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  • Yes, Virginia (and Lisa), There IS a Railroad Industry

    Posted by David Foster on April 21st, 2011 (All posts by )

    There’s a Simpsons episode in which Lisa is on a nostalgia kick and is making a video on that theme…but real-world events keep getting in the way. For example, she is down by the tracks, doing an elegiac voice-over along the lines of “these lonely railroad tracks, where the trains come no more” when 4 or 5 diesel units thunder by with a mile or so of freight cars in tow.

    I was reminded of this episode by some recent discussions in the blogosphere and elsewhere. In debates about high-speed passenger rail, it’s pretty clear that many if not most people conflate “trains” with “passenger trains” and think of freight-rail, if they think of it at all, as a vestigial holdover from the railroads’ glory days. The many people who remark on U.S. passenger-rail inferiority vis-a-vis Europe rarely notice that the situation looks a bit different when it comes to freight. And in reviews of the new movie Atlas Shrugged–the principal protagonist of which is a railroad executive–there have been suggestions that it might have been better to switch the action to something more modern, rather than continuing the book’s focus on “1950s industries,” as one commenter called them, such as railroads and steel. One newspaper reviewer, describing the film’s setting, called it “2016 in an alternative retro-future where everything has the look of mid-20th-century modern, the Internet apparently was never invented (people still read papers!), and trains are how goods get from coast to coast.”

    Actually, there’s nothing very retro about goods getting from coast to coast via train. Here are some statistics on various transportation modes. Intercity domestic freight market share in ton-miles (2005 data) is 38% for rail, 25% for truck, and much, much less for air. And “coast to coast” and other long-distance routes are specifically those on which rail has the greatest competitive advantage. UPS, for example, ships packages going over 750 miles via rail when feasible.

    Lots of interesting data at the Association of American Railroads site. This report shows total rail ton-miles hauled as having increased from 592 billion in 1950 to 932 billion in 1980 to 1820 billion in 2007. And this analysis indicates that rail shipping charges are down by 54%, in inflation-adjusted terms, from 1981 (when deregulation occurred) to 2007…the same document contains a comparison of rail freight charges in the U.S. with those in other countries, showing our costs to be about 2:1 lower than those in France, China, and Japan. Intermodal (moving shipping containers or truck trailers on rail cars) has more than quadrupled since 1980.

    Sorry, Lisa.

    (Disclosure: I’m a stockholder/bondholder in several railroads)

     

    30 Responses to “Yes, Virginia (and Lisa), There IS a Railroad Industry”

    1. Cousin Dave Says:

      From what I’ve read, at least in the U.S., passenger rail service was never profitable for the railroads even during 1920-1950 glory days. They did pax service for the prestige and publicity, but freight was where they made their money. Given that, it’s no surprise that Amtrak is subsidized, while the freight lines still operate as private-sector entities.

      The nature of freight service does seem to have changed, and I suppose this is all part of eliminating operations that were of lower value. Last spring I spent some time walking around a former industrial part of the town I live in, and one of the things I noted was that there was at one time a vast array of spurs and sidings serving the various businesses that operated in that area. A lot of places, including some retail establishments, once had their own rail docks. Today, that’s all gone, and most of the service seems to be intermodal — they have a big rail yard at the airport where they move stuff from train to truck for local delivery. I guess this is more efficient than dropping off cars at various establishments in midtown, and it has the advantage of not blocking surface streets while they’re shuffling rolling stock around. There are still a few large industrial establishments that take delivery directly from the rail, but not many.

    2. Joseph Somsel Says:

      It seems to me that the biggest role for rail is to connect container ship ports to the hinterland. Consider the Long Beach, CA line to Chicago. To get an idea of the physical volume, stand in downtown Flagstaff, Arizona for an hour. You’ll see a long frieght train every ten minutes each direction highballing through town.

    3. David Foster Says:

      During the early days of railroads, the only alternative transportation was horse & wagon, so there was huge economic value in being able to bring goods/materials right to your factory or warehouse door rather than carrying them by wagon for even 5 or 10 miles…this was also true in the early days of trucking. Today, having your own rail spur will usually make sense only if you’re shipping/receiving multiple carloads on a pretty frequent basis.

      People don’t usually think about the words “startup” and “railroad” in connection with one another, but check out Railex, a fairly new company focused on fruit, vegetable, and wine transportation. They run 55-car unit trains, with very large refrigerated transload centers at each end, and provide integrated service and tracking via alliances with truckers for delivery to & from the endpoints.

    4. David Foster Says:

      Container freight from (and sometimes to) the ports is indeed a major market for rail.

      Journalists often refer to globalization as something brought about by the Internet, but in reality globalization, for better and for worse, is as much a result of the emergence of container freight as it is a result of communications & computing technologies.

    5. Dan from Madison Says:

      I can’t imagine how much grains, beef and pork would cost to get from the Midwest/Plains to the ports without trains.

    6. Michael Kennedy Says:

      I would like to be the guy who invented containers. I imagine it began as “piggy backed” trailers loaded onto rail flat cars in the 60s. I have also read a version in which it was a trucker who got the idea for the wheelless container.

    7. David Foster Says:

      Michael K…the individual generally credited with creating the container-freight industry is Malcolm McLean, although there has been some earlier uses of containerization. A little bit about McLean in my book review here.

    8. renminbi Says:

      The real biggy for the railroads is coal. We produce over a billion tons of it yearly, and almost all it goes by rail. The hundred car plus unit trains delivering it to the powerplants could not be replaced trucks, except at a prohibitive cost.

    9. Michael Kennedy Says:

      The McLean story is the one I had read but I wondered if piggy backing, which was a big innovation when I was young, was involved. I have a book on Otis. History of technology is one of my things and there is quite a bit of it in my history of medicine.

    10. Robert Schwartz Says:

      “EU Looks to Cargo Trains To Ease Load on Trucking” by John W. Miller in the Wall Street Journal on June 5, 2007 at Page A6
      http://online.wsj.com/article/SB118101646800824842.html

      Between 1995 and 2005, the percentage of European goods shipped by truck rose to 73% from 68%, while rail’s share fell to 17% from 20%. The rest goes by canal or, in the case of oil and gas, pipelines. In the U.S. in 2005, 42% of freight was moved by train and 33% by truck.

      The result, on Europe’s roads, is a big economic bottleneck. “European roads can’t handle the road traffic anymore,” says John Verschelden, a vice president at APM Terminals International, a company that unloads containers at the Port of Rotterdam. “Everybody is looking for easier connections, especially to Eastern Europe.”

      “America’s system of rail freight is the world’s best. High-speed passenger trains could ruin it”

      Jul 22nd 2010
      http://www.economist.com/node/16636101?story_id=16636101

      America’s railways are the mirror image of Europe’s. Europe has an impressive and growing network of high-speed passenger links, many of them international, like the Thalys service between Paris and Brussels or the Eurostar connecting London to the French and Belgian capitals. These are successful—although once the (off-balance-sheet) costs of building the tracks are counted, they need subsidies of billions of dollars a year. But, outside Germany and Switzerland, Europe’s freight rail services are a fragmented, lossmaking mess. Repeated attempts to remove the technical and bureaucratic hurdles at national frontiers have come to nothing.

      Amtrak’s passenger services are sparse compared with Europe’s. But America’s freight railways are one of the unsung transport successes of the past 30 years. They are universally recognised in the industry as the best in the world.

    11. Jim Bennett Says:

      Th real economic driver for rail passenger service always was and still is (where allowed) increasing the value of real estate along the line. It’s like a long horizontal elevator with a skyscraper on its side. When antitrust and later asset-stripping, and also zoning severed the economic link between land and rail, it no longer made sense. In Japan, where there is no zoning, the American-style interurban electric railway companies (which are also real-estate and retailing companies) continue to be profitable. Critics keep saying “but the rail operations aren’t profitable, they make all the money on real estate.” That’s not a bug, it’s a feature. Like saying “but the elevator’s not a profit center, they make all the money on the office space”.

      I remember the Kintetsu Railway station in Kyoto — it’s inside a department store that the company owns. You have to walk through the store to get in or out of the station. Really nice stuff — it’s hard to walk through without buying something. The Kintetsu equipment still looked a lot like American interurban equipment; it could have been running on the South Shore along with the old orange cars.

    12. David Foster Says:

      If the American railroads were government-owned, and investment decisions were being made via Congressional appropriations bills, does anyone think freight would get adequate attention?…Much more likely, the more glamorous passenger-rail would get the investment dollars, and freight would suffer increasing obsolescence and bottlenecks.

      One Chinese rail expert has critiqued the priority decisions in that country, arguing that there should be more attention to freight and less to H/S passenger rail…he even used a phrase like “playing with train sets” with regard to government officials…brave man!

    13. Anne Lee Says:

      I worked in the travel industry for many years 1965-1980. During those years I watched as our own pax service in/out of my town became so degraded even I would not use it. The cars were filthy, the union staff were lazy and rude, the food was nauseating. Not like the older days of pax rail travel when there were luxury cars available at a higher rate.

      TWO or even THREE classes of service is the fundamental piece to making pax rail service viable once more. On the lines that offer some type of express (or nearly express) service, and the opportunity to sit in clean comfortable cars with good food service those tickets sell. Once we have it out of our heads that Americans will be an easier amalgamation of humans to manage when they all learn to ride in the same car for the same rate–once we stop designing our pax services around that old 1950′s socialist model, we will be able to design/fund pax service that everyone wants. When we agree that mid range commute travel (500 miles +/-) provides a great opportunity for new rails and trains that travel at a speed comparable to going to the local airport, checking in, stripping down, waiting in line to board, boarding, waiting to take off and land, flying there and landing, picking up luggage, finding car, etc.–once we do what France has done–design a train that covers mid range distances in rapid time we will be talking about successful passenger rail service–not until. Because, what happens when speed is available? The cars fill up with 2nd and 3rd class passengers as well as 1st class ! You just have to recognize that I do not want to sit in someone else’s piss, I do not want to eat something nuked in a cellophane package, and I do not want to sit with knees to my chest for four hours. Once you recognize that I am willing to pay for that comfort and convenience–then you will DESIGN a passenger train system that sells tickets!

    14. renminbi Says:

      Very sharp analysis, Mr.Bennett.Japanese private passenger railways are the only large passenger train operations that are profitable. Gov’t run railways almost invariably lose money hand over fist. Excepting the Australian mining roads and the North American freight roads,no one makes money in the business.

    15. Robert Schwartz Says:

      “China’s Bullet-Train Plan: Not So Fast; Concerns Over Energy Efficiency, Too-Expensive Tickets Prompt Beijing to Order High-Speed Rail Fleet to Slow Down” By Brian Spegele in the Wall Street Journal on April 15, 2011 at Page A9.
      http://online.wsj.com/article/SB20001424052748703983104576262330447308782.html

      “China will begin operating its growing fleet of high-speed trains at slower speeds, the country’s railways chief said in an interview with state-run media, in the latest sign of trouble for the country’s most vaunted transportation project. … the decision will make tickets more affordable and improve energy efficiency on the country’s high-speed railways.

      * * *

      High-speed rail in China has grown steadily in scope in recent years. The World Bank estimated in a report last year that by 2012 China will have at least 42 trains with maximum speeds above 250 kilometers an hour and will have laid more high-speed railway than the rest of the world combined. China’s government has invested heavily in the projects as well: The Beijing-Shanghai line alone costs around $33 billion.

      … running trains above speeds of 330 kilometers an hour poses safety concerns and higher costs. At that speed threshold, wheels slip so much that you need bigger motors and significantly more electricity to operate. There is also so much wear on the tracks that costs for daily inspections, maintenance and repairs go up sharply. That’s why in Europe, Japan and Korea no operators run trains above 320 kilometers an hour …

      In the interview, Mr. Sheng said high-speed trains will begin operating at a maximum 300 kilometers an hour from July 1, compared with previous speeds of around 350 kilometers an hour. Many of the country’s intercity trains will operate at speeds between 200 and 250 kilometers an hour.

      … Trains operating at 350 kilometers an hour require twice as much energy as those operating at 200 kilometers an hour …

      Tickets for high-speed trains can be twice as expensive as the highest-class tickets on regular-speed trains. A high-speed rail ticket between eastern China’s Wuhan and Guangzhou, for example, costs 469 yuan, or about $70. That is prohibitively expensive for many Chinese, and has resulted in at least some trains operating almost empty, industry experts say.

      * * *

    16. David Foster Says:

      Since we’re talking about railroads, I’d like to take the opportunity to again recommend Linda Niemann’s book “On the Rails: A Woman’s Journey.” Niemann went to work for the Southern Pacific in the early 1980s, shortly after getting her PhD in English, and this is a memoir of high literary quality.

    17. David Foster Says:

      Forgot the link: my review of Niemann’s book is here.

    18. Steve Walton Says:

      From the “Railway Age” April 2011 magazine on my desk:
      For the week ending March 12,2011 major US railroads shipped a total of 508,992 carloads.
      of those:

      216,828 (42.6%) were inter-modal or containers
      131,915 (25.9%) were coal

      You would have to move lots of people to challenge freight volumes.

      One of the car-builders forecasts 48,495 new rail cars per year from 2011 to 2015.

      BNSF paid Berkshire Hathaway $2.25 billion in dividends over 13 months.

      Rail is still big business.

    19. Michael Kennedy Says:

      We have a small scale example of what happens when government chooses the routes here in Orange County. I used to take a commuter train called MetroLink from Orange County to Los Angeles. The medical school runs shuttles from the campus to the railway station mornings and afternoons. The commuter trains share the rails with freight and the schedule is only approximate. I went into LA twice a week and about 1 in 3 trips would miss the last shuttle because the train was late. Then I had to take a taxi.

      There have been discussions about improving the tracks which are single track for some distance. Orange County passed a sales tax increase ten years ago to improve transportation. The intent was to upgrade the freeways (Just north of Mission Viejo, I 5 has 23 lanes) but of course the light rail folks got a hold of about 20% of the money. A group of us (I was on the transportation commission of Mission Viejo at the time) suggested that this money be used to upgrade MetroLink which had a pretty good load factor.

      Here is where politics reared its ugly head. The mayor of Irvine, a small bore politician who is supported by his wife, a professor at the UCI medical school, and who has run for president a couple of times, came up with a plan for a light rail project to run from the railway station in Irvine to City Hall ! It would have a stop at UCI. The plan would go down the center of existing streets worsening traffic congestion. Fortunately, we got the thing submitted to the voters and it was sunk but there still has been no upgrade to MetroLink.

      My impression is that China has many of these ego projects that may collapse one day in the not too distant future.

    20. Joseph Somsel Says:

      I’ve taken several several long Amtrak trips over the years, last about 15 years ago, Chicago to LA, SF to SLO, SF to Denver and back. Rode the Hummingbird Special from Cincinnati (via Kokomo) to Mobile once as a kid by myself – that was an adventure!

      Traveling first class is indeed a delightful experience. The maintenance was lousy but the service was a delight relative to coach air. Forget schedules though. Three major groups of passengers at the time – Europeans on a pass seeing the country, the neurotics afraid of flying, and the clinically obese who couldn’t fit in an airplane seat. (I was neither.)

      Thanks for the subsidized trips, fellow taxpayers!

    21. NedLudd Says:

      Here is how passenger train travel worked for me. When working in Chicago’s South Loop, taking the train was the best way to go. At worst, it was 1hr15 minutes for a local to West Chicago or Bartlett. However, when I lost my position there, I ended up with a temporary job in Detroit which I used the AMTRAK because it was the cheapest and I could leave my car in Detroit. For eleven months weekly this is what I did.
      1) On Sunday, pack by 1:30 so my wife could take me to the Bartlett station because the 2:30 train was the latest I could take to make the AMTRAK. Running time; 1hr 15 min.
      2) At 3:45, I walked across the platform and bought a ticket to the 6PM AMTRAK, I waited until just before then to board.
      3) At 6PM was departure. It was generally on time. Running time to Dearborn; 5 hours. Seldom was it on time. A number of times the rest rooms were unkempt and stock was not added for holidays and other times of increased travel. One time in winter, the train just lost power on the Michigan-Indiana border for an hour and a half. No explanation given.
      4)Arrival in Dearborn was usually 11:30 to 1:30. Travel 30 minutes to where I was staying. Usually arrived at 12:30. Repeat the opposite trip every Friday.

      Total travel time 2PM to 12:30AM; Approximately 10hr 30min. TRavel time by car; 5hr 30 minutes. Unless you have to do this for necessary reasons or pleasure, AMTRAK makes no sense.

    22. foxmarks Says:

      Even more of a throwback, there is still a river barge industry, too. They’re expanding from their bulk cargo niche to container-on-barge.

      When someone uses “diversity” and “choice” as justification for some silly passenger rail scheme, I like to request we also build canals. In ton-mile terms, water-borne transport is the most friendly to the environment.

    23. Michael Kennedy Says:

      As bad as that Amtrak was, especially restrooms, the French RER to Versailles takes some sort of record. I was taking three teenaged girls through France for several weeks in 2006. Going from car to car, I noticed some newspapers on the floor of the connecting link and realized just in time that tucked in the newspaper was a pile of human feces. The girls stepped daintily over and got another lesson about France. That was the worst and the TGV was quite nice although I’ve usually slept through my trips on it.

    24. Robert Schwartz Says:

      Another Report from China.

      For God’s sake, Please, Nobody tell Tom Friedman. He would be so upset.

      “China’s train wreck” by Charles Lane, in the Washington Post on Friday, April 22, 2004:

      For the past eight years, Liu Zhijun was … minister of railways … On Feb. 25, he was fired for “severe violations of discipline” — code for embezzling tens of millions of dollars. Seems his ministry has run up $271 billion in debt … But ticket sales can’t cover debt service that will total $27.7 billion in 2011 alone. Safety concerns also are cropping up.

      * * *

      The fact is that China’s train wreck was eminently foreseeable. High-speed rail is a capital-intensive undertaking that requires huge borrowing upfront to finance tracks, locomotives and cars, followed by years in which ticket revenue covers debt service — if all goes well. …

      Japan’s bullet trains needed a bailout in 1987. Taiwan’s line opened in 2007 and needed a government rescue in 2009. In France, only the Paris-Lyon high-speed line is in the black.

      This history counseled caution about introducing bullet trains in China, where the typical passenger was still a migrant worker, not a businessman rushing to a meeting. To be sure, there was an economic case to be made for upgrading China’s lumbering rail system: It would free up limited rail capacity for freight trains, thus reducing truck traffic on congested roads. Beijing’s initial feasibility studies envisioned the gradual introduction of trains that would move at a maximum 125 mph …

      * * *

      In 2004, the State Council signed off on Liu’s plan to build the world’s largest high-speed-rail network by 2020. The first leg, a 72-mile stretch between Beijing and Tianjin, would open in time for the 2008 Olympics.

      … the Beijing-Tianjin line, built at a cost of $46 million per mile, is losing more than $100 million per year.

      * * *

      Meanwhile, in the United States, Obama’s high-speed rail plan, originally set at $53 billion over six years, has gotten a thorough democratic vetting. Three freshly elected Republican governors spurned federal dollars for high-speed rail, fearing a long-term burden on their budgets; homeowners in liberal Northern California are fighting construction through their neighborhoods; and the president agreed with Congress to trim current-year spending as part of a budget deal. On the whole, I’d say China should envy us.

    25. David Foster Says:

      RS…thanks for that link!

      And meanwhile, Chinese roads are suffering 60-mile-long traffic jams owing in substantial part to the transport of coal by *truck*…which is in turn due mainly to a shortage of rail capacity.

    26. Michael Kennedy Says:

      The video from the traffic story is now blocked.

    27. Michael Says:

      ” “America’s system of rail freight is the world’s best. High-speed passenger trains could ruin it” ”

      This isn’t inevitable. The architect Paolo Soleri came up with the notion of stacking commuter rail and high-speed rail into the same structure, with homes and businesses built in as well. Replace (or supplement) the commuter rail with a heavy freight line, with the additional structures left or removed as the width of the right-of-way allows, and the two could coexist.

      http://www.arcosanti.org/project/background/soleri/solare/SOLARE.swf

    28. Michael Kennedy Says:

      The problem with grandiose plans is politics. Thirty years ago, Orange County was a bedroom community for Los Angeles. The I-5 was crowded northbound every morning and southbound every afternoon. The Irvine Company was a family owned development company that owned something like 98,000 acres of central Orange County. A fellow named Donald Bren ran the company during its formative years. They managed to entice the U of California to build a campus in the middle of the Irvine Ranch. The city was built around it. What was really wise, and this only became apparent in the 1970s, was the decision to reserve large areas of the property zoned for light industry.

      Mission Viejo, which was developed earlier, did not choose this plan and suffered because of it. The family that developed Mission Viejo, also developed a newer community called Rancho Santa Margarita and they copied Irvine in this later development. The traffic patterns have reversed. The morning commuting traffic is now heavier southbound, toward Irvine, and the reverse in the afternoon. In fact, the huge development in Riverside County to the east was a bedroom community for the high tech companies in Orange County. This is now having trouble about real estate prices but the trend is permanent. The fact is that, unlike all previous industrial development in this country, people want to live near their job but can’t afford it. The new high tech industries are clean and the residential real estate near those companies is the most expensive in the county. The only exception is ocean front.

      There has been a proposal to build a tunnel under the mountains between Orange and Riverside County. The tunnel proposal would include at least five tubes with a center rail tube and auto lanes on each side. Both Orange County Airport and LAX are over crowded. The tunnel proposal would include the concept of a rail link to Ontario Airport, a large underutilized airport in Riverside County. Much of this resembles the Soleri concept and it will not be built for at least 25 years because it is too hard to explain these things to the voting public and, more importantly, to politicians who majored in political science.

    29. Michael Kennedy Says:

      I should have included the information that the 91 freeway, which connects Riverside and Orange Counties is the most crowded freeway in California during rush hours. There are mountains blocking any other route, hence the tunnel proposal.

    30. tomw Says:

      I found this site interesting, a bit of history and a bit of future. Japan is aging, and their outlying cities and towns are dying. Much like the small ‘county seat’ towns in NE, IA, KS, etc, which hang by a thread.
      Wander around here, and see the sites:
      requiem for a railway

      Their railway is being dismantled.

      Coyoteblog has an interesting financial analysis if rail transport. It never pays, and sucks the lifeblood of all the other forms of transit.
      Light rail hype
      More at:
      Rail and Mass Transit
      He has some thoughtful essays.
      tom