12.7.13

LET'S DISENTANGLE THE IDEOLOGY FROM THE INCENTIVES.

The Montreal Maine and Atlantic railroad that operates the old Canadian Pacific Atlantic Limited route through Megantic, Quebec, is a Rail World property.  Rail World is in some ways a successor to the Wisconsin Central Transportation Corporation that operated freight railroads all over the world, including the English Welsh and Scottish in the UK, Wisconsin Central and Algoma Central in the U.S. and Canada, Estee Raudtee in Estonia, and  Tranz Rail in New Zealand.  If you saw a maroon and cream locomotive on any continent, or a General Electric hood unit in Tallinn, you were observing Wisconsin Central in action.

The political economy of Rail World is contested territory.  One essay blames privatization itself.  That sounds like ideological spouting rather than analysis.  The Europeans don't know how to run freight trains, and the railroads of the former Soviet Union have a lot of potential for North American style operating practices.  (There's probably an entire post just on locomotives built to show Stalin how it's done.)  Wisconsin Central is Canadian Pacific's Soo Line spinning off some of its light-density lines, and Montreal Maine and Atlantic is another Canadian Pacific spinoff.  No privatization there.

The operating practices of Rail World properties are instructive in a number of ways.
[Rail World president Edward] Burkhardt's career in the industry includes a 12-year stint as president of a railroad that broke convention by shunning unions, reinvesting profit rather than paying dividends to investors and expanding internationally.

Burkhardt helped to found Wisconsin Central railroad in 1987 on a business model that took advantage of the 1980 law that deregulated the U.S. rail industry, according to Tribune articles.

Complaints from railway unions slowed the railroad's start and caused early financial troubles, but the company quickly emerged as a profitable enterprise, according to reports.
Wisconsin Central operated profitably enough to become a takeover target for the former Canadian National, and a key component of the carrier's expansion in Mid-America. (I think CNR is the only North American carrier to reach the Atlantic Ocean, Gulf of Mexico, and Pacific Ocean.)  In a railroading world influenced by Patrick McGinnis, who stripped assets and deferred maintenance in order to pay dividends to stockholders, reinvesting profits in the railroads, rather than seeking subsidies, might not be a crime.  Going along with business's current do more with less obsession, however, might be both a crime and a blunder.
When he took over the Montreal, Maine & Atlantic Railway in 2003, he cut employee wages by 40 per cent according to a company history in the Bangor Daily News.

There were more layoffs and cuts in expenditures in 2006 and again in 2008.

The company also announced plans “to improve safety and efficiency” by cutting its locomotive crews in half, replacing two workers with a single employee.

That prompted at least one veteran engineer to quit the company in part over his fears for safety.

Jarod Briggs, who had worked on railways since 1998, told the Star he left MM&A in 2007 because he thought leaving only one engineer in charge of a train — as happened in Lac-M├ęgantic — was too risky.

“If you have two people watching you can catch a mistake,” he said in a phone interview from his home in Maine. “It was all about cutting, cutting, cutting. It’s just an example of putting company profits ahead of public safety.”
I can understand the logic of entrusting a single-consignee train to one operator. The entire lading moves on one waybill. As long as the train keeps moving, the defect detectors work, and the maintenance department has a carman and pickup truck nearby, all is well.  Park a train for crew rest with the operator on short time, though, and there's lots of potential for bad things to happen.

That seems to be the common error in all corporate downsizing efforts: as long as nominal conditions prevail, the bottom line gets richer.  Let something small, or something large, go wrong, and things turn sour for the company, and its neighbours, very quickly indeed.

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