The Railroad Week in Review:
Wisconsin Central Transportation Corporation has revamped its website. Readers contemplating construction of their own railroad websites would do well to look closely at this one. For several reasons. First, it loads fast. Nothing is more annoying that waiting around for graphics to load when all you want is information. Second, it's well organized. The "frames" setup is intuitive and makes it easy to see where you're going. Click on "Investor Information" and get a full sub-menu of choices. Ditto for "North American Rail Information," with the added benefit of a full menu under "Doing Business with Us."
Third, a website design like this is essential in an era of instant customized information. To be effective, the website host has to think in terms of what readers will want and help them there quickly and effortlessly. Moreover, focusing on reader needs forces managers to focus on their own service delivery systems, keeping the core business up front. Is there any better way to enhance shareholder returns? I rather think not.
(And speaking of results, be sure to read Tom Power's excellent "Opportunities for the 21st Century" and go through the "Introduction for Investors" slide show. Both are available at www.wclx.com, Investor relations, Presentations.)
The Journal of Commerce says the argument on Amtrak's self-sufficiency is heating up again. On the one hand, "Amtrak's supporters say the railway is becoming a financially viable, fast and reliable alternative to air travel." On the other, "Government watchdogs say Amtrak faces numerous obstacles to reaching self-sufficiency in time to avoid possible liquidation and a restructuring of rail service."
You have to wonder how many of the pro-side writers actually spend any time on Amtrak. Here in Philadelphia, there is a large cohort of regulars riding to NY and Washington, and late, dirty trains with rude, unkempt, and uninformed help are the norm. The standing gag is that ACELA, the name awarded new high-speed train service, is actually an acronym: Amtrak Customers Expect Late Arrivals. I say, either make it work by making it a pleasant riding experience or get somebody in there who can.
Long-time readers of this letter will recall it was begun when I was hosting the Railroad Message Board on The Motley Fool (www.fool.com). The board is still there, and one of the current threads has to do with post-merger performance of both CSX and NS.
The answers are in the STB Performance Measures available at www.nscorp.com and www.csx.com. For the week ending 11/5, CSX had 69 trains delayed for crew, power, and congestion while NS had 61. CSX averaged 139 cars a day offered to NS and refused; NS had no cars offered to CSX and refused. CSX had 34 blocked sidings or multiple mains to NS' 19.
Please note that the car figures for yards are the throughput for the week, so the higher the better. Dwell time is what needs watching, and the longer the dwell time the lower the per car velocity. Note too that average train speed is total number of train hours on line between terminals divided by the number of trains run. Local and yard jobs are not included.
That's why you hear RR execs citing the STB Performance Measures saying things are getting better and shippers and shortlines are saying no they aren't. Most of the latter are served by local freights and yard jobs, whose performance is not captured in the broader measures. Yet that's precisely where most of the delays occur. Perhaps we need a measure of average per car transit time.
The STB reports it has dismissed -- at the parties' request - CP's petition regarding trackage rights into NY City over CSX. One of the conditions the Board imposed in approving the CR transaction was to grant CP trackage rights over the lines of CSX from Albany to Oak Point Yard in the Bronx.
Once CP cars got to the yard, they were to be switched to customers by CSX crews. Then last summer, a dispute arose over two issues. The first was whether the condition should be construed as permitting CP to handle traffic to or from Harlem River Yard directly. The second was whether the cost-based switching service that CSX was required to provide for CP at Oak Point Yard should be construed as including certain traffic moving through a CSX transload facility.
In a joint motion filed by CP and CSX the parties indicated that they had in fact resolved their differences privately and, as a result, the Board dismissed the proceeding. Specifics were not forthcoming, however mere resolution without Board intervention is good news enough.
A recent editorial by Larry Kaufman in the Journal of Commerce tells of a fanciful dream in which UPS buys Burlington Northern Santa Fe and Norfolk Southern (Logical -- isn't NS the middle name of BNSF?). He reasons that the recent IPO floated by UPS and subsequent run-up in market cap gave UPS more than enough stock to buy the two railroads in an all-stock deal.
He continues, "UPS was able to swing the purchase easily because railroad stocks have been depressed for much of 1999, meaning it had to give less UPS stock to the BNSF and NS holders who were happy to trade for the high-flying UPS paper." Go figure: UPS closed the week at $69 a share, NS ended at $22, and BNI at $29. UPS has 1.2 billion shares for a market cap of $83 bn. Market caps of BNSF and NS are $31.1 bn and $8.3 bn respectively, $39.4 for the pair, less than half the UPS market cap. What a concept!
We've written a fair amount about the link between "customer value drivers" - service attributes that add value as perceived by the buyer - and equity value drivers - those accounting measures that enhance shareholder value. Back in January 1997 my Railway Age column was devoted to this very subject.
To review, there are four customer value drivers. First is customer knowledge or how much you know about how the customer's business works, and second is a service delivery system designed around the customer's logistical process. Third is the ability to renew and replace equipment and personnel to stay ahead of the other two, and fourth is a customer service system that makes your offering hassle-free.
Last week's comments about the rapid CSX response to a rate request go directly to items one and four: customer knowledge and service delivery. But the CSX story gets better. Three work days later the same cheery voice called back to say that after considering the volume potential and the CSX assets required, the proffered rate could be reduced significantly. Needless to say, the customer was delighted.
Now contrast the perceived value of the CSX response in the eyes of the customer to the scenario in which phone calls and e-mails requesting rates and service info go unanswered for a week or more. Believe me, it still happens, and the guilty parties know who they are. Thirty years ago, when I began my selling career on Madison Avenue in NYC, my mentor said, "If you don't go see the people you can't ask for the order." It's still true today, even if you "go see" via the Internet and e-mail. Listen up, boys and girls.
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