Trucks and trains are not the same

Trucks and trains are not the same

The seeming national pastime (forgive me, baseball commissioner Bud Selig) of complaining about rail service continues with some new and some old complainants.

UPS is transferring some service-sensitive traffic from rail intermodal service to all highway movement.

YRC Corp.'s Bill Zollars complains that rail intermodal service failures are affecting his company's ability to provide consistently reliable service to its customers.

Coal and utility customers regularly complain that railroads are putting expansion capital into intermodal routes and facilities - to the detriment of coal customers.

There are two different issues. The first - the quality and reliability of intermodal service - deserves attention. The second - how railroads make capital spending decisions - does, too, but not to the same degree.

UPS is a demanding customer. It pays premium rates and expects the railroads to provide precision service. But UPS has a problem: It competes vigorously with FedEx for premium customers that demand time-definite delivery of parcels and envelopes.

FedEx shuns rails. A nonunion company, FedEx has a lower wage cost than UPS and can afford to use team drivers in all-highway movements of premium ground volume, while UPS uses rail to compensate in part for its cost disadvantage.

UPS has pushed the railroads to provide a level of service that will allow it to compete. That service also taxes the railroads' capacity. When railroads had excess capacity, they were largely able to provide the service UPS required. Having agreed to the conditions UPS demanded, the railroads have no complaints. As one railroad marketing executive said a few years ago when asked why his railroad could provide superior service to UPS and not to others: "If the others pay me the way UPS does, I'd give them the kind of service I give UPS."

Today, though, railroads no longer have the excess capacity that allowed them to devote high-speed operations for UPS. High-speed trains, because of the required separation between preceding and following trains, soak up capacity rapidly. A few years ago, for example, UPS switched some business from BNSF to Union Pacific. When UP ran into its capacity problems in 2003, it paid UPS to take its traffic back onto the highway. UP just didn't have the capacity to satisfy UPS's demands.

UPS is a bit disingenuous when it says it is taking premium traffic off the rails and putting it over the road. In today's constrained capacity environment, it probably is the right thing to do, and the decision to do so probably only hurts some rail egos.

Mile- and two-mile-long trains do not behave the way trucks do. Passing or overtaking another vehicle on a highway is relatively simple. If moving in opposite directions, the trucks likely are on two-lane highways in which all traffic is moving in the same direction. If moving in the same direction, it is easy and quick to use directional signals, pull out to the left and pass the slower vehicle.

Rail operations are much more difficult. Most of the U.S. rail system is still single track. Dispatchers must plan for trains moving in opposite directions to pass and for faster trains to overtake slower trains. This only can be done where there are sidings that allow one train to leave the mainline and wait for a second train to pass. And trains are limited in length to the maximum length of siding.

With the growth of intermodal, certain kinds of traffic that once were highly sought now may consume so much capacity that shipper and carrier will be better served if they stay on the highways. The same could be said for YRC trailers. YRC uses intermodal because it provides a level of service at a price that it is willing to pay. If it didn't, those trailers never would see a railyard. Presumably, YRC is saving enough driver time and fuel to justify the slower speed of rail.

Coal shippers believe that every penny the railroads put into expansion of intermodal capacity is a penny that should be invested in coal capacity. It is not an either-or situation. As a network business, rail investment in track and locomotives benefits all customers. Railroads continue to invest in coal-specific projects, just as they are investing in intermodal projects.

Coal shippers must accept that they are no longer the customers that effectively keep railroads in business. Intermodal today produces returns that justify new capital investments. Utilities still are valued customers, but they no longer can dictate railroad strategy.