Western Railroad Discussion > How about leasing 1.76 miles of track to make millions?

Bill Stephens commentary in this months Trains magazine has almost left me speechless.  CN called Watco and said "have we got a deal for you!".  Lease 1.76 miles of track from us 20 miles south of Baton Rouge and service 9 chemical plants that ship 35,000 car loads a year. Watco accepted , sent in 3 engines and went to work.   CN did this because the plants wanted more and "timely switching" which CN did not want to provide.   Norrnal switch fees are $200 a car and folks, that is $7,000,000 a year .

I know shortlines pay less than the big guys for labor but, man, CN's actions just don't make sense to me.  Their switching just had to be profitable.

Comments?



Edited 1 time(s). Last edit at 06/07/21 11:45 by tomstp.

Maybe it made "bad" metrics in terms of crew starts per GTM or something.
Or CN was tired of the chemical plants calling and requesting/complaining about service.
The article did not make sense to me either.
Maybe "facts not in evidence".

tomstp Wrote:
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> I know shortlines pay less than the big guys for
> labor but, man, CN's actions just don't make sense
> to me.  Their switching just had to be
> profitable.
>
> Comments?

Profitable, but not profitable enough. Railroad accounting: if you want to make $50 million profit but only make 10...you have lost 40 million. Making zero is better than losing 40.

TAW

Taw, it seems we see a lot of that especially with PSR.

The pay and benefits package for a shortline employee is a LOT cheaper then the one for a Class 1 employee.
For CN it's cheaper to pay WATCO to do it for them.

This is the big thing in business right now.. Just do the one thing that has the best return.   Its not about flexibility or service.  In fact, they hate flexibiliity, cause it involves uncertanty.  IDK when business became so anal, but they just want everything predictable, to the point of absurdity.

The pendulum will swing back some day.....someone will miraculously come up with the idea of flexibility and customer service, like its never been heard of before.

Also, IMHO, from what Ive seen...between the insane amount of work rules and poor labor relations..id say it can take a class 1 crew 3 times longer to do a switch, than a shortline or regional crew. Im not saying all class 1 crews are like that, but Ive seen some crews outlaw on what would normally be a 4 ot 5  hour job...



Edited 1 time(s). Last edit at 06/07/21 00:13 by pdt.

The cost to put an operating crew member or a few  on the ground  working the plant isn't worth the money they have in them they figure?

I used to work near a UP yard so I would frequently go there for lunch when a train that originated there usually left. It would regularly take a half hour to set out a bad order car.

pdt Wrote:
-------------------------------------------------------
> This is th big thing in business right now.. Just
> do the one thing that has the best return.   Its
> not about flexibility or service.  In fact, they
> hate flexibiolity, cause it involves uncertanty. 
> IDK when business became so anal, but they just
> want everything predictable, to the point of
> absurdity.
>
> The pendulum will swing back some day.....someone
> will miraculously come up with the idea of
> flexibility and customer service, like its never
> been heard of before.
>
> Also, IMHO, from what Ive seen...between the
> insane amount of work rules and poor labor
> relations..id say it can take a class 1 crew 3
> times longer to do a switch, than a shortline or
> regional crew. Im not saying all class 1 crews are
> like that, but Ive seen some crews outlaw on what
> would normally be a 4 ot 5  hour job...

And the class one railroads themselves are primarily to blame for this.  They have made it their mojo to tie both hands and feet together on train crews while they try to do their work.

TAW Wrote:
-------------------------------------------------------
> Profitable, but not profitable enough.
> Railroad accounting: if you want to make $50 million profit but only make 10...you have lost 40 million.
> Making zero is better than losing 40.

Real life they are choosing between making $10 million and making $0. But I can see some railroad executive labeling that as a $40 million loss, even though they are creating a $10 million loss by turning away the business.

I assume in this case CN is still making a lot of money delivering cars to Watco for final delivery and spotting.



Edited 1 time(s). Last edit at 06/06/21 22:27 by justalurker66.

PHall Wrote:
-------------------------------------------------------
> The pay and benefits package for a shortline
> employee is a LOT cheaper then the one for a Class
> 1 employee.
> For CN it's cheaper to pay WATCO to do it for
> them.

I call bullshit on that. 6 Million!?!? I’m sorry but that dog don’t hunt.🙄
This is just a PSR NUMBERS(I hear the word “metrics” one more time I’m gonna puke) game.

Posted from iPhone

justalurker66 Wrote:
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> Real life they are choosing between making $10
> million and making $0.

Right. I have seen the scenario I described too many times to think it is hypothetical.

TAW

tomstp Wrote:
-------------------------------------------------------
> Bill Stephens commentary in this months Trains
> magazine has almost left me speechless.  CN
> called Watco and said "have we got a deal for
> you!".  Lease 1.76 miles of track from us 20
> miles south of Baton Rouge and service 9 chemical
> plants that ship 35,000 car loads a year. Watco
> accepted , sent in 3 engines and went to work.  
> CN did this because the plants wanted more and
> "timely switching" which CN did not want to
> provide.   Norrnal switch fees are $200 a car and
> folks, that is $6,000,000 a year .

35,000 cars/year * $200/car = $7,000,000/year, assuming each car is switched once. Do they get paid for spotting the empty cars? If so, then it is $14,000,000/year. How many of the plants have their own switchers or Trackmobiles? What do they get for interchanging cars with an in-plant railroad?

It would be interesting to know how many CN employees
were displaced by the lease.  Displaced is a nice management
word for "lost their jobs".  Union wage and benefit jobs.

Next, CN can start leasing their yards to shortlines.  Any regulations
or union agreements to prevent this from happening?  PSR phase
two. Watch the RCO's and hamstringing "safety rules" disappear and
efficiency magically increase.

Then the main lines in the few remaining heavy industrial areas will be next. 

Sad when a railroad can't perform one of the industry's basic operations.
Something is VERY wrong.  

 



Edited 2 time(s). Last edit at 06/07/21 04:39 by Englewood.

What has taken them so long?  Contact switching has been happening along the Houston Ship Channel for 40 years.  The service is superior and the risk of unintentional releases is lower.  When your making methyl ethyl death unintentional releases are a very big deal.

Bob Wilcox
Charlottesville, VA
My Flickr Shots

Englewood Wrote:
-------------------------------------------------------
> It would be interesting to know how many CN
> employees
> were displaced by the lease.  Displaced is a nice
> management
> word for "lost their jobs".  Union wage and
> benefit jobs.
>
> Next, CN can start leasing their yards to
> shortlines.  Any regulations
> or union agreements to prevent this from
> happening?  PSR phase
> two. Watch the RCO's and hamstringing "safety
> rules" disappear and
> efficiency magically increase.
>
> Then the main lines in the few remaining heavy
> industrial areas will be next. 
>
> Sad when a railroad can't perform one of the
> industry's basic operations.
> Something is VERY wrong.  
>
>  
I would agree with this, and add two pieces.

1) the cost of this still profitable service is now transferred to Watco. That makes CN earnings forecasts more stable.

2) CN willingness to outsource profitable business will play well in the KCS merger.

Posted from Android

TAW, Lackawanna, Englewood.
I agree 100%, have seen this where I work. It is happening on other carriers as we speak. In Modern Railroading bizzaro world making less revenue is GOOD as long as less money is being spent too. Here’s the basic math.
If a job can be cut or a yard closed and engine’s put in storage, employees cut off and a Million dollars “saved” thats success. If 15 million in revenue is lost that doesn’t matter because the operating revenue numbers look better for the quarter. I’m not making this up.
Now, anyone with a 6th grade education might ask how in God’s name is this business model sustainable? Doesn’t matter. The OR is on the right path, the stock price is in the stratosphere, and the whiz kids in the Chrystal Palace are getting ready to exercise all those stocks and be hailed as genius’s on the cover of Railway Age. If, on the other hand you don’t have millions in company stocks, live in reality, and have a modicum of experience and knowledge of the industry and what is happening to it, you live with the shooting pain’s down the left arm and a growing love of alcohol.
Also, if in management and you don’t subscribe to the insanity you will be branded a heretic and subjected to scorn and ridicule.
You’re results may vary.

Posted from iPhone

sounds it might be worth considering shortlines as an investment possibility..............

66

The WC was so successful CN bought them. If the Class Ones would hustle all those locomotives and people would be really putting a hurt on trucking.
 

EricSP Wrote:
-------------------------------------------------------
> I used to work near a UP yard so I would
> frequently go there for lunch when a train that
> originated there usually left. It would regularly
> take a half hour to set out a bad order car.

that's not a horrible time. Figure you have to untie the train. Pull the train up to the bad order, secure the train and do a release test. After that cut the train, set the car over where ever they want it. Secure it and do a realize test if needed. Put the train back together. Take off your hand brakes, pump up your train. Do a class three air test. Now you are ready to go. Hell a half hour is a great time.