(erielack) Railroad profits, was Meat reefers

["Paul Brezicki" <doctorpb_@_bellsouth.net>]

Very good questions, Chris. I think that for many on the List, RR financials
as detailed in quarterly and annual statements would be an effective night
sedative. Much of this info resides with the U of Akron Archival Services;
click on this link to see what's available:
http://www3.uakron.edu/archival/ErieLack/erie1.htm

There is a good discussion of piggyback meat traffic in V15#2 of the Diamond
by Bill Gale, Terminal Manager at 51st St during the 70's. His opinion:
"Even though we seemed to make a big thing of the meat traffic, I felt that
it was a loser, and that there wasn't a smart meat receiver in New York who
ever paid a freight bill, as they were able to offset these with claims of
one kind or another." In other words, L&D payouts made it unprofitable.
Ultimately he was proven correct when EL gave up on the meat business.
Service was also a factor, as midwestern meat shippers found that for
additional pennies per lb, all-highway was a full day faster and eliminated
headaches like missed connections and weekend service lapses. He also
addresses the question of overall TOFC profitability. In EL's case, he felt
that a big negative was an insufficiently aggressive collections policy, in
deference to the Sales dept fear of upsetting "good" customers. The
"Friendly Service Route" may have been a little too friendly for it's own
good!

There's no doubt that RR cost accounting was less sophisticated during
intermodal's formative years; you still had people with the "lose a little
on each move but make it up on volume" mindset, and of course they were
anxious to establish a position in the markets they served. As RR's gained a
better understanding of cost during the 70's, they began eliminating
unprofitable business including short hauls (under 500 miles), low volume
terminals (during the decade the no. of ramps in the US declined 80%), and
yes, the meat business.

As for the boxcar to intermodal shift, I think that for service reasons, a
lot of this business would have diverted to all-truck anyway. Also I feel
that the issue of equipment utilization is not sufficiently appreciated. For
many decades the industry has failed to attract sufficient capital because
of inadequate ROI, and a big factor here is the poor utilization of those
expensive railcars. In EL's case, a boxcar coming into North Jersey would
spend up to 24 hr being switched at Croxton, then another day getting to the
customer, then a couple days being unloaded then repeat the process in
reverse. By contrast, a pig flat coming in on NY-100 would be turned and
headed back to Chicago with a new load the same day. So while boxcars were
turning in a pathetic 50 loaded car-miles (or less) per day, the TTX's were
banging off 3,000 miles per week in NY-Chicago service.

As Schuyler implied in today's post, the most important issues facing RR's
in the 70's were external and more or less beyond their control; the
critical event that restored the industry's viability was dereg. The EL was
doomed even before it was created in 1960. I like to describe it's plight
like this: It was using a mid-19th century alignment within an early 20th
century regulatory/employment structure to compete with a late 20th century
highway system in a region with a declining manufacturing base. Predictably,
it was unsuccessful.

Paul B

I also realize that the amount and quality of information going back to the
EL and Erie / DL&W days is not as abundant as it is today with businesses
having, what seems at least, almost limitless computing power with massive
amounts of IT resources at their disposal.  It makes me think about
something I read, in either one of the Trains issues, or on a list like this
about someone commenting about during the 60's, the sales forces at many
RR's had no idea what the true costs of intermodal (specifically piggyback)
were and how to price the service accordingly.  They went on to say that in
80's and 90's, with the massive amounts of IT power at hand, they had a much
better handle on what their costs were and could make pricing and operating

decisions that made it more profitable.  They also lamented on how they
during the 60's and 70's, in many cases, had decimated profitable boxcar
business to migrate it to less profitable or even unprofitable TOFC
business.



Anyway, my $0.02.  I think if any of this info is available, it would
provide a very interesting insight into how the EL, Erie and DL&W were run
and provide part of the explanation why the two mergers that come about that
resulted in their ultimate demise.



Regards,



Chris Thurner




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