CONRAIL UNVEILS CAR HIRE PLAN

CONRAIL UNVEILS CAR HIRE PLAN

Consolidated Rail Corp. is pushing a plan to revamp the often contentious system by which railroads and private owners of railcars settle on rental prices for railcars.

The proposal would eliminate federal regulation of car hire rates but establish a complaint procedure for handling disputes over pricing. The plan was outlined by Ralph von dem Hagen, Conrail vice president of customer service, at the Rail Equipment Finance conference here.Car hire rates - the prices paid by railroads to private car owners for the use of their cars - currently are regulated by the Interstate Commerce

Commission.

Grain shippers and coal shippers that provide freight cars contend that payments for their cars are too low to justify investment in needed capacity. Carriers, on the other hand, say car hire rates can stimulate unnecessary investment in cars.

Conrail's plan involves a bid-and-offer auction system for use of private cars, to be handled through the Association of American Railroads' Universal Machine Language Equipment Register system, a computer database currently used to maintain equipment information.

The Interstate Commerce Commission has allowed railroads to negotiate car hire rates for some types of cars, such as intermodal cars. For a large segment of the railcar fleet, however, car-hire rates at set by a formula.

Major railroads complain that the commission's car-hire formula is unrealistic and distorts the market. Smaller railroads and private car owners maintain that some sort of federal overview of the car-hire system is needed to ensure that they are properly compensated for their investment.

Negotiations have been going on for several months in an effort to develop a compromise to present to the government. Conrail believes its solution will satisfy everyone's concerns.

"It's very much in the interest of carriers and in the interest of a seamless transportation system for customers to get this done," Mr. von dem Hagen said.

Conrail's "de-prescribed" car-hire system would allow car owners to deprescribe portions of their fleets voluntarily over the next 10 years. This would allow for a transition in the industry, Mr. von dem Hagen explained.

New cars would not be subject to federal car-hire formulas. Those cars already subject to the formulas could continue to use them. There would be no link between car-hire rates and freight rates.

Using the railroad Universal Machine Language Equipment Register system, car owners could set the amount they want to be paid for use of cars. Users would specify the price they arewilling to pay.

If the user's offer is greater than the owner's minimum amount, that would become the settled rate for the car. If the user's price is less than the owner's asking price, the owner would be notified and the two parties could try to negotiate a price. While negotiations progress, the user's offer price is paid.

Arbitration could be invoked by users or owners to settle disputes. During arbitration the average of the user's offered price and the owner's asking price would be used.

Mr. von dem Hagen said the Conrail proposal would not only settle car-hire rates but also would encourage investment in rail equipment.

He indicated that Conrail is willing to talk about its proposal with other railcar interests. He made it clear, however, that Conrail would not support a system that could be used "as a protected or guaranteed shelter for any interests."

Mr. von dem Hagen said Conrail will not accept a car-hire system that: encourages "game playing" with bidding rules; does not treat all cars and carriers equally; puts restrictions on freight rates; does not have a "phase- in" period, or discourages bilateral agreements.

If a car-hire system opposed by Conrail ultimately is proposed to the government, his company will advocate complete car-hire deregulation, Mr. von dem Hagen indicated.