28.3.19

LIQUIDATING THE RAILROAD?

Over the years, I've been skeptical of efforts to make businesses in general, and railroads in particular, better by shrinking the physical plant and antagonizing shippers.  The latest effort sails under the banner of "precision scheduled railroading," but, trackside, it strikes Jeff Lusanne as just another speed-up.
[T]he central focus of [precision scheduled railroading] is to “sweat the assets” of a railroad, by reducing the headcount, idling locomotives and equipment, closing shops and facilities, reducing maintenance, curtailing service, and selling off routes. The stock market joyfully responds to every cutback, pumping the stock price up in the short term, while the physical infrastructure decays, morale sours, and customers are chased away.
The approach might look good for a quarter or a business cycle, but what happens when there's economic growth?
For railroad workers, PSR is more like a spreading virus that, no matter how disastrous its results have been, continues to spread from railroad to railroad. Harrison died in December 2017, but since that time, Norfolk Southern, Union Pacific, and Kansas City Southern have adopted the PSR policies and begun or announced cutbacks. BNSF, which is privately owned, is now the only large railroad that is not openly implementing PSR, although it has made operational changes that harshly impact operating crews and dispatchers.

In each case, these railroads announce that PSR will lead to “operational efficiencies” and “better service,” with the financial and trade press providing universal praise. It is a preposterous, proven lie. The concept of PSR is that railroads can do more with less—they can get rid of workers, reduce maintenance, close repair shops and sorting yards, cut train frequency, and supposedly provide better service while still making more money. Only the latter is true, and only for a short time—until the long-term consequences emerge.

When CSX implemented these policies in 2017, service to customers plummeted so drastically that the industry-friendly Surface Transportation Board was pushed to criticize the delays and demand regular reporting on performance. Meanwhile, CSX invented its own metrics for measuring its performance that didn’t match the rest of the industry, making it impossible to determine how bad it had gotten.
I suppose we should be grateful CSX management didn't single-track sections of The Water Level Route, but when you have a columnist for World Socialist Web Site pointing out that the railroads are leaving business unsolicited during a time of truck-driver shortages, something that's contrary to most principles of business strategy, something's not right on the railroad, under-performing routes not-withstanding.
Over recent decades, the railroads have sought only the most profitable traffic, a tendency that PSR emphasizes.

The policy works to make railroad operations “efficient” only in the sense of how the railroad can spend as little as possible to provide service. For example, they may cut a train that provides the only service over a route, and instead reroute traffic hundreds of miles out of the way on another higher-traffic route to consolidate operations, in an effort to save on crews and shutter trackage. Yet the customer sees transit times that take days or even weeks longer.

Another method is to run fewer trains that are longer and heavier than ever before and save on the reduction of crews and locomotive usage—assuming that massive trains don’t suffer more frequent problems that cause more frequent delay. Traffic gets held for longer amounts of time for the fewer, more “efficient” trains that do run, which adds to transit time.

If customers complain about the service, the railroad might decide they aren’t even worth the trouble—the emphasis is on the highest-margin traffic that the railroad can run with the lowest costs, and in effect, customers are chased away. In 2017, when CSX implemented PSR, its total yearly carloads fell by 1.4 percent compared to 2016, with almost every type of traffic showing declines, yet the stock price doubled. That feeds into the cycle that allows further reduction of employees, equipment, and maintenance.
Those are just the within-mode effects.  Motorists see more congestion with big rigs operated by over-stressed drivers, and the roads get beat up.  In the limit, do the railroads have to rediscover that the Chicago Great Western model of One Big Train a day doing all the work isn't sustainable.

Will the investors figure it out before the soviets of transportation workers Mr Lusanne prays for emerge?

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