will be existing more intermodal lanes (ie: Denver-LA), BNSF with a service-oriented paradigm should be poised to pick up more traffic, even in lanes that they don't have the best route structure (again, Denver-LA, but possibly I-5 corridor traffic).  Rose gets the long-term picture in terms of growth/market share, as does BH, and hopefully that stays after he is gone. 

Bruce

highgreengraphics Wrote:
-------------------------------------------------------
> And thus we are witnessing the difference between
> a stockholder-held railroad and a privately-held
> railroad. PSR espouses the Friedman Doctrine (look
> it up), whereas Mr. Buffett and Mr. Rose still
> believe in service and corporate responsibility in
> society. === === = === JLH

Could not have said better myself. Kudus to Mr Rose. It's the Burlington Northern Santa Fe way!

SantaFeRuss

Santa Fe way? Wasn't it Larry Cena who said the whole place was for sale?

Posted from Android

Krebs/Rose? They were from the Santa Fe. Not Burlington Northern. BN or ATSF could not have survived on their own in the railroading environment of 1995 moving forward. Corrections are welcome.

SantaFeRuss



Edited 1 time(s). Last edit at 01/11/19 12:03 by SantaFeRuss.

Rose was BN.

Posted from iPhone

SantaFeRuss Wrote:
-------------------------------------------------------
> Krebs/Rose? They were from the Santa Fe. Not
> Burlington Northern. BN or ATSF could not have
> survived on their own in the railroading
> environment of 1995 moving forward. Corrections
> are welcome.
>
> SantaFeRuss

Ooopsies... Matt Rose came from the BN Burlington Northern!

Could also make an argument that Rob Krebs came from the Southern Pacific...

However, I do agree, to an extent (they might have survived, but maybe not thrived) if they hadn't merged.  I definitely believe BNSF would be much worse off now if they were not purchased by Berkshire Hathaway and taken out of immediate grasps of the massive greed and short sightedness of "Wall Street".  Hopefully, even after Mr. Buffet is gone, Berkshire Hathaway will keep thumbing their noses at those greedy "Wall Street" guys; it has served BH very well in the past to do this (I still remember hearing Mr. Buffet ridicule Wall Street, and their big "its a whole new market now and history doesn't matter" statements just before the tech bubble imploded back at the turn of the century.  Of course, Buffet had the last laugh.  I just hope there isn't something to Fred Frailey's article a while back that said that the person in charge of the railroad part (ie above Carl Ice) of Berkshire Hathaway is intrigued by PSR!

I posted a message on a thread over on the Eastern Board a few days ago as I also believe that if the "PSR" that all these Class Ones' are doing is anything like what Hunter Harrison did at CSX, then we are likely to see the re-regulation of the railroad industry.  I think there will be enough big corporations that will be mad enough (and have the money and political power to push it) to make the STB and Congress take action with new railroad regulations.  Already, over the past few years, there's been an increasing larger push for this.

If all this comes to pass, then I guess all one can say about it is that the railroads will deserve what they get.

PS... Matt Rose is going to be missed at the BNSF.



Edited 3 time(s). Last edit at 01/11/19 13:47 by spwolfmtn.

Sorry about my brief answer about Rose being from BN - I was in a restaurant and got cut off.

Yes, Matt Rose was from BN at merger, but only for a couple years.  He came to BN from Triple Crown truck intermodal service. Prior to that, he was with Schneider National truckload carrier.. He actually began his railroad career in 1981 as a corporate management trainee with the Missouri Pacific after he graduated from the University of Missouri.

Rose's time at BN was during a period when they were recovering from what amounted to PSR (although not branded by that name at the time) during the 1980s after the Frisco merger.  Indeed, that was where Hunter Harrison learned and started perfecting his philosophy of PSR before moving on to Illinois Central in the late 1980s.  I am sure that Rose learned a lot about the pitfalls of PSR during that time from many career BN railroaders, customers and others that had shaped the views that he has held as CEO.  



Edited 1 time(s). Last edit at 01/11/19 13:38 by czephyr17.

I am just glad to see someone speaking out against this abomination called PSR.  There is a reason BNSF is picking up so many employees from other Class 1's.  Is BN perfect in the way it deals with its unions?  No, but it is by far the best of the lot and in the way it is working to take care of the customers which will ensure employment for the rank and file.

BNSF does have an advantage in only having to answer to just one master, Berkshire Hathaway, instead of trying to please the various Wall Street traders.
Berkshire Hathaway seems to be in it for the long run while the traders are in it until the end of the trading day.

In the real business world, it doesn't matter what I, or probably any one else, thinks about PSR here on Train Orders, but I have liked the discussions and it allows me to learn more, especially from people on here that do have knowledge of railroad operations.  Most on here probably do not care what "PSR" (ie Precision Scheduled Railroading) by E Hunter Harrison (and what most Class One railroads are apparently adopting) really is.  No, its not really "precision scheduling".  All Class One railroads have had schedules for their freight trains for decades, if not more.  In addition, for decades, they have had computer programs that develop "trip plans" for all their cars from the time that a shipper releases it to when the railroad "thinks" it will get there.  However, the accuracy of the trip plans and train schedules are extremely far from precise.  Yes, Class One railroads tend to do a pretty good job for their top tier priority trains (ie on UP and BNSF, their "Z" trains (usually UPS is the primary customer here)), however, with all the trains below that, yeah, there isn't much attention paid to those, if any at all (every now and then, there are short bursts of trying to keep a schedule for lower tier trains, but that doesn't last long). 

Canadian Pacific is one I have been watching recently via the Revelstoke Train cam.  CP's train operations seem pretty easy to figure out as most are unit trains that do not operate on a daily set schedule.  However, out of the few non-unit trains CP does run, I have noticed very little "precision" in them going by the Rail cam as one would expect, about the same times each day (except for their WB flagship train, #101 which seems pretty predictable).  Now, Canadian Pacific was definitely one of Hunter Harrison's "PSR" railroads, but I haven't seen much of a "schedule" for their trains that you'd expect to be scheduled.  It would seem like these regular manifest and intermodal trains would go by around the same time each day (Precision Scheduling).  I'm not criticizing CP and it's operations, I just do not think this "schedule railroad" hype that "PSR" feeds everyone is much different than the way railroads have been running before.  No, mine isn't a definitive research project, but I think it proves what I already know, and that's this:

"PSR" is really a massive cost cutting and an overworking of assets (they call it asset "efficiency") effort.  "PSR"'s real heart and core is cutting costs and capital so that profits are increased, stock prices then go up, and "Wall Street" is happy.  Then "Wall Street" sells the stock at a big profit and they take off and move on, but the railroad is left with little capital reinvestment, deferred maintenance, extremely low employee morale (more like very pissed off), etc.  In addition, the same can probably be said for many of their customers (the one's that are left are probably those that have to use that railroad's "service" because they have little practical choice).  Hunter Harrison was famous for literally telling customers to get lost because he didn't think they were profitable enough (notice, didn't say NOT profitable, just not how profitable as he wanted them to be!).  This is what I think is going to bring down the wrath of government and regulation on the railroads, if these Class One's go the Hunter Harrison "PSR" route.

It's interesting in how this Hunter "PSR" scheme is so self contradicting of what it says it is.  How can a railroad run a PRECISION SCHEDULED system when its assets (which includes its employees) are all worked and stressed to their maximums, leaving no room for the countless things that go wrong everyday in the operations of a railroad?!?!  I, for one who works for a railroad, can see no practical way a railroad can operate PRECISE, day in and day out - there are just way too many variables and things that happen out there in the real world that messes operations up.  A railroad would have to spend huge amounts of money and capital to have enough back up "systems" and procedures to allow it to run with precision.  While that sounds great from the stand point of a customer, etc, we all know it is not feasible and that this railroad would not be in business for very long.  The key is that there must be a balance, cut too far (as Hunter's "PSR" seems to do), and service, employees, customers, and communities will suffer (and eventually the stock of the company will too); but spend too much to be prepared for any situation that might arise would cost way too much and also destroy the company as well.  So a balance has to be met, one in which can maximize the best of both worlds.  Ideally, a real "Precision Scheduled Railroad" would be great, but the "snake oil" that Hunter has been selling, and what I fear many of the Class One's are now buying, is going to cause big problems in the future, not only in lost customers and good employees, but also in a new round or regulations that a number of very powerful companies are wanting to see take place even before this "PSR" snake oil made its rounds.

Yeah, I probably took up way too much space here and bored the hell out of some readers, and for that I apologize, however, I do have strong emotions in this (hey, it is my career), and I do wonder what the hell these railroads are thinking is going to be their future?!?!  With so many of their "cash cow" business disappearing (for example, coal - for obvious reasons, but also carload freight traffic, which railroads seem to be driving away), what are they going to do for business and customers in the future???  It is really, at least to me, starting to feel like some of the 70's again where people (ie some of these railroads' current managements and Wall Street investors) are just trying to get as much out of them as they can, so then the shell that is left is left their to rot and eventually collapse.  There appears to be no vision or plan for their future existence...



Edited 1 time(s). Last edit at 01/11/19 18:03 by spwolfmtn.

GNR1938:No, but it is by far the best of the lot and in the way it is working to take care of the customers which will ensure employment for the rank and file.
 Ah, they're gonna loooove you.

To spwolfmtn: Not boring at all, it's good to hear from the RRers out there and how they feel about the ongoing PSR Virus... In fact lately posts like yours are what I generally look for in PSR topics...

Posted from Android

PHall Wrote:
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> BNSF does have an advantage in only having to
> answer to just one master, Berkshire Hathaway,
> instead of trying to please the various Wall
> Street traders.
> Berkshire Hathaway seems to be in it for the long
> run while the traders are in it until the end of
> the trading day.

BNSF produces earnings and up streams them to its parent, Berkshire Hathaway. That saves the double taxation of paying taxes on earnings, and then having millions of share owners pay more taxes on the dividends.

But, it's not free money.  Berkshire pays taxes on its corporate earnings.  And, Berkshire decides where it will direct BNSF's earnings.  They could go to Lubrizol, or to Precision Castparts.  Or, See's candies.  BNSF presents a capital expenditure plan, and what it expects this investment will produce in a stream of earnings down the road.  If Warren, Ray, Todd, Greg, etc like it, they get the money.   If they don't like the plan, somebody else gets the money or it sits in their huge piggy vault.

I don't worship at Matt Rose's shrine.  It wasn't Precision Railroading that drove BNSF's decision to force the grain trade to build $40 million (in today's dollars) shuttle elevators and price the smaller country elevators out of the rail market.  North Dakota was a classic case of monopoly pricing in the grain trade.  No rail competition at the western end of the state.  Soo Line competed in the eastern part.  BNSF rail pricing for west coast export was higher in the west than it was in the east.  Elevators were trucking as much as 200 miles east to reach the cheaper rail market.  Personal experience as owner of Dakota Southern Railway.  In 1999, BNSF shuttle train pricing applied to an elevator they served directly in Mitchell, SD where DSRC interchanged.  The rate was restricted to elevators served directly by BNSF in equipment provided by BNSF.  The differential rate a shipper would have paid BNSF per car at Mitchell for west coast delivery, if the car was provided by DSRC, was more than what it cost to truck to Mitchell.  What actually happened is most wheat went north to the DM&E.  DSRC went out of the grain business.  A ten month attempt by another operator, Nobles Rock, ended in bankruptcy.  DSRC survived on switching boxcars in and out of a carton printing plant which had located near Mitchell.

Not an original idea, MILW was doing it in some markets prior to 1980, but DSRC had made its living by peddling cars to the small elevators, turning around and picking the loads back up to deliver to interchange as a unit train of 26 or 52.  All cars went to a single destination on BNSF.  Sometimes 52's were "exploded" east of Chicago and went to two different destinations.   
Alex Huff     

rantoul Wrote:
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> What makes one think the Wall Street grinder won't
> make hash out of Berkshire after the founders are
> gone?  They ground up and spit out the railroad
> industry in the 1980's and are doing it again now.

Yup. I'm not too worried about whoever succeeds Buffett and Munger, but beyond that, who knows? When the BRK shareholder demographics change in a generation or two, there will be new whiner-BRK-shareholders who'll want to install some lame "activist hedge fund manager, divest of BNSF to "maximize shareholder value," and so forth. BNSF will make a "triumphant" IPO and idiot Wall St. will celebrate that, then dismantle the railroad.