Western Railroad Discussion > Did UP waste its money on 2T and 3T-ing?

After looking at all the numbers posted here on UP's current train counts on both the Sunset Route and NE Transcon, it makes me wonder if they didn't waste a lot of money double-tracking and triple-tracking these lines. For instance, on the Sunset, train numbers average in the mid-30's (formerly 50-55/day) and peak in the low 40's, certainly not needing any doubletrack. And even the once-mighty Transcon is maybe 60-80 trains most days (formerly 140-160/day), easily handled by doubletrack and not needing tripletrack. With UP's seeming disinterest in growing the franchise (including intermodal) due to PSR, and the fast drop in coal that will most likely never return, were they too quick to spend billions to add capacity along these routes? Should they altogether quit the rest of the DT on the Sunset Route, or even do the unthinkable and rip up the third main across NE? Lots of savings to be had there for today's masters of puppets (not Metallica), the Street's short-sighted investors! If still needed, then why? What could possibly replace lost business or justify keeping such excess capacity for future use? Of course, they would say it was needed at the time, but maybe they were short-sighted then and the new-normal means it's not needed anymore? Time to "rightsize" the infrastructure? Things that make you go HMMM...

JG



Edited 4 time(s). Last edit at 07/21/19 15:57 by jgilmore.

They spent a bundle on Blair Cutoff improvements and ended up with one really nicely lengthend
siding, a straightened out hill, and some nice ready for track row, doesn't appear to be money well
spent.

Out

Train counts stalled, service never reached the levels necessary for non-bulk shipper needs, and UP has been questioning the value of intermodal, especially LTL traffic, quite a while before the PSR craze took off. BNSF has been aggressively growing their franchise (not always successfully, but nevertheless with a growth paradigm); UP has been hesitating for quite some time. UP just doesn't get the service side of it running a railroad, and that is what the future growth markets require. UP's future based on market share and growth is not rosy.  Profitable for now, but not building the necessary infrastructure, nor restructuring operations, to meet non-bulk needs.

Bruce



Edited 1 time(s). Last edit at 07/21/19 15:49 by StStephen.

jgilmore Wrote:
--------------------i-----------------------------------
> After looking at all the numbers posted here on
> UP's current train counts on both the Sunset Route
> and NE Transcon, it makes me wonder if they didn't
> waste a lot of money double-tracking and
> triple-tracking these lines. For instance, on the
> Sunset, train numbers average in the mid-30's
> (formerly 50-55/day) and peak in the low 40's,
> certainly not needing any doubletrack. And even
> the once-mighty Transcon is maybe 60-80 trains
> most days (formerly 140-160/day), easily handled
> by doubletrack and not needing tripletrack. With
> UP's seeming disinterest in growing the franchise
> (including intermodal) due to PSR, and the fast
> drop in coal that will most likely never return,
> were they too quick to spend billions to add
> capacity along these routes? Should they
> altogether quit the rest of the DT on the Sunset
> Route, or even do the unthinkable and rip up the
> third main across NE? Lots of savings to be had
> there for today's masters of puppets (not
> Metallica), the Street's short-sighted investors!
> If still needed, then why? What could possibly
> replace lost business or justify keeping such
> excess capacity for future use? Of course, they
> would say it was needed at the time, but maybe
> they were short-sighted then and the new-normal
> means it's not needed anymore? Time to "rightsize"
> the infrastructure? Things that make you go
> HMMM...
>
> JG

Some of these questions make sense, others don't. My understanding is the 3rd track in Nebraska isn't going anywhere in the short term. But I'm fairly certain the idea of pulling up portions of it and sending the ties and rail down to the Sunset Route in AZ or CA has been kicked around. It will depend on projected coal volumes. Remember some of UP's coal loss over the last 3 years is due to BNSF offering a lower contract rate on business UP had.

The Sunset Route NEEDS a second main line or extended sidings at various locations between Niland,Ca and east of Gila Bend,Az. UP does well against BNSF in the LA Basin - Ft Worth/Dallas lane and pretty good to Marion,Ar. They will expand on these strengths. But they'll have to get over the cold feet they have on LTL shipments ( non UPS/FedEx), where late delivery penalties come into play.

As I said before we may get an idea of how aggressive they will be once the "remodeling" of LATC is complete.

Allen

Posted from Android



Edited 7 time(s). Last edit at 07/21/19 21:55 by bradleymckay.

Union Pacific may have decided that the opportunity to use the investment tax credits and accelerated depreciation in the 2017 Tax Bill made sense, even though the market isn't there right now.

The opportunity to use tax credits drove a lot of corporate decision making.   UP  have a shopping list of improvements.  So they may be thinking long term, very long term.

Pennsylvania Railroad electrified its NEC and bought a slew of electric locomotives during the Great Depression.  The offer of very low cost loans, which were paid back, was a huge incentive.  Even though traffic volume was at an ebb.

One thing to remember is that tracks periodically need to be unavailable for trains due to maintenance and inspection requirements, and that additional tracks can lessen the impact of these operations. 

maybe increased capacity should have been done sooner.........

66

LTCerny Wrote:
-------------------------------------------------------
> One thing to remember is that tracks periodically
> need to be unavailable for trains due to
> maintenance and inspection requirements, and that
> additional tracks can lessen the impact of these
> operations. 

Yes, of course. My point wasn't that excess capacity is necessarily bad, esp. for operations. It's that PSR doesn't look too kindly on such "wasted" assets. Since the jackals on Wall St are dictating everything to railroads these days, how long until they demand excess mainline capacity be cannibalized in the name of short-term profits? For example, no 35-t/p/d line needs complete double-track when service is clearly not the priority! Recent history makes one believe the roads will cave in this regard...

JG

Posted from Android

The rush to question capital expenditures on multiple track and longer sidings overlooks the fact that operation of PSR-type 150-250 car trains without this second track and long sidings is impossible.

The UP three track main east of North Platte can work well with 70-80 trains a day.  Imagine one track out of service for maintenance and allowing track gangs a full day of work while maintaining the ability to run trains in both directions.  This keeps traffic on the "Precision Schedule" and saves crew costs for dogcatching on a long crew district.  Assuming competent dispatching, the three track main east of North Platte delivers substantial cost savings to UP every single day.   BSB

A better question to ask is why UP poured so much money into rehabbing the KP line east of Denver. At the time it seemed to be a good investment. Now it could be described as a head scratcher.

These decision's were made with the best available info UP had at the time...

Allen

Posted from Android

Why in the world would UP have "cold feet" about LTL shipments, or penalties for those trains being late.  Why would they worry??  Remember, they are now running a "Prescison Scheduled Railroad."  They can now schedule every train, precisely, on their railroad.

 

Train counts may be down, but is tonnage on those lines down? If they were run 60 trains a day at 6500' average, they may be only running 40 trains a day at 10,000' average. It's still the same amount of traffic. But it wouldn't be possible without the double and triple track.

Ted Curphey
Ontario, OR

Give it time.. everything cycles. It'll all come back in time.

Posted from Android

coach Wrote:
-------------------------------------------------------
> Why in the world would UP have "cold feet" about
> LTL shipments, or penalties for those trains being
> late.  Why would they worry??  Remember, they
> are now running a "Prescison Scheduled Railroad."
>  They can now schedule every train, precisely, on
> their railroad.

Because there is a conflict between what UP offers verses what the LTL shipper wants. Then throw in details of the contract agreement, which, depending on the shipper, can have serious late delivery penalties, which can blow up the expected rate of return. There is a good reason why so many of UP's "Z" trains became "I" trains...

The domestic container/trailer business is pretty tough for the railroads right now in many lanes. The international marine container shipping industry isn't exactly doing great either and hasn't been for awhile.

Allen

Posted from Android



Edited 1 time(s). Last edit at 07/22/19 12:48 by bradleymckay.

A couple years ago I questioned Lance Fritz at a town hall meeting as to WHY in the world they were wasting billions of dollars in our capital every single quarter to buy back stock.  I told him that this may be good for the short run share price, but it fails to add REAL shareholder value in the form of a better railroad, tracks, ties, equipment, capacity.  As an example, I figured that the entire OSL could be double tracked from Granger to Oregon for the cost of a couple quarters of share buybacks that year.  He laughed and told me that "The OSL doesn't have enough traffic to justify double track!"  

I firmly believe that UP is making a huge mistake that will haunt us until the day that the last train rolls.  What he fails to see is that we don't have enough traffic BECAUSE we don't have more double track!  We live in an age of instant gratification.  People want their goods now, not next week.  Trains can't adequately compete with trucks on single tracked railroads and that is why we are bleeding market share.  Trains can make excellent time across the system, even at 50mph.....as long as they don't stop.  When you start to throw in numerous siding meets, especially in restricted sidings at 15mph the time rapidly adds up and it takes 12 hours to get across the district.  We need double track in many places to get the traffic to come to us.....Lord knows it's already there, just rolling by us on the interstate at 70 mph.  The problem in America, it seems, is that there is always the money available to add lanes of interstate, but never enough to add rail capacity.  No,you won't be able to sit down with a calculator and calculate the return for shareholders next quarter, but if we don't invest in some modern infrastucture we may not have a railroad to even invest in 20 years from now.

ALthough Wall St may dictate how much return on investment and dividends they expect, hopefully, there's still enough real railroaders in charge that know you can't reliably run trains with 30 year old locomotives on track that hasn't been maintained in years.  Nor can more and/or longer trains run on single track lines that don't have the capacity to handle them efficiently.

From the management perspective, when it comes to capital spending, I think railroads come in dead last in terms of 'fore sight' and 'ahead of the curve' planning and spending.  Maybe bankers are the slowest.  RR management is not going to commit to a $20, 100, or a 300 million capital expense over 3-5 years unless there already is a clear need AND probable benefit/profit from that expense.  As a result, they have to be somewhat 'reactionary' and the need for double tracking, for example, becomes painfully obvious as they can't get trains over the route on reliable schedules due to lack of trackage.  I call it 'management by disaster'.  It isn't a problem until it's a disaster then some 'white knight' comes to the rescue.  It permeates all large corporations.

Back to RRs...The next step is to set up one or more committees to 'study' the idea for a year or so, and hopefully come up with a reasonable number on how much it will cost, how long it will take to accomplish, then how long before any benefits (read $$$) are seen.  Then it has to be 'sold' to every level of management, all the way to the board of directors and CEO.  In corporate America, -everyone- in upper management has to agree that it's a good project, will generate more revenue, and benefit the stockholders.  If there's someone sitting on the fence, then they have to 'go to work' and convince them.  THEN it gets put into the capital spending 'blue sky' schedule of major projects to start.  So far, maybe 3 years have already been spent from someone realizing there's a need for the project until management finally decides to do it.  It might be yet another 2-5 years before the first years' allocation of money, maybe 20% of the total, gets allocated in the corporate budget and then the design engineers come in and start engineering the project for the next 2-3 years, assuming the money keeps coming and the 'backers' of the project haven't retired or left the company.  FINALLY, maybe 5-8 years after the idea first popped into someones' head, they let the contracts for construction and the bulldozers start moving the dirt.  Maybe 6-8 months later, the first mile of 2nd track is in service.  

So, after maybe 8-10 years expended, the project has gone from idea to 1 mile of new track with plans to lay 100 miles per year or however long it takes after that.  By then, it's quite possible that the expected increased amount of traffic has evaporated or dropped off dramatically.  Look at the rapid decline of coal trains in the past 10 years.  Or look at the spike in oil trains only to largely evaporate 5-6 years later.  What looked like a sure thing 5 or 10 years ago is now miles and miles of stored cars and locomotives.  Now throw in the general economy and it's cyclic swings from boom to recession to bust and then back again about every 10 years or so.  How does that affect the number of new automobiles carried by the RRs, or new washing machines? 

In our personal lives, how many times have we seen 'the sure thing' only to have it fall apart too soon.  I have 2 ex-wives that fit that category as well as a couple of significant investments that went bad in my lifetime.  Does anyone have a crystal ball that correctly predicts the future 100% of the time?

Edit: I should have mentioned 'maximum load' handling.  The electric company has to have enough operating generating stations to handle the heatwave that finally let up here in New England today.  The rest of the time, they're running at perhaps 75% of their total capacity.  How much 'extra capacity' does the railroad need?  How much 'extra capacity' will PSR and the wolves at the door allow?  Also consider 'resiliancy' to get things back to normal after a wreck blocks the main lines for 2 days, or major blizzards tie up Chicago for the winter.  PSR promoters want neither excess capacity nor resiliency.  They want the bare minimum needed to run todays' freight loads.  I shudder to think how bad-off railroading will be in another 5-10 years.  I wouldn't be surprised if it looks like the good old days of the '60s and '70s with 10 MPH trains and daily derailments after Wall Street has sucked the railroads dry.



Edited 1 time(s). Last edit at 07/22/19 15:12 by BRAtkinson.