Too Cheap?

Too Cheap?

Copyright 2003, Traffic World, Inc.

Despite being "asked to leave" the Atchison Topeka & Santa Fe Railway in the mid-1960s for backing a plan that would have taken market share away from trucks, Amtrak President David Gunn has sympathy for the freight railroads in their quest to build the infrastructure needed to provide customers with better service. He just doesn''t agree with the way they''ve gone about trying to attain the needed investment.

Speaking at a Transportation Table luncheon in Washington, D.C., on May 23, Gunn explained that although Amtrak has made progress since he was hired last year to cut costs and make the organization more accountable, obtaining needed revenue will be an uphill battle for the freight railroads as well as Amtrak. "We''re having trouble with our infrastructure but the freight railroads are in real trouble," Gunn said. "We run on their track. We know what''s going on out there. There is gradual congestion building up and there is deterioration of infrastructure. The nation faces a serious problem: you''ve got a mode that moves 40 percent of the national tonnage, but takes in 7 percent of the freight bill."

He recounted a recent trip by an Amtrak employee on Union Pacific Railroad between Jefferson City and St. Louis, Mo. "It took him four hours to go 125 miles," Gunn said. "There were outlawed trains sitting around, (trains) pumping ballast, slow orders. And that line has 40 to 50 trains a day. This is a serious problem."

Gunn said he was hesitant of being too critical of the freight rail industry because the way to run a business is a matter of philosophy. "But if I had to criticize strategy, I''d say they tend to focus on trying to be the cheapest mode, as opposed to an inexpensive and very reliable mode."

In other words, what the railroads should have done was take advantage of their capacity to run high-speed trains "and focus on precision but high rates for that particular service - high rates meaning being very close to truck costs."

Whereas railroads in the past have worked hard to save money and get costs down, Gunn said, "now they''ve got themselves in a position where the volume is growing and they don''t generate enough cash to provide adequate plant and equipment. There are places all over the country where you need multiple mains and extra sidings, and they don''t have the cash to put it in."

The introduction of guaranteed service by the railroads and the "different speeds for different needs" philosophy of Burlington Northern Santa Fe Railway has attempted to address the issue. But Gunn pointed out that freight railroad market share is still stuck at 40 percent.

"I don''t have any simple solution but I do know you need some equality of treatment (from the government) between the modes or you''re going to lose a big part of the rail network," Gunn said. "Shippers would be much better off if the railroads had a little more cash to work with on their plant and equipment."