1 / 14

An Era of Change

An Era of Change. Richard F. Timmons Minnesota Regional Railroads Association July 19, 2005. Economy. U.S. – Strong and Sustainable International Trade and China - Fueling Growth Coal, Grain, Steel, Housing, Petroleum, Gen Merchandise

tamar
Download Presentation

An Era of Change

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. An Era of Change Richard F. Timmons Minnesota Regional Railroads Association July 19, 2005

  2. Economy • U.S. – Strong and Sustainable • International Trade and China - Fueling Growth • Coal, Grain, Steel, Housing, Petroleum, Gen Merchandise • Imports/Exports – Forecasts are Strong; Long Beach 26% Above 2004 • New Orders Growth Previous 12 Months 6.8%* • Industrial Production Growth Previous 12 Months 3.1%* • ISM Manufacturing Index PMI 57.1* • Manufacturing Production Growth Previous 12 Months 3.5%* • Industrial Capacity Utilization 79.2%* • Consumer Confidence Index – Up 105.8 – 3-Year High • Unemployment Rate 5.1%* • Trucks – Labor, Fuel, Environmental, Insurance, Highways, Public Pressure, Safety = Opportunities • Port Congestion – Slow and Getting Worse • Highway Congestion – Systemic Nationwide and No Solutions • Rail Capacity? Class I’s Peaked Out; Short Lines No Problem; Targeted Investments Ongoing • No National Transportation Plan – A Governmental Disgrace * Federal Reserve National Database

  3. Railroad Renaissance as a Result • New Demands for Railroads and Improved Service – Up 4.7% Ton Miles (Billion) • Market Opportunities Due to Economic Resurgence and Truck Issues • Record Car Loads – Up 3.1%; Intermodal – Up 6.4% • Record Revenues • U.S. Rail Stocks Up 22.42% for 2004-2005 • New Hiring – Up 4.17% • New Equipment • More Locomotives • New Investment– ROW, Yards and Terminals • Revenue Ton-Miles (Trillion) Up 7.2% • Revenue Adequacy (?) • Network Data Interdependence – Trains and Trucks • Greater Security and Oversight at the Federal Level • Capacity Concerns for Rail

  4. Network Productivity Changes Rail Network of Class I Railroads Locomotives – Class I Railroads -26% Ton-Miles per Mile of Track Owned(millions) -38% +170% Miles of Track Owned (000) Locomotives (000) Class I Personnel Average Revenue per Ton-Mile1(1980-2003) -66% Index(1980 = 100) Number of Employees (000) Nominal Locomotive Productivity Changes Real +128% Personnel Productivity Changes Ton-Miles per Locomotive (millions) +400% Ton-Miles per Employee (millions) Industry is Uniquely Poised • We have prepared for 25 years: • Mergers/Acquisitions Within the Industry – Streamlined, Smaller and Modernized • 66% Workforce Reduction Since 1980’s (155k) – Workforce Productivity Up 400% • Loco Fleet Down 26% - Productivity Up 128% • Rail Network Down 38% (170k miles) - Productivity Up 170% • Freight Rates Down 21% Since 1980 • Infrastructure Investments in Billions • Rail Traffic Up 70% • But, Revenues per Ton Mile Reduced by 60% • Intermodal Revolution • Technology Innovations • Car Ownership Migration • Environmental Improvements/Advantages • Professionalism of the Workforce • Unchallengeable Safety Standards, In Percentages and Events / Incidents • Short Line Explosion Since Staggers Act – 545 and Growing Source: Association of American Railroads

  5. The Class II / III Slice • Volume - > 9.4 Million Carloads; 1.8 Million Intermodal • Revenue - > $2.8 Billion • Customer Expansion > 11.2k Facilities; 1.3 Million Employees • Investments – RRIF Loans $409 Million; 6 Loans Pending • Class I’s Revenue from SL’s – 18%-24% to Bottom Line • Fuel Tax Elimination - $15-20 Million Per Year to SL’s • Feeder/Distributor Network Expansion • Preservation of 50K Miles of Freight Lines (30% of system) • Infrastructure Upgrades – New Federal Tax Credits • Expanding Technology Solutions for Shippers and Class I’s • The Holding Company Syndrome – RailAmerica, G&W, WATCO, OmniTRAX • Increasing Impacts on the Freight Network

  6. Minnesota Railroading • Short Line/Regional Railroads: 15 • Total State Miles Operated: 4,526 • State Miles Operated by Class II / III: 1,207 (27%) • Number of Cars Handled: 180k • State/Local Taxes: $1.2 Million • Trucks off Highways: 590,000 • Pavement Damage Avoidance: $56 Million • Facilities Served: Approx. 350

  7. The Short Line Formula • Service and Responsiveness Above All • Asset Utilization • Work Force Adaptability and Competence • Flat Local Management Structure • Equipment Availability • Flexibility • Stringent Cost Controls • Decisive • Safety • Entrepreneurial

  8. Setting the Conditions for Success • Tax Credit • RRIF • Fuel Tax Elimination • RIWG Industry Issues Forum • Class I Annual and Caucus Meetings • ASLRRA Annual and Regional Meetings • ASLRRA and AAR Teaming – NARA, RR Day on the Hill, Legislative Conference, Safety / Ops Conference, SOMC / NEMC, TTCI • Federal Forums – STB, FRA, RSAC, RSTAC, DHS, TSA, DOL, EPA, Congress

  9. The Way Ahead • Infrastructure Upgrades – 286K lb Cars • Security Related Challenges –Communications, HAZMAT Protection, Regulatory Efforts, Terrorism, New TSA / DHS Field Stations & Inspectors • Seamless Service... • Employee Retirements Through 2012 (80K) • Training • Capacity? • Car Availability? • Class I Relations • Insurance • Federal Issues • Rate Challenges

  10. End Notes and Thoughts for Class I Partners • Have we identified where we must improve together? • Do we agree and are the initiatives in priority? • Have we worked on solutions to real problems? Do the results equal revenues? • Have we focused on eliminating manual procedures where practicable? • Are we building trains to avoid unnecessary handling, switching, dwell and, longer routing as a systems approach to the operating plan? • Service, Service, Service! As a team have we examined every conceivable factor in the service equation and polished it again – car plans, trip plans, ISA’s, routing, switching, blocking, reporting, technology, support, commo, customer focus and feedback, crews, power, cars, coordination, discipline and accountability?

  11. End Notes and Thoughts (Cont’d.) 7. Are we jointly investing for the future? In the right area? At the right location? Where do we think we want to be in 5-10 years? 8. Can we measure what we are doing? If so, what are we learning? Are we sharing it? What are we doing to improve together as partners? No pabulum – Real initiatives as partners...that makes money! 9. Is our industry really committed to an attitude of constant change in the dynamic marketplace of today and the future, or are we simply content and excited with the unprecedented revenues of the moment? 10. Can Class I’s make decisions fast enough for both Class I’s and SL’s to reap economic benefit? Can we get inside the competitors decision cycle? If not, the marketplace will punish us both.

  12. Paradigm Shift? • The traditional Class I / II / III focus on carload volumes as the business objective for railroading may have shifted. • For the Class I’s it may now be quality and revenues as the model. • And for the Class II/III it may remain traditional volume. • If true, what does it portend for the short line industry and the revenues the Class I’s have come to expect? • What does it mean for railroads and shippers in Minnesota?

  13. If we have not seriously considered these questions within our own companies, and as partners the future may have surprises we should know about and think through now.

  14. American Short Line and Regional Railroad Association “The Voice of America’s Independent Railroads”

More Related