Rail service has slipped because of bad weather and cost-cutting that have left railroads without enough train crews to operate trains or switch railcars frequently, shippers told an investment bank conference on Wednesday.
“We’re paying rates 20, 30 percent higher than we were three or four years ago and the service hasn’t gotten markedly better,” said Richard Lissa, director of logistics management at Formosa Plastics. “The question is, are we getting the service we’ve been promised by the railroads?”
Lissa spoke during a shipper panel discussion at Dahlman Rose & Co.’s fourth annual Global Transportation Conference in New York that suggested some of the transportation economy is being stalled by service issues.
He said railroads trimmed workforces during the recession and haven’t restored crews quickly enough. He said reduced switching schedules have stretched delivery times for companies that can’t afford to hold inventories.
Lissa said trucks aren’t an option for his company’s bulk products, and reduced switching has magnified delivery delays. “If a plant got switched five days a week, it dropped to three cays a week. Or if they switched three days a week, they drop to two or one day a week,” he said.
“Now, if the car is 12 hours late and its only getting switched twice a week, and it misses the Monday switch, that guy doesn’t get switched until Thursday,” Lissa said. “Just imagine if you were flying somewhere and you missed your connection and instead of them saying, ‘We’ll put you on the next plane, which is two hours later,’ they said, ‘Gee, I’m sorry, the next connection is three days from now.’ You’re going to run out of socks.”
Wayne Johnson, manager of global carrier relations at Owens Corning, said his company has had to divert shipments to truck because of floods and other weather problems. He said high water kept trains out of a Memphis plant for weeks.
Johnson said railroads’ need to reroute trains around Midwest floods left railroads short of crews. Railroads mitigate the problems, he said, but “they’d have to get more crews in there, which costs them more money, and they’re not willing to do it at this time.”
Peter Gilbertson, CEO of Anacostia & Pacific, said his short line has encountered service problems, some apparently related to flooding. He said the situation has improved recently but that in one case, a Class I railroad partner couldn’t provide crews for unit coal trains bound for his line.
Two short-line executives who spoke with Gilbertson in a panel discussion said, however, that they’d had no problems with their Class 1 rail partners.
John Levine, president of Arkansas-based Pinsley Rail, said CSX and Union Pacific provide “very good” service. Terry Towner, president and chief operating officer at Watco Companies, praised major railroads’ cooperation. “You can’t blame the Class 1s for the weather and the flooding,” he said.