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Railcar 101 The Basics of Railcars: Car Types, Components and Rules

Railcar 101 The Basics of Railcars: Car Types, Components and Rules. Acquisition and Maintenance Options Carol Scarborough. So you need some Railcars…. What are my options? Order railcars from the railroad Buy railcars Trip lease (or borrow) some railcars from others on a temporary basis

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Railcar 101 The Basics of Railcars: Car Types, Components and Rules

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  1. Railcar 101 The Basics of Railcars: Car Types, Components and Rules Acquisition and Maintenance OptionsCarol Scarborough

  2. So you need some Railcars… • What are my options? • Order railcars from the railroad • Buy railcars • Trip lease (or borrow) some railcars from others on a temporary basis • Lease railcars • Full service lease • Net lease DTE Rail Services, Inc Maintenance Management Seminar

  3. RailcarsWho Provides the Assets Shipping By Rail Increasingly Means Owning/Leasing Your Own Cars DTE Rail Services, Inc Maintenance Management Seminar

  4. Acquisition of Railcars byRailroads and Private Car Owners 2006 total new cars = 74,729. The most cars acquired since 1998 (75,685) Source AAR Policy and Economics Department DTE Rail Services, Inc Maintenance Management Seminar

  5. How the U. S. Freight Car Fleet Changed Source AAR Policy and Economics Department DTE Rail Services, Inc Maintenance Management Seminar

  6. RailcarsOwnership/Maintenance • Railroads are pushing capital investment in cars to their customers • AAR will increasingly implement stricter standards on railcar maintenance with higher penalties • Wheel impact load detectors • Acoustic bearing detectors • Truck hunting detectors • Revised Car Repair Billing Rules allow for specific pricing of repairs based on responsibility and why made codes DTE Rail Services, Inc Maintenance Management Seminar

  7. RailcarsOwnership/Maintenance • Railcars represent a new set of factors for the shipper • Acquiring/subleasing/disposing of railcars • Lease/ownership strategies • Maintenance • Administration • Fleet planning, distribution and management Analyzing and controlling these costs is a key factor in rail economics DTE Rail Services, Inc Maintenance Management Seminar

  8. Components for Furnishing Railcars DTE Rail Services, Inc Maintenance Management Seminar

  9. What does my railcar really cost? DTE Rail Services, Inc Maintenance Management Seminar

  10. Auditing Rental • Lease Invoices • Monthly Rental Charges • Delivery (on rent) dates • Termination (off rent) dates • Shop Credits (rental abatement) DTE Rail Services, Inc Maintenance Management Seminar

  11. Auditing Mileage • Mileage Credits • For loaded miles paid by railroads • Apply as offset against rental • Excess Mileage Charges • Vary according to lease • Limit of miles for calendar year • Offset increased maintenance expense DTE Rail Services, Inc Maintenance Management Seminar

  12. Auditing Mileage (continued) • Mileage Equalization • Apply to tank cars only • Cars usually return in reverse of loaded movement • Charges apply if empty miles exceed loaded miles by 106% on annual basis • Verify that railroads are not running up excess empty miles DTE Rail Services, Inc Maintenance Management Seminar

  13. Auditing Transportation • Transportation Charges • Delivery into service • Use prior lessee’s last free empty move • Lease Termination • Be sure to follow loaded movement for free empty return • Negotiate termination location at the beginning of the lease DTE Rail Services, Inc Maintenance Management Seminar

  14. Auditing Transportation (continued) • Transportation Charges • Costs to / from shops • If net lease use shops on loaded route • If full service lease work with lessor to use shops on loaded route • Use empty move after loaded move when possible DTE Rail Services, Inc Maintenance Management Seminar

  15. Auditing Transportation (continued) • Transportation Charges • Out of route charges • Use free empty repositioning movements when possible • Verify that the route charges is for the route that was issued to the railroad • Try to negotiate contract rates with railroads DTE Rail Services, Inc Maintenance Management Seminar

  16. Maintenance Responsibilities • Net Leases • Lessee responsible for all maintenance • Full Service Leases • Not always “full” • Usually AAR running repairs and FRA requirements DTE Rail Services, Inc Maintenance Management Seminar

  17. Maintenance Responsibilities (continued) • Lessee’s responsible repairs: • Linings • Cleaning • Removable car parts • outlet caps, valves, dome covering, fittings, gates and hatches DTE Rail Services, Inc Maintenance Management Seminar

  18. Other Administrative Tasks • Possible Lessee’s responsibilities: • Net lease • UMLER registration • Remarking of equipment • Ad Valorum tax reporting • Insurance DTE Rail Services, Inc Maintenance Management Seminar

  19. Conclusion • Railcar fleets are expensive • There are several options for obtaining railcars • Be sure to compare all options and responsibilities: • Does your company want to invest in assets long term or have a short term need? • Do you have the manpower and expertise to manage the assets? • Do you want to outsource some or all of the management? • Do you have a strategy for disposing of assets at end of term? DTE Rail Services, Inc Maintenance Management Seminar

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