Reinventing America's railroads

Railway Age, Nov, 2001 by William C. Vantuono

"It may still be asked whether this perfected transportation tool will have a role to pay in future economic development," said Louis Armand of the railway industry in 1964. "There still persist people who believe that the economy of modern nations can get along without railways and that, as a consequence, railways ought to consider that their job is to shrink, with the goal of disappearing entirely one of these days."

Armand himself was not among the doubters. A wartime resistance hero who went on to become director general of the French National Railways, secretary general of thc International Union of Railways (UIC), and a member of the French Academy, Armand wrote 37 years ago of the "railway use of cybernetics" (today, computerization) and the role other modern technology would have to play in "plunging the industry ahead toward audacious accomplishments."

But some of the basic questions posed by the world's best-known railroader nearly half a century ago are still being asked in the United States today: Where does the railway industry fit in, economically, socially, politically? What does it need to do to compete effectively as a transportation provider with those modes, primarily highway and air, that garner the lion's share of public and legislative attention?

Economically, times right now are tough. Business is down in just about every sector. Growth capital is short or non-existent. But despite all this, the industry is beginning to position itself to claim a much larger share of the transportation marketplace than it has had in many years. Gradually coming into focus is a fundamental shift in public policy and perception toward rail transportation that could pump billions of public dollars into the system. Equally as important as new capital is a rethinking of business practices, a reconsideration of traditional industry values and concepts, a change in railroad culture--indeed, a "reinvention" of the industry.

A new source of capital

A key word in Ike Evans's contribution to this special section (p. 32) is "partnership." Partnerships will certainly unlock many opportunities for the railroads. Union Pacific's chief describes the rapid growth of interline alliances, and speaks of the need for more partnering with highway carriers. Indeed, Evans describes a railroad industry that may not need to "reinvent" itself so much as it needs to more aggressively capitalize on its strengths.

Other railroad leaders are beginning to say that partnering in a broader sense, and in ways that many in the industry may find disagreeable, could unlock many more opportunities in the future. What they're talking about is federal subsidies to freight railroads--subsidies that will create, in the words of Association of American Railroads President and CEO Ed Hamberger, "the railroad equivalent of the Interstate Highway System," a system that will support sustained growth in both freight and passenger traffic. For example, the infrastructure for operating higher speed short- and medium-haul intercity passenger trains: It's owned, operated, and maintained by freight railroads. Investing federal and state dollars to increase the frequency and speed of passenger trains without compromising the integrity of freight service or safety--adding track, improving signaling and train control systems, closing or improving highway/rail grade crossings--would cost a fraction of expanding an airport or highway, and would ce rtainly be environmentally wise.

Federal aid--two words that would have given some railroaders a heart attack just a few years ago--may very well be the only way a capital-intensive railroad industry that often doesn't earn its cost of capital can remain alive and well. Burlington Northern and Santa Fe President and CEO Matt Rose speaks for a growing number of railroaders when he says that "we're singing a different tune from the one we have sung in the past," and that "this is today's reality."

Rose has called attention to "breakthrough proposals" now moving through Congress that would help railroads strengthen and expand their infrastructure. Legislation known as RIDE-21 in the House and RAIL-21 in the Senate would make $35 billion in low-interest loans available to Class I's, regionals, and short lines. These bills would also provide billions of dollars of funding for rail passenger projects, many of which would benefit freight carriers by adding much-needed capacity to existing rights-of-way. The Senate bill includes authorization for $350 million per year for three years to upgrade small railroads to handle 286,000-pound cars.

"These proposals recognize the need for more public/private partnership initiatives to improve the nation's rail infrastructure and to be responsive to concerns about traffic congestion, safety, transportation flexibility, and economic development," says Rose. "The rail industry needs ongoing help with its infrastructure investments to remain strong and competitive. Public policy dictates a sound rail infrastructure for America so we can continue to be a strong economic force globally."