The Railroad Week in Review:
Week Ending January 9, 1999

Can the dust be settling in Texas? Reuters reports (1/8) that BNSF and the Texas-Mexican Railway agreed to a five-year cross-traffic agreement for routes between Texas and Mexico. Traffic will move via Laredo in favor of a parallel UP route. Recall Tex Mex is jointly owned by KCS and the Mexican transportation conglomerate TMM. The competing parallel railroad is operated by Miner Gruppo Mexico, Empresas ICA and Union Pacific.

RailAmerica has closed on the purchase of the 290-mile Esquimalt and Nanaimo Railway Company (E&N) from CP Rail. The new line expects to handle approximately 8,000 carloads of freight during its first 12 months of operation. Commodities include forest/paper products, mineral and chemical products. The VIA Rail passenger service on the ENR will continue to operate as before.

Continuing the recent Wisconsin Central thread (WIR 12/19), an institutional investor friend writes, "The stock stalled because people probably saw what I saw at presentations over the last year and a half. The company had extremely low quality earnings, that is, earnings that have no accessible cash flow. This is the problem with ventures and foreign investments, you can't touch the earnings, if any. It became clear at presentations that money to continue investment for future growth was not at hand. Now we see the projected growth rates clearly slowing as a result." Any feedback?

Can't get no respect department: After recovering nicely from its recent doldrums KCS got cut Thursday as Baring Furman Selz lowered its rating to hold from strong buy, based on valuation. The firm said, "After more than doubling its price in 1997 and increasing 55 percent in 1998, Kansas City Southern has reached our $50 price target.'' Funny thing, KCS has had one of the stronger stock performance gains of the entire rail group during the recent upturn.

RailTex has announced the appointments of John M. Hovis to the post of Vice President, Operations, and Thomas W. Arnst to Vice President, General Counsel and Secretary. Hovis comes to RailTex following 27 years with BNSF and its predecessors in a number of operating and commercial assignments. Arnst comes to RailTex from Ryder TRS in Denver, Colorado where he served as Vice President, General Counsel and Secretary.

Meanwhile, RTEX posted a 17% gain for its December carloads year-to-year citing gains primarily in railroad equipment, farm products, and chemicals. Year-to-date, December December 1998 carloadings increased by 13% over December 1997. On a "same railroad" basis, carloadings increased by 14% with gains attributed to movement of empty coal cars for the Union Pacific from an Arkansas Power & Light plant to Kansas City via the Missouri & Northern Arkansas Railroad. The Company also experienced strong gains in farm products at its Ohio and New Orleans properties.

UP employees now can make money while saving UP money. The program, called IdeaWorks and begun in February 1997, has helped save UP more than $8 mm. Employees earn points by developing an idea, implementing the idea once it is approved and attending periodic program training. The employees can redeem accumulated points for a variety of merchandise, ranging from coffee cups to big screen televisions or vacation trips. (One enterpprising chap won himself a fully-decked out Harley Davidson touring machine.) IdeaWorks will be fully implemented across the entire UP system by late 1999. All active, full- or part-time Union Pacific Railroad employees not on a leave of absence are eligible to submit ideas.

CP Rail, according to an Rip Watson article in JOC, has kicked off An "Iron Highway" short-haul intermodal service on its St. Lawrence & Hudson Railway subsidiary in eastern Canada. CP will double capacity on its existing Montreal-Toronto route next month and expand the service to reach Detroit this summer. Readers will recall the concept was first developed some long time ago with NY Air Brake in the lead. The CP equipment is standard trainsets with special ramps for easy ramp operations without the need to a lot of real estate and expensive lifting equipment.

The CSX Intermodal schedule discussion brought some additional and helpful commentary from Larry De Young. He writes, Several railroads have tried multiple departure times through the day, usually without great success, but the usual railroad level of patience applied, too--i.e., "Jeez, we've run these trains for two whole weeks now, and only twenty trailers a day are showing up, and that doesn't pay, so we'll drop the service."

"One railroad I know actually checked out the problem of terminal congestion. It was six hours of total congestion every day, with virtually nothing going on the other eighteen. So, multiple departures through the day would spread the load out (and improve capital facilities utilization). But that would require running frequent, short trains, and there is still a tendency for management to think of railroads as labor intensive and thus unable to afford to do that.

"Rather, they spend more capital money to increase terminal capacity, buy more 4, 5, or 6,000 horsepower six-axle units, and lease more flat cars from TTX." The end result is that bigger yards mean more room for equipment staging and not that many more trains on the road. Better the rails spend the money to keep the third main in place.

--Roy Blanchard

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