Customers seem to have the same attitude about their rail service as they do about the weather: everyone talks about it, but no one is really able to do anything about it.
The late 1990s proved to be a turbulent time for freight railroad employees and customers alike. Mergers and acquisitions took their toll on payrolls, and were subsequently pointed to as the cause for service disruptions in different parts of the country at different times.
The fatalistic "what can we do about it?" attitude of customers may about to be shaken off with the latest merger announcement. In addition to questioning the logic of mergers, shippers are also anxious to seek advice from railroads on how to avoid situations where they are waiting for cars or having shipments sidetracked.
FEAR OF MERGERS
The headaches caused by the acquisition of Southern Pacific railroad in1996 by the Union Pacific Railroad, Omaha, Neb., were barely forgotten before a deal was finalized between the Norfolk-Southern and CSX rail lines to divide the former Conrail freight rail assets. The combination of operations resulting from that takeover, as shippers feared, brought on a new round of problems for many freight rail customers. Many scrap shippers have complained of gondola cars not being delivered in a timely manner or of slow shipping service. When Norfolk Southern Railroad Co. (NS), Norfolk, Va., announced a 5% rate increase for recyclables at the start of this year, the Institute of Scrap Recycling Industries Inc. (ISRI) raised objections on behalf of its members. "ISRI has received numerous and persistent reports from its members concerning the poor service being provided by NS commencing June 1, 1999 and continuing to the current time," ISRI executive director Robin Weiner wrote in a late 1999 letter to Norfolk Southern’s CEO. In January of 2000, ISRI began seeking testimonies from its members regarding CSX’s and Norfolk-Southern’s service track records as a means of consolidating its complaints against the railroad firms. "Please advise us if you have filed a claim for service against CSX or NS and any response you have received," wrote ISRI director of risk management Mike Mattia in a faxed memo to the group’s trade members. In light of the woes caused by the two most recent Class I railroad mergers, shippers are wary of the latest merger announcement—the proposed merger between Canadian National Railway Co. (CN), Toronto, with Burlington Northern Santa Fe Corp. (BNSF), Fort Worth, Texas. The U.S. Surface Transportation Board set a March 8 public hearing date to receive comments regarding the pending merger, and is almost certain to hear from ISRI and other trade associations regarding concerns of the effects of the merger on service. The Chemical Manufacturers Association, Arlington, Va., is another trade group that is questioning the logic of another merger, stating that two-thirds of the facilities represented by its association are already "captive" to one railroad and stuck with paying higher rates. When contacted by the Wall Street Journal, one chemical company executive expressed his view that "railroads today already have very little reason to innovate, because they hold many customers captive." Opposition to the deal in Canada has also come from several quarters. One Canadian cabinet official warned that the government should exercise caution while reviewing the deal, and hinted that the merged company might be tempted to divert export-bound shipments to less expensive U.S. ports rather than the port of Vancouver. A member of the Canadian Parliament has told the Wall Street Journal that "if this lessens competition, it’s a real problem, because we don’t have much competition here to begin with." Fears in Canada were not eased by a statement in January by an executive from Canadian Pacific Ltd., Calgary, Alberta, that the company is "not closing the door" on potential suitors seeking a merger with Canada’s other major freight rail shipper.MAKING THE BEST OF IT
While recyclers and other rail shippers lobby and voice concerns about the increased consolidation in the freight rail industry, the daily business of shipping scrap metals and paper continues.Following is an essay submitted by Jeff Johnson of Union Pacific Railroad on freight rail’s role in the economy and how to best take advantage of shipping by rail. RT
Explore the March 2000 Issue
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