Walter Rich: Wining And Dining The Power Brokers Isn't Enough - owns a railroad - Brief Article

Railway Age, Oct, 1999 by Frank N. Wilner

Walter Rich could have bartered his Syracuse University law degree for a 9-to-5 job reviewing contracts for New York State's DOT or verifying legal precedents for the ICC. What boredom. What utter nonsense for a risk taker. You ought to be able to turn in Webster's unabridged dictionary to the word "entrepreneur" and find a reference to Walter Rich. But don't look under "monopolist." Rich cherishes rail-to-rail competition and proposes more.

Rich took an entrepreneurial interest in short lines 33 years ago while studying political science. By the time he received his law degree in 1971, his maturing Delaware Otsego Corp. had graduated from operating a 2.6-mile steam-powered tourist line to piecing together 550 miles of rights-of-way ownership and trackage rights in three states that, under the banner of New York, Susquehanna & Western, became an alternative to Conrail for reaching the Port of New York and New Jersey from the Midwest through Buffalo.

True to its acronym, Delaware Otsego excelled as a can-do and will-do organization whose creativity and flexibility attracted Sea-Land stack trains even though its route was longer and slower than Conrail's. Where Class I railroads imposed a charge--often a hefty one--for each accessorial service, DO's flagship Susie-Q was more like the small-town grocer, offering neighborly extras with a smile. When an economic downturn wounded industry, Rich provided 60 days of zero-price "storage on wheels" until the loaded freight could be sold.

No wonder after CSX and Norfolk Southern carved up Conrail, CSX loaned Rich the funds to take Delaware Otsego private, control a board on which CSX and NS have minority representation, and keep doing what DO does. John Snow and David Goode recognize that coddled DO shippers would shift to truck were they forced to deal directly with rigid Class I bureaucracies. An independent DO also stands ready to act as an overflow route for CSX and NS between the Midwest and metropolitan New York.

And wow, has success followed Rich's strategy of understanding the customer, performing on the advertised, and respecting unionized employees. This past summer, New York Republican Gov. George Pataki and Texas governor and Republican presidential candidate George W. Bush knocked on Rich's door, bid their respects, sat on his screened porch, and sought his advice. Former Democratic New York Gov. Mario Cuomo issued Rich a single-digit New York license plate. His fellow short line and regional rail entrepreneurs elected Rich chairman of the American Short Line and Regional Railroad Association.

Ever the small-town grocer, Rich says "monopolies are destructive. We've injected a huge dose of new competition through the Conrail carve-up, but fine tuning may be necessary.

Fine tuning? Listen up, Mr. Snow and Mr. Goode. You may be Walter Rich's business partner, but not his master. Before creation of Conrail, recalls Rich, "many cities were served by Penn Central and Erie Lackawanna. Reciprocal switching disappeared with Conrail. How do you explain to someone with no competition that his captivity is a quirk of history?" asks Rich rhetorically. In approving the Conrail carve-up, "the Surface Transportation Board did not create new competition. Maybe it should have."

Rich is complimentary, however, of STB Chairman Linda Morgan "for keeping everyone's feet to the fire" in crafting the voluntary agreement among short lines and Class I railroads enhancing competitive opportunities.

Although many line-sale contracts restricted the new short line from interchanging with other major railroads, the negotiated agreement eases those restrictions for new business.

Although Class I railroads are criticized for not eliminating the restriction in its entirety, Rich says complainers are "trying to cut a better deal than they paid for. Those contracts were negotiated at arms length in a free market environment.

Rich does have harsh words for Class I railroads. "The public's good will toward railroads has lost its way" and it's the railroads' own fault, he says. "Railroads must do more than wine and dine congressional power brokers. Railroads must project a positive image at the grass roots level and they're making only a minimal effort."

NS's decision to scrap its steam program (the Susie-Q still has one), a CSX threat to tear down an Indiana town's war memorial if higher land-rent charges weren't paid, and BNSF's refusal to fund a grass-roots public relations budget are examples drawing frowns from Rich.

Railroads cannot bet their future on a "public perception of railroads as environmentally friendly and efficient," says Rich. "Lawmakers listen to constituents. Railroads must be more cognizant of public relations--and not the Madison Avenue type. At the end of the day, he who wins the PR campaign wins the battle."